Monday, 29 February 2016

India Union Budget 2016 Speech Highlights

Though the Finance Minister of India Mr Arun Jaitley started his Budget Speech with negative statement that there is a hint of global fall in growth from 3.4% in 2014 to 3.1% in 2015, still India is holding on and doing well.

The IMF has declared India as a 'bright spot' and India's growth has been extra-ordinary. The GDP growth of India is at around 7.6%. The Forex Reserves has been at its highest point today at 350 billion US Dollars.

The Union Budget 2016 has been declared on 9 pillars as follows:
  1. Rural Sector (Employment etc.)
  2. Agriculture sector i.e. doubling the income of Farmer in next 5 years
  3. Social and Health sector
  4. Educational skills development
  5. Infrastructure and Investment
  6. Financial policies
  7. Governance
  8. Fiscal Discipline
  9. Tax Reforms to reduce compliance burden
The Highlights of Budget Speech are as follows:
  • Help to Farmers: 15,000 crore set aside for Farmer loan interest repayment subvention
  • 100% Rural electrification Target by 01.05.2018
  • Digital Degree Repository to maintain a system to store School Leaving Certificates, College degrees etc. at one single place
  • Bringing Entrepreneurship to the doors of the youth
  • All small shops can be open 7 days of the week just like Shopping Malls. There was a provision of compulsory one weekly off which is done away with
  • Government will contribute 8.33% for new employees towards Employees Provident Fund for initial 3 years. Thus giving a boost to employment
  • 100% FDI route for marketing of food products produced and manufactured in India so that the farmers receive correct price to their produce and their products reaches the consumers in time
  • Companies will be incorporated in one single day as per Companies Act 2013.
  • Instead of increasing the basic tax slab of income tax payers, the tax rebate of Rs.2,000 has been increased to Rs.5,000. This will benefit nearly 2 crore taxpayers.
  • Those who pay rent but do not get benefit of the same by way of HRA etc., 80GG deduction has been increased from Rs.24,000 p.a. to Rs.60,000 p.a.
  • Presumptive tax (8%) under section 44AD turnover limit has been increased from Rs. 1 crore to Rs. 2 crore. Around 33 lacs taxpayers currently enjoy benefit of the same
  • Professionals will also be in be included in the list of business for presumptive tax under section 44AD whose Turnover is less than Rs.50 lacs with the condition that gross profit is shown at 50%
  • Section 35CCD applicable taxpayers to have a Sunset clause of 01.04.2020
  • New Manufacturing companies incorporated on or after 01.04.2016 have an option to pay corporate tax at 25% + surcharge + cess if they dont take any investment or profit linked benefits
  • Those Companies having Turnover less than Rs. 5 crores for year ending March 2015, the Corporate tax will be 29% + Surcharge + cess
  • STARTUPS get mention: 100% profit deduction to Startups for 3 out of 5 years which are started between April 2016 till March 2019. Capital Gains will not be taxed. However, MAT will be applicable.
  • Tax will be exempt from withdrawal from NPS to the limit of 40%
  • Tax Collected at Source (TCS) will be applicable at 1% on Luxury cars priced above Rs. 10 lacs and purchase of Goods and Services above Rs. 2 lacs.
  • Housing Sector made affordable: 100 % profit deduction for Housing Scheme where Flats constructed upto in metro cities and upto in non-metro cities.
  • These projects need to be approved between June 2016 to March 2019 and needs to have completion within 3 years once approved. MAT will be applicable
  • For First timers housing loan payers, additional interest deduction will be available if the Loan approved amount is maximum Rs 35 lacs and House value is maximum Rs. 50 lacs
  • Service Tax will be exempt for Housing projects having Flats less than 60 sq.mtrs.
  • Dividend Distribution Tax now will not remain uniform. Those earning Dividends more than Rs.10 lacs p.a. will face additional tax at 10% on gross i.e. Individuals and HUF. Surcharge on the Individual income increased from existing 12% to 15% (Taxing the Super Rich)
  • General Anti Avoidance Rules (GAAR) will be implemented from 01.04.2017
  • New Excise Duty at 12.5% with input credit or 1% without input credit on articles of jewellery (excluding silver, diamond, precious stones)
  • Excise Duty on Tobbacco excluding bidis will increase between 10% and 15%
  • Infrastructure cess on Cars: 1% on Petrol,LPG, CNG. 2% on Diesel Cars, and 4% on SUVs
  • Reducing Litigation: Limited period window made available to Declare undisclosed income. This undisclosed income will be taxed at 30% and surcharge at 7.5%. There will be no scrutiny proceedings and will receive immunity from any proceedings. This window will be available between 01.06.2016 to 30.09.2016
  • Currently, 3 lacs cases are pending at Appellate level with total litigative tax amount around Rs. 5.5 lacs crore. A DRS (Dispute Resolution Scheme) is introduced where if the tax and interest amount is paid, penalty will not be applicable. These are the cases where tax litigative amount is less than Rs. 10 lacs
  • One Time settlement scheme for those who are victim of retrospective taxation. Settle the tax amount and the interest and penalty will be waived. (For eg. Vodafone case)
  • Currently Penalty can be levied between 100% to 300% of tax amount at the discretion of Income Tax offier. This power is taken away and slab wise penalty will be applicable
  • 50% penalty in cases of under-reporting and 200% penalty in case of misreporting
  • 11 new Benches will be introduced for CBEC i.e. Indirect Tax Department
  • The Ministry has agreed and implement to several recommendation received from TARC. 
  • TDS mismatch (which is a major pain currently) reforms is dealt separately with Annexure to Budget Speech
  • NRI selling flats or home in India, TDS rate is high in current scenario. By providing alternate document, this TDS rate will be reduced
  • E-Assessment is already in its pilot stage. This will expanded to 7 cities thus avoiding face to face contact between Income tax officer and taxpayers
Total Budget Revenue loss due to Direct Tax amendments is Rs. 1060 crore whereas Total Budget Revenue gain due to Indirect Tax amendments is Rs. 20,670 crore resulting into Net Gain of Rs.19,610 crores!
“Champions are made from something
they have deep inside of them - a desire, a dream, a vision”. We have a
desire to provide socio-economic security to every Indian, especially the
farmers, the poor and the vulnerable; we have a dream to see a more
prosperous India; and a vision to ‘Transform India’.

CA Niraj Mahajan
Pune, India

* 1 lakh = 1,00,000 (0.1 million)
**1 crore = 1,00,00,000 (10 millions)

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