INDIA BUDGET 2016 SUMMARY OF IMPORTANT PROPOSED AMENDMENTS.

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1 INDIA BUDGET 2016 SUMMARY OF IMPORTANT PROPOSED AMENDMENTS.

2 Income Tax Amendment - Personal SN Description Impact Author remarks 1 For Income more than one crore surcharge Negative More tax from super rich increased to 15% from 12% 2 10% tax on dividend income for more than 10 Lakhs other than companies Negative Taxpayer now can escape section 14A disallowance. 3 Tax on 60% withdrawal portion of EPF & NPS Negative Expecting more clarification in future 4 Additional Rs. 50,000 deduction on interest for purchase of first home of value less than 50 Lakh and loan of Rs. 35 Lakh Only for one year 5 Advance tax rationalize for all taxpayer in four installments Negative Now everybody have same advance tax calendar 6 Filing of return of income mandatory for taxpayer having only exempted income Negative More compliances 7 As per section 50C, value of property required to be determined at the time of entering of sale Reasonable for all property buyers. agreement and not at the time of registration of property 8 Under section 87A rebate increased to Rs More tax benefit for small taxpayer 9 Now pay 10% LTCG on sale of unlisted shares Good tax planning route 10 Period of holding reduced to LTCG to 2 Years pay less tax on capital gain profit 11 Rent paid deduction u/s 80GG increased to Rs. 60,000 For people who don t claim HRA 12 TCS on purchase of motor car exceed value Negative Chances of scrutiny. Rs. 10 Lakh 13 One time exemption for transfer of cumulated PF and superannuation amount to NPS

3 Income Tax Amendment - Corporate SN Description Impact 1 Stay application to be provided on payment of 15% of tax demand 2 Section 206AA of the Act not to be applicable to non-residents who do not possess a PAN on satisfaction of conditions yet to be prescribed. Reference could be made to the Draft Report of Justice R.V Easwar (Retd) Committee to simplify the provisions of IT Act, where it was recommended that Tax Identification Number (TIN) from the country of residence of the recipient could be furnished to avoid higher withholding under Section 206AA if the Act 3 Rule 8D of the Income-tax Rules, 1962 ( Rules ) to limit disallowance to 1 percent Negative of average monthly value of investments yielding exempt income, but not exceeding actual expenditure claimed. Rules to be published 4 Introduction of Country by country reporting for companies having turnover Negative more than 750 Mn Euro 5 Introduction of maintenance of Master file by India HO Negative 6 New levy of 6 percent on the consideration for specified services (online advertisement, provision for digital advertising space or any other facility or service as may be prescribed for the purpose of online advertisement) received by nonresident not having permanent establishment in India. Not applicable in case the nonresident has a permanent establishment in India/ in case where the consideration does not exceed INR 100,000 in any financial year or in a case where the payments are not for the purpose of any business or profession. Such income would be exempt under the proposed Section 10(50) of the IT Act. The proposed levy is outside the purview of the Income tax Act. Negative 7 Profit of Housing project being 100% exempted for each unit less than 60 SM 8 Manufacturing Company incorporate after can pay 25% subject does not claim any special exemption Please be noted that no special condition required for formation of new company and can be a good tax planning 9 Tax 29% for companies having turnover less than 5 Crore. 10 Tax incentives under Section 80JJAA of the Act proposed to be extended to all assesses subject to tax audit under Section 44AB of the Act. Deduction available in respect of cost incurred on any employee whose total emoluments is less than or equal to INR 25,000 per month. In the first year of a new business, 30 percent of all emoluments paid or payable to employees to be allowed as deduction. The minimum number of days of employment in a financial year stands reduced from 300 days to 240 days. The deduction is available only in respect of additional employee cost (ie only if there is an addition in the workforce and not mere replacement hiring) 11 With effect from 1 April 2016, units in IFSC eligible to following tax benefits: Deduction under section 80LA to continue without a sunset clause. Companies not liable to DDT. MAT rate reduced to 9%. 12 Royalty income derived from patents developed and registered in India taxable at 10 percent (plus applicable surcharge and cess) on the gross amount of royalty. No expenditure or allowance in respect of such royalty income to be allowed. The concessional rate would not apply to sale of patented products

4 13 which an eligible start-up is incorporated Section 54GB if sale proceeds from sale of residential house property are invested in newly incorporated companies in which they hold majority of shares. Existing provision of section 54GB requires the company to invest the proceeds in the purchase of new assets being plant and machinery. The Budget proposes to extend the definition of new assets to include computer and software. ed in corporate form of business organisation investments made in a 'fund of funds' set-up to finance start-ups - up to INR 5,000,000 in a financial year. Investments proposed to have a lock in of 3 years from the date of investment. 14 POEM postponed for 1 year 15 Additional depreciation of 20 % extended to power sector 16 MAT provisions not to be applicable to foreign companies with retrospective effect Negative from April 1, 2001 if (i) the assessee is a resident of a country or a specified territory with which India has entered into a tax treaty and such assesse does not have a permanent establishment in India, or (ii) the assessee is a resident of a country with which India does not have a tax treaty and the assessee is not required to seek registration under any law for the time being in force relating to companies 17 Phase out removal of tax incentives and deductions Negative 18 Reduction on deprecation rate of 40% Negative 19 Reduction on section 35 deduction to 150% now and 100% in 2020 Negative. Sl Section Proposed changes No 1 10AA SEZ unit tax holiday to be available only to units which commence activity on or before March 31, IA/ 80IAB /80IB No deduction shall be available if the specified activities commences on or after April 1, Depreciation to be limited to a maximum of 40 percent irrespective of the block of assets 4 35(1)(ii)/ 35(1)(iia) Weighted deduction for payments made to various eligible institutions capped at 100 percent from April 1, (2AB) Weighted deduction for in-house research reduced from 200 percent to 150 percent from April 1, 2016 and 100 percent from April 1, Tax on share buybacks under Section 115QA of the Income tax Act also to include buybacks undertaken under the Companies Act, Further Rules to be prescribed for the manner of determination of cost of shares bought back by a company in various circumstances including shares being issued under tax neutral reorganisations Negative.

5 Income Tax Amendment - Others. SN Description Impact 1 Change in TDS Provision 194C - INR 75,000 increased to INR 1,00, H - INR 5,000 increased to INR 15,000; TDS rate under Section 194H of the Act reduced to 5 percent (from the existing rate of 10 percent). 2 Reduction in penalty rates and relaxation in their condition 3 Voluntary disclosure of undisclosed 45% of tax 4 Mandatory summary assessment u/s 143(1) 5 Introduction of bank guarantee for attachment of properties 6 Time limit for assessment reduced to 21 months 7 IRS cannot file appeal against DRP order 8 Introduction of direct tax dispute resolution scheme Postive 9 Taxation of Non compete Fees Negative 10 Increase in turnover limit of tax audit

6 Service Tax - Important Amendments. SN Description Impact 1 Introduction of Krishi Kalyna 0.5% making service 15% Negative 2 No service tax applicable on sale of flat less than 60 SqM 3 No Input of credit of Swach Bharat cess Negative 4 Refund of both KKC and SBC allowed 5 All services received from government are taxable under reverse charge Negative 6 Allowability of cenvat credit on office equipment s 7 Cenvat credit allowable to Contract/ Job worker 8 Annual return to be filed on November 30 th along with 2 half year return Negative 9 Legal services removed from reverse charge w.e.f One person company and HUF can pay quarterly tax 11 Notification No. 27/2012 (ST refund notification) has been amended to specify that the refund claim shall be filed before the expiry of one year from the date of receipt of foreign exchange (where service is provided prior to receipt of payment) or one year from the date of issue of invoice (where payment has been received prior to the date of issue of invoice) This shall come into force from March 1, No service tax on packed software 13 Normal period of limitation under Section 73 of the Finance Act, 1994 is now proposed to be extended from the current 18 months to 30 months. Negative 14 Staggered interest rates for delay in payment of service tax to be done away with. Interest to be paid at the rate of 24% in case of collection of service tax but nonpayment to Government. In all other cases, interest rate is capped at 15%.

SURENDER KR. SINGHAL & CO

SURENDER KR. SINGHAL & CO PROPOSED TAX RATES FOR FINANCIAL YEAR 2016-17 A. Y. 2017-18 Income Tax Rates for Individuals, HUF Individuals, Hindu Undivided Families (HUF) and Artificial Jurisdictional Person: Net Income Range Income