BUDGET 2016

BUDGET (2016)

Budget Impact
Tax Rates Back
Key Amendments Back
Changes in TDS/TCS Back
Startup Announcements Back
  • Up to Rs. 2,50,000 Nil
  • Rs. 2,50,001 to Rs. 5,00,000 10%
  • Rs. 5,00,001 to Rs. 10,00,000 20%
  • Above Rs. 10,00,000 30%
  • * Surcharge at 15% if net income exceeds Rs. 1 Crore
  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge
  • * Relief u/s 87A up to Rs. 5,000 for resident individuals having total income of up to Rs. 5,00,000
  • Up to Rs. 2,50,000Nil
  • Rs. 2,50,001 to Rs. 5,00,000 10%
  • Rs. 5,00,001 to Rs. 10,00,000 20%
  • Above Rs. 10,00,000 30%
  • * Surcharge at 15% if net income exceeds Rs. 1 Crore
  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge
  • * Relief u/s 87A up to Rs. 5,000 for resident individuals having total income of up to Rs. 5,00,000
  • Up to Rs. 3,00,000 Nil
  • Rs. 3,00,001 to Rs. 5,00,000 10%
  • Rs. 5,00,001 to Rs. 10,00,000 20%
  • Above Rs. 10,00,000 30%
  • * Surcharge at 15% if net income exceeds Rs. 1 Crore
  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge
  • * Relief u/s 87A up to Rs. 5,000 for resident individuals having total income of up to Rs. 5,00,000
  • Up to Rs. 5,00,000 Nil
  • Rs. 5,00,001 to Rs. 10,00,000 20%
  • Above Rs. 10,00,000 30%
  • * Surcharge at 15% if net income exceeds Rs. 1 Crore
  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge
  • Tax Rate (Domestic Company)** 30%
  • Tax Rate (Foreign Company) 40%
  • MAT 18.5%
  • * Surcharge on Domestic Company : 7% if net income exceeds Rs. 1 Crore and 12% if net income exceeds Rs. 10 Crores
  • * Surcharge on Foreign Company : 2% if net income exceeds Rs. 1 Crore and 5% if net income exceeds Rs. 10 Crores
  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge
  • ** Tax Rate is 29% if turnover or gross receipt of the company doesn’t exceed Rs. 5 crore
  • Tax Rate 30%
  • * Surcharge at 12% if net income exceeds Rs. 1 Crore.
  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge

INDUSTRY WISE IMPACT

Banking

Key points

test
ReadMore

Experts' reaction on Union Budget 2016

Grant Thornton

NINE Positives on Tax from Indian Budget 2016

The budget is distinct in style and content from the norm.The NINE pillars in the speech and the NINE thrusts to Tax Reforms in the content indicate a strong push on investment in infrastructure and rural areas which should infuse substantial funds in the right direction within the economy. The government has focussed on job creation through incentivising the human intervention rather than capex that until now was the other way round – a dichotomy in our country where capital is scarce and labour is abundant. Hopefully this signals a new thinking which is welcome. We hope the States also follow suit. Focussed efforts on reining in black money, the proposal to initiate another amnesty scheme, making tax officers accountable, digitising land records and other such digital initiatives will serve to reduce black money and bring hitherto invisible funds into the mainstream. This should further add to the India’s GDP growth.

Vishesh Chandiok

National Managing Partner, Grant Thornton India LLP

The FM has juggled with several pain points fairly well. An overall positive budget, focusing on the core sectors namely agriculture, rural investment keeping in mind fiscal consolidation. Continued focus on Skill Development and livelihood creation through increased allocation for MNREGA, PM Kaushal Vikas Yojna and strengthening the Digital India agenda is welcome. The budget is much in sync with the economic survey but there could have been more for India Inc.

Divyang Thakker

Vice President – Direct Taxes, Reliance Communications Limited

In the midst of the global slowdown and turbulence coupled with the beaten-up Financial markets, the Finance Minister has been able to present a pragmatic and well balanced budget rightly focusing on core sectors. Choosing to stick with FRBM target of 3.5% fiscal deficit is laudable. It was comforting to observe no change in two most discussed issues during pre-budget week, tinkering of capital gain tax regime and increase in the service tax rate. Budget has proposed noteworthy steps for reducing tax litigation and promoting affordable housing. This budget is rightly an onset to the long term expedition for a pensioned society and use of technology for interface between tax department and tax payer. As expected, the budget provides fillip to the start-ups be introduction of tax holidays. Deferral of POEM by a year a welcome move, but it would have been constructive if the deferral was till April 2017. However, on reduction in the corporate tax rate, much was expected than what is done. No mention on GST roadmap and completely missing the disinvestment targets were big dampener. Bringing dividend to tax in the hands of recipient, though only for super rich, would result in double taxation of the same income. Plethora of cesses would further complicate the intricate tax structure. Urban middle class, which had maximum contributed to the GDP growth, does not seem to be benefited much from the budget. To summarize, amidst huge industry expectation, the Budget on one hand deserves lot of applause but at the same time fails on certain expected parameters. Now, the focus shifts on implementation.

Nimish Goel

Partner & Head, Indirect Tax, International Business Advisors

The Finance Minister rose to present his third budget by stating that the global economy is weak but India has done well. With a fiscal deficit target of not exceeding 3.5% as budgeted, the Finance Minister surely seems to have done his bit to make it happen. The Finance Minister very clearly seems to have focused on empowering the ‘Make In India’ initiative by removing customs and excise duty exemptions on a variety of goods. The thrust seems to be more on electronics, hardware and the infrastructure industry where duty exemption has been provided to imported parts and components for manufacture of chargers/adapters, speakers (to be used for manufacture of mobile phones), parts &components for use manufacture of routers, broadband modems, set-top boxes, DVRs, CCTV cameras etc. These exemptions are available only when the companies import such items for their actual use since direct import of these items (without the importer actually using such imported goods) has been made taxable on import. Prolonged litigation seems to have taken a toll on Government’s administration machinery and this seems to be corrected by proposing a one-time Dispute Resolution Scheme allowing the tax payer to settle the tax dispute pending with the first appellate authority. The Budget also seems to encourage ‘export of goods’ by not only announcing a widening of the duty drawback schemesbut also providing a retrospective amendment to allow refund of input service tax credit on services used beyond the factory gate for manufacture of goods subsequently exported out of India. This is a welcome measure considering the retrospective amendments are generally towards garnering tax rather than allowing tax benefits. A great push has also been made to affordable housing sector by way of exempting service tax on construction projects involving small dwelling units and also exempting the concrete mix manufactured at site from 12.5% excise duty. This is surely going to reduce the tax burden on the sector, making cash bled housing sector a slight fillip. The much-needed demand for reducing interest rate on delayed payment of customs & excise duty and service tax seems to have found a favourby the Finance Minister with the rate getting reduced from 18% to 15% subject to few conditions. On the aspects of ease of doing business that has been one of the mantras of Mr. NarendraModi to the investors, few measures seem to be visible on a first look of the Finance Bill. Increase in monetary limits for prosecution, restricting the situations for arrest of defaulting taxpayers and introducing the provisions for deferred payment of customs duties for certain classes of importers and exporters seem to be a welcome measure. Overall, the Budget seems to be quite populist with a larger focus on creating value addition in India, remove cascading effect by streamlining credit mechanism and create a conducive environment for doing business with ease.

Uday Ved

My first cut reaction is that this is a good Budget giving focus on 9 Pillars which include focus on Infra, rural areas, relief to small tax payers, creating ease of doing business, affordable housing and so on and so forth. Fiscal deficit has been proposed to keep at 3.5% which is a big positive without compromising development agenda. On Taxation front, there are simplification and rationalisation measures, introducing presumptive taxation for small and medium tax payers. Keeping in line with objective of unearthing black money, the FM has proposed to introduce Domestic black mint by laying 30% tax, 7.5% surcharge and 7.5% penalty thus totalling 45% to be operational from June 1, 2016 to Sept 30, 2016 in a manner that tax will be paid within 2 months of declaration. Numbers of measures have been introduced for reducing tax litigation. Most recommendations of Tax reforms administration report and Easwar Committee have been accepted - this is a good simplification and rationalisation measures. On capital market front, additional tax on dividend has been introduced at 10% in addition to DDT if dividend income exceeds Rs.10 lacs. Short term capital gains tax period for non-listed companies has been reduced from 3 years to 2 years - the FM was silent on listed companies. Corporate tax rate has been reduced from 30% to 29% in restricted cases thus the path to reducing tax rate and also corresponding incentives will need to be examined in detail. 3 year tax holiday has been introduced for startups with keeping Minimum alternate tax leviable. Introducing 10% tax on patent companies is a big boost for IPR related companies and it looks like it is in line with country like UK. On international taxation, Base Erosion and Profit Shifting measures including Country by Country regime. Also the FM made a declaration to resolve retro taxation by paying tax and no interest and penalty. Deferring POEM by a year is a good measure. GAAR will be introduced by 01/04/2017 as proposed last year. This looks like a big measure to create certainly, predictability and non-adversarial tax regime and create ease of doing business in India. Overall, on tax front there are good rationalisation measures on both direct and indirect taxation. Also there are good 9 Pillars of FM'a speech which should take India to an increased growth story soon.

Sachin Menon

Partner and Head, Indirect Taxes at KPMG

It is welcome that Duty drawback schemes will be widened, to give impetus to sagging exports. But emphasis shall also be on fine tuning the existing schemes and promote transparency. Budget outlay of more than 2 lakh crore in infrastructure sector, would fuel economic activity and kicky start the economy. The budget outlays for infrastructure sector would help the cement and steel industry to improve their performance. Service tax on spectrum fees will increase the cost of providing telecom services, and will hit telecom companies and the quality of service.

Sunil Shah

Partner, Deloitte Haskins & Sells LLP

The Budget has taken a step forward in rationalizing the tax regime through sunset provisions for certain exemptions and deductions. It will also give a boost to manufacturing and to SMEs through the reduction in tax rates. Startups will be encouraged by the 3-year tax holiday and capital gains exemption for investors. The special patent regime is an innovative idea and will encourage indigenous research and development. The rules for place of effective management have been deferred by one year in response to representations by stakeholders. This will give time to companies to make adjustments to align with the rules. The proposals such as stay of demand, easing of TDS requirements, the alternative facility for non-residents who do not have PAN, the procedure for e-assessment and time limits for passing effect orders will facilitate a taxpayer-friendly environment and in turn the objective of ease of doing business.”

Saloni Roy

Partner, Deloitte Haskins & Sells LLP

There were enormous expectations from the Finance Minister as this is their 3rd budget. Announcements regarding GST were expected, however there was no commitment of a date for GST introduction in the Finance Minister’s speech apart from a mention that focus would be to introduce it at the earliest. Introduction of 12 new benches of the CESTAT should help in reducing the congestion currently existing in the litigation system. However, levy of new Krishi Kalyan Cess of 0.50% on all services, though creditable, is a setback as it would increase the cost of services. This cess would have an impact on all aspects of the economy, since all taxable services will attract this cess. Further, levying and reporting service tax would be more complex as service tax and Krishi Kalyan cess would be creditable but Swachh Bharat cess would not be. Overall, it’s a budget with some reform but it leaves us with an expectation that more could have been done

Prashant Deshpande

Partner, Deloitte Haskins & sells LLP

In the backdrop of make in India initiative, the manufacturers have been spared the rate increase, except in a few sectors like automobile and Tobacco. Rate increase has been spared for service providers too, but for the levy of Krishi Kalyan Cess for which input tax credit would be available. Rate structure rationalization of customs and excise duties for specific sectors such as information technology, capital goods would address the inverted duty structures faced by some of these industries. Housing gets a boost with relief from service tax and exemption from excise duties on ready mix concrete for affordable housing programs. The dispute resolution scheme rightly targeted at appellate level would benefit litigation reduction for those taxpayers who did not take the benefit of lower penalties at earlier stages of dispute or those tax payers with smaller demands who are no longer required to pay penalties. Simplification and rationalization of CENVAT credit was long due with provisions relating to apportionment of credit between exempt and taxable services clearly found wanting. Improving the flow of credit, reducing compliance burden would help all tax payers. Input credit distribution form a common warehouse would help multi locational manufacturers. Deferred payment of customs duties would help accredited importers to release cargo before payment of duty, thus reducing dwell time and bring down transaction costs.

Girish Vanvari

Partner and Head, Tax at KPMG

Budget 2016, an incremental move in the backdrop of global uncertainty. Maintaining a fiscal deficit of 3.5% a very credible step for the financial markets, robust outlays for infrastructure, agriculture, rural and socio economic schemes, however, one can argue that more could be provided for recapitalization of Banks. No change in capital gains tax regime for listed stocks a positive for the stock exchange, however an additional tax 10% on dividends in excess of 10 lakhs and increase in STT on options a dampener for the markets. No change in individual slabs, POEM deferral, GARR confirmation, Action point on BEPS master file and country by country report, road map to reduction to lower tax rates and phase out of exemptions along expected lines. Introduction of Amnesty scheme can be questioned. Further, many provisions to build confidence with the tax payers with a view to reduce litigations and commitment to no retrospective amendment. All in all, in the backdrop of the prevailing global scenario, Budget 2016 a good pragmatic balancing acts. 1. Maintaining the fiscal deficit of 3.5% a credible signal to the global investors and good news for the bonds markets. 2. Higher allocations to rural programs such as MNREGA, Swach Bharat etc, a big flip to Rural demand. 3. Budget 2016 Focus on nine pillars of growth, a pragmatic approach to inclusive growth.

Videos on Budget

POLL OF THE DAY

Whether standard deduction may make a comeback for salaried class taxpayers?

Payment
Total Site Visits 7 5 6 8 9 5 7