The Union Budget 2016 Key Highlights Prepared by WAHIDI ASSOCIATES CHARTERED ACCOUNTANTS For Private Circulation Only
AGRICULTURE AND FARM WELFARE A dedicated irrigation fund worth Rs 20,000 crore to be set up under NABARD. Rs 35,984 cr. allocated for Agriculture in 2016-17. Allocation to PM Fasal Bima Yojana for 2016/17 is Rs 5,500 cr. Rs 15,000 crore set aside for loan subvention for agricultural loans taken by farmers. Rs.500 crores under National Food Security Mission has been assigned to pulses. 28.5 lakh hectares will be brought under irrigation under the Pradhan Mantri Krishi Sinchai Yojana'. Completion of 23 of 89 irrigation projects under AIBP before 31 Mar 2017. These 89 projects require Rs 17,000 crore next year and Rs 86,500 crore in the next five years.. Other measures: 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years. 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA. Soil Health Card scheme will cover all 14 crore farm holdings by March 2017. E- procurement of agricultural produce to be promoted Rs 412 crore to promote organic farming through 'Parmparagat Krishi Vikas Yojana' and 'Organic Value Chain Development in North East Region. RURAL DEVELOPMENT Overall allocation for rural development of Rs 87,765 crore. 2.87 lakh crore grants to gram panchayats and municipalities - a quantum jump of 228%. Rs 6,000 crore for recharging of ground water. 100% rural electrification by May 1, 2018. Rs 2.87 lakh crore will be given as grant in aid to gram panchayats, municipalities Rs 850 crore allocated for animal husbandry, cattle and livestock breeding. Rs 900 crore for Market Stabilization Fund for Pulses. A sum of Rs 38,500 crore allocated for MGNREGS. Rashtriya Gram Swaraj Abhiyan proposed with allocation of Rs 655 crore to develop governance capabilities to deliver on the Sustainable Development Goals for Panchayat Raj Institutions.
SOCIAL WELFARE New health protection schemes for health cover upto Rs.1 lakh per family for below poverty line families. For senior citizens an additional top-up package up to Rs 30,000 will be provided. Rs 9000 crore allocated for Swachh Bharat. Rs 2,000 crore allocated for initial cost of providing LPG connections to BPL families. A National Dialysis Services Program to be introduced under National Health Mission. Certain parts of dialysis equipment exempted from basic customs duty, excise/cvd and SAD. 3,000 Stores under Prime Minister's Jan Aushadhi Yojana will be opened during 2016-17. Rs. 100 crore each for celebrating the Birth Centenary of Pandit Deen Dayal Upadhyay and the 350th Birth Anniversary of Guru Gobind Singh. INFRASTRUCTURE DEVELOPMENT Total allocation to road sector including PMGSY: Rs 97,000 crore. Rs 19000 crore allotted for Pradhan Mantri Gram Sadak Yojana PMGSY. Will connect remaining 65,000 eligible habitations by 2019. Rs 55,000 crore allocated for Roads and Highways. Additional Rs 15,000 crore to be raised by NHAI through bonds. 50,000 km of state highways to be taken up for upgradation as national highways. Road transport in passenger segment to be opened up to private sector. Rs. 800 Crore for modernization of ports. Rs 3000 crore earmarked for nuclear power generation. 160 non-functional airports to be developed. Action plan for revival of unserved and underserved airports to be drawn up in partnership with State Governments.
Other Measures: 300 rurban clusters to be set up to incubate growth centres in rural areas by providing infrastructure amenities and market access for the farmers. Total outlay for infrastructure - Rs 2,21,246 crore. EDUCATION AND JOB CREATION A higher education Financing Agency to be set up, with a fund of Rs 1000 crore. Govt. will pay EPF contribution of 8.33% for all new employees for 1st three years. A provision of Rs.1,000 crore for this scheme. Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up. 62 new Navodaya Vidyalayas proposed in the remaining uncovered districts over the next two years. A deduction of 30% under Sec.80JJAA of the Income Tax Act for three years to employers in respect of employees with monthly pay of less than Rs.25000. 1,500 multi skill development units at cost of Rs 1,700 crore to be set up under Pradhan Mantri Kaushal Yojana. Stand Up India scheme allocated Rs 500 cr for SC, ST and women entrepreneurs. FISCAL ADMINSTRATION Additional finances to the extent of Rs.31,300 crore by NHAI,PFC, REC, IREDA, NABARD and Inland Water Authority through raising of Bonds during 2016-17. Plan - non-plan classification of expenditure to be done away with from FY 2017-18. TAX REFORMS DIRECT TAXES INCOME TAX ACT Rebate under Section 87A increased from Rs.2000 to Rs. 5000. 2 crore tax payers to get relief of Rs 3,000 in case of income under Rs 5 lakh.
Increase house rent deduction allowed under section 80GG from Rs.24000 to Rs 60,000 Per annum. Surcharge increased from 12% to 15% on persons, other than companies, firms and cooperative societies having income above Rs.1 crore. Additional interest of Rs.50,000 on purchase of first house with loan sanctioned upto Rs.35 lakhs if cost of house does not exceed Rs.50 lakhs. Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme. superannuation funds and recognized provident funds, including EPF. 10% tax levied on dividend received by individuals, HUFs and firms if the total dividend received during a year exceeds Rs. 10 lakhs. Amend the provision of section 44AB of the Income- tax Act to enhance the threshold limit for audit of accounts from Rs.25 lakh to Rs.50 lakh for persons having income from profession. Ceiling of Presumptive tax under section 44AD increased from Rs.1 crore to Rs. 2 Crore. Extension of presumptive tax scheme to professionals by insertion of Section 44ADA with gross receipts of upto Rs. 50 lacs and presumption of 50% profit. The accelerated depreciation provided under IT Act will be limited to maximum 40% from 1.4.2017 The benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020 The benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020. The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020. 100% deduction for profits for an entity undertaking housing projects. Rate of Securities Transaction tax in case of Options is proposed to be increased from.017% to.05%. Special patent regime with 10% rate of tax on income from worldwide exploitation of patents developed and registered in India. Non-banking financial companies shall be eligible for deduction to the extent of 5% of its income in respect of provision for bad and doubtful debts.
The period for getting benefit of long term capital gain regime in case of unlisted companies is proposed to be reduced from three to two years. Income of SPV distributed to REITs and INVITs exempted from DDT. Advance tax payment installments to be uniform for companies and individuals/hufs etc. PROPOSAL FOR LOWER CORPORATE TAX RATE Proposals for reduction in corporate tax rates: o The new manufacturing companies which are incorporated on or after 1.3.2016 to be given an option to be taxed at 25% + surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation o Lower the corporate income tax rate for the next financial year of relatively small enterprises i.e companies with turnover not exceeding Rs. 5 crore (in the financial year ending March 2015), to 29% plus surcharge and cess. 100% deduction of profits for 3 out of 5 years for startups set up during April 2016 to March 2019. Capital gains will not be taxed if invested in regulated/notified Fund of Funds and by individuals in notified startups, in which they hold majority shares. INTERNATIONAL TAXATION The determination of residency of foreign company on the basis of Place of Effective Management (POEM) is proposed to be deferred by one year. The government stands committed to implement General Anti Avoidance Rules (GAAR) from 1.4.2017. Country by country reporting, as recommended by OECD, for countering BEPS for companies with consolidated revenue of more than 750 million Euros. It is also proposed to provide for penal consequence in case of non-compliance by such person. Withholding tax of 6% of gross amount paid in case of online advertisement on B2B transactions, if aggregate income exceeds Rs.1 lakh. It is proposed to extend DTAA benefits by allowing for rate in force being applicable for withholding tax purposes in respect of distribution by Category-I and II Alternate Investment Funds to the non-resident investors. It is also proposed to provide that the investors may seek certificate of lower deduction or nil deduction of tax.
TAX DEDUCTION AT SOURCE TDS thresholds enhanced under sections 192A, 194BB, 194C, 194LA, 194D, 194G and 194H as follows: Present Section Heads Existing Threshold Limit (Rs.) Proposed Threshold Limit (Rs.) 192A Payment of accumulated 30,000 50,000 balance due to an employee in EPF 194BB Winnings from Horse 5,000 10,000 Race 194C Payments to Contractors Aggregate Aggregate annual limit annual limit of 75,000 of 1,00,000 194LA Payment of Compensation on 2,00,000 2,50,000 acquisition of certain Immovable Property 194D Insurance commission 20,000 15,000 194G Commission on sale of lottery tickets 1,000 15,000 194H Commission or brokerage 5,000 15,000 The rate of TDS is sought to be modified as follows: Present Section 194DA 194EE Heads Payment in respect of Life Insurance Policy Payments in respect of NSS Deposits Existing Rate of TDS (%) 2% 1% Proposed Rate of TDS (%) 20% 10% 194D Insurance commission 10% 5% 194G Commission on sale of lottery 10% 5% tickets 194H Commission or brokerage 10% 5% 194K Income in respect of Units To be omitted w.e.f 01.06.2016 194L Payment of Compensation on acquisition of Capital Asset To be omitted w.e.f 01.06.2016
INDIRECT TAXES Service tax exempt on services provided by Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development & Entrepreneurship. Infrastructure cess of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs. 1% tax on luxury goods and cars above RS. 10 lakhs SERVICE TAX Exemption from service tax on general insurance services provided under Niramaya Health Insurance Scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability. Service tax on Single premium Annuity (Insurance) Policies reduced from 3.5% to 1.4% of the premium paid in certain cases. Krishi Kalyan Cess of 0.5% on all taxable services CUSTOMS AND EXCISE DUTY Nil custom duty for Braille Paper. Changes excise and customs rules to benefit Make in India Initiative. 1% without input tax credit or 12.5% with input tax credit on articles of jewellery with a higher exemption and eligibility limits of Rs.6 crores and Rs.12 crores respectively. Excise on branded readymade garments with retail price of more than Rs.1000 to 2% without input tax credit or 12.5% with input tax credit. Clean Energy Cess levied on coal, lignite and peat renamed as Clean Environment Cess and its rate from Rs.200 per tonne to Rs. 400 per tonne.
Excise duties on various tobacco products other than beedi by about 10 to 15%. EXEMPTIONS GIVEN 1. Service Tax a. Services provided by National Centre for Cold Chain Development under Department of Agriculture, Cooperation and Farmer s welfare, Government of India, by way of knowledge dissemination, b. Service Tax on services in respect of i. construction services under Housing For All (HFA) (Urban) Mission/ Pradhan Mantri Awas Yojana (PMAY); ii. construction projects under Affordable housing in partnership component of PMAY, subject to carpet area of dwelling units of such projects not exceeding 60 square metres; iii. Low cost houses up to a carpet area of 60 square metres per house in a housing project under any housing scheme of the State Government. c. Service Tax on service of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund d. Service tax on services provided by Employees Provident Fund Organization (EPFO) to employees, being exempted, with effect from 01.04.2016. e. Services of general insurance business provided under Niramaya Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability being exempted, with effect from 01.04.2016 f. Regulatory services provided by Securities and Exchange Board of India and Insurance Regulatory Development Authority being exempted, with effect from 01.04.2016. g. services provided by Insurance Regulatory and Development Authority of India (IRDA), being exempted, with effect from 01.04.2016 h. Annuity services provided by the National Pension System (NPS) and Services provided by EPFO to employees to be exempt from Service Tax
2. Excise Duty a. on physical mixture of fertilizers, made out of chemical fertilizers on which duty of excise has been paid, by Co-operative Societies, holding certificate of manufacture for mixture of fertilizers under the Fertilizer Control Order 1985, for supply to the members of such Co- operative Societies, b. Excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work at such site being extended to Ready Mix Concrete manufactured at the site of construction for use in construction work at such site. 3. Reduction in Excise & Customs Duty Excise Duty on electric motor, shafts, sleeve, chamber, impeller, washer required for the manufacture of centrifugal pump being reduced. Customs Duty on project imports for cold storage, cold room (including for farm level pre-cooling) being extended for cold chain including pre-cooling unit, pack houses, sorting and grading lines and ripening chambers also. Existing Proposed Rate Rate 12.5% 6% 10% 5% Excise duty on micronutrients 12.5% 6% BCD on refrigerated containers 10% 5% Excise Duty on refrigerated containers 12.5% 6% 4. Increase in Service Tax / New Services Brought into Service Tax Ambit Services provided by,- (i) a senior advocate to an advocate or partnership firm of advocates providing legal service; and (ii) a person represented on an arbitral tribunal to an arbitral tribunal construction, erection, commissioning or installation of original works pertaining to monorail or metro, in Existing Rate Proposed Rate Nil 14% Nil 5.6%
respect of contracts entered into on or after 1st March 2016 Services of transport of passengers, by ropeway, cable car or aerial tramway Service of transportation of passengers by air conditioned stage carriage, at the abatement of 60% without input tax credit. (Corresponding Negative List entry has been deleted) Abatement on shifting of used household goods by a Goods Transport Agency is being rationalized at the rate of 60%, without input tax credit Composition rate of service tax on single premium annuity (insurance) policies Nil 14% Nil 5.6% 4.2% 5.6% 3.5% 1.4% In addition to the above the Budget also proposes a host of deductions in excise, customs and service tax in various industries to support the Make in India initiative. REFORMS IN TAX ADMINISTRATION Taxation of undisclosed income under voluntary disclosure @45% (30% Tax + 7.5% Krishi Kalyan surcharge+ 7.5% penalty) o Exemption from scrutiny o Immunity from Benami Transaction (Prohibition) Act, 1988 o Time allowed: 1 st June 2016 to 30 th September 2016. New Dispute Resolution Scheme to expedite pending cases New penalty scheme to replace the old one in the Act: o Penalty of an amount equal to 50% of tax in case of underreporting of income o 200% of tax where there is misreporting of facts o Remission of penalty is also proposed in certain cases 11 new benches of CESTAT and increase in monetary limit of single member bench from RS. 15 lakhs to RS. 20 lakhs. Proposal to deduct tax on payments to nonresident at normal rate in absence of PAN if alterative documents are provided.
It is proposed to amend section 139 of the Income-tax Act so as to provide that,- o A person shall be required to furnish his return of income if this total income during the previous year without claiming exemption under section 10(38) [Capital Gain on transfer of Long Term Equity Shares] exceeds the maximum amount which is not chargeable to tax. o A person, who has not furnished a return for any previous year by the due date, may furnish the same before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. He may also revise such return before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. o A return furnished in response to a notice issued under section 142 (1) of the Income-tax Act cannot be revised. o A return which is otherwise valid would not be treated defective merely because self-assessment tax and interest payable in accordance with the provisions of section 140A, has not been paid on or before the date of furnishing of the return. 13 cesses levied by other Ministries/Departments and administered by the Department of Revenue, where the revenue collection from each of them is less than RS. 50 crore in a year being abolished. FOREIGN DIRECT INVESTMENT 100% FDI through FAPB route in marketing of food products produced and manufactured in India. Insurance and Pension sectors to get upto 49% FDI 100% FDI in Asset Reconstruction Companies (ARCs) will be permitted through automatic route Investment limit for foreign entities in Indian stock exchanges will be enhanced from 5 to 15% on par with domestic institutions. Investment by FPIs in Central Public Sector Enterprises, other than Banks, listed in stock exchanges, will be increased to 49% from 24%. Foreign investors will be accorded Residency Status subject to certain conditions.
BANKING Massive rollout of ATMs and micro-atms in post offices. Financial Data Management Centre for integrated data collection and analysis. Proposal to increase sanction of credit under Pradhan Mantri Mudra Yojana (PMMY) In 2016-17 to Rs 1,80,000 crore Rs 25,000 crore for recapitalization of public sector banks. Comprehensive code of bankruptcy resolution of financial firms will be introduced as a bill in 2017. RBI Act to be amended to give statutory backing for monetary policy GOVERNANCE The Director General of Supplies and Disposal (DGS&D) will establish a technology driven platform to facilitate procurement of goods and services by various Ministries and agencies of the Government. Proposal to register companies in One Day Necessary interim provisions made for implementation of 7th Pay Commission recommendations. More number of benches of Security Appellate Tribunal to be introduced by amending SEBI Act to reduce pendency.
Contact: Wahidi Associates Chartered Accountants Abi Guzar, Srinagar Jammu & Kashmir Ph: 0194 2474361 Email: info@wahidiassociates.com www.wahidiassociates.com Disclaimer: This document contains the highlights of the Union Budget 2016 prepared from the information available at the time of its preparation only. This document is not intended to provide specific advice or opinion regarding accounting, business, financial, legal, taxation investment or trade related matters. This document is not intended to be a substitute for such advice. Any action taken on the basis of information contained herein shall be at your own risk. While every effort has been taken to ensure that the information in this document is accurate, the same cannot be guaranteed. The reader is advised to obtain specific opinion before taking any action based on this document, and Wahidi Associates or any related party shall not be liable to any person or entity that relies on the information contained herein. This document is for private circulation only.