BUDGET -2016--BIG HIGHLIGHTS --

OVERVIEWThe Union Budget for 2016-17 was presented by the Finance Minister on 29 February 2016. The Finance Bill,

2016 (FB 2016), that was introduced in the Parliament as part of the Budget proposals, contains a number of international tax proposals.

The Union Budget for 2016-17 shows India’s commitment to implement a number of BEPS(Base Erosion andProfit Shifting) recommendations which may get implemented over a period of time through legislativeamendments, as well as through changes to rules and administrative procedures.

The international tax proposals implemented in the Budget could be far reaching. International investorswould need to carefully monitor developments and assess the impact on their operations. Internationalgroups would need to assess readiness and begin preparing for complying with the Master File and CbCReporting requirements.

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Tax changes for you !!!

Tax Rates

• No change in income slabs or tax rates

• Increase in surcharge from 12% to 15% on individuals, HUFs having income exceeding `1 crore

• Rebate of income tax for resident individuals with total income not exceeding `5 lakh enhanced from `2,000 to `5,000.

House Property

• An additional deduction of `50,000 in respect of interest payable on home loan taken by an individual during the financial year 2016-17. This deduction is available to a person not owning a house property and where the cost of house does not exceed `50 lakhs and the loan does not exceed `35 lakhs.

• Maximum deduction for house rent paid by individuals not receiving House Rent Allowance increased from `2,000 per month to `5,000 per month.

• The period within which the construction or acquisition of a self occupied house property is to be completed, to claim a deduction of interest on housing loan, increased from 3 years to 5 years reckoned from the year in which the loan is borrowed. The permissible deduction limit continues to be `200,000.

• The arrears of rent or unrealized rent received from a tenant shall be deemed to be the income from house property in the year of receipt irrespective of whether the assesse continues to bethe owner of the house or not. A deduction at 30 percent of the amount so received is allowed.

Capital Gains

• Deposit certificates issued under ‘Gold Monetization Scheme 2015’ will not be considered as capital assets. The interest thereon would also be exempt from tax.

• Gains from redemption of gold bonds issued by the Reserve Bank of India under ‘Sovereign Gold Bonds Scheme 2015’ shall not be subject to capital gains tax in the hands of the individual.

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Retirement Benefits :• The lower of employer’s contribution to Provident fund in excess of 12% of the salary of the employee or `150,000 p.a. will be subject to tax.

• Exemption limit for employer’s contribution to superannuation has been enhanced from `100,000 to `150,000 p.a.

• The exemption on withdrawal of accumulated balance from a recognized PF is reduced from 100% to 40% to the extent it relates to contributions made by the employee(other than excluded employee) after 1 April 2016. Excluded employee is an employee whose monthly salary does not exceed an amount prescribed for this purpose.

• 40% of the amount withdrawn from New Pension Scheme (NPS) on retirement will be tax exempt. Currently the entire withdrawal is being taxed. In order to bring paritybetween NPS and Superannuation funds, the exemption available on withdrawal from superannuation funds would be restricted to 40%.

• The amounts received by a nominee from NPS on death of the tax payer would be exempt from tax.

The Income Declaration Scheme 2016 :• Immunity has been granted from further scrutiny under the income tax Act in cases where the tax payer declares domestic undisclosed income and pays 45% thereof

(tax of 30%, surcharge of 7.5% and penalty of 7.5%). A window is available between 1 June 2016 and 30 September 2016 for such declaration.

Tax changes for you !!!

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INCOME TAX / SERVICE TAX / EXCISE

1. No changes in tax slabs under Income Tax and same is as was earlier, i.e.

2. Income tax surcharge for having income Rs. more than 1 crore increased to 15% (previously 12%)3. Deduction u/s 80GG for RENT payment increased upto Rs. 5,000/- per month (previously Rs.2,000/-)4. Service tax - 0.50% agriculture development krishi kalyan surcharge cess5. Rebate u/s 87A increased from Rs.2,000/- to Rs.5,000/- (persons having taxable income upto Rs.5,00,000/-)6. 10% Dividend tax for dividend receipt over Rs.10,00,000/- per annum

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INCOME TAX / SERVICE TAX / EXCISE

7. Additional exemption o Rs.50,000/- for first time house buyers on housing loan upto Rs.35.00 lakh, provided cost of house in not more than Rs.50.00 lakh

8. Companies with revenue less than Rs. 5 crore to be taxed at 29% plus surcharge and Cess

9. Service tax exemption for housing construction of houses less than 60 sq. mtr.

10. Tax Audit Limit revised to non professional Rs. 2.00 crore from Rs. 1.00 crore

11. Presumption taxation scheme for all professionals with gross receipts upto Rs.50 lakh if income declared @ 50%

12. Corporate tax for new manufacturing companies @ 25.00% + surcharge + cess

13. Withdrawal upto 40% from NPS to be exempted

14. LTCG on unlisted securities limited to 2 years

15. 100% tax deduction for companies building houses upto 30 sq. mtr.

16. TCS on purchase of assets over Rs. 2.00 lakh

17. Penalty for concealment of income reduced to 50% - 200% (previously 100% - 300%)

18. Excise duty on branded garments exceeding Rs. 1,000/-

19. Securities transaction tax on option raised to 0.05%

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serViCe tAx – MAin CHAnges

The following change will be effective from 1 June 2016:

• Krishi Kalyan cess will be payable @ 0.5% of the value of taxable services.

Changes in Negative list:The following change will be effective from the date on which the Finance Bill, 2016 receives the assent of the President:

• Services provided by educational institutions are omitted and inserted in the mega-exemption notification

• The following entries will be deleted with effect from 1 June 2016:

Services of transportation of passengers, with or without accompanied belongings, provided by a stage carriage

Services of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance.

Changes in Declared Services:The following change will be effective from the date on which the Finance Bill, 2016 receives the assent of the President:

Right to use radio-frequency spectrum and subsequent transfers will be taxable as a declared service.

• Changes in exemption:

The following changes will be effective from 1 March 2016: Exemption granted to:

• Low cost housing projects approved by competent authority under specified schemes

• Services provided by Indian Institute of Management by way of specified educational programmesKnoW to Win....

• Exemption relating to services of construction, erection, installation, etc. of non-commercial civil structures, structuresused for educational, clinical, art or cultural establishments or residential complex for employees, provided togovernment, local authority or a governmental authority, which was withdrawn last year, is restored. This exemption isfor contracts entered into prior to 1 March 2015 and on which appropriate stamp duty has been paid prior to suchdate. This exemption shall not be available on or after 1 April 2020. For service tax which has been collected for theperiod 1 April 2015 to 29 February 2016 in respect of such a contract, refund application shall be made within 6months from the date on which the Finance Bill, 2016 receives the assent of the Preside.

• Exemption relating to services of construction, erection, installation, etc. of original works pertaining to an airport orport, which was withdrawn last year, is restored. This exemption is for contracts entered into prior to 1 March 2015and on which appropriate stamp duty has been paid prior to such date. This exemption shall not be available on orafter 1 April 2020. For service tax which has been collected for the period 1 April 2015 to 29 February 2016 in respectof such a contract, refund application shall be made within 6 months from the date on which the Finance Bill, 2016receives the assent of the President

• Withdrawal of exemption on construction, erection, etc. of original works relating to monorail or metro for contractsentered into on or after 1 March 2016. This will not apply to projects entered into prior to 1 March 2016 on whichappropriate stamp duty has been paid

• Service tax on services of Information Technology Software on a medium bearing RSP is exempted, provided centralexcise duty is paid on RSP under applicable Central Excise provisions

serViCe tAx – MAin CHAnges

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Exemption withdrawn on:

- Services provided by senior advocates to an advocate or partnership firm of advocates

- Services provided by a person represented on an arbitral tribunal to an arbitral tribunal

- Transport of passenger service by ropeway, cable car or aerial tramway

Exemption will be extended to the following:

- Life insurance services provided by way of annuity under the National Pension System

- Specified services provided by SEBI

- Services provided by EPFO to its employees

- Services provided by BIRAC approved biotech incubators to the incubates

- Services provided by National Centre for Cold Chain Development

- Services provided by IRDA of India

- General insurance services under the ‘Niramaya’ Health Insurance scheme implemented by National Trust

- Skill or vocational training provided by Deen Dayal Upadhyay Grameen Kaushalya Yojana training partners

- Services of Assessing Bodies empaneled centrally by Directorate General of Training, Ministry of Skill Development & Entrepreneurship.

Following changes will be effective from the date on which the Finance Bill, 2016 receives the assent of the President:

- Exemption to services provided by educational institutions, which earlier existed under the negative list of services

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Following services will be exempted with effect from 1 June 2016:

• Transportation of passengers by a stage carriage other than air conditioned stage carriage

• Transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India

• Changes in abatement: Following changes will be effective from 1 April 2016:

• The abated value at which service tax will be payable on renting of motor vehicle will be computed as fairmarket value of goods (including fuel) and services supplied by the recipient of services.

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• The following change will be effective from 1 June 2016:

• Changes in Reverse Charge Mechanism:

• The following change will be effective from 1 April 2016:

Changes in Reverse Charge Mechanism:

The following change will be effective from 1 April 2016:

• Mutual fund agents/ distributors to a mutual fund or asset management company are proposed to be taxed under normal charge from 1 April 2016 with a view to enable such agents/ distributors to avail the exemp�on of ₹ 10 lakhs per year

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CustoMs

• Standard rate of BCD is maintained at 10%

• Deferred payment of customs duties based on proven track record for certain class of importers and exporters

• A new class of warehouse is introduced for enabling storage of goods to be specified, under physical control of the customs authorities.

• Export duty has been reduced on Ores and Concentrates.

• Rate of import duty reduced for cold chain storage, mineral oils and fuels, chemicals and petrochemicals, wood chips or particles for manufacture of paper, fibre, yarn and fabrics, certain electronics/hardware, disposable sterilized dialyzer, micro barrier of artificial kidney, engine for hybrid vehicles.

• Rate of duty increased for plans, drawings and designs, e-readers and parts of e-readers, mobile charger/adapter, battery and wired headsets/speakers for manufacture of mobile phone, specified telecommunication equipment's, populated PCBs for manufacture of personal computers, PCBs for manufacture of mobile phone/ tablet computer, aluminium products, specified machinery required for construction of roads.

• Notifications relating to Advance Authorisation and Duty Free Import Authorization Schemes are amended retrospectively to provide exemption from safeguard duty.

• The Rules governing import of goods at concessional rate of duty for manufacture of excisable goods simplified. Permission is replaced with self-declaration by the importer with effect from 1 April 2016.

• New Baggage Rules introduced to simplify and rationalize multiple slabs of duty free allowance for various categories of passengers with effect from 1 April 2016.

• Filing of Customs declaration required only for those passengers who carry dutiable or prohibited goods

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Other legislative changesThe following changes will be effective from 1 April 2016:

• Benefit of quarterly payment of service tax extended to OPC and HUF

• Benefit of payment of tax on receipts extended to OPC

• Composite scheme introduced for service tax liability on single premium annuity

• Annual returns needs to be filed by assessees beyond a prescribed threshold limit. The said return can be revised with one month from the date of filing original return

Following changes will be effective from the date on which the Finance Bill, 2016 receives the assent of the President:

• Time limit to issue a show cause notice in cases not involving fraud, collusion, etc. is increased from 18 months to 30 months

• Interest rate on delayed payment of service tax is reduced to 15% p.a.

• Interest rate in cases where tax is collected but not deposited will be 24% p.a.

• Interest rate on service tax collected in excess reduced from 18% p.a. to 15% p.a.

• Penalty proceedings against director, manager, etc. will be deemed to be closed in case where the demand and penalty proceedings have been closed against the company

• Monetary limit for launching prosecu�on increased from ₹ 50 lakhs to ₹ 2 crores of service tax evaded

• Power to arrest is restricted only to cases where the tax payer has collected but not deposited the tax exceeding ₹ 2 crores

• Refund of service tax on services used beyond the factory or any other place or premises of production, for export of goods will be allowed retrospectively from 1 July 2012. Exporters whose claims were rejected earlier can now reapply for the refund within one month from the date on which the Finance Bill, 2016 receives the assent of the President

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Changes Existing Proposed

Excise duty on electric motor, shafts, sleeve, chamber, impeller, washer required for the manufacture of centrifugal pump being

reduced. More than 50% of such pumps are used in agriculture.

12.5% 6%

Concessional 5% Basic Customs Duty as presently available under project imports for cold storage, cold room (including for farm

level pre-cooling) being extended for cold chain including pre-cooling unit, pack houses, sorting and grading lines and ripening

chambers’ also.

10% 5%

BCD on refrigerated containers being reduced 10% 5%

Excise duty on refrigerated containers being reduced 12.5% 6%

Nil Basic Customs Duty being extended on magnetron of capacity of 1 KW to 1.5 KW for use in manufacture of domestic

microwave ovens, subject to actual user condition.

10% Nil

Machinery, electrical equipment, instrument and parts thereof (except populated PCBs) for semiconductor wafer fabrication/LCD

fabrication units being exempted.

Applicable

BCD

SAD – 4%

Nil BCD

Nil SAD

The exemption from basic customs duty, CV duty, SAD on charger/adapter, battery and wired headsets/speakers for

manufacture of mobile phone being withdrawn.

BCD – Nil

CVD – Nil

SAD - Nil

Applicable

BCD

CVD –

12.5%

SAD – 4%

HigHligHts Present Vs. ACtuAl

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Changes Existing Proposed

Inputs, parts and components, subparts for manufacture of charger / adapter, battery and wired headsets /speakers, of mobile

phone, subject to actual user condition being exempted.Applicable

BCD,

CVD

SAD

Nil BCD

Nil CVD

Nil SAD

Parts and components, subparts for manufacture of Routers, broadband Modems, Set-top boxes for gaining access to internet,

set top boxes for TV, digital video recorder (DVR)/network video recorder (NVR), CCTV camera/IP camera, lithium ion battery

[other than those for mobile handsets] being exempted.

Applicable

BCD, CVD

SAD

Nil BCD

Nil CVD

Nil SAD

Specified telecommunication equipment [Soft switches and Voice over Internet Protocol (VoIP) equipment namely VoIP phones,

media gateways, gateway Product/Switch (POTP/POTS), Optical controllers and session border controllers, Optical Transport

equipment; combination of one / more of Packet Optical Transport Network(OTN) products, and IP Radios, Carrier Ethernet

Switch, Packet Transport Node (PTN)products, Multiprotocol Label Switching- Transport Profile (MPLS-TP) products, Multiple

Input / Multiple Output (MIMO) and Long Term Evolution (LTE) Products on which 10% BCD was imposed in 2014-15 Budget]

being excluded from the purview of the other exemption also.

Nil 10%

Exemption from SAD on populated PCBs for manufacture of personal computers (laptop or desktop) being withdrawn. Nil 4%

Exemption from SAD on populated PCBs of mobile phone/tablet computer being withdrawn. Concessional SAD on populated

PCBs for manufacture of mobile phone/tablet computer imposed.

Nil 2%

Excise duty structure on domestically manufactured charger/adapter, battery and wired headsets/speakers for supply to mobile

phone manufacturers as original equipment manufacturer being changed.

Nil 2% [without ITC]

or 12.5% [with ITC]

HigHligHts Present Vs. ACtuAl

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Changes Existing Proposed

Excise duty on inputs, parts and components, subparts for manufacture of charger/adapter, battery and wired

headsets/speakers of mobile phone, subject to actual user condition being exempted.

12.5% /

Nil

Nil

Excise duty structure on Routers, broadband Modems, Set-top boxes for gaining access to internet, set top boxes for

TV, digital video recorder (DVR) / network video recorder (NVR), CCTV camera / IP camera, lithium ion battery [other

than those for mobile handsets ) being changed.

12.5% 4% [without ITC]

or 12.5% [with ITC]

Excise duty on parts and components, subparts for manufacture of Routers, broadband Modems, Set-top boxes for

gaining access to internet, set top boxes for TV, digital video recorder (DVR) / network video recorder (NVR), CCTV

camera / IP camera, lithium ion battery [other than those for mobile handsets] being exempted.

12.5% Nil

HigHligHts Present Vs. ACtuAl

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THANK YOU

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