Budget 2016- Key Takeways from FM Speech

Budget  2016- Key Takeways from FM Speech

Facts & to  Figures

  1. GDP Growth Rate : 7.6%
  2. CPI Inflation Reduced from 9.4% to 5.4%
  3. Current Account Deficit : $ 14.4 Bn
  4. Forex Reserves – Highest till date $350 Bn

Investment proposals

  1. Special Focus on Farm, Social , Infra & Rural Sector
  2. All Government benefits will be conferred upon persons who deserve it, by giving a statutory backing to the AADHAR platform.
  3. Move beyond Food Security towards Income Security for Farmers. Farm Incomes to double by 2022.
  4. Rs 35,984 crore allocated for Agriculture in 2016-17
  5. A dedicated irrigation fund worth Rs 20,000 crore to be set up under NABARD
  6. A major programme for sustainable management of ground water resources has been prepared with an estimated cost of Rs 6,000 crore and proposed for multilateral funding.
  7. Soil Health Card scheme to be Revitalised. All 14000 cr farm to be brought under it by 2017.
  8. Rs 19000 crore allotted for e Pradhan Mantri Gram Sadak Yojana (PMGSY)
  9. Against the target of Rs 8.5 lakh crore in 2015-16, the target for agricultural credit in 2016-17 will be an all-time high of Rs 9 lakh crore.
  10. A sum of Rs 2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission.
  11. A sum of Rs 38,500 crore has been allocated for MGNREGS in 2016-17.
  12. 100% rural electrification by May 1, 2018
  13. Rs 9,000 crore has been provided for Swachh Bharat Abhiyan.
  14. Launch of new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional households within the next 3 years
  15. LPG connection in the name of women members of poor households
  16. New health protection schemes for health cover upto 1 lakh per family. Additional Rs 30000 under special conditions
  17. 3,000 Stores of Generic Drugs under Prime Minister’s Jan Aushadhi Yojana will be opened during 2016-17
  18. National Dialysis Services Programme’ to be launched.
  19. National SC/ST hub to support SC/ST entrepreneurs
  20. 62 new Navodaya Vidyalayas will be opened in the remaining uncovered districts over the next two years.
  21. An enabling regulatory architecture will be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions.
  22. Higher Education Finance Agency with Initial Corpus of Rs 1000 cr established
  23. Establish a Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets, on the pattern of a Securities Depository.
  24. Government of India will pay the Employee Pension Scheme contribution of 8.33% for all new employees enrolling in EPFO for the first three years of their employment. Applicable for Employees with salary less than Rs 15000
  25. Total outlay on roads and railways will be Rs 2,18,000 crore in 2016-17.
  26. Government will enact necessary amendments in the Motor Vehicles Act and open up the road transport sector in the passenger segment. An enabling eco-system will be provided for the States which will have the choice of adopting the new legal framework.
  27. 100% FDI will be allowed through FIPB route in marketing of food products produced and manufactured in India
  28. A comprehensive Code on Resolution of Financial Firms will be introduced as a Bill in the Parliament during 2016-17.
  29. Amendments proposed in RBI Act, Companies Act, SRAFESI Act, SEBI Act
  30. Rs 900 crore for Market Stabilization Fund for Pulses
  31. Rs 3000 cr for Nuclear Power Generation
  32. Rs 25000 cr for Recapitalization of Public sector Banks and RBI Act to be Ammended
  33. A bill on targeted delivery of financial services using Aadhar to be introduced:
  34. Plan – non-plan classification of expenditure to be done away with from FY 2017-’18. New Classification will be in the form of Revenue and Capital expenditure
  35. Nominal premium and highest ever compensation in case of crop loss under the PM Fasal Bima Yojana

Tax Reforms

  1. Increase in the ceiling of tax rebate under section 87A from Rs 2,000 to Rs 5,000 for Taxable income less than Rs 500000
  2. Increase the limit of deduction in respect of rent paid under section 80GG from Rs 24,000 per annum to Rs 60,000 per annum
  3. Increase in Turnover Limit of Rs 1 Cr to Rs 2 Cr in case of Section 44 AD
  4. Extension of presumptive Taxation to Professionals with Gross Receipts of Rs 50 lacs and profits to be taxed at 50%
  5. The accelerated depreciation provided under IT Act will be limited to maximum 40% from 1.4.2017.
  6. The benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020.
  7. The benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020.
  8. The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020
  9. The new manufacturing companies which are incorporated on or after 1.3.2016 are proposed 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.
  10. 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.
  11. 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. MAT to Apply.
  12. Special patent regime with 10% rate of tax on income from worldwide exploitation of patents developed and registered in India.
  13. POEM Rules deferred by 1 Year.
  14. GAAR will be implemented by 1st April,2017.
  15. Withdrawl upto 40% of the corpus at the time of retirement tax exempt in the case of National Pension Scheme/ EPF
  16. Reduction in service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid in certain cases.
  17. 100% deduction for profits to an undertaking from a housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019, and is completed within three years of the approval. Minimum Alternate Tax will, however, apply to these undertakings.
  18. For the ‘first – home buyers’, deduction for additional interest of `50,000 per annum for loans up to Rs 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed Rs 50 lakh
  19. Exempt service tax on construction of affordable houses up to 60 square metres
  20. In addition to Dividend Distribution tax paid by the Company, Dividend will be taxable @10% of gross amount of dividend for individuals, HUFs and firms receiving dividend in excess of Rs 10 lakh per annum.
  21. Increase in surcharge from 12% to 15% on persons, other than companies, firms and cooperative societies having income above Rs 1 crore.
  22. TCS @1% on purchase of luxury cars exceeding value of 10 lakh and purchase of goods and services in cash exceeding 2
  23. Rate of Securities Transaction tax in case of ‘Options’ is proposed to be increased from .017% to .05%.
  24. TDS of 6% on Gross amount paid to Foreign E-Commerce Firms with aggragate Online Advertisement revenue of more than Rs 1 lac. Applicable only on B2B Txns.
  25. Krishi Kalyan Cess, @ 0.5% on all taxable services, proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. The Cess will come into force with effect from 1st June 2016. Input Tax credit of this cess will be available for payment of this cess.
  26. 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.
  27. Imposition of Excise duty of ‘1% without input tax credit or 12.5% with input tax credit’ on articles of jewellery [excluding silver jewellery, other than studded with diamonds and some other precious stones], with a higher exemption and eligibility limits of Rs 6 crores and Rs 12 crores respectively
  28. Change the excise duty on branded readymade garments and made up articles of textiles with a retail sale price of `1,000 and above from ‘Nil without input tax credit or 6%/12.5% with input tax credit’ to ‘2% without input tax credit or 12.5% with input tax credit’
  29. Clean Energy Cess renamed as Clean Enviroment Cess doubled from Rs 200/ tone to Rs 400/tone.
  30. Increase the excise duties on various tobacco products other than beedi by about 10 to 15%
  31. Right to use the radio-frequency spectrum and its subsequent transfers will be considered as Service and not Intangible Good.
  32. Introduction of Limited Period Compliance Window for domestic taxpayers to declare undisclosed income or income represented in the form of any asset and clear up their past tax transgressions by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. There will be no scrutiny or enquiry regarding income declared in these declarations under the Income Tax Act or the Wealth Tax Act and the declarants will have immunity from prosecution. Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to certain conditions.
  33. New Dispute Resolution Scheme. A taxpayer who has an appeal pending as of today before the Commissioner (Appeals) can settle his case by paying the disputed tax and interest up to the date of assessment. No penalty in respect of Income-tax cases with disputed tax up to Rs 10 lakh will be levied. Cases with disputed tax exceeding Rs 10 lakh will be subjected to only 25% of the minimum of the imposable penalty for both direct and indirect taxes.
  34. Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty. Certain categories of persons including those who are charged with criminal offences under specific Acts are proposed to be barred from availing this scheme
  35. Change in Penalty rates in Income tax :

The penalty rates will now be 50% of tax in case of underreporting of income and 200% of tax 31 where there is misreporting of facts.     Remission of penalty is also proposed in certain circumstances where taxes are paid and appeal is not filed

  1. Amendment in Rule 8D of Income Tax Rules- The said Rule is being amended to provide that disallowance will be limited to 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure claimed.
  2. Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty
  3. Setting up of 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
  4. The monetary limit for deciding an appeal by a single member Bench of ITAT is proposed to be enhanced from Rs 15 lakhs to Rs 50 lakhs
  5. Non-residents without PAN are currently subjected to a higher rate of TDS. It is proposed to amend the relevant provision to provide that on furnishing of alternative documents, the higher rate will not apply..
  6. Facility of Revision of Excise Returns will be Introduced
  7. E-assessments in Income Tax to all Assessees in 7 mega cities in the coming years.
  8. Government will pay interest at the rate of 9% p.a against normal rate of 6% p.a in case there is delay in giving effect to Appellate order beyond ninety days.




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