Budget 2016 –  Major changes in Direct Tax Law

1. Rates of income-tax- Surcharge @12% if Income exceeds 1 Crore with marginal relief.

2. Dividend Tax- any income by way of dividend in excess of Rs.10 lakh shall be chargeable to tax in the case of an individual, Hindu undivided family (HUF) or a firm who is resident in India, at the rate of ten (10) percent.

3.STT- It is proposed to increase the STT rate from 0.017 per cent.to 0.05 per cent where option is not exercised.

4.Equalisation Levy- An equalisation levy of 6 % of the amount of consideration for specified services received or receivable by a non-resident not having permanent establishment (‘PE’) in India, from a resident in India who carries out business or profession, or from a non-resident having permanent establishment in India.

5.Section 206C- Tax Collection at Source (TCS) on sale of vehicles, goods or services-

It is proposed that the seller shall collect the tax at the rate of one per cent from the purchaser on sale of motor vehicle of the value exceeding ten lakh rupees (Rs.10 Lakh) and sale in cash of any goods (other than bullion and jewellery), or providing of any services (other than payments on which tax is deducted at source under Chapter XVII-B) exceeding two lakh rupees.(Rs.2 Lakh).

6.Section 2(24) amended-Levy of tax where the charitable institution ceases to exist or converts into a non-charitable organization.

7. Phasing out of deductions and exemptions in Section 10AA, 35AC,35CCD,80IA,80IAB and 80IB,32 & 35 of the IT Act.

8. Tax incentives for start-ups

9. Incentives for Promoting Housing for All

10. Sec 80JJAA amended-Tax incentive for employment generation

11.Section 47 of the Income-tax Act amended so as to provide that any redemption of Sovereign Gold Bond under the Scheme, by an individual shall not be treated as transfer and therefore shall be exempt from tax on capital gains with indexation benefit.

12.Section 48 of the Act amended so as to provide that the capital gains, arising in case of appreciation of rupee between the date of issue and the date of redemption against the foreign currency in which the investment is made shall be exempt from tax on capital gains.

13. Consolidation of ‘plans’ within a ‘scheme’ of mutual fund; Section 47 so as to provide that any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating plan of a mutual fund scheme, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund shall not be considered transfer for capital gain tax purposes and thereby shall not be chargeable to tax.

14.80GG amended so as to increase the maximum limit of deduction from existing Rs. 2000 per month to Rs. 5000 per month.

15.Tax Treatment of Gold Monetization Scheme, 2015- Section 2 (14) amended so as to exclude Deposit Certificates issued under Gold Monetisation Scheme, 2015 notified by the Central Government, from the definition of capital asset and thereby to exempt it from capital gains tax.

16.Section 56- any shares received by an individual or HUF as a consequence of demerger or amalgamation of a company shall not attract the provisions of clause (vii) of sub-section (2) of section 56.

17.Section 87A- Rebate increased from Rs.2000 to Rs.5000.

18.Section 24(b) Limit of year amended from 3 years to 5 years.

19. Exemption from Dividend Distribution Tax (DDT) on distribution made by an SPV to Business Trust.

20. Modification in conditions of special taxation regime for off shore funds Section 9A.

21. Enabling provision for implementation of various provisions of the Act in case of a foreign company held to be resident in India.

22. Sec 44ADA –Presumtive taxation for Profession 50% if total gross receipts doesnot excedd Rs.50 Lakhs.

23.Sec 44AD- Limit increased from Rs.1 Crore to Rs.2 Crore.

24.Sec 36- Provsioning for Bad Debts for NBFC Companies.

25.Sec 32AC and 206AA amended.

26. Applicability of Minimum Alternate Tax (MAT) on foreign companies for the period prior to 01.04.2015.

27. Tax Incentives to International Financial Services Centre –Sec 10(38) amended.

28. The Income Declaration Scheme, 2016

29. The Direct Tax Dispute Resolution Scheme, 2016

30. Providing Time limit for disposing applications made by assessee under section 273A, 273AA or 220(2A)

31. Providing legal framework for automation of various processes and paperless assessment

32. New Taxation Regime for securitisation trust and investors.

33. Rationalization of tax deduction at source provisions relating to payments by Category-I and Category-II Alternate Investment Funds to its investors.

34. BEPS action plan – Country-By-Country Report and Master file

35.Sec 43B included payments made to Railways.

36. Set-off : No set off of any loss shall be allowable in respect of income under the sections 68 or section 69 or section 69A or section 69B or section 69C or section 69D.

37.Taxation of Non-compete fees and exclusivity rights in case of Profession.

38.Clarification regarding the definition of the term ‘unlisted securities’ for the purpose of Section 112 (1) (c).

39. Time limit for carry forward and set off of such loss under section 73A of the Income-tax Act.

40. Amortisation of spectrum fee for purchase of spectrum.

41. Rationalization of tax deduction at Source (TDS) provisions in section 192A, 194BB, 194C, 194LA, 194D, 194G, 194H, 194DA, 194EE,194K & 194L.

42. Enabling of Filing of Form 15G/15H for rental payments.

43.Sec 50C in case of Registration of Immovable Properties.- where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration.

44. Rationalization of conversion of a company into Limited Liability Partnership (LLP)

45. Rationalisation of tax treatment of Recognised Provident Funds, Pension Funds and National Pension Scheme.

46. Filing of return of Income, Processing under section 143(1) be mandated before assessment, Rationalisation of time limit for assessment, reassessment and recomputation.

47. Rationalisation of time limit for assessment in search cases.

48. Rationalisation of advance tax payment schedule under section 211 and charging of interest under section 234C.

49. Payment of interest on refund

50. Rationalisation of penalty provisions

51. New Section 270AA- Immunity from penalty and prosecution in certain cases by inserting new section 270AA