Budget Highlights 2016-17 - apcca.files.wordpress.com · Union Budget 2016-17 – Direct Tax...
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Ambalal Patel & Co.
Chartered Accountants 1st Floor, Sapphire Business Centre,
Above SBI Vadaj Branch, Usmanpura,
Ashram Road, Ahmedabad-380013
Email: [email protected]
Website: www.apcca.com
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Budget Highlights
2016-17 DIRECT TAX PROPOSALS
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
Ambalal Patel & Co
Chartered Accountants
Budget
2016-17
Finance Minister Arun Jaitley on 29th February, 2016, Monday announced a
budget aimed at high growth,
He started the Speech by saying that “The Global Slow Down has not impacted
the Indian Economy. The International Monetary Fund has hailed India as a
‘bright spot’ amidst a slowing global economy”.
Here are the clause by clause changes proposed by Honorable Finance Minister
in respect of Direct Tax :
i. Income Tax rates:
a) There is no change in Slabs of Income tax, Rates of Income Tax or Education
Cess except in case of Companies. The changes in the tax rate of Domestic
Companies is as under:
Assessee Old Tax
Rate
New Tax
Rate
Conditions
Domestic
Company
30% 29% Turnover Below 5 crores in Prev. year i.e. in
2014-15
Newly set-up
Domestic
Company
(Section
115BA)
NA 25% (at
Option of
Assessee)
1) Set-up and registered after
01.03.2016
2) Manufacturing or Production activity
3) No other activity allowed
4) Has not claimed any profit linked
benefits or deductions e.g.10AA,
Additional Depreciation,etc.
5) 80JJAA Deduction can be claimed
6) MAT is Applicable
Domestic
Company
30% 30% Other Than above
b) In case Resident Individual having taxable income of less than Rs.5,00,000/-
(after deduction under Ch-VIA), the amount of Tax Rebate u/s 87A will be
increased from Rs.2000/- to Rs.5000/- .
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
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c) However there is change in rate of Surcharge as under:
Assessee Taxable income Old
Surcharge
Rate
New
Surcharge
Rate
Maximum
Tax Rate
FY 2016-17
Individual/HUF More than 1 Crore 12% 15% 35.535%
Partnership Firm More than 1Crore 12% No Change 34.608%
Domestic Company
(Normal Tax)
1 Cr to 10 Crs 7% No Change 33.063%
More than 10 Crs 12% No Change 34.608%
MAT 1 Cr to 10 Crs 7% No Change 20.38885%
More than 10 Crs 12% No Change 21.3416%
Dividend Dist Tax No Change 20.3576%
ii. Section 2 (23C) Electronic hearing added
In the definition of the hearing, communication of data and documents through
electronic mode is included. Due to which the “E-Assessments” can be done from
01.06.2016.
iii. Withdrawal of accumulated balance from Provident Fund (Section 10(12)) and
Superannuation Fund (Sec.10(13)) (W.e.f: FY 2016-17) :
Current:
a) Whole amount withdrawn from Provident Fund after 5 years of service is
exempt.
b) Whole amount of Annuity is exempt.
Proposed:
It is proposed that tax is payable on amount withdrawn in excess of 40% of
balance as on date (60% of the total withdrawl is taxable). This is applicable for
employees contribution made on or after 01.04.2016.
However, any amount received in hands of Legal Heir on death, is not taxable.
The taxability is protested and Govt. may rollback to the Non-taxability.
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
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iv. Section 10(12A) Withdrawl of accumulated balance from National Pension System
Fund (W.e.f: FY 2016-17) :
Current:
Whole amount withdrawn is taxable.
Proposed:
It is proposed that tax is payable on amount withdrawn in excess of 40% of
balance as on date (60% of the total withdrawl is taxable).
However, any amount received in hands of Legal Heir on death, is not taxable.
(Section 80CCD(3) proviso)
v. Section 10(15B) Interest on deposit certificate issued under “Gold Monetisation
Scheme” (W.e.f: FY 2016-17) :
Present:
Whole amount of interest is taxable.
Proposed:
It is proposed that Whole amount of Interest is exempt.
vi. Section 10(34) Dividend Income in excess of Rs.10 lacs (W.e.f: FY 2016-17) :
Present Provision:
The amount of dividend income is exempt.
Proposed Change:
In case of Resident Individual, HUF and Firms, dividend received exceeding Rs.10
Lakhs is taxable @ 10% (Section 115BBDA) in the hands of the receiver of the
dividend (From FY 2016-17). No expenses are allowed as deduction from such
Taxable Dividend exceeding Rs. 10 lacs.
AOP and BOI are not covered under this provisions.
Example:
In case the amount of dividend is Rs.11,00,000/-, then amount taxable @ 10% is
Rs.1,00,000/- (Rs.11,00,000 – Rs.10,00,000).
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
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vii. Section 10AA – Deduction to units in SEZ
Deduction under this section will not be available from 01.04.2020.
viii. Section 17(2)(vii) – Perquisites – Change in limit of Superannuation Fund
Currently the amount contributed by Employer towards Superannuation Fund of an
Employee is not taxable upto limit of Rs.1,00,000/-.
It is proposed to enhance the limit from Rs.1,00,000/- to Rs.1,50,000/- in a financial
year.
Change in Rule 6 of Part-A of Fourth Schedule – Change in limit of Provident Fund
Currently the amount contributed by Employer towards Employees Provident Fund of
an Employee is not taxable upto limit of 12% of Basic Salary.
It is proposed that the amount in excess of Rs.1,50,000/- contributed by an Employer in
Provident Fund of an Employee will be taxable in hands of Employee in a financial year.
ix. Section 24- Deduction from Income from House Property ( W.e.f.: FY 2016-17)
Currently the interest on borrowed capital is allowed as deduction if property is
acquired or constructed within 3 years from the year in which capital is
borrowed.
It is proposed that the period of 3 years may be increased to 5 years.
x. Section 28- Taxability of Non- Compete fees received by Professionals ( W.e.f.: FY
2016-17)
It is proposed that the amount of received by Professionals as Non – Compete fees
will now be taxable under “Income from Business & Profession”. Earlier it was
taxable under “Income from Other Sources”.
xi. Section 32- Proposal to reduce the rate of Depreciation to 40% for all assets.
It is proposed that the rate of depreciation on all the assets may be reduced to a
maximum rate of 40% in the coming years. The date of applicability of this change
has not been announced.
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xii. Section 35- Phasing out of Deductions and Exemptions
Section Deduction Type Upto
FY 2016-17
From FY
2017-18 to
2019-20
From FY
2020-21
35(1)(ii) Scientific research to
university, college, etc.
175% 150% 100%
35(1)(iia) Scientific research to
company
125% 100% 100%
35(1)(iii) Social or Statistical
research to university,
college, etc.
125% 100% 100%
35(2AA) Scientifice Research-
National Laboratory/
I.I.T.
200% 150% 100%
35(2AB) Scientific Research - In
house research
200% 150% 100%
35AC Contribution to
approved institution for
Social Development (Eg.
CRY, Akshay Patra)
100% No deduction No
deduction
xiii. Section 35AD- Deduction of Capital Investment in Infrastructure Projects (Similar to
Section 80IA) (w.e.f.: AY 2018-19)
It is proposed that any company shall be given deduction of whole capital
expenditure pertaining to Developing or Maintaining and Operating or Developing,
Maintaining and Operating a new Infrastructure Facility on entering into agreement
with Central Government or State Government.
This provisions are similar to Section 80IA but the only difference is that Section 80IA
gives deduction of Profit whereas Section 35AD gives deduction of Capital
Expenditure.
xiv. Section 36(1)(viia)- Provision for Bad & Doubtful debts made by NBFC (w.e.f.: FY
2016-17)
Deduction upto 5% of Total Income (before deduction of Chapter – VIA) is allowed as
provision for bad & doubtful debts in case of NBFCs.
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
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xv. Section 40(a)(ib) – Disallowance of amount on which Equalisation Levy has not
been deducted (w.e.f.: FY 2016-17)
It is proposed that where an amount is payable for services from non-resident and
equalization levy is not deducted and paid, the amount of such expense shall not be
allowed as deduction. However if the equalization levy is paid before filing the return
of income, then the same will be allowed as deduction.
xvi. Section 43B- Deductions on actual payment basis (w.e.f.: FY 2016-17)
Amount due to Indian Railways for use of assets of Indian Railways shall be
allowed as deduction only if the payment is made on or before the due date, just like
any other duties and taxes under Section 43B.
xvii. Changes in Presumptive taxation and Tax Audit Limit (w.e.f.: FY 2016-17)
Presumptive Taxation(Individuals, HUF and Partnership Firms)
The limit of turnover for governing under this section has been increased as under:
Sections Nature of
Activity
Old Turnover
Limit
New Turnover
Limit
Rate of
Presumptive
Profit
44AD Business 1 crores 2 crores 8%
44ADA (New) Profession NA 50 Lakhs 50%
Note:-
1) In case of Partnership firms, the amount of profit after deducting interest and
remuneration paid to partners shall be more than 8% or 50% as may be
applicable of total turnover. Previously the deduction of interest and
remuneration was allowed from such profit.
2) For Section 44AD – Business, where once an assesse has shown profit as per
Section 44AD in a Financial Year, then he has to follow the same for lifetime. And
in case he does not show profit as per Section 44AD in subsequent year, then he
cannot show the profit as per Section 44AD for next 5 years. For Example:
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
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Asst Year Turnover Profit Remarks
2017-18 1 crore 8 lacs As per 44AD
2018-19 1 crore 4 lacs Not as per 44AD
2019-20 to
2024-25
For this 5 years profit cannot be shown as per 44AD. (Books
of accounts are required to be maintained).
2025-26 From this 6th year he can opt for 44AD
Tax Audit Limits – Section 44AB
The limits of tax audit has been changed as under:
Particulars Old Turnover Limit New Turnover Limit
Business 1 crore No Change
Profession 25 Lacs 50 Lacs
xviii. Section 47- Transaction not regarded as transfer for Capital Gains (w.e.f.: FY 2016-
17)
a) In case of Individuals assesse only, redemption of Sovereign Gold Bonds issued by
RBI will not be considered as transfer and thus there will not be any Capital Gains
Tax.
b) In case of conversion of Company into LLP, one more condition is added that the
Total assets in books of accounts of company in any of the 3 Previous Year
preceding the previous year in which conversion took place does not exceed Rs.5
crores.
xix. Section 48- Computation of Capital Gains (w.e.f.: FY 2016-17)
a) In case of redemption of Sovereign Gold Bonds issued by RBI, benefit of
indexation in case of Long Term Capital Gain will be available.
b) In case of Non Resident, while calculating capital gain on account of redemption
of Rupee denominated bond (Capital Index Bonds) of Indian company, gain
arising due to exchange rate fluctuation shall be allowed as deduction from Sale
Consideration.
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
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xx. Section 50C- Adaption of Stamp duty value in case of sale of Immovable Property
(w.e.f.: FY 2016-17)
It is proposed that when any amount of consideration was paid by way of Account
Payee cheque, D.D. or ECS before the agreement to sale (banakhat) and sale deed is
executed on date after that, then the Sale Consideration shall be the stamp duty
valuation on the date of agreement to sale (banakhat) and NOT THE VALUE ON DATE OF
SALE DEED.
xxi. Section 54EE- Investment of Capital Gain in units of Specified Funds
(w.e.f.: FY 2016-17)
It is proposed to provide exemption from Capital Gain tax if the capital gain proceeds
are invested by an Assessee in the units of specified fund not exceeding 50 Lacs as may
be notified within a period of Six Months from date of transfer and lock in period of 3
years is applicable. (Similar Provision to Section 54EC).
xxii. Section 56- Income from Other Sources (w.e.f.: FY 2016-17)
It is proposed that Shares received as a result of Demerger or Amalgamation of a
company by individual or HUF will be exempt.
xxiii. Section 80EE- Deduction on account of Interest on Housing Loan (w.e.f.: FY 2016-
17)
With effect from 01.04.2016, it is proposed that deduction of Rs.50,000/- above
Rs.2,00,000/- (u/s.24) will be allowed, subject to following conditions:
Conditions Upto 31.03.2016 W.e.f. 01.04.2016
1) Residential house purchased First First
2) Loan Sanctioned between FY 2013-14 FY 2016-17
3) Amount of Loan Below Rs.25 lacs Below Rs.35 lacs
4) Value of Residential House Below Rs.40 lacs Below Rs.50 lacs
5) Amount of deduction Max Rs.1 lacs
(One time
Deduction)
Rs.50,000/- for every year till
repayment of loan.
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xxiv. Section 80GG- Deduction on account of Rent paid (Other than HRA) (w.e.f.: FY
2016-17)
With effect from 01.04.2016, it is proposed that maximum deduction of Rs.5000/- per
month will be allowed, subject to following conditions:
Conditions Upto 31.03.2016 W.e.f. 01.04.2016
1) Maximum deduction Rs.2000/- per month Rs.5000/- per month
2) Excess of 10% of
Income
Rent paid – 10% of Total
Income
No Change
3) Max 25% of Total
Income
Maximum upto 25% of the
Total Income
No Change
Lower of the above will be available.
xxv. Restriction on claim of various deductions.
Section Description Available for Not Available for
80IA(4)(i) Development of
Infrastructure
Facility like Road,
Bridges, etc.
Projects started
before 31.03.2017
(Will continue to
claim benefit after
01.04.2017)
Projects started
after 01.04.2017
80IAB(1) Development of SEZ Projects started
before 31.03.2017
Projects started
after 01.04.2017
80IB(9)(ii),(iv),(v) Industrial
undertaking other
than Infrastructure
Projects
Projects started
before 31.03.2017
Projects started
after 01.04.2017
Note:-
The deductions in case of 80IA for Development of Infrastructure Facility like Road,
Bridges, etc. shall now be available under Section 35AD. Only difference is that Section
80IA gives deduction of Profit whereas Section 35AD gives deduction of Capital
Expenditure.
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xxvi. Insertion of New Section – 80IAC for deduction in respect of “Start-ups”.
a) Deduction available to “Start-Up Business” involving the activities like Innovation,
Development, Deployment or Commercialization of new products, processes or
services driven by Technology or Intellectual Property.
b) “Start-Up” must be incorporated between 01.04.2016 to 31.03.2019.
c) The amount of Turnover of the business does not exceed Rs.25 crores in any
previous year during 01.04.2016 to 31.03.2021.
d) Business is approved and holds certificate from Inter-Ministerial Board of
Certification as notified by the Central Government.
e) 100% of Profits and Gains are eligible for deduction.
f) Benefit can be availed for 3 consecutive Assessment Years out of 5 years.
g) Deduction is available from FY 2016-17.
h) Subject to certain other conditions.
xxvii. Insertion of New Section – 80IBA for deduction in respect of Housing Projects.
Particulars 4 Metro Cities – 25 kms
from Muncipal Limit
Non – Metro cities
Plot Size Above 1000 sq. mtrs. Above 2000 sq.mtrs
Built-up area of Residential
units
Less than 30 sq.mtrs. Less than 60 sq.mtrs
Commercial
Establishments
Not more than 3% of total
built-up area
Not more than 3% of total
built-up area
a) The project has to be approved by Competent Authority between 01.06.2016 to
31.03.2019.
b) The assesse is required to complete the said project within 3 years from the date
of approval, failing which the entire deduction claimed in earlier years shall be
deemed as his income.
c) Only one unit is allotted to an individual in the project and no other unit has been
allotted to his wife or minor children.
d) Separate books of accounts are required to be maintained for such projects.
e) The deduction shall be available to “Developer” only and not available to “Work-
Contractor”, even if the project is allotted by Central or State Government.
f) 100% of Profits and Gains are eligible for deduction.
g) Deduction is available from FY 2016-17.
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xxviii. Substitution of Section – 80JJAA for deduction of 30% in respect of New Employees
Cost. (w.e.f. FY 2016-17)
Particulars Old Section New Section
Applicable to Manufacturing Units All units covered by Audit
u/s 44AB
No. of Employees
increased
Minimum 100 workmen
and increase of 10% per
year of New Workmen
Additional employees
employed during the year
and no such condition of
increase
No. of Days employed in a
FY
Minimum 300 days Minimum 240 days
Period of deduction 3 years from the Previous
Year
No change
Covered Employees All covered Employees below salary of
Rs.25000/- per month and
included in EPF.
Mode of Payment of
salary
Any Other than Cash
xxix. Section – 112(1)(c)(iii) – Tax on Long Term Capital Gain on shares of unlisted
companies by Non Resident. (W.e.f. FY 2016-17)
It is proposed that the Long Term Capital Gain on Shares of Unlisted Company for
Non Resident will be taxable at 10%, without indexation.
xxx. Insertion of Section – 115BBF for taxation of Income from Royalty @ 10% in
respect of New Patents developed and registered in India. (w.e.f. FY 2016-17)
It is proposed that the Royalty Income received in respect of New Patents developed
and registered in India, will be taxable at 10%. No expense is allowed as deduction.
While calculating the MAT, income from royalty shall be ignored if tax is paid as per
this provisions.
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xxxi. Changes in Section – 115JB MAT. (w.e.f. FY 2016-17)
a) In case of a company being a unit of International Financial Service center (Like
GIFT City) established after 01.04.2016 and deriving its income only in convertible
foreign exchange, MAT is payable @ 9%.
b) MAT will not be applicable to all Foreign Company retrospectively from AY 2001-
02.
c) Patent Income received on new patents as taxed under Section 115BBF shall be
excluded for calculation of MAT under this Section.
xxxii. Changes in Section – 115JH Place of Effective management.
The applicability of Place of Effective Management rules has been deferred for 1 more
year. Government may issue guidelines for foreign companies which may be considered
as resident due to “POEM Rules”.
xxxiii. Changes in Section – 115O -Dividend Distribution Tax (w.e.f. FY 2016-17)
No Dividend Tax is payable on dividend distributed by Special Purpose Vehicle (SPV)
Domestic Company to business trust out of its current income. Further any income
distributed by Business trust to Unit Holder will not be taxable under Section 115UA.
Also no Dividend Tax is payable on dividend distributed by a company being a unit of
International Financial Service center established after 01.04.2016 and deriving its
income only in convertible foreign exchange.
xxxiv. “Exit Tax” for Trusts Section – 115TD (w.e.f. 01.06.2016)
Any charitable trust registered under Section 12AA in the following cases have to pay
tax @ Maximum Marginal Rate (30%) on the amount of Accreted Income:
a) Change of Object from Charitable to Non-Charitable.
b) Merger with the trust having Non Charitable Object
c) On dissolution of the trust the assets are transferred to the trust having Non
Charitable Object.
Accreted Income means the amount by which the aggregate fair market value of the
total assets of the trust or the institution, as on the specified date, exceeds the total
liability of such trust or institution computed in accordance with the method of
valuation as may be prescribed.
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xxxv. Changes in Section – 139 – Filling of return of Income (w.e.f. FY 2016-17)
Current:
a) Any Individual, HUF, AOP or BOI is required to file the return of income, if his
income before allowing deduction u/s. 10A, 10B, 10BA or Chapter – VIA is above
the basic exemption limit.
b) Belated Return u/s. 139(4) can be filed before one year from the end of specific
assessment year (upto AY 2016-17, return can be filed till 31.03.2018)
c) Belated return as above cannot be revised.
d) If return is filed without paying Self Asst Tax then it is considered as Defective
Return.
Proposed:
a) It is proposed that in case of Individual, HUF, AOP or BOI in addition to above
Income from Long term Capital Gains (exempt u/s.10(38)) is also required to be
added to calculate the basic exemption limit.
b) Belated return u/s. 139(4) can be filed before the end of specific assessment year
(From AY 2017-18, return can be filed till 31.03.2018), so Extra Period of ONE
YEAR is now NOT AVAILABLE to file Belated Return.
c) Belated return filed as above can be revised.
d) If the return is filed without paying Self Asst Tax, then it will not be considered as
Defective Return.
xxxvi. Changes in Section – 143 – Issue of Intimation and selection of case for Scrutiny
Assessment (w.e.f. FY 2016-17)
a) Any difference of Income as per Form 26AS and as per Return of Income filed will
be added while processing the return u/s 143(1). However 30 days time will be
given to explain and rectify the difference, otherwise the amount will be added in
income.
b) Any amount reported by Auditor as disallowance and the same has not been
disallowed in Income Computation will be added while processing u/s 143(1).
c) It is compulsory to issue intimation u/s 143(1) even if the case is selected for
Scrutiny Assessment u/s 143(3).
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xxxvii. Changes in Section – 153 - Time Limit of Completion of Assessment or Re-
assessment and Re-computation (w.e.f. 01.06.2016)
a) The due date for completion of assessment proceeding u/s. 143 or 144 has been
reduced from 24 months to 21 months from the end of relevant Asst Year i.e. to
be completed before 31st December instead of 31st March.
b) The due date for completion of re-assessment proceeding u/s. 147 has been
reduced from 12 months to 9 months from the end of Financial year in which
notice was issued i.e. to be completed before 31st December instead of 31st
March.
xxxviii. Changes in Provisions related to Tax Deducted at Source and Tax Collected at
source (w.e.f. 01.06.2016)
a) Increase in threshold limit of deduction of tax at source on various payments
mentioned in the relevant sections of the Act
Present Heads – Section Existing Threshold
Limit (Rs.)
Proposed Threshod
Limit (Rs.)
192A - Payment of accumulated balance
due to an employee
30,000 50,000
194BB - Winnings from Horse Race 5,000 10,000
194C - Payments to Contractors Aggregate annual
limit of 75,000
Aggregate annual
limit of 1,00,000
194LA - Payment of Compensation on
acquisition of certain Immovable Property
2,00,000 2,50,000
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
b) Revision in rates of deduction of tax at source on various payments mentioned
in the relevant sections of the Act
Present Heads – Section Existing Rate
of TDS (%)
Proposed Rate of
TDS (%)
194DA Payment in respect of Life Insurance
Policy
2% 1%
194EE Payments in respect of NSS Deposits 20% 10%
194D Insurance commission 10% 5%
194G Commission on sale of lottery tickets 10% 5%
194H Commission or brokerage 10% 5%
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c) Form 15G / H can be furnished for NO TDS on payments made in respect of
Rent of Immovable Property.
d) Tax Collected At Source (TCS):
Nature of Goods Rate of
TCS (%)
Mode of Payment
Sale of Motor Vehicle, value exceeding 10 Lacs 1% Any mode of payment
Sale of any goods or service except bullion and
jewelry
1% In cash only (Note -1)
Note - 1:
In case tax has been deducted by the buyer on the amount then TCS is not required to
be collected.
xxxix. Requirement of furnishing PAN in case of payment made to Non Residents (w.e.f.
01.06.2016)
Current:
If a Non Resident does not hold a PAN, then TDS is required to be deducted at 20.6%
or rate applicable as per Section 195 or DTAA, whichever is higher.
Proposed:
It is proposed that this provision will not be applicable for Payments made to Non
Residents. Hence if the rate of TDS as per Section 195 or DTAA is lower than 20.6%,
then TDS can be deducted at such lower rate. Subject to furnishing of other
documents as may be prescribed.
xl. Changes in Section – 211 - Provisions related to Advance Tax (w.e.f. 01.06.2016)
1) It is proposed to amend the advance tax payment schedule for assesse other
than companies and bring it in line with payment made by companies. So now
advance tax has to be paid in FOUR INSTALLMENTS INSTEAD OF THREE
INSTALLMENTS.
2) It is proposed that the eligible assesse opting for Section 44AD – Presumptive
taxation shall be required to pay advance tax of 100% in one installment on or
before 15th March of Financial year. Earlier there was no such provisions.
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xli. Changes in levy of Penalty Section – 270A & 270AA (w.e.f. FY 2016-17)
Upto 31.03.2016 – Section 271(1)(c)
1) Penalty on account of Concealment of Particulars of Income or Furnishing of
Inaccurate particulars of Income is leviable @ 100% to 300% of amount of tax
evaded.
2) Appeal can be filed against such orders.
From 01.04.2016 – Section 270A
Section Description Rate of Penalty
270A 1) Penalty of Under Reporting and 50% of Tax Evaded
2) Penalty of Mis-Reporting of Income 200% of Tax Evaded
Section 270AA – Immunity from Imposition of Penalty levied u/s.270A
Immunity from Penalty can be granted on following conditions:
1) This immunity is available for Penalty of Under reporting of Income cases only.
2) Application to AO who has imposed penalty within 30 days from the date of
order u/s. 143(3) or 147.
3) Application can be made only if assesse has paid Tax and Interest payable as per
order u/s. 143(3) or 147.
4) No appeal has been filed against the order u/s. 143(3) or 147
5) The order passed under this section for imposing penalty is not appealable.
xlii. Changes in levy of Penalty in Search Cases – 271AAB (w.e.f. FY 2016-17)
It is proposed that the rate of penalty on undisclosed income in case of search shall
be levied at flat rate of 60%. Earlier the penalty was leviable between 30 – 90% of
the undisclosed income.
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
Ambalal Patel & Co
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2016-17
xliii. Changes in stay of Demand by paying 15% - Instruction No.1914 dated.21.03.1996
as amended on 29.02.2016(w.e.f. 29.02.2016)
It is instructed to all the AO, that even if the Appeal has been filed he may ask for
payment of 15% of disputed demand and balance can be stayed till the disposal of
first Appeal.
xliv. Changes in period of holding in case of Shares of Private Company
As mentioned by Honorable Finance Minister in his speech, it is proposed that the
period of holding will be reduced to 2 years from 3 years to consider the shares of
Private Ltd Company as Long Term Capital assets.
xlv. Change in section 14A- Rule 8D Calculation:
It is proposed that disallowance under section 14A will be limited to 1% of the
average monthly value of investments yielding exempt income, but not exceeding
the actual expenditure claimed under rule 8D (Effective date yet not notified).
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
Ambalal Patel & Co
Chartered Accountants
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2016-17
Income Declaration Scheme 2016
An opportunity is proposed to be provided to persons who have not paid full
taxes in the past to come forward and declare the undisclosed income and pay tax,
surcharge and penalty totaling in all to forty-five per cent of such undisclosed
income declared at Fair Market Value as on 01.04.2016.
The scheme is proposed to be brought into effect from 1st June 2016 and will
remain open up to the date to be notified by the Central Government in the official
gazette. The scheme is proposed to be made applicable in respect of undisclosed
income of any financial year upto 2015-16.
Tax is proposed to be charged at the rate of thirty per cent on the declared
income as increased by surcharge at the rate of twenty five per cent (Effective
7.5%) of tax payable (to be called the Krishi Kalyan cess). A penalty at the rate of
twenty five per cent (Effective 7.5%) of tax payable (Totalling to 45% of Declared
Income) is also proposed to be levied on undisclosed income declared under the
scheme.
It is proposed that following cases shall not be eligible for the scheme:
1) where notices have been issued under section 142(1) or 143(2) or 148 or 153A or
153C, or
2) where a search or survey has been conducted and the time for issuance of notice
under the relevant provisions of the Act has not expired, or
3) where information is received under an agreement with foreign countries regarding
such income,
4) cases covered under the Black Money Act, 2015, or
5) persons notified under Special Court Act, 1992, or
6) cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic
Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention
of Corruption Act, 1988.
It is proposed that payment of tax, surcharge and penalty may be made on or before a
date to be notified by the Central Government in the Official Gazette and non-payment
up to the date so notified shall render the declaration made under the scheme void.
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
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It is proposed to provide that declarations made under the scheme shall be exempt
from wealth-tax in respect of assets specified in declaration. It is also proposed that no
scrutiny and enquiry under the Income-tax Act and Wealth-tax Act be undertaken in
respect of such declarations and immunity from prosecution under such Acts be
provided. Immunity from the Benami Transactions (Prohibition) Act, 1988 is also
proposed for such declarations subject to certain conditions.
It is proposed to provide that where a declaration under the scheme has been made by
misrepresentation or suppression of facts, such declaration shall be treated as void.
It is also proposed that nothing contained in the Scheme shall be construed as
conferring any benefit, concession or immunity on any person other than the person
making the declaration under this Scheme. In cases where any declaration has been
made but no tax and penalty referred to the scheme has been paid within the time
specified, the undisclosed income shall be chargeable to tax under the Income-tax Act in
the previous year in which such declaration is made.
In cases where any income has accrued, arisen or received or any asset has been
acquired out of such income prior to commencement of this Scheme, and no
declaration in respect of such income is made under the Scheme such income shall be
deemed to have accrued, arisen or received, or the value of the asset acquired out of
such income shall be deemed to have been acquired or made, in the year in which a
notice under section 142, section 143(2) or section 148 or section 153A or section 153C
of the Income-tax Act is issued by the Assessing Officer and the provisions of the
Income-tax Act shall apply accordingly.
It is further proposed that if any difficulty arises in giving effect to the provisions of this
Scheme, the Central Government may, by order, not inconsistent with the provisions of
this Scheme, remove the difficulty by an order not after the expiry of a period of two
years from the date on which the provisions of this Scheme come into force and such
order be laid before each House of Parliament.
It is proposed that the Central Board of Direct Taxes under the control of Central
Government be provided the power to make rules, by notification in the Official
Gazette, for carrying out the provisions of this Scheme and such rules made be laid
before each House of Parliament in the manner provided in the scheme.
Union Budget 2016-17 – Direct Tax Proposals (For Clients only)
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EQUALISATION LEVY
A new chapter has been added in the Finance Act 2016, named Equalisation Levy.
Highlights of the same is as under:
Applicability:
This levy is applicable in following cases:
1) To a person resident in India and carrying on business activities (B2B
Transactions only) and Non Resident having Permanent Establishment in India.
2) Making payment to Non Resident not having PE in India above Rs.1 lacs
3) For services such as Online Advertisement, any space or any other service for
Online Advertisement and any other service as may be notified.
Example: Google Adwords, Monster, etc.
Rate of Deduction:
The Equalisation Levy is required to be deducted @ 6% on the consideration paid or
payable to the Non Resident.
Date of Payment:
The amount deducted as above has to be paid to the credit of Government by 7th Day of
next month.
Furnishing of Statements:
Statement has to be furnished to AO or other specified Authority in prescribed form
within prescribed time at the end of Financial Year.
The effective date of applicability of Equalisation Levy is not yet published in Official
Gazette.
Indirect Tax Proposals will Follow Soon……..