Deduction of
Additional Interest of Rs.50,000 Per Annum for First-Time Home buyers
New Dispute
Resolution Scheme to be Introduced
Thirteen Cesses
Levied by Various Ministries having Revenue Collection less than Rs.50 Crore to
be Abolished
‘E-Sahyog’ and
‘E-Assessment’ to be Expanded Further
100% Deductions
for Profits to an undertaking in Housing Project for Flats up to 30 Sq. Mtrs.
The Union Finance Minister Shri Arun Jaitley said that taxation is a major
tool available to government for removing poverty and inequality from the
society. He enlisted 09 categories of thrust in his text proposals
which include (1) Relief to small tax payers (2) Measures to boost growth and
employment generation (3) Incentivizing domestic value addition to help Make in
India (4) Measures for moving towards a pensioned society (5) Measures for
promoting affordable housing (6) Additional resource mobilization for
agriculture, rural economy and clean environment (7) Reducing litigation and
providing certainty in taxation (8) Simplification and rationalization of
taxation (9) Use of technology for creating accountability.
Announcing relief to small tax payers Shri Jaitley proposed to raise the
ceiling of tax rebate U/s. 87A from Rs.2000 to Rs.5000. With this,
individuals having income up to Rs.5 lakh will get a relief of Rs.3000 in their
tax liability. He also proposed to increase the limit of deduction of
rent paid U/s.80 GG from Rs.24,000 per annum to Rs.60,000 to provide relief to
those who live in rented houses. Shri Jaitley proposed to increase the
turnover limit under presumptive taxation scheme U/s.44 AD of the Income Tax
Act to Rs.2 Crores from existing limit of Rs.1 Crore which will benefit more
than 30 lakh small business people. He also proposed to extend the presumptive
taxation scheme with profit deemed to be 50%, to professionals with gross
receipts up to Rs.50 lakh.
Announcing the measures to boost growth and employment generation Shri Arun
Jaitley said that the accelerated depreciation provided under IT Act will be
limited to maximum 40% from 1st April 2017. The benefit of
deductions for research would be limited to 150% from 1st April 2017
and 100% from 1st April 2020. The benefit of Section
10-AA to new SEZ units will be available to those units which commence
activity before 31st March 2020. The weighted deduction
U/s.35-CCD for skill development will continue up to 1st April 2020,
Shri Jaitley said.
Announcing Corporate Tax proposals Shri Arun Jaitley said that new
manufacturing companies incorporated on or after 1st March 2016 will
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. He further proposed to lower
the Corporate Tax rate for the next financial year for relatively small
enterprises i.e., companies with turnover not exceeding Rs.5 crore (in the
financial year ending March 15), to 29% +Surcharge and Cess.
Recognizing the importance of start-ups in employment generation and as key
partners in Make in India programme, Shri Jaitley proposed 100% deduction of
profits for three out of five years for start-ups set up during April 2016 to
March 2019 entailing MAT liability. He also proposed 10 per cent rate of tax on
income from worldwide exploitation of patents, developed and registered in
India by a resident. In order to get more investment in Asset Reconstruction
Companies (ARCs) he proposed complete pass through of Income Tax to
securitization trusts including trusts of ARCs. Securitization Trusts
will be liable to deduct tax at source. Period for getting benefit of
long term Capital Gain regime in case of unlisted companies will be reduced
from 3 to 2 years. Non-banking financial companies shall be eligible for
deduction to the extent of 5% of its income in respect of provision for bad and
doubtful debts. Shri Jaitley said that determination of residency of foreign
company on the basis of place of effective management (POEM) will be deferred
by one year and reiterated commitment to implement General Anti Avoidance Rules
(GAARs). He further proposed exemption of Service Tax on services provided
under Deen Dayal Upadhyay Gramin Kaushalya Yojana and services provided by
assessing bodies empanelled by Ministry of Skill Development and
Entrepreneurship. He also announced exemption of Service Tax on general
insurance services provided under Niramaya Health Insurance Scheme launched by
National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disability. Shri Jaitley also announced
reduction of basic custom and excise duty on refrigerated containers to 5% and
6% respectively.
To promote Make in India campaign of the Government Shri Arun Jaitley proposed
changes in Customs and Excise Duty rates on certain inputs to reduce costs and
improve competitiveness of domestic industry in sectors like Information
Technology Hardware, Capital Goods, Defence Production, Textiles, Mineral Fuels
and Mineral Oils, Chemicals and Petrochemicals, Paper, Paperboard and
Newsprint, Maintenance Repair and Overhauling (MRO) of aircraft and ship
repair.
Announcing measures for pensioners Shri Arun Jaitley said that withdrawal up to
40% of the corpus at the time of retirement will be tax exempt in the case of
National Pension Scheme (NPS). Annuity Fund which goes to legal heir will
not be taxable. In case of superannuation funds and recognized provident
funds, including EPF, the same norm of 40% of corpus to be tax free will apply
in respect of corpus created out of contributions made on or from 1st
April 2016. Shri Jaitley also proposed limit for contribution of employer
in recognized provident and superannuation fund of Rs.1.5 lakh per annum for
taking tax benefit. Exemption from Service Tax for annuity services
provided by NPS and services provided by EPFO to employees will be given. He
also announced reduction of Service Tax on single premium annuity (Insurance
Policies) from 3.5% to 1.4% of the premium paid in certain cases.
To address the housing needs of all and more specifically the poor, in a time-bound
manner, Shri Arun Jaitley announced 100% deduction for profits to an
undertaking in housing project for flats up to 30 sq mtrs. in four metro cities
and 60 sq. mtrs. in other cities, approved during June 2016 to March 2019 and
completed in three years. However, Minimum Alternate Tax (MAT) will be
applicable. The Finance Minister announced deduction for additional
interests of Rs.50,000 per annum for loans up to Rs.35 lakh sanctioned in
2016-17 for first time home buyers, where house costs does not exceed Rs.50
lakh. He also proposed that distribution made out of income of SPV to the
REITs and INVITs having specified shareholding will not be subjected to
Dividend Distribution Tax (DDT), in respect of dividend distributed after the
specified date. Shri Jaitley also proposed to exempt Service Tax on
construction of affordable housing up to 60 sq. mtrs. under any scheme of the
Central or State Government including PPP Schemes. He also proposed
Excise Duty exemption presently available to concrete mix manufactured at site
for use in construction work to ready-mix concrete.
Announcing resource mobilization measures for agriculture, rural economy and
clean environment Shri Jaitley said that additional tax @ 10% of gross amount
of dividend will be payable by the recipients receiving dividends in excess of
Rs.10 lakh per annum. Surcharge will be raised from 12% to 15% on
persons, other than companies, firms and cooperative societies having income
above Rs.1 Crore, he said. Shri Jaitley said that tax will be deducted at
source @ 1% on purchase of luxury cars exceeding value of Rs.10 lakh and
purchase of goods and services in cash exceeding Rs.2 lakh. He proposed
to increase security transaction tax in case of ‘Options’ from 0.017 to 0.05
per cent. Equalization levy of 6% of gross amount for payment made to
non-residents exceeding Rs.1 lakh a year in case of B2B transactions was also
proposed. He further proposed Krishi Kalyan Cess @ 0.5% on all taxable
services w.e.f. 1st June 2016. Proceeds from this would be exclusively
used for financing initiatives for improvement of agriculture and welfare of
farmers, he said.
Expressing concern over pollution and traffic situation in Indian cities, Shri
Jaitley proposed an Infrastructure Cess of 1% of small petrol, LPG, CNG cars;
2.5% on Diesel Cars of certain capacity and 4% on other higher engine capacity
vehicles and SUVs. No credit of this Cess will be available nor credit of
any other tax or duty be utilized for paying the Cess, he said. Shri
Jaitley also proposed levy 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
Crore and 12 Crore respectively. The Finance Minister further proposed to
raise Excise Duty on ready-made garments with retail price of Rs.1,000 or more
to 2% without input tax credit or 12.5% with input tax credit. He also
proposed to increase Clean Environment Cess on coal, lignite and peat from
Rs.200 per tonne to Rs.400 per tonne. Excise Duty on various
tobacco products other than bidi was also proposed to be raised by about 10 to
15%. Proposing amendment to Finance Act 1994 he said that assignment of
right to use the spectrum and its subsequent transfers will be a service
leviable to Service Tax and not sale of intangible tax.
Highlighting Government’s priority towards a lower tax regime with
non-litigious approach the Finance Minister desired to give an opportunity to
the earlier non-compliant to move to the category of compliant. He reiterated
government’s commitment to provide a stable and predictable taxation regime and
reduce black money. Shri Arun Jaitley announced that domestic tax payers
can declare undisclosed income or such income represented in the form of any
asset 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. Such declarants will have
immunity from prosecution. He said that Surcharge levied at 7.5% of
undisclosed income will be called Krishi Kalyan Surcharge to be used for
agriculture and rural economy. Announcing New Dispute Resolution Scheme
he said that no penalty will be charged in respect of cases with disputed tax
up to Rs.10 lakh. Cases with disputed tax exceeding Rs.10 lakh will be
subjected to 25% of the minimum of the imposable penalty. Any pending
appeal against a penalty order can also be settled by paying 25% of the minimum
of the imposable penalty and tax interest on quantum addition, he said.
Shri Jaitley announced a High Level Committee chaired by Revenue Secretary to
oversee fresh cases where Assessing Officer applied the retrospective amendment.
In case of mis-reporting of facts, the Finance Minister proposed penalty rates
of 200% of tax and 50% penalty in case of under-reporting of income.
He said this allowance will be limited to 1% of the average monthly
value of investments yielding exempt income, but not exceeding the actual
expenditure claimed under Rule –AD of Section -14A of Income Tax Act.
There will be a time limit of one year for disposing petitions of the
tax-payers seeking waiver of interest and penalty. It will be mandatory
for the Assessing Officer to grant stay of demand once the assessee pays 15% of
the disputed demand while the appeal is pending before Commissioner of Income
Tax (Appeals). Shri Jaitley said that the monetary limit for deciding an
appeal by a single member Bench of ITAT will be enhanced from Rs.15 lakh to
Rs.50 lakh. He also announced creation of 11 new Benches of Customs,
Excise and Service Tax, Appellate Tribunal (CESTAT) to remove backlog of cases.
Stressing on simplification and rationalization of taxation the Finance
Minister said that 13 cesses, levied by various Ministries in which revenue
collection is less than Rs.50 Crore, will be abolished. For non residents
providing alternative documents to PAN Card will be allowed and TDS provisions
for Income Tax will be rationalized. Facility for revision of return will
also be extended to Central Excise Assesses. With respect to non-taxable
services for reversal of input tax credits, additional options to banking
companies and financial institutions, including NBFCs will be provided.
Exporters and importers with proven track record will be extended the facility
for deferred payment of customs duties. At major ports and airports starting
from next financial year customs single window project will be implemented.
Shri Jaitley also announced increase in free baggage allowance for
international passengers. Filing of baggage declaration will be required
only for those carrying dutiable goods.
Emphasizing use of technology in taxation department in a big way to make life
simpler for a law-abiding citizen. Shri Arun Jaitley announced expansion
in the scope of e-Assessment to all assesses in seven mega cities in the coming
years. Interest @ 9% per annum against normal rate of 6% per annum for
delay in giving effect to Appellate Order beyond 90 days will be
chargeable. To reduce compliance cost especially for small tax payers
‘e-Sahyog’ will be expanded, he said. Shri Jaitley said that direct tax
proposals would result in revenue loss of Rs.1060 Crore and indirect proposals
are expected to yield Rs.20670 Crore which means a revenue gain of Rs.19610
Crore. The Finance Minister said that government have a desire to
provide socio-economic security to every Indian, especially the farmers, the
poor and the vulnerable; a dream to see a more prosperous India; and a vision
to ‘Transform India’.
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DSM/GB/2016-17/GG/DM