Budget 2016 – Highlights of Income Tax Provisions
INDIVIDUALS / HUF / AOP / BOI
No change in income tax rates, no increase in tax exemption Limit.
First-time home buyers to get additional deduction of Rs 50,000 on interest for loan upto Rs 35 lakh. The cost of house should not be more than Rs. 50 lakh.
Surcharge on income tax for those with incomes exceeding 1 crore per annum raised from 12% to 15%.
Relief u/s 87A- Ceiling of tax rebate for tax payers with up to Rs 5 lakh annual come raised to Rs. 5,000 from Rs. 2,000 currently.
Deduction under Section 80GG for individuals paying rent but not receiving HRA proposed to be increased from Rs. 24,000 to Rs. 60,000.
Tax exemption on withdrawal of 40% from national pension Scheme at the time of retirement.
40% Withdrawal from Super Annuation Funds proposed to be tax exempt.
Dividend Income will be taxed @ 10% for persons/HUFs receiving dividend more than Rs 10 lakh.
Investment in Sukanya Samriddhi Scheme will be eligible for deduction u/s 80C and any payment from the scheme shall not be liable to tax.
Increase in the limit of deduction u/s 80D of the Income-tax Act from Rs. 15,000 to Rs. 25,000 on health insurance premium (in case of senior citizen from Rs. 20,000 to Rs. 30,000)
Increase in the limit of deduction in case of very senior citizens u/s 80DDB of the Income-tax Act on expenditure on account of specified diseases from Rs. 60,000 to Rs. 80,000.
Increase the limit of deduction u/s 80DD of the Income-tax Act in respect of maintenance, including medical treatment of a dependant who is a person with disability, from Rs. 50,000 to Rs. 75,000. It is also proposed to increase the limit of deduction from Rs. 1 lakh to Rs. 1.25 lakh in case of severe disability.
Capital gains not to be taxed if invested in select categories.
Increase in the limit of deduction u/s 80CCD of the Income-tax Act on account of contribution by the employee to National Pension Scheme (NPS) from Rs. 1 lakh to Rs. 1.50 lakh. It is also proposed to provide a deduction of upto Rs. 50,000 over and above the limit of Rs. 1.50 lakh in respect of contributions made to NPS.
Transport allowance exemption is being increased from Rs. 800 to Rs. 1,600 per month for salaried personnel’s.
No change in Corporate Tax rate. Surcharge in the case of domestic companies having income exceeding Rs. 1 crore and upto Rs. 10 crore is proposed to be levied @ 7% and surcharge @ 12% is proposed to be levied on domestic companies having income exceeding Rs. 10 crore.
Amendment in Section 14A; disallowance under Sec. 14A should not increase the actual expenditure
Capital gain exemption proposed for investment in start-up.
Corporate tax reduced to 29% for small business having turnover less than 5 crores.
Reduction in corporate tax – New manufacturing companies set up after March 1, 2016 have to pay tax at 25% only.
Presumptive taxation scheme introduced for all professionals with receipts up to Rs. 50 lakhs.
Increases in the turnover limit of presumptive taxation Scheme for business to 2 crores.
Amendment in the provisions of section 80JJAA of the Income-tax Act so as to provide that tax benefit under the said section shall be available to a ‘person’ deriving profits from manufacture of goods in a factory and paying wages to new regular workmen. The eligibility threshold of minimum 100 workmen is proposed to reduced to 50.
Amendment in the provisions of section 115A of the Income-tax Act so as to reduce the rate of tax on royalty and fees for technical services from 25% to 10%.
Levy of surcharge @12% as against current rate of 10% on additional income-tax payable by companies on distribution of dividends and buyback of shares, or by mutual funds and securitisation trusts on distribution of income.
For Power Generating units, Additional Depreciation @ 20% shall be allowed even if the addition in Plant & Machinery is made after 30th
Additional Interest @3% shall be granted u/s 244A if the refund arises out of appellate order is not granted within 3 months of appellate order.
INTERNATIONAL TRANSACTIONS / NRI / FOREIGN TAXATION:
No higher withholding tax if non-resident does not have PAN but furnishes an alternative document.
In order to rationalise the MAT provisions for FIIs, profits corresponding to their income from capital gains on transactions in securities which are liable to tax at a lower rate, shall not be subject to MAT.
In domestic transfer pricing, threshold Limit has increased from Rs. 5 crore to Rs. 20 crore.
Modification in the Permanent Establishment (PE) norms to the effect that mere presence of a fund manager in India would not constitute PE of the offshore funds resulting in adverse tax consequences.
GAAR would apply prospectively to investments made on or after 01.04.2017.
Reduction in the rate of income tax on royalty and fees for technical services from 25% to 10%.
Amendment in the provisions of section 194LD of the Income-tax Act so as to extend the period of applicability of reduced rate of tax at 5% in respect of income of foreign investors (FIIs and QFIs) from corporate bonds and government securities, from 31.5.2015 to 30.06.2017.
Under the existing provisions of the Income-tax Act, an individual buying an immovable property from a resident is required to deduct tax but is not required to obtain TAN for depositing the tax so deducted. The same benefit is extended when property buys from a non-resident.
It is proposed to provide for chargeability of interest paid by a permanent establishment (PE) or a branch of foreign bank to its Head Office (HO) and other overseas branches under the source rule of taxation and for treating the PE or branch as a taxable entity for computation of income and for purpose of levy of TDS.
With a view to ensuring proper deduction of tax on payments made to non-residents, it is proposed to amend the provisions of section 195 of the Income-tax Act so as to provide for enabling power to the CBDT for capturing information about prescribed foreign remittances which are claimed to be not chargeable to tax.
Amendment in section 269SS and 269T of the Income-tax Act so as to prohibit acceptance or re-payment of advance in cash of Rs. 20,000 or more for any transaction in immovable property.
In search cases, it is proposed to allow seized cash to be adjusted towards the assessee’s tax liability under his settlement application.
Amendment in the provisions of section 2(15) of the Income-tax Act so as to include ‘yoga’ as a specific category of activity in the definition of ‘charitable purpose’ and also to provide relief for activities in the nature of business undertaken by genuine charitable organizations subject to the condition that aggregate receipts from such activity is less than 20% of the total receipts.
Amendment in the provisions of the Income-tax Act so as to provide a mechanism to pre-empt the repetitive appeals by the revenue in the same assessee’s case on the same question of law year after year.
1% TCS on purchase of Luxury Cars.
OTHER MAJOR ANNOUNCEMENTS:
Introduction of Limited period compliance window for domestic taxpayer to declare domestic black Money.
Announcement of introduction of one time dispute resolution Scheme for cases already pending due to retro-amendment.
A new dispute resolution scheme is introduced, no penalty upto disputed amount of Rs. 10 lacs.
Registration of Companies should be given in one day, Companies Act proposed to be amended.
Complete pass through proposed for trust of ARCs.
Amendment in the provisions of section 255 of the Income-tax Act so as to increase the monetary limit from Rs. 5 lakh to Rs. 15 lakh, for a case to be heard by a Single Member Bench of the ITAT.