indian union budget - s.r dinodia & co. llp · the indian union budget 2016 – highlights 1...
TRANSCRIPT
INDIAN UNION BUDGET
2016
1 The Indian Union Budget 2016 – Highlights
The Indian Union Budget 2016 - Foreword
• It is said that Third time is a charm and given that our honourable
Finance Minister Mr. Arun Jaitley was presenting the 3rd Annual
Budget under the Modi government he has done a great job of
addressing vast sections of our country in the current budget that he
presented on February 29, 2016. The foundation that was laid during
his first budget in July 2014 has been further cemented in the current
budget, showing that the government is not afraid to continue down
the same path that they had first spoken about when elected – Slow
and Steady inclusive progress
• The fiscal discipline shown by the government, coupled with a forward looking mind-set with a strong
focus on development of infrastructure, simplification and stability of the tax regime and progress in key
areas of education & skill development, job creation, healthcare and financial inclusion all bode well for
long-term success of India
• Our country is predominantly a rural and agrarian economy and without adequate support and
incentives given to these sectors the overall country cannot progress. The schemes announced under
the Rural & Agriculture segment are both positive and progressive and will continue to provide the much
needed impetus for growth in the sector which accounts for ~50% of our country’s employment
• For many years India has seen a severe brain drain having lost our best and brightest to the developed
world. Now, with the strong incentives announced in the budget for the start-up ecosystem and around
Digital India, we will retain our domestic talent within India, thereby creating world-class companies and
generating higher employment
The Indian Economy at a glance
2
The year that was
The Indian Union Budget 2016 – Highlights
3
Macro Overview
GDP Growth Rate1 Sector wise GDP Growth Rate
Rupee Vs Dollar GVA Growth Rate
The Indian Union Budget 2016 – Highlights
Source : Economic Survey 2015-16 & Reserve Bank of India
5.6%
6.6%
7.2% 7.6%
2012-13 2013-14 2014-15 2015-16
1Based on constant 2011-12 market prices
4.9%
6.6% 7.1% 7.3%
2012-13 2013-14 2014-15 2015-16
58
60
62
64
66
68
70
L
H
H High during 15-16
(April – Feb) at Rs.
68.7775 per dollar
L Low during 15-16 (April
– Feb) at Rs. 62.1580
per dollar
4.20%
-0.20%
1.10%
5% 5.90%
7.30% 7.80%
10.30%
9.20%
2013-14 2014-15 2015-16*
Agriculture & Allied Industry Services
* Based on April 2016 to January 2016
GVA : Gross Value Added, GDP = Ʃ GVA at basic prices + product taxes – product subsidies
(calculated at factor price)
4
Macro Indicators
Inflation & Monetary Factors Industrial Performance
The Indian Union Budget 2016 – Highlights
• The Average Headline WPI Inflation came down to a five
year low of -2.80% in 2015-16 after having significantly
stabilized in 2014-15
• CPI Inflation also came down to ~4.9% from 5.9% from
last year
• RBI reduced the Repo rate three times during the year
by 25 bps each to 6.75% from 7.75% last year on
account of decline in inflation rate
Our Views : The cooling in inflation is a result of falling global
commodity prices. Being a net importer and consumer of commodities,
India is reaping the dividends of a slump in global prices of coal, oil,
iron ore and other basic materials.
• IIP of 3.1% suggests that the industrial sector is
recovering at an increasing rate
• Growth of 3.1% can be attributed to a recovery in the
mining sector (2.3%) and manufacturing sector (3.1%)
• The mining sector growth was mainly on account of
higher coal production. The manufacturing sector was
propelled by the higher overall production
Our Views – IIP declined 1.3% y-o-y in December of 2015, following
an upwardly revised 3.4% contraction in the November, marking a
sharp reversal from a 5 year high of 9.9% growth in
October. Stability is still not in sight for the manufacturing sector.
Source : Economic Survey 2015-16, ** Data for month April - December
8.2
2.9
1.1
(0.1)
2.8 3.1
(2.0)
-
2.0
4.0
6.0
8.0
10.0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16*
IIP
Pe
rce
nta
ge %
Index of industrial Production %
7.4% 6.0%
2.0%
-2.8%
10.2% 9.5%
5.9% 4.9%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2012-13 2013-14 2014-15 2015-16**
WPI CPI
5
Fiscal and Current Account Deficit
Fiscal Deficit (as a % of GDP) Current Account Deficit
Fiscal Deficit over the last 10 Years (as a % of GDP) Forex Reserves over the last 7 Years (in $ Bn)
The Indian Union Budget 2016 – Highlights
3.9% 3.9% Budgeted vs. Actual
Our Views – As prescribed in the revised Fiscal Responsibility
and Budget Management (FRBM) Act, 2003, announced
during the last budget as part of the Medium Term Fiscal
Policy (MTFP) statement, the Central government fiscal deficit,
as a percentage of GDP, was fixed at 3.9% for FY16, and
3.5% (FY17) and 3.0% (FY18) as rolling targets. The road to
achieve 3.5% fiscal deficit in the Budget 2017 as per the
current road-map is hard, but not impossible, given the strain
on government finances.
1.3% 2014-15 vs. 2015-16*
Our Views – There are strong headwinds from the global
financial markets and persistent weak global growth. This is
reflected in the continued deceleration in India’s exports growth.
Based on April 2015 to January 2016 data, Indian exports have
declined by 17.6% and compared to a decline of 1.3% in FY15.
The same has been somewhat offset by a large 15.5% decline
in imports.
Source : Economic Survey 2015-16, *Budget Estimates * 2015-16 : Data is for April 2015- September 2015
279.1 304.8 294.4 292 304.2
341.6 349.6
0
100
200
300
400
2010 2011 2012 2013 2014 2015 2016*
4% 3.30%
2.50%
6% 6.50%
4.80%
5.70%
4.90% 4.50%
4.00% 3.90%
0%
1%
2%
3%
4%
5%
6%
7%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
1.4%
Sectoral Highlights
6 The Indian Union Budget 2016 – Highlights
What does it mean for your business?
7
Agriculture & Farmer’s Welfare
The Indian Union Budget 2016 – Highlights
• 6.54% of total plan expenditure is allocated for agriculture and
farmer’s welfare
• Focus on drought prone areas:
• 28.5 lakh hectares to be bought under irrigation
• 89 irrigation projects to be implemented on fast track basis
• A Long term Irrigation fund to be created in NABARD with a corpus of
about Rs. 2,000 Crores
• A Soil Health card scheme to be introduced which will provide soil and
seed testing facilities covering 14 Crore farmers nationwide
• Activities to be undertaken for promotion of organic farming
• Unified Agriculture Marketing e-Platform for wholesale markets to be
introduced
• Pradhan Mantri Gram Sadak Yojana to connect remaining 65,000
habitations by 2019
• In order to reduce the burden of loan repayment on farmers a
provision of Rs 15,000 Crores has been made towards interest
subvention
8
Social & Healthcare
The Indian Union Budget 2016 – Highlights
• 27.5% of total planned expenditure is allocated for the social sector
including education and health care
• Rs 2,000 Crores allocated towards LPG connection to Below Poverty
Line families
• National Scheduled Caste and Scheduled Tribe entrepreneurship Hub
to be set up
• New Health protection scheme to cover Rs 1,00,000 per family with
an additional top-up up to Rs 30,000 for senior citizens
• National Dialysis Services Program to be started under PPP mode
• 3,000 medicine stores to be opened under Prime Minister’s Aushadhi
Yojana during 2016-17
9
Governance and Ease of doing Business
The Indian Union Budget 2016 – Highlights
• Task Force for rationalization of Human Resource in various
ministries
• Introduction of DBT (Direct Benefit Transfer) on pilot basis for
fertilizer
• Automation facilities to be provided in 3,00,000 fair price shops
• Amendments in Companies Act to make a suitable environment for
start- ups
• Price stabilization fund with a corpus of Rs 900 Crores to help
maintain stable prices of pulses
• “Ek Bharat Shrestha Bharat” program to be launched to connect
people through exchanges in language and culture
10
Rural Sector Reforms
• Total allocation for Rural Sector for the Budget Year 2016-17
amounts to Rs. 87,765 Crores
• For strengthening Gram Panchayats and Municipal Corporations,
a sum of Rs. 2,87,000 Crores will be given
• Mahatma Gandhi National Rural Employment Guarantee Act has
been allocated Rs. 38,500 Crores
• A deadline of 1st March, 2018 has been set for the 100%
electrification of villages in India
• A digital literacy mission scheme for rural India has been launched
to cover around 6 crore additional households within the next 3
years
• Schemes such as Shyama Prasad Mukherjee Rurban scheme to
develop 300 Rurban Clusters have been launched
• National Land Record Modernisation Programme has been
revamped
The Indian Union Budget 2016 – Highlights
11
Financial Sector Reforms
• Comprehensive code on Resolution of Financial Firms to be
introduced and Financial Data Management Centre to be set up
• Monetary Policy Framework has to be assigned a Statutory basis
and a Monetary Policy committee will be set up through the Finance
Bill 2016
• SEBI to formulate New Derivate Products
• SARFAESI Act 2002 to be amended to enable the sponsor of an
Asset Reconstruction Company (ARC) to have 100% stake in ARC
and also permit non-institutional investors to invest in Securitization
receipts
• To facilitate quick and effective litigation, the members and benches
of the Securities Appellate Tribunal to be increased
• Comprehensive Central Legislation to be brought to deal with the
menace of illicit deposit taking schemes
• Public Sector banks to be recapitalized by allocating Rs. 25,000
Crores and RBI to facilitate retail participation in Government
securities
• Amount Sanctioned under Pradhan Mantri Mudra Yojana has been
increased to reach a target of Rs. 1,80,000 Crores
• General Insurance Companies owned by the Government to be
listed in the stock exchanges
The Indian Union Budget 2016 – Highlights
12
Education & Skill Development
• 62 new Navodaya Vidyalayas will be opened
• Sarva Shiksha Abhiyan for increasing focus on quality of education
• Regulatory architecture to be provided to 10 public and 10 private
institutions to emerge as world-class Teaching and Research
Institutions
• A Higher Education Financing Agency to be set-up with an initial
capital base of Rs. 1,000 Crores
• Digital Depository for School Leaving Certificates, College Degrees,
Academic Awards and Mark sheets to be set-up
• Total Allocation of Rs. 1,804 Crores for skill development
• 1,500 Multi Skill Training Institutes to be set-up
• National Board for Skill Development Certification to be setup in
partnership with the industry and academia
• Entrepreneurship Education and Training through Massive Open
Online Courses
The Indian Union Budget 2016 – Highlights
13
Infrastructure and Investment
• Total investment in the road sector, including PMGSY (Pradhan
Mantri Gram Sadak Yojna) allocation, would be Rs. 97,000 Crores
during 2016-17
• Allocation of Rs.55,000 Crores in the Budget for Roads. Additional
Rs. 15,000 Crores to be raised by NHAI through bonds
• Action plan for revival of unserved and underserved airports to be
drawn up in partnership with State Governments
• Comprehensive plan, spanning next 15 to 20 years, to augment the
investment in nuclear power generation to be drawn up
• 100% FDI to be allowed through FIPB route in marketing of food
products produced and manufactured in India
• A new policy for management of Government investment in Public
Sector Enterprises, including disinvestment and strategic sale,
approved
Steps to revitalize PPPs:
• Public Utility (Resolution of Disputes) Bill will be introduced during 2016-17
• Guidelines for renegotiation of PPP Concession Agreements to be issued
• New credit rating system for infrastructure projects to be introduced
The Indian Union Budget 2016 – Highlights
Direct and Indirect Tax Highlights
14 The Indian Union Budget 2016 – Highlights
15
Changes in the Tax laws – affecting Individuals (Personal Taxation)
The Indian Union Budget 2016 – Highlights
No increase in
basic exemption
limit for individual
taxpayers
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
• Resident individual - whose total income does not exceed Rs.5 Lakh - Rebate of Income
tax enhanced u/s 87A from Rs.2,000 p.a. to Rs.5,000 p.a.
• Resident Individual - deduction u/s 80GG in respect of Rent paid - enhanced from Rs.
24,000 p.a. to Rs. 60,000 p.a. where HRA not received from employer.
• Housing Incentives -
• Section 80EE (Deduction for Interest on loan taken for residential house property) –
additional deduction allowed up to a limit of Rs 50,000, over and above the limit of
deduction already available of Rs 2,00,000 u/s 24 for a self-occupied property of interest
on loan subject to:
- where loan is up to Rs.35 Lakhs
- taken from a Financial Institution,
- sanctioned during the period 01-04-2016 to 31-03-2017
- for acquisition of a 1st time residential house
- whose value does not exceed Rs 50 lakhs.
• Sec 24 - For claiming deduction of interest on capital borrowed - time period for acquisition
and construction of a self occupied property increased from 3 yrs. to 5 yrs from the end of
F.Y. in which the capital was borrowed.
16
Changes in the Tax laws – affecting Individuals (Personal Taxation)
The Indian Union Budget 2016 – Highlights
• The provisions of section 197A providing non-deduction/lower deduction of TDS by filing
self declaration form in 15G/15H extended to the benefit of recipient of rental income.
• Receipt of shares by individual or HUF as a consequence of demerger or amalgamation of
a company would not attract tax under section 56(2) of the Act
• Increase in surcharge on Taxable Income above Rs. 1 crore from 12% to 15% making
the maximum marginal tax rate from 34.61% to 35.54% causing a tax impact of Rs.
4,63,500 (approx.) on an income of Rs 5 cr.
• Exemption reduced from 100% to 40% in respect of withdrawal of accumulated balance
in recognized PF, NPS and approved superannuation fund.
• Dividend income u/s 10(34) was exempted from tax till A.Y. 16-17 for all class of
assessees. From A.Y. 17-18, such dividends, would be chargeable to tax @10% in the
hands of Resident Individuals, HUF or firms, if the aggregate dividend income is in
excess of Rs. 10 lakhs in a FY.
• Tax at source imposed @1% on purchase of cars exceeding value of Rs.10 Lakh and
purchase of goods and services in cash exceeding Rs.2 Lakh. This is effective from
01.06.2016.
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
17
Changes in the Tax laws – affecting all assessees
The Indian Union Budget 2016 – Highlights
• Special dispensation & exemption from levy of DDT on income distributed from SPV
to business trusts (REIT & Invits), subject to the condition of business trust holding
100% share capital of SPV and dividend out of current income. Effective from
01.06.2016.
• Investment Allowance - Sec 32AC(1A) - amended with a view of mitigating hardship in
cases in which assets acquired could not be installed in the same previous year:
- Acquisition of the plant and machinery of specified value and installation of the same
need not be in the same year. Installation may be made up to 31.03.2017 to avail the
benefit of investment allowance of 15%. Applicable for AY 2016-17 and AY 2017-18.
• The Income Declaration Scheme, 2016 - is proposed to enable persons to declare
undisclosed income :-
- On payment of 45% of such undisclosed income (tax @30%, surcharge @7.5% and
penalty @7.5%)
- From 1st June 2016 until a date to be notified by CG.
- Such person shall not be subject to scrutiny & enquiry
- They shall be immune from interest, penalty & prosecution under the Acts.
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
18
Changes in the Tax laws – affecting all assessees
The Indian Union Budget 2016 – Highlights
• New Dispute Resolution Scheme – introduced:-
- No penalty in respect of cases with disputed tax up to Rs 10 lakh.
- Cases with disputed tax exceeding Rs 10 lakh to 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, tax and interest on the
quantum addition.
• Time limits for providing appeal effects provided as 3 months:
- In respect of order passed u/s 250 / 254 / 260 / 262 / 263 / 264 / settlement order u/s
245D(4)
- The 3 months limitation is from the end of the month in which such order is received.
- It can further be increased up to 6 months by special permission of Principal CIT, on the
AO giving reasons in writing for such delay.
• An additional interest of 3% per annum u/s 244A will be provided if the there is delay in
giving appeal effects beyond limit prescribed i.e.3 months.
• Rectification time limit u/s 254(2) reduced - The time limit for rectification of mistake in
an Order passed by the ITAT was 4 years from the date of Order which is now revised to
6 months from the end of the month in which the order was passed.
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
19
Changes in the Tax laws – affecting all assessees
The Indian Union Budget 2016 – Highlights
• Exemptions & deductions available to assessee’s to be phased out:-
o Profit linked, investment linked and area linked deductions to be phased out
o Sunset clause date will not be advanced
o Tax incentives with no terminal date, now have a sunset date of 31st March 2017
o There will be no weighted deductions from 1st April 2017
Accordingly:
• Weighted deductions u/s 35CCD - reduced from 150% to 100%
• Profit linked deduction u/s 80IA, 80IAB and 80IB - not available to new assessee
from 01.04.2017
• 10AA not available to new assessee from 01.04.2020.
• Incentive to tax Patent Income at lower than MMR - section 115BBF inserted - income
of a resident eligible assessee from royalty shall be taxable @10%(++). No expenditure or
allowance in shall be allowed respect of such royalty income. This amendment will be
applicable from A.Y. 17-18
• Incentive to Start-ups – Start-Ups Business that involves innovation development,
deployment or commercialization of new products or services driven by technology and
intellectual property (IP) given incentives:-
- deduction of 100% of profits for eligible start-ups
- exemption from capital gain tax u/s 54EE, subject to conditions
This amendment will be applicable from A.Y. 17-18
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
20
Changes in the Tax laws – affecting all assessees
The Indian Union Budget 2016 – Highlights
• Presumptive Taxation extended to Professionals - section 54EE introduced for
resident individuals, HUF and partnership firms engaged in any profession u/s 44AA(1).
Where total gross receipts are upto Rs. 50 lakhs at 50%. No deduction under other
sections 30 to 38 shall be allowed. This amendment will be applicable from A.Y. 17-18
• Existing threshold limit u/s 44AB (Tax Audit) Enhanced for Professionals – with
turnover or gross receipts of Rs. 25 lakhs limit increased to Rs. 50 lakhs. This
amendment will be applicable from A.Y. 17-18
• Existing threshold limit u/s 44AD for Eligible Business Enhanced - with turnover or
gross receipts of Rs. 1 crore has been increased to Rs. 2 crore. This amendment will be
applicable from A.Y. 17-18
• In case of domestic corporate assessee, there are benefits extended to two new
categories of assesses:
• Small and medium assessee, whose turn over is less than 5 Crores in F.Y. 2014-
15, in those cases; the tax rate shall be 29% plus applicable surcharge and cess,
effective tax rate.
• Newly set up domestic companies, engaged in the business of manufacture, shall
be taxed @ 25% at the option of the company, subject to certain conditions.
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
21
Changes in the Tax laws – affecting all assessees
The Indian Union Budget 2016 – Highlights
• Special provision for full value of consideration in certain cases - Section 50C
brought at parity with section 43CA - to provide that where the date of agreement in
which the consideration for transfer of immovable property has been fixed and date of
registration are not same, the stamp duty value on the date of agreement shall be
considered for computing the value of consideration. For this the payment should be made
in advance through cheque, draft or electronic transfer only. This now equates capital
assets (u/s 50C) and stock in trade (u/s43CA) scenarios.
This amendment will be applicable from A.Y. 17-18
• Transaction not regarded as transfer u/s 47(xiiib) - for Conversion of private
company or an un-listed public company to an LLP – additional condition imposed –
existing clause required that the turnover in the previous 3 years does not exceed Rs.
60 lakhs in any year. New condition imposed that the total value of the assets in the
books of accounts of the assessee in the 3 previous years preceding the year of
conversion, should not exceeds 5 crore rupees in any year.
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
22
Changes in the Tax laws – affecting all assessees
The Indian Union Budget 2016 – Highlights
• Revision of ITR u/s 139(5) extended to belated returns filed u/s 139(4) –The provision
of 139(5) which is for the revision of return has been extended to include belated returns
u/s 134(4). The time period for such revision is one year from the end of relevant
assessment year.
• Integration of technology for processing of ITRs, facilitating paperless assessment &
reduction for manual representation in tax dept.
- Processing of return u/s 143(1) is mandatory before assessment u/s 143(3).
- E-notice to be sent by tax dept.
- E-Communication of data through electronic mode for E-hearing
- E-sahyog portal established for effective resolution of compliance mismatches
• ROI u/s 139(1) mandatory where assessee has exempt income u/s 10(38), even if such
income exceeds the maximum amount not chargeable to tax.
• ITR Filing – Due dates revised:-
- Reduction in time limit for filing ITR u/s 139(4) – when ITR is not filed by the due date
then period of filing available is reduced to the end of relevant assessment year for which
such return is being filed.
Example: For FY 2016-2017 the due date for filing of ITR u/s 139(1) is 30th Sept. 2017. If
ITR has not been filed by such due date, under the old provisions, it could be filed by 31st
March 2019. This time-limit is revised to 31st March 2018. Thus, the time has been reduced
by 12 months for filing of belated ITR.
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
23
Changes in the Tax laws – affecting all assessees
The Indian Union Budget 2016 – Highlights
TDS provisions rationalized - The existing thresholds limit beyond which tax is required to
be deducted at source have been revised. Key amendments are:-
• Threshold u/s 194C for payment to contractors have been increased from aggregate
annual limit of Rs. 75,000 to Rs. 1 lacs
• Threshold u/s 194H for commission & brokerage increased from Rs. 5,000 to Rs. 15,000.
These amendment will take effect from 01.06.2016.
• Penalty Provisions rationalized to provide objectivity and certainty:
- Meaning of concealment done away with for under-reporting & inaccurate particulars
done away with for misreporting. Section 270A introduced in place of section 271(1)(c),
which provides levy of penalty in cases of under reporting and misreporting of income.
- Immunity from Penalty & Prosecution - Section 270AA is introduced providing the
immunity procedure from penalty u/s 270A and prosecution u/s 276C, provided the
assesse pays tax and interest as per notice of demand on the quantum addition and does
not prefer an appeal and makes an application within 1 month from end of the month in
which order is received. The AO is to grant immunity unless the assesse falls within any
of the 6 conditions prescribed. Incase the application is rejected the period of limitation for
filing of appeal before CIT(A) shall exclude the period in which the application is pending
before AO.
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
24
Changes in the Tax laws – affecting all assessees
The Indian Union Budget 2016 – Highlights
Assessment Existing Time Limit Proposed Time Limit
Assessment u/s 143(3)
& 144
24 months from the end of A.Y. in
which income was 1st assessable.
21 months from the end of A.Y. in
which income was 1st assessable.
Assessment u/s 147 12months from the end of financial
year in which notice u/s 148 was
served.
9 months from the end of financial year
in which notice u/s 148 was served.
Fresh assessment in
respect to order u/s
254/263/264
12 months from the end of financial
year in which order u/s 254/263/264 is
passed.
9 months from the end of financial year
in which order u/s 254/263/264 is
passed.
• Schedule of Advance tax Installments equalized for all assesses – with effect from 1st
June 2016 all assesse’s (except eligible assesses) are required to pay Advance tax in 4
installments – as was required to be paid by corporate assesses – i.e. 15th June (15%), 15th
September (45%), 15th December (75%) and 15th March (100%). Corresponding
amendment has been made in sec 234C.
• Time limits for completing assessments has been revised as under:-
• Stay to be granted on 15% payment of demand by AO – The AO is to grant stay of the
demand on payment of 15% of the quantum demanded within 2 weeks from the date on
which such application is made. In certain cases where the AO feels that 15% of the
demand would not be sufficient, may make an application to The Principal CIT, who will
decide the quantum, within 2 weeks from the application of the AO.
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
Changes in the Tax laws – affecting Cross Border Transactions & Transfer Pricing
25 The Indian Union Budget 2016 – Highlights
No change in tax
rates & surcharge
for Foreign
Companies
• Deferment of POEM based resident test by one year in order to provide clarity regarding
guidelines and applicability of other provisions of the Act to foreign companies.
• Foreign companies assessable for the first time may be subjected to a simplified tax
regime as may be notified by Government.
• Exemption from the requirement of furnishing PAN under section 206AA to non-resident in
respect of payment of interest on LT bonds (S.194LC) and any other payment subject to
certain conditions as may be prescribed by the Government.
• AO’s right to file appeal to ITAT against directions of the DRP withdrawn.
• BEPS-Country by country reporting (CbyC) provisions proposed to apply on constituent
entity/Parent entity in India forming part of international group having consolidated revenue
above a threshold which is to be prescribed (Intl. consensus is €750 million or INR 5,395
Crores). Non-compliance to attract onerous penalties.
• E-commerce : A new tax namely ‘Equalization levy’ @ 6% proposed to be levied on
amount of consideration for specified services received or receivable by a non-resident not
having PE in India in certain cases. Payer to deduct the levy on consideration
paid/payable, failing which payment would suffer disallowance.
• General Anti-Avoidance Rule (GAAR) : No deferral of GAAR provisions i.e. GAAR
provisions will be applicable w.e.f. A.Y. 2018-19 (FY 2017-18)
• In the last budget, Government proposed to notify rules for giving foreign tax credit.
However no such rules notified till date.
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
26 The Indian Union Budget 2016 – Highlights
• Levy of Krishi Kalyan Cess on all services – Resulting in increase in the rate of
service tax from 14.5% to 15%. Applicable from 01.06.2016.
• Legal Service now removed from Reverse Charge and brought to Direct Service tax
would be levied @ 14%. Applicable from 01.04.2016.
• List of negative services has been extended.
• Exemption given to services provided by Employee’s Provident Fund Organization
(EPFO) to employees.
• Benefit of quarterly payment of Service tax extended to One Person Company and HUF.
• Point of Taxation Rules, 2011 is being amended – to determine the point in time when
service has been provided or agreed to be provided.
• Time limit for filing of application for refund of CENVAT Credit in case of export of
services has been amended.
• To reduce compliance cost – No. of Returns to be filed decreased from 27 to 13 i.e. 1
Annual & 12 monthly.
• Provision related to Input Service distributor changes – to improve credit flow and
reduce compliance burden and litigations.
• CENVAT Credit Rules amended to provide reversal on Input/Input Services.
• Increase the limitation period of Demand Notice from 18 to 30 months.
• No Service tax for housing construction of houses less than 60 sq. meter
Increase in the rate of
service tax to 14% from
12.36% effective from
01.06.2015
Swachh Bharat Cess
(SBC) is applicable @
0.5% w.e.f 15.11.2015
And now Krishi Kalyan
Cess of 0.5% w.e.f
01.06.2016
Effective rate of Service
Tax to be 15% on all
taxable services.
Changes in the Tax laws for Indirect Taxes
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
27 The Indian Union Budget 2016 – Highlights
• Customs Single Window Project to be implemented at major ports and airports starting
from beginning of next financial year.
• Customs Act to provide for deferred payment of customs duties for importers and
exporters with proven track record.
No change in Basic
rates of –
Excise Duty
Custom Duty
• To curb pollution Infrastructure Cess has been introduced in addition to Excise Duty
on:-
• Motor Vehicles –
• Petrol/LPG/CNG - length not exceeding 4m & engine capacity not exceeding
1200cc – 1%
• Diesel - length not exceeding 4m & engine capacity not exceeding 1500cc –
2.5%
• Other - higher engine capacity motor vehicles, SUVs & bigger sedans – 4%
• Categories exempt - Three wheeled vehicles, Electrically operated vehicles,
Hybrid vehicles, Hydrogen vehicles based on fuel cell technology, Motor vehicles
which after clearance have been registered for use solely as taxi, Cars for
physically handicapped persons and Motor vehicles cleared as ambulances or
registered for use solely as ambulance, No credit will be given for this cess
Changes in the Tax laws for Indirect Taxes
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
• Clean Energy Cess (now renamed as Clean Environment Cess) increased from RS.
200/ton to 400/ton on coal, lignite and peat
• Cigarettes (excluding bidis) - Increase in Excise Duty across all lengths filter and non
filter
• Refrigerated Containers – Excise duty reduced from 12.5% to 6%
• Mineral Water / Aerated Water containing added sugar or other sweetening matter or
flavor – Excise Duty reduced from 18% to 12%.
• Solar Lamps - Excise duty abolished
• Ready mix concrete manufactured at construction site - Excise duty abolished
• Sacks and bags of plastic - Excise duty rationalised from 12% to 15%
The Indian Union Budget 2016 – Highlights
• Branded Readymade Garments - Excise Duty increased to 2% (without CENVAT credit)
or 12.5% (without CENVAT credit) in respect of retail sell price of Rs. 1000/- or more
• Articles of Jewellery [excluding silver jewellery, other than studded with diamonds or
other precious stones namely, ruby, emerald and sapphire] – Excise Duty of 1% [without
CENVAT credit] or 12.5% [with CENVAT credit]
• Plans, Drawings and Designs – Customs duty levied at 10%
Changes in the Tax laws for Indirect Taxes
28
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
The Indian Union Budget 2016 – Highlights
Other rationalization and ease of administration measures :-
• Monetary Limit of disputed amount before Single Member Benches (SMC) increased from
15 Lacs to 50 Lacs.
• Number of CESTAT Benches increased by 11
• Indirect tax Dispute Resolution Scheme, 2016 introduced – in cases pending before
Commissioner (Appeals), the assessee, after paying the duty, interest and penalty
equivalent to 25% of duty, can file a declaration such that the proceedings will be closed.
He will get immunity from prosecution (subject to certain conditions.
• Cenvat Credit Rules, 2004 - amended to effect better input tax credit flow including
apportionment of credit.
• Number of returns under Excise reduced from 27 to 13 – 12 monthly and 1 annual.
• Revised returns option available to manufacturers under Excise laws.
Changes in the Tax laws for Indirect Taxes
29
Excise and Customs Service Tax
Cross Border
Taxation & Transfer
Pricing
Taxation – All
assessees’ Personal Taxation
Conclusion
The Indian Union Budget 2016 – Highlights
India is a lone bright star today in the world economy having grown at 7.6% in 2015-16. Despite global
economic woes and two consecutive monsoon shortfalls, the Indian economy is chugging along quite well.
Our foreign exchange reserves are at an all time high, our current and fiscal account deficits are on target
and the government is taking strong measures to build infrastructure, encourage FDI and increase job
creation. The global scenario seems quite gloomy today, but India with its favourable demographic
dividend and strong focus on inclusive growth is on a long-term path of progress and prosperity.
Sources
Speech of Hon’ble Finance Minister Shri Arun Jaitely
Finance Bill, 2016
Memorandum to Finance Bill, 2016
Economic Survey of India 2016
S.R. Dinodia & Co. LLP – Your Intelligent Connect
For more information on how S.R. Dinodia & Co. LLP can provide business solutions that work for you
Contact us at [email protected] or visit us at www.srdinodia.com
For our blog – Intellinsight, you may visit intellinsight.srdinodia.com
This information contained herein is in summary form and is therefore intended for general guidance only. This publication is not intended to address
the circumstances of any particular individual or entity. No one should act on such information without appropriate professional advice after a thorough
examination of the particular situation. This publication is not a substitute for detailed research and opinion. Before acting on any matters contained
herein, reference should be made to subject matter experts and professional judgment needs to be exercised. S.R. Dinodia & CO. LLP cannot accept
any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication.
30
ASSURANCE SERVICES
Statutory Assurance Management Assurance Advisory Services SocioConnect Assurance
TRANSACTION ADVISORY SERVICES
Business Valuation Corporate Finance Advisory Mergers and Acquisitions & Re-
structuring Sales, Divestitures and Demergers Transaction Evaluation (Due Diligence) Negotiation & transaction Management CapitalConnect
TAXATION SERVICES
Direct Taxation Advisory Cross Border Taxation Taxation Litigation Services TaxConnect Services
REGULATORY ADVISORY SERVICES
Corporate Law Foreign Exchange Law Limited Liability Partnership Law EthiConnect
For further details, contact:
Pallavi Dinodia,
Partner (Delhi Office)
Tel: 011-43703311
Rekha Dhamankar
Partner (Pune Office)
Tel: 020 25469683
Delhi office: K-39, Connaught Circus,
New Delhi – 110001, INDIA
Pune Office
Siddhatek Apartments,
4th Floor, 95/8, Prabhat Road,
Pune 411004
Website : www.srdinodia.com
S.R. Dinodia & Co. LLP., Chartered Accountants