Presumptive tax scheme to bring cheer to small businesses and professionals

The Budget presented on Monday has come under fire for the move to tax EPF but there's one proposal that is sure to bring cheer to small businesses and professionals, and that's the presumptive tax scheme.

This scheme covers small businesses with gross turnover up to Rs 2 crore — up from the existing ceiling of Rs 1 crore. It has also been extended to professionals with gross income up to Rs 50 lakh. So what exactly is presumptive taxation? As per Section 44AA of the Income-tax Act, 1961, a person engaged in business is required to maintain regular books of account. However, a person adopting the presumptive taxation scheme can declare income at a prescribed rate of 8% and, in turn, is relieved from the tedious job of maintaining books of account.

However, in case income earned is at a rate higher than 8%, then the higher rate can be declared.

And with the inclusion of professionals, a new Section 44ADA is proposed to be inserted in the Act to provide for estimating the income of an assessed who is engaged in any profession referred to in sub-section (1) of Section 44AA such as legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration or any other profession as is notified by the board in the official gazette and whose total gross receipts does not exceed Rs 50 lakh in the previous year. For the purpose, 50% of the total receipts of the professional during the financial year will be considered as profit and get taxed under the income-tax head "profits and gains of business or profession".

If you look at the table, it's clear that the assessee not only saves on record-keeping headaches, he also saves a considerable amount in taxes. Yes, there can be a few counters to this — mainly that the taxable income could be much below the presumptive taxation rate of 8% and 50% of receipts respectively. And if that is the case then the individual has no option but to maintain the books of accounts.

To further keep the compliance burden minimum, those using presumptive taxation scheme are also allowed to pay advance tax by March 15 of the financial year, as against the normal practice of paying the advance tax in four installments.

However, the taxpayer needs to be careful when opting for this as he or she has to remain in that scheme for 5 years to avail the benefits.

The writer is a certified financial planner

Source: Economic Times

A 25-year-old could lose 18% of retirement income

It's not about paying more in new taxes, which middle-class India has been doing year after year. You just have to count the number of new cesses introduced in the last decade to be sure of this. It's also not about giving up subsidies, which Indians have begun to do rather speedily—the latest example being the surrender of 7.5 million LPG connections in little over a year.

The rage over the new tax on withdrawal from employees' provident fund (EPF) is because the government is seen to be attempting to steal the hard-earned savings of salaried private sector employees. Unlike government employees, private sector workers do not have guaranteed pension or healthcare plan to take care of their sunset years.

Ever since news of the EPF tax broke, people have been worrying about how much of an impact it will have on their nest egg. TOI did the calculations and as the table above shows, if the government goes ahead with the tax on the interest accrued on PF contributions after April 2016, a person starting his career after this could lose 18% of his entire retirement savings at provident fund maturity. Even those in the middle of their career face the prospects of losing between Rs 10 lakh and Rs 20 lakh (12% to 8%) of their retirement corpus.

All this to nudge people towards the National Pension System (NPS) which has failed to get the number of subscribers it expected to because the scheme does not generate as high post-tax returns as the EPF does. By taxing 60% of the interest on EPF withdrawal—if it is not invested in annuity — the government is attempting to make it less attractive for people so that more investment flows into the NPS.

A better way to mend the EPF could have been to fix the dysfunctional employees' pension scheme (EPS), which is a part of EPF. Every EPF member mandatorily contributes towards EPS, but the scheme is designed so badly that the monthly pension cannot exceed Rs 4,000 — an amount that won't equal even 1% of the lastdrawn total monthly salary in many cases.

Times View

The proposal to tax part of the corpus of provident funds on withdrawal needs to be rolled back completely. The salaried middle class has consistently borne the brunt of direct taxation in India and it is unfortunate that instead of making a serious and concerted effort to widen the net, successive governments have opted to squeeze honest taxpayers at every available opportunity.

The latest proposal amounts to double taxation, since the employee's PF contribution is in any case not tax exempt beyond the 80C ceiling of Rs 1.5 lakh per annum.

Thus, those with just decent salaries — often in the last few years of their working lives — would end up having their contribution taxed in the fi rst instance and then 60% of it taxed again at the stage of withdrawal. As for those starting their careers now, quick calculations show they could stand to lose nearly a fi fth of their retirement savings to tax. This is grossly unfair.

The government's argument that the move is aimed at encouraging people to plan for pension for their old age ignores the fact that EPF already has a pension component — in the form of the employees' pension scheme — whose fl awed design has resulted in low payout. Instead of forcing people to move to the national pension system, it should revamp the EPS.

This would ensure competition between EPS and NPS and investors would have the option to choose. If the idea is to promote competition and free market across the economy, why go back to the regulated regime of old? The government shouldn't let ego stand in the way of acknowledging the inherent unfairness of what it's seeking to do.

In any democracy, Budget proposals are not cast in stone and should become law only after debate and discussion. The government should pay heed to the spontaneous sense of outrage this proposal has evoked and let it go. It'll only gain goodwill by doing so.

Source: Economic Times

Government fixes loophole to make non-compete fee taxable for professionals

MUMBAI: Professionals obtaining any sum of money under a non-compete agreement will now be subject to tax with the government having plugged a loophole in the Budget.

Once non-compete agreements were largely restricted to the manufacturing arena.For instance, an outgoing employee would have to sign on the dotted line that he would not share knowhow or a patent that he had helped develop during his employment. Or if he was an inventor, he could be debarred under the non-compete agreement from starting a similar line of business for a certain period. The money received under such non-compete agreements was duly taxed.

"There was no specific provisions to cover professionals who could argue that the sum of money received by him under a non-compete agreement was not taxable," says Gautam Nayak, tax part ner, CNK & Associates.

Now a wide gamut of pro essionals -such as those in he legal, medical, enginee ring or architectural profes sion, or engaged in accoun ancy , consultancy and inte rior decoration, to name a few -have no escape from paying their tax dues when they receive money under a non-compete agreement.

The nature of the tax will be based on the nuances of the agreement. The money received could be taxed either as a capital gain or as income from business or profession. Nayak illustrates: "If a managing partner in a consultancy transfers the right to carry on the firm in its existing name, the sum of money received by him would be a capital gain, subject to a lower rate of tax, assuming the managing partner falls in a higher tax bracket. But if the managing partner decides not to set up a competing consultancy business for a certain period of time, say three years, then the sum of money received under the non-compete agreement will be treated as income from business or profession and taxed at the applicab le income tax rates."

One of the most significant developments in the transfer pricing arena contained in the Finance Bill, 2016 is the introduction of Country-by-Country Reporting (CBCR) norms for the purpose of transfer pricing documentation.

"The new requirement comes into being from April 1, 2016 (financial year 2016-17) for Indian parent companies having consolidated turnover in excess of 750 million euros (or Rs 5,395 crore at current exchange rate). India's transfer pricing authorities will also be able to access CBCR documentation of parent companies, outside India, which have subsidiaries in India, via the mutual exchange of information agreements," explains Sanjay Tolia, partner, PwC.

Typically , the CBCR do cumentation requires reporting various details for each country where business operations are carried out by a company , such as amount of revenues, profit before tax, income paid and accrued, number of employees, assets, and details of activities carried out in each country . CBCR documentation will give Indian tax authorities a global picture of the operations of an Indian-headquartered company and of multinational companies having business in India, and deter mine whether appropriate profits are apportioned to the business operations carried out in India.

Indian-headquartered companies having interna tional operations will need to file CBCR documentation reports for the FY2016-17, before the due date of filing of the tax return, which is November 30, 2017. A graded stiff penalty structure has been prescribed for various noncompliances (see table).

"While CBCR is expected to bring in increased transparency , it is likely to increase compliance burden significantly. Transfer pricing authorities would want to have updated information at least on a yearly basis," says Hitesh Gajaria, chartered accountant and transfer pricing specialist.

"An Indian company , whose parent is resident of a country which is perceived as not co-operating with India for exchange of information, say Cyprus, will find it tougher. The Indian company may not have all the relevant information pertaining to its foreign parent and non-filing of the CBCR will result in a daily penalty ," adds Gajaria.

Source: Economic Times

We expect dialogues with government to improve investment climate

In a chat with ET Now, Mayank Ashar, MD & CEO, Cairn India, says when the burden goes from fair to an extremely high load, at that point we go away from win-win to a win-lose situation

ET Now: This budget has been pretty negative for oil explorers. Ad valorem duty has not been as per estimates. What is your reaction on this?

Mayank Ashar: First my reaction on the budget and then on the energy sector. We understand that the finance minister had to look at all stakeholders across the country and times are very challenging. So they had to find a variety of initiatives and stitch them together to a coherent whole with reforms in the agricultural sector, road sector, skill development, infrastructure and energy sectors. So we were hoping for some improvements and clearly we want to acknowledge that reforms have taken place. If I look at the new regime on the gas pricing for deep offshore field to get full import parity, that is very significant. It is something that the industry has been asking for a long time. So getting full recognition and implementation of that is very noteworthy and the backdrop to the budget is that the ministry has been doing some reforms on its own. I was at Houston last week where the Indian marginal fields were announced. So I see this as not a one shot deal but a continuum of openness of energy sector for investment in this country. We import three quarters of our oil consumption, so it is important that we get the indigenous production right. We were hopeful that the cess levy would get significantly altered in this budget. We noted that it did get altered to ad valorem but the percentage of ad valorem is actually a lot higher than we were expecting. But we accept this as a first step and we hope that not just Cairn but other producers as well will continue to have dialogues with the ministry and the government for a continued improvement in investment climate.

ET Now: So how much pressure are you witnessing on your realisations now that the cess also has not been as per estimates and crude prices continue to fall?

Mayank Ashar: The energy industry is facing a perfect storm. It does not matter whether you are an OPEC country or a shale oil producer in United States or oil and gas producer anywhere else in the world. We are facing very significant pressure of the like we have not seen in many decades. As far as Cairn is concerned, we are proud of our Rajasthan fields. We have some of the lowest cost oil in the world but despite that what we find is that at these levels of prices with the current burden that we have, our proftabilities under significant stress and if you were to look at our earnings after depreciation, they are virtually negligible. So this results in us looking hard at shutting down some unprofitable production. So we were really counting on the cess burden to be significantly lower. It has not happened yet but we hope that we can continue to have dialogue with the government and find a way so that the burden on the industry is not so severe that it hurts investment.

ET Now: So what is the option available? ONGC expects some negotiations to continue with the government. You too will reach out?

Mayank Ashar: Yes, I think we acknowledge the government efforts here. They clearly recognise that it was an issue and we would suggest that their response is less than what it ought to be but we appreciate the first steps. So I am not surprised at all that ONGC is feeling the pain. We are feeling the pain and together the two of us pay a lot in cess. So that is not surprising. I do want to separate a burden from, for lack of better word, an allowance of sorts. So sometimes there are incentives given to industries to invest or to grow and then there are burdens. These burdens are fair because at the end of the day, the oil and gas is owned by the government, by the people and so it is appropriate that the industry pays a burden. But when that burden goes from fair to an extremely high load, at that point we go away from win-win to a win-lose and we would suggest that in any industry not just oil and gas when the burdens are too high, where the government take is too high, it has collateral impact.

Source: Economic Times

Budget 2016 is growth-oriented

In a chat with ET Now, Adi Godrej, Chairman, Godrej Group, says the budget has done in a fair amount for demand picking up and of course GST would do a lot. So when demand picks up, private sector investments will pick up. Edited excerpts

ET Now: What do you think of the Budget?

Adi Godrej: Clearly this budget is growth oriented, it is development-oriented especially in the agri and rural sectors which have suffered recently. What would be absolutely great is if in this budget session they could pass the GST constitutional amendment bill because the combination of a good budget and the GST could be very growth oriented.

ET Now: When do you think that the capex cycle for corporates will pick up? Right now, the economy is just moving on two cylinders of public spending and private consumption.

Adi Godrej: Private capex will pick up when demand picks up. I think this budget has done in a fair amount for demand picking up and of course GST would do a lot. So when demand picks up, private sector investments will pick up tremendously.

Source: Economic Times

Hero Motor back in demand on Budget’s rural thrust

ET Intelligence Group: The stock of world's largest motorcycle manufacturer Hero MotoCorp is once again on investors' radar, thanks to the government's impetus to stimulate the rural sector, a key market for the company. It is also gaining a foothold in scooter segment — the fastest-growing twowheelers segment.

Hero Moto's stock has outperformed the BSE Auto index by 14% since January after being an underperformer in the past two years.

It is among the few stocks in the Nifty, which have not broken their low of August 2013. This is the prime reason why traders have been accumulating the stock over the past three months.

The stock is trading at 22% premium to the BSE Auto index based on projected FY17 earnings growth compared with 37.4% average premium in the past five years, according to Bloomberg data.

Based on the early commentary of weather forecasters, traders are betting on a good monsoon this year after two consecutive years of drought.

Historical data shows that monsoon has never been in deficit for three straight years. If monsoon turns out to be normal, it will augur well for Hero Moto's volume growth as half of it is derived from the rural area. Another positive factor is the government's intent to double the rural income in five years.

Higher allocation to rural employment guarantee scheme — MGNREGA, increased agriculture credit, and better pricing for agricultural products through minimum support prices are expected to lift the agriculture contribution to the GDP.

The company's motorcycle volume grew 6.1% in 2014 and fell 3.1% in 2015. If rural consumption improves this year, volume may grow significantly. According to Bloomberg, consensus earnings per share are expected to be Rs 172 and Rs 192 for FY17 and FY18, respectively implying growth of 11% each year.

The company reported 22% earnings growth in the nine months to December 2015 despite 3% decline in the volumes. This shows that it has multiple levers to drive profitability. Gross margins improved — for the sixth quarter in a row — to 33.1% in the December quarter.

Hero is also gaining foothold in the scooter market by introducing new models such Maestro Edge and Duet.

Source: Economic Times

Expected more funds to boost govt banks

Union Finance Minister Arun Jaitley's focus on the nine key pillars in Budget 2016-17 should revitalise the economy, strengthen the pace of reforms and set the country on a growth trajectory. The budget is timely and critical at a time when the global economy is in crisis. I think, the Finance Minister has done a fine balancing act by harmonising the need for higher capital expenditure on one hand and higher revenue spending on the other — even as he has stuck to the fiscal target of 3.5%.

The emphasis on agriculture, farm welfare and rural sector, as evident from the increase in allocations to both capital creation and welfare schemes, is welcome.

The allocation of Rs 17,000 crore to irrigation and the fast-tracking of rural development projects will reduce dependence on monsoon in the long term. Besides, the allocation of Rs 38,500 crore for NREGA will reduce short-term rural distress in light of deficient rainfall and drought situation in the last two years. The move towards the smooth resolution of disputes and contract renegotiations for Public-Private Partnership (PPP) projects indicates that the PPP regulatory regime in India is maturing.

One was expecting a greater allocation for recapitalisation of public sector banks. Overall, Budget 2016-17 balances long-term vision and short-term stimulus measures, which the Indian economy so desperately needs in the current global environment.

Source: Economic Times

How to make a Bharat-focused portfolio after Budget 2016

NEW DELHI: One sure-shot way of making money whenever there is a change in government spending is by realigning your portfolio in favour of that theme, say experts.

The recent budget presented by Finance Minister Arun Jaitley had 'Bharat' written all over it. In other words, the budget was focused on rural and infrastructure spending. Instead of focusing more on capital expenditure, which was the focus in the 2015-16 Budget, this one appeared to prioritise rural sector.

Experts say investors should tweak portfolios towards the 'Bharat' theme or slightly increase exposure to stocks that cater to that theme. Going through the Budget fine print, the rural sector is the one that benefited most among all sectors, with a total budget allocation of Rs 87,765 crore.

"The growth potential in the rural segment is high. Investors should focus on stocks in sectors that are relatively more levered to rural markets, which will definitely show better signs of earnings growth going forward," Taher Badshah, Senior Vice President & Co-Head Equities, Motilal Oswal Asset Management, said in an interview with ET Now.

"Investors can look for select stocks in the FMCG space and NBFCs that actually cater to low-income housing. There are micro-lending companies which also cater to that segment of the market," he said.

The Finance Minister in his budget stuck to the path of fiscal prudence and maintained its fiscal deficit target at 3.9% for FY16 and 3.5% for FY17.

Going forward, the government is likely to focus on ensuring macro-economic stability, with a thrust on improving infrastructure and at the same times maintaining fiscal prudence.

The government in the Budget outlined a roadmap that would focus more on key areas like farm sector, rural development, infrastructure and employment generation, which would boost consumption.

"As far as rural discretionary consumption is concerned, the budget is a welcome change. The government has rightly recognised that after two years of weak monsoons the whole segment is under stress and they have done what they could to improve conditions out there," said BharatIyer, JP Morgan India in an interview with ET Now.

"I would not get carried away because let us face it at the end of the day the allocations have increased by about 8% to 10% but it is not more than that. And secondly, we still have to watch out for a couple of more variables such as monsoon, minimum support prices for Agri commodities etc," he added.

But, there is no doubt that the Budget did a good job in balancing many economic, social and political priorities that the FM had to juggle in these trying times, say experts.

Ahead of the Budget, the market was little nervous about higher capital gains taxes, which did not materialize. Both Sensex and Nifty50 fell by over 10% ahead of the event.

A lack of major negatives and credible numbers has led to massive short-covering and long positions being built in the equity markets, say experts who advise investors to tweak their portfolio towards sectors like cyclical, HFCs, two-wheeler makers, cement, FMCG etc.

"There's a significant increase in outlay for the rural sector. Combined with the implementation of the 7th Pay Commission recommendations and OROP, it means a good impact on consumption," said Mihir Vora- Director and Chief Investment Officer, Max Life Insurance.

"Sectors like cars, two-wheelers, other consumer durables, cement, FMCG, housing finance, microfinance and other NBFCs etc. could see better demand. The Budget is also overall positive for housing and real estate - there's increase in the tax incentives for affordable housing and simplifying the tax structure for REITs," he added.

Top five stocks to play the Bharat theme:

Analyst: Anand Tandon, Independent Analyst

M&M Financial: Iyer, who runs M&M Financial, is a fantastic manager. "Among many people I have met in the financial services business I would argue that his grasp on his business is among the best," said the analyst. You require a certain calibre of person to be running a bank who has to be able to make NPAs and so on.

That said, the company suffers unnecessarily because of the fact that they actually genuinely show their NPAs when they come out with one. Tandon is of the view that if you are really making a case for an uptick in terms of the rural economy then, without a doubt, this would be a company which will benefit hugely and will also have the largest beta in terms of recoveries in terms of their portfolio.

Mahindra Financial is going to be a bellwether stock in the rural economy.

Analyst: Sudip Bandyopadhyay, Market Expert

Jain Irrigation: This is one company which has got a great potential, especially after Budget. There were certain setbacks for the company in the past but I think the company has corrected the course quite a bit and remained focussed on the core business which is small and medium irrigation equipment and projects, said the analyst.

"With the budget brining back focus to rural economy and irrigation, I think this is one company which is going to benefit. Their valuation still continues to remain attractive so, with a one-year time the horizon, it is a great buy," he added.

Coromandel International:

Coromandel International is an excellent company, great management. "Unfortunately, the market was not conducive but with again focus coming back to rural India, I think this company has a great future," said the analyst.

"Also, remember that fertiliser subsidy rationalisation is on cards and there has been enough and more precursor to that. We are expecting current valuation if an investor buys, it is one-year time horizon, it should give excellent returns," he said.

Analyst: Daljeet Singh Kohli, HoR, IndiaNivesh

Hero MotoCorp:

Kohli said his team will be revising the rating on Hero MotoCorp to buy from hold rating and increase the target price from Rs 2600 to around Rs 3000 odd, said the analyst. The basic logic behind the move is that the kind of push that has been given on the rural side in the budget is going to yield results over a period of one to two years.

That is a long-term sustainable positive for Hero MotoCorp because that is where their major market lies. "Also, if we see in terms of valuation, the stock is still trading only at 16 times of FY 17," he said. This PE multiple actually had contracted from 18x to 16x because in him last two-three months, they did not show that kind of numbers but the numbers which have come for February were also good.

Most of the things are positive for Hero Motocorp and in comparison to Bajaj Auto, it is still better because Bajaj Auto is still facing headwinds in export.

Analyst: D K Aggarwal, Chairman and MD, SMC Investments and Advisors

Bharat Electronics:

The government's greater emphasis on 'Make in India' initiative in Defense sector provides a great opportunity for the Company to enhance its indigenization efforts and to address the opportunities in Indian defence sector.

Healthy order book and orders in the pipeline, capacity enhancements and the creation of new test facilities help the company in achieving the targeted growth and also would continue to drive the growth in the coming 4 to 5 years.

Source: Economic Times

Budget has offered room for monetary policy easing

NEW DELHI: The Budget that aims to limit fiscal deficit to 3.5 per cent of GDP in 2016-17 has been able to provide room for easing of the key policy rate by the Reserve Bank, Minister of State for Finance Jayant Sinha today said.

"Macroeconomic stability is fundamental to ensuring that monetary policy has space. If we don't provide that monetary policy space by generally a tighter fiscal policy, we cannot expect monetary policy to loosen up," he said while speaking at an event of the Indian Private Equity and Venture Capital Association (IVCA) here.

"So, that is the kind of environment we have tried to create on the macro side (in the Budget)."

There is widespread speculation that RBI is going to cut policy rate soon as the government has walked a tightrope on the fiscal deficit.

Amid debate over balancing growth and financial management, Finance Minister Arun Jaitley adhered to the fiscal consolidation road map by proposing to keep the deficit at 3.5 per cent of GDP in 2016-17.

The fiscal deficit in the current fiscal has been estimated at 3.9 per cent, which will be brought down to 3.5 per cent in the next fiscal as per the Budget 2016-17.

Citing the example of the previous NDA rule, he said this is what had happened in 1999-2001.

"There was fiscal consolidation, the current account deficit came down, inflation came down. As that happened, interest rate, which was very high over 10-12 per cent, came down quite dramatically," he said.

With regard to the proposed goods and services tax (GST), Sinha said it is stuck in the Upper House but may get passed.

"GST is stuck in the Rajya Sabha, but we are very hopeful that the bankruptcy law will be passed. Even for GST, the numbers (in the Rajya Sabha) are going to change... so, we are hopeful of GST as well," he said.

On banking sector reforms, Sinha said the government has announced its intent for consolidation in the sector in the Budget.

"As far as IDBI Bank is concerned, we are going to transform it. We can potentially drop below 50 per cent as part of strategic disinvestment. We have made a very strong statement around that. We have consolidation process of public sector banks (that has) started," he said.

The government currently holds 80.16 per cent in IDBI Bank.

"All of us as citizens of India own 27 public sector banks. Once the consolidation process starts, I do not think we will have 27 public sector banks (going forward)," he said.

Source: Economic Times

FM's plan focused on taxation of retiral schemes

By Parizad Sirwalla

The much awaited and the much talked about Budget 2016 has been revealed by the Finance Minister (FM), Mr. Arun Jaitley. This Budget talks about an India being transformed, and in order to do so, the FM has introduced us to the measures which would be undertaken based on the proposed nine pillars for India. The pillars which he set across includes agriculture, rural sector, social sector, education, skills and job creation, infrastructure investment, financial sector reforms, governance reforms and ease of doing business, fiscal discipline and tax reforms to reduce compliance burden.

The key provisions in direct taxes which have been proposed in this Budget, particularly for the individuals have been listed hereunder:

Tax slabs and 80C limits :The common man had been quite hopeful on the basic rates of taxation to undergo a change along with the 80C deductions limits to be raised but these have remain unchanged. However, for small taxpayers earning annual income not exceeding INR 5 lakhs, the FM has raised the ceiling of tax rebate from INR 2,000 per annum to INR 5,000 per annum. This has resulted in tax savings up to INR 3,090 per annum.

Additionally Taxing the Super Rich: For the super-rich the basic tax rates haven't changed but the rate of surcharge for the super-rich class of individuals (i.e. total income is exceeding INR 1 crore) has been increased from 12 per cent to 15 per cent (which was increased by 2 per cent last year as well). The maximum marginal rate of tax (i.e. for income in excess of INR 1.065 crore) will now stand at 35.535 per cent compared to the erstwhile rate of 34.608 per cent.

Additional interest deduction: As anticipated, in order to boost the real estate sector and in-line with the Government's long term intention to provide housing for all, an additional deduction of up to INR 50,000 per annum for interest on housing loan provided the loan amount does not exceed INR 35 lakhs (sanctioned during FY 2016-17) and the cost of the house does not exceed INR 50 lakhs. Also, the individual should not own any other property on the date of sanction of the loan.

Increase in time period for acquisition or construction of self-occupied house property for claiming deduction of interest - Delays in housing construction projects that adversely impacted the tax deduction claim made by house owners now sought to be relaxed. Enhanced deduction for interest paid on housing loan now proposed to be allowed even if construction is completed after 3 years but before 5 years.

Deduction in respect of rent paid: In case of individuals who does not own a house and is not in receipt of House Rent Allowance from employer, a deduction of up to INR 2,000 per month was allowed in respect of rent paid towards accommodation occupied by them. This limit has been raised to INR 5,000 per month.

High earners of Dividend will now be taxed: Currently, income earned by way of dividends from shares of domestic companies is exempt from tax and dividends are taxed only at the rate of fifteen per cent at the time of distribution of dividend in the hands of company declaring dividends. It is proposed that income earned by way of dividends from shares of domestic companies in excess of

Rs 10 lakhs shall be taxable in the hands of resident individuals, HUFs or a Firm at the rate of 10 percent (plus applicable surcharge and cess).

Employer's contribution to Super-annuation fund: Currently, the amount of any contribution made to an approved Superannuation Fund by the employer in respect of the employee, to the extent it exceeds INR 1 Lakh is taxable as perquisite in the hands of the employee. FM has proposed to enhance this threshold to INR 1.5 Lakhs. Further, the payment from a superannuation fund in lieu of or in commutation of annuity purchased exempt only to the extent of 40% in respect of contributions made on or after 1 April 2016.

Employer's contribution to and withdrawal from a Recognized Provident Fund - The employer's contribution to a recognized Provident fund in excess of INR 150,000 per annum may now be taxable in the hands of the employee. Further, tax exemption on withdrawal of provident fund may now be limited to 40 percent of accumulated balance attributable to contributions made on or after 1 April 2016 by an employee. Salary limits will be separately prescribed for employees excluded from tax on such withdrawal. However, it is likely that the Finance Ministry will issue detailed FAQs on this subject.

Belated Tax Return - The time limit to file a belated individual tax return has been reduced to one year from the end of the relevant financial year. Further, a belated tax return which was not allowed to be revised earlier can now be revised within the prescribed time limits.

For the Aam Aadmi, this Budget was focused on taxation of retiral schemes, reducing compliance burden and litigation and minimizing administrative and procedural difficulties faced by taxpayers.

(The writer is Partner and Head of Global Mobility Services - Tax, KPMG in India)

Source: Economic Times

Too many regulations the biggest roadblock in India

The most significant part of the government's latest Budget is pegging the 2016-17 fiscal deficit at 3.5% of GDP, says Godrej group Chairman Adi Godrej. He says the Budget wasn't a surprise to him and that he expects the proposals to revive rural demand. But, there are still roadblocks like too much regulations, which cause delays, he tells ET. Edited excerpts:

Was the Budget a surprise to you?

It was not a surprise. Achieving a fiscal deficit of 3.5% was a god move in the Budget. I feel many measures on Bharat will revive slowing demand from rural areas.

But there are concerns about single-digit growth of consumer products makers?

It is very rare for the monsoon to be erratic consecutively for three years. Faster execution of initiatives mentioned in the Budget, good monsoon, plus GST will help FMCG companies achieve double digit (growth).

What is your opinion on 100% FDI in food marketing?

It is a very good step. In my opinion, why have restrictions on FDI at all? Competition improves when there are no restrictions and 100% FDI is a good thing to aspire for.

Will you be looking at exploring new sectors?

We don't wish to get into new sectors as of now. We are doing well in the various sectors that we are currently in and there is so much scope and opportunity.

Will the group be looking at acquisitions?

Acquisitions are a part of our company's strategy to expand into emerging markets, the most recent being Canon Chemicals in Kenya. Our focus is on home care, personal care and hair care, and we are definitely planning more acquisitions. Roughly, half of our revenue comes from our international businesses where the higher per capita sales come from Indonesia, Chile, Uruguay, Kenya, the UK, etc.

One of the proposals of the budget is to bring in a regulator for real estate. What is your take on this?

Independent regulators do well, but whenever the government enters regulations, things tend to get out of hands. There are areas that government needs to stay out.

What are the roadblocks India faces today?

The biggest roadblock in India is that there are too many regulations. So many permissions need to be taken. There again the process is extremely slow, which causes so many delays.

Source: Economic Times

Budget ups tax compliance burden: Advance tax due 3 months earlier now

By Pragati Kapoor & Suraj Goel

Budget 2016 has significantly increased the income tax compliance burden on individual tax payers by making advance tax payable from June 15 instead of September 15 earlier. Now, individuals (except for exempted categories) will have to estimate their income for the full financial year as early as June 15, compute the income tax payable on that income and pay 15 per cent of that or else get ready to shell out interest on late payment at a stiff rate of 1 per cent simple interest per month.

The current advance tax payment schedule for a company is 15 per cent, 45 per cent, 75 per cent and 100 per cent (cumulative) of income tax payable on the full financial year's income to be paid by 15th June, 15th September, 15th December and 15th March, respectively. Till now, individuals liable to pay advance tax, had to pay 30 per cent, 60 per cent and 100 per cent (cumulatively) of tax payable on the full fiscal's income by 15 September, 15 December and 15 March, respectively. An individual with a tax liability of Rs 10,000 or more in a financial year has to pay advance tax in that year as per current income tax law. The budget proposes to do away with the separate advance tax payment schedule for individuals and instead, impose the same schedule as that for companies on the individuals as well.

Making advance tax payable by June 15 instead of Sept 15 earlier will hike compliance burden on individuals. Agree?

— ET Wealth (@ET_Wealth) March 10, 2016

"Aligning advance tax schedule for individual tax payers is an accelerated revenue collection measure and will be an administrative burden for tax payers. There will be another compliance date to remember and missing it will mean having to pay interest. So instead of 3 there will be 4 advance tax instalments with the first date being June 15 followed by September 15, December 15 and March 15 as dates by which advance tax should be paid", says Sonu Iyer, Partner & National Leader - People Advisory Services, EY.

Impact of proposed change
For taxpayers who calculate and pay advance tax based on estimated income, the adverse impact of this proposal would increase with increase in variation (quantum as well as degree) of actual income from estimated and vice versa. For tax payers, who are unable to take out time from their busy schedules (a substantial number fall in this category) to calculate and pay advance tax, the adverse impact would be in the form of a significant increase in interest payable on the deferment of advance tax payment.

In practice, even now a majority find it very tedious to calculate and pay advance tax and therefore a large number skip the first or the first two advance tax payment dates and pay only by the third. Therefore, advancing the payment schedule by one quarter will increase compliance burden for them.

"The general feeling is that it (the budget proposal) has increased the tax compliance burden for the smaller tax payers'', says Mr Sanjay Sood, a Delhi-based practising chartered accountant.

"The change in advance tax payment schedule for individuals as proposed in Budget 2016 will increase the compliance burden for them. Practically most people do not pay the first few instalments because they find it difficult to estimate their income for the full year which means that the interest payment on deferment of advance tax will increase for them. Individuals may also have to bear the unnecessary burden of additional professional fee if he has engaged a professional (chartered accountant) and he increases the fee due to extra compliance, " adds practising chartered accountant R K Malhotra of Rajinder Kumar Malhotra & Co.

There is a small concession though: As per the proposed amendment, even if an individual pays 12 per cent and 36 per cent of the total tax payable for the full fiscal by June 15 and Sept 15, instead of the full 15 per cent and 45 per cent, then he would not be liable to pay interest of 1 per cent on the shortfall in advance tax. However, the real problem in case of advance tax is the fact that a substantial number of people are simply unable to find the time to properly estimate their income for the full financial year multiple times.

Advance tax calculation
The advance tax required to be paid by a particular date is a percentage of the total tax that is expected to be payable for the full financial year. Therefore, in order to pay advance tax by a given date, an individual tax payer will have to: (1) Accurately estimate his expected income for the full year; (2) Calculate the tax that would be payable on this estimated income; (3) Then pay advance tax so that the specified percentage of the total tax payable is paid by the dates stipulated.

If the stipulated amount, say 15 per cent, is not paid by June 15, then the tax payer will have to pay a simple interest @ 1 per cent of shortfall in actual advance tax payable per month for every month that the advance tax has been delayed under Section 234C of the Income Tax Act.

Refer illustration below for how the change in advance tax payment schedule may impact a tax-payer.

Problems faced
Individuals, normally, do not have the kind of account keeping and computation resources that companies do. Therefore, this kind of calculation four times in a year is quite a bit of work. Whether an individual does this computation himself or takes the help of a chartered accountant/financial expert, the compliance cost in terms of time and money increases with the number of times it has to be done. In fact, most people prefer to pay the interest on late payment and pay the total amount in March in one go rather than pay advance tax instalments as prescribed.

The problem does not end here. If advance tax payer's estimate of income for the full year goes drastically wrong (i.e. actual income is much less than estimated), then he may end up having paid more tax than necessary and will have to claim a refund. He would have also suffered the notional loss of interest he would have earned on the excess advance tax paid. If he does not pay advance tax or pays less than the requisite amount, then he has to pay heavy interest for paying late. Either way, it is a tightrope walk which has been made even more difficult by Budget 2016.

Actual income may vary sharply from estimated income due to several reasons: (a) A person may lose his job after the third instalment is paid which would entail loss of salary for three months; (b) A person may not get any of the bonus normally paid along with salary at the end of the financial year which he may have included in estimated income; (c) Interest income may vary as interest rates would change whenever fixed deposits are renewed/ investment allocation is reworked; (d) Rental income may stop mid-way through the year if the tenant suddenly vacates and the property given on rent remains vacant due to some problem or the other e.g. renovation/ pipe leakage etc.

Alternatively, a person may find a much higher paying job mid-way through the year and also get a hefty bonus at the year-end thereby pushing the actual salary way above the original estimate. Although capital gains are not subject to advance tax, the other income of an individual can still vary a lot. Therefore, the task of accurate advance tax calculation becomes tedious and difficult for the common tax payer.

While salaried individuals can inform their employers about their 'other income' and get the advance tax paid via TDS, they will still have to compute the estimated income prior to the four advance tax instalment dates.

Advance tax is payable as per the new schedule by all individuals except certain exempted categories. These exempted categories are: Senior citizens who do not have income from business or profession; If an individual is eligible for and opts for presumptive taxation scheme, then he would be liable to pay tax as per that scheme and the four proposed advance tax payment dates would not apply to him/her.

The table below illustrates how the amendment proposed in Budget 2016 will impact the interest burden of an individual tax-payer.

We have assumed a tax-payer's estimated income on the first three advance tax payment dates and the actual income on the last advance tax payment date in FY 2016-17. We have calculated advance tax payable on each of the first three due dates (as per the new proposed schedule) using these estimated income levels and after that, have included the impact on the tax-payer's interest burden due to the proposed amendment of u/s 211 and Section 234C of the Income Tax Act, 1961 made under the Finance Bill, 2016. * This being the actual income of the F.Y.

Advance tax and interest payable in Rs: (where actual income turns out to be higher than estimated income)

As per existing tax laws

Due Dates	Estimated Income level for whole year	Advance tax paid on estimated income	Advance tax payable on actual income	Shortfall in advance tax payment	Interest u/s 234C
By 15th June	1200000	0	0	0	0
By 15th Sept	1500000	84975	131325	46350	1400
By 15th Dec	1700000	207030	262650	55620	1700
By 15th Mar	*2000000	437750	437750	0	0
TOTAL					3100

As per newly proposed amendment

Due Dates	Estimated Income level for whole year	Advance tax paid on estimated income	Advance tax payable on actual income	Shortfall in advance tax payment	Interest u/s 234C
By 15th June	1200000	28580	65660	37080	1100
By 15th Sept	1500000	127460	196990	69530	2100
By 15th Dec	1700000	258790	328310	69520	2100
By 15th Mar	2000000	437750	437750	0	0
TOTAL					5300

The newly proposed amendment has increased the interest payable from Rs 3,100 to Rs 5,300 which means an increase of around 71 per cent in the interest burden for the tax-payer assuming his estimated income varies from actual as per illustration. The actual impact on interest payable by any individual will depend on how much his actual income varies from his estimates.

Thus, whether an individual tax payer complies with the proposed new schedule of advance tax payment or does not, either way the cost in terms of time or money is set to increase.

Source: Economic Times

The key Budget 2016 proposal that you probably missed

The analysis of Arun Jaitley's Budget has focused on issues like the fiscal deficit, boost to infrastructure, and sundry tax measures.Yet in terms of life and death, by far his most important proposal is the scheme to provide LPG (cooking gas) to the poorest 50 million households over the next few years. This finally shows sensitivity to one of India's greatest health hazards that has long been ignored.

The chatterati are much agitated by outdoor pollution affecting all our cities. Yet indoor pollution has always been a far greater health hazard, killing and maiming millions.

"Indoor pollution? What's that?" many people ask me. The answer: smoke from cooking chullahs made of clay or stones, fuelled by firewood or dung, used by 700 million Indians. Professor Kirk Smith of UCLA, the world's top authority , estimates that smoke from an Indian cooking fire is the equivalent of smoking 400 cigarettes per hour (note: per hour, not per day).The WHO estimates that this kills 1.2 million Indians per year.

Chullahs also produce carbon monoxide, but rarely in lethal doses. The most deadly is PM 2.5, particles under 2.5 microns that lodge in the lungs and cause cancer and TB. Smith says women cooking with biomass daily inhale more than 10 times the WHO norm for PM 2.5.

The chatterati are obsessed with outdoor pollution, which can kill them. But indoor pollution does not threaten elite households using clean cooking fuels like cooking gas or electricity. It threatens only poor folk using biomass. And so the elite couldn't care less.

Respiratory diseases are the second biggest killers after unclean water. TB is especially vicious, since it spreads fast.A National Family Health Survey (NFHS) study suggests TB incidence of 1,046 cases lakh population for unclean-fuel users versus just 296lakh for clean-fuel users. One study suggests that 51% of all TB cases in India (and 59% in rural India) are caused by cooking smoke.

Biomass smoke makes people blind. One NFHS study of women showed that blindness was 8,967 per lakh population in biomass homes compared with 6,152lakh in cleaner-fuel homes. Up to 17% of partial blindness and 20% of complete blindness in rural homes could be attributed to cooking smoke.

In recent decades, many attempts have been made to improve the traditional chullah. Modern chullahs have been designed to improve fuel efficiency and reduce smoke. This could in theory reduce the rural female workload of collecting firewood, reduce deforestation, and improve health. Many states installed millions of modern chullahs in villages. Yet every follow-up survey showed that most modern chullahs lay unused or broken.

There are many reasons. One study back in the 1980s cited a villager who abandoned modern chullahs saying that an open fire not only provided cooking heat but also lit up the house almost all villages lacked electricity). Modern chullahs cut out the light and plunged homes into darkness. Another villager said smoke from an open fire was a useful insect-controller that drove away insects living in thatched roofs.

Whatever the many reasons, the modern chullah programme simply failed. Women continued to use biomass in traditional chulhas, with no realization that they were slowly killing and maiming their families.

Switching to cooking gas will be very expensive. But it will do wonders for rural health. Jaitley said in his Budget speech that the government aimed to provide concessional connections to no less than 50 million families in coming years, covering the poorest quarter of the population. However, his Budget provided a pittance: just Rs 2,000 crore to meet the initial cost of subsidizing 15 million LPG connections to households below the poverty line. The scheme will continue two more years to cover 50 million families.

Oil minister Dharmendra Pradhan says the connection subsidy will be Rs 1,600 per family . The normal cost is Rs 3,400 per connection. Gas is an excellent clean fuel but is unaffordable for the rural poor. Poor families using free firewood and cow dung as fuel today will shift to clean gas only very gradually. To begin, the rural elite, parading as the rural poor, will be the main beneficiaries.

Besides, it will take years to create an all-India rural network of cooking gas dealers who can supply new cylinders and take away used cylinders. The ground reality will be slow, incremental progress.

I am not usually a votary of expanding subsidies. But I fully support subsidies for rural cooking gas to save rural lives.Future budgets must provide far bigger sums. At last we have recognized a huge problem terribly neglected for decades. The emphasis is no longer on fuel efficiency through modern chullahs, but on saving rural lives through clean fuels. That is a welcome, overdue change of approach.

Source: Economic Times

Budget 2016 - Highlights

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Key Features of Budget 2016-2017

INTRODUCTION

 Growth of Economy accelerated to 7.6% in 2015-16.

 India hailed as a ‘bright spot’ amidst a slowing global economy by IMF.

 Robust growth achieved despite very unfavourable global conditions

and two consecutive years shortfall in monsoon by 13%

 Foreign exchange reserves touched highest ever level of about 350

billion US dollars.

 Despite increased devolution to States by 55% as a result of the 14th

Finance Commission award, plan expenditure increased at RE stage in

2015-16 – in contrast to earlier years.

CHALLENGES IN 2016-17

 Risks of further global slowdown and turbulence.

 Additional fiscal burden due to 7th Central Pay Commission

recommendations and OROP.

ROADMAP & PRIORITIES

 'Transform India' to have a significant impact on economy and lives of

people.

 Government to focus on –

 ensuring macro-economic stability and prudent fiscal

management.

 boosting on domestic demand

 continuing with the pace of economic reforms and policy

initiatives to change the lives of our people for the better.

 Focus on enhancing expenditure in priority areas of - farm and rural

sector, social sector, infrastructure sector employment generation and

recapitalisation of the banks.

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 Focus on Vulnerable sections through:

 Pradhan Mantri Fasal Bima Yojana

 New health insurance scheme to protect against hospitalisation

expenditure

 facility of cooking gas connection for BPL families

 Continue with the ongoing reform programme and ensure passage of

the Goods and Service Tax bill and Insolvency and Bankruptcy law

 Undertake important reforms by:

 giving a statutory backing to AADHAR platform to ensure benefits

reach the deserving.

 freeing the transport sector from constraints and restrictions

 incentivising gas discovery and exploration by providing

calibrated marketing freedom

 enactment of a comprehensive law to deal with resolution of

financial firms

 provide legal framework for dispute resolution and

re-negotiations in PPP projects and public utility contracts

 undertake important banking sector reforms and public listing of

general insurance companies undertake significant changes in FDI

policy.

AGRICULTURE AND FARMERS’ WELFARE

 Allocation for Agriculture and Farmers’ welfare is ` 35,984 crore

 ‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission

mode. 28.5 lakh hectares will be brought under irrigation.

 Implementation of 89 irrigation projects under AIBP, which are

languishing for a long time, will be fast tracked

 A dedicated Long Term Irrigation Fund will be created in NABARD with

an initial corpus of about ` 20,000 crore

 Programme for sustainable management of ground water resources

with an estimated cost of ` 6,000 crore will be implemented through

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multilateral funding

 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost

pits for production of organic manure will be taken up under MGNREGA

 Soil Health Card scheme will cover all 14 crore farm holdings by March

2017.

 2,000 model retail outlets of Fertilizer companies will be provided with

soil and seed testing facilities during the next three years

 Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’

and 'Organic Value Chain Development in North East Region'.

 Unified Agricultural Marketing ePlatform to provide a common emarket platform for wholesale markets

 Allocation under Pradhan Mantri Gram Sadak Yojana increased to `

19,000 crore. Will connect remaining 65,000 eligible habitations by

2019.

 To reduce the burden of loan repayment on farmers, a provision of `

15,000 crore has been made in the BE 2016-17 towards interest

subvention

 Allocation under Prime Minister Fasal Bima Yojana ` 5,500 crore.

 ` 850 crore for four dairying projects - ‘Pashudhan Sanjivani’, ‘Nakul

Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for

indigenous breeds

RURAL SECTOR

 Allocation for rural sector - ` 87,765 crore.

 ` 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

 Every block under drought and rural distress will be taken up as an

intensive Block under the Deen Dayal Antyodaya Mission

 A sum of ` 38,500 crore allocated for MGNREGS.

 300 Rurban Clusters will be developed under the Shyama Prasad

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Mukherjee Rurban Mission

 100% village electrification by 1st May, 2018.

 District Level Committees under Chairmanship of senior most Lok Sabha

MP from the district for monitoring and implementation of designated

Central Sector and Centrally Sponsored Schemes.

 Priority allocation from Centrally Sponsored Schemes to be made to

reward villages that have become free from open defecation.

 A new Digital Literacy Mission Scheme for rural India to cover around 6

crore additional household within the next 3 years.

 National Land Record Modernisation Programme has been revamped.

 New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation

of ` 655 crore.

SOCIAL SECTOR INCLUDING HEALTH CARE

 Allocation for social sector including education and health care –

`1,51,581 crore.

 ` 2,000 crore allocated for initial cost of providing LPG connections to

BPL families.

 New health protection scheme will provide health cover up to ` One

lakh per family. For senior citizens an additional top-up package up to `

30,000 will be provided.

 3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be

opened during 2016-17.

 ‘National Dialysis Services Programme’ to be started under National

Health Mission through PPP mode

 “Stand Up India Scheme” to facilitate at least two projects per bank

branch. This will benefit at least 2.5 lakh entrepreneurs.

 National Scheduled Caste and Scheduled Tribe Hub to be set up in

partnership with industry associations

 Allocation of ` 100 crore each for celebrating the Birth Centenary of

Pandit Deen Dayal Upadhyay and the 350th Birth Anniversary of Guru

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Gobind Singh.

EDUCATION, SKILLS AND JOB CREATION

 62 new Navodaya Vidyalayas will be opened

 Sarva Shiksha Abhiyan to increasing focus on quality of education

 Regulatory architecture to be provided to ten public and ten private

institutions to emerge as world-class Teaching and Research Institutions

 Higher Education Financing Agency to be set-up with initial capital base

of ` 1000 Crores

 Digital Depository for School Leaving Certificates, College Degrees,

Academic Awards and Mark sheets to be set-up.

SKILL DEVELOPMENT

 Allocation for skill development – ` 1804. crore.

 1500 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

JOB CREATION

 GoI will pay contribution of 8.33% for of all new employees enrolling in

EPFO for the first three years of their employment. Budget provision of

` 1000 crore for this scheme.

 Deduction under Section 80JJAA of the Income Tax Act will be available

to all assesses who are subject to statutory audit under the Act

 100 Model Career Centres to operational by the end of 2016-17 under

National Career Service.

 Model Shops and Establishments Bill to be circulated to States.

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INFRASTRUCTURE AND INVESTMENT

 Total investment in the road sector, including PMGSY allocation, would

be ` 97,000 crore during 2016-17.

 India’s highest ever kilometres of new highways were awarded in 2015.

To approve nearly 10,000 kms of National Highways in 2016-17.

 Allocation of ` 55,000 crore in the Budget for Roads. Additional `

15,000 crore to be raised by NHAI through bonds.

 Total outlay for infrastructure - ` 2,21,246 crore.

 Amendments to be made in Motor Vehicles Act to open up the road

transport sector in the passenger segment

 Action plan for revival of unserved and underserved airports to be

drawn up in partnership with State Governments.

 To provide calibrated marketing freedom in order to incentivise gas

production from deep-water, ultra deep-water and high pressure-high

temperature areas

 Comprehensive plan, spanning next 15 to 20 years, to augment the

investment in nuclear power generation to be drawn up.

 Steps to re-vitalise PPPs:

 Public Utility (Resolution of Disputes) Bill will be introduced during

2016-17

 Guidelines for renegotiation of PPP Concession Agreements will be

issued

 New credit rating system for infrastructure projects to be

introduced

 Reforms in FDI policy in the areas of Insurance and Pension, Asset

Reconstruction Companies, Stock Exchanges.

 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,

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approved.

FINANCIAL SECTOR REFORMS

 A comprehensive Code on Resolution of Financial Firms to be

introduced.

 Statutory basis for a Monetary Policy framework and a Monetary Policy

Committee through the Finance Bill 2016.

 A Financial Data Management Centre to be set up.

 RBI to facilitate retail participation in Government securities.

 New derivative products will be developed by SEBI in the Commodity

Derivatives market.

 Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC

to hold up to 100% stake in the ARC and permit non institutional

investors to invest in Securitization Receipts.

 Comprehensive Central Legislation to be bought to deal with the

menace of illicit deposit taking schemes.

 Increasing members and benches of the Securities Appellate Tribunal.

 Allocation of ` 25,000 crore towards recapitalisation of Public Sector

Banks.

 Target of amount sanctioned under Pradhan Mantri Mudra Yojana

increased to ` 1,80,000 crore.

 General Insurance Companies owned by the Government to be listed in

the stock exchanges.

GOVERNANCE AND EASE OF DOING BUSINESS

 A Task Force has been constituted for rationalisation of human

resources in various Ministries.

 Comprehensive review and rationalisation of Autonomous Bodies.

 Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and

Services by using the Aadhar framework to be introduced.

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 Introduce DBT on pilot basis for fertilizer.

 Automation facilities will be provided in 3 lakh fair price shops by

March 2017.

 Amendments in Companies Act to improve enabling environment for

start-ups.

 Price Stabilisation Fund with a corpus of ` 900 crore to help maintain

stable prices of Pulses.

 “Ek Bharat Shreshtha Bharat” programme will be launched to link

States and Districts in an annual programme that connects people

through exchanges in areas of language, trade, culture, travel and

tourism.

FISCAL DISCIPLINE

 Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.

 Revenue Deficit target from 2.8% to 2.5% in RE 2015-16

 Total expenditure projected at ` 19.78 lakh crore

 Plan expenditure pegged at ` 5.50 lakh crore under Plan, increase of

15.3%

 Non-Plan expenditure kept at ` 14.28 lakh crores

 Special emphasis to sectors such as agriculture, irrigation, social sector

including health, women and child development, welfare of Scheduled

Castes and Scheduled Tribes, minorities, infrastructure.

 Mobilisation of additional finances to the extent of ` 31,300 crore by

NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising

Bonds.

 Plan / Non-Plan classification to be done away with from 2017-18.

 Every new scheme sanctioned will have a sunset date and outcome

review.

 Rationalised and restructured more than 1500 Central Plan Schemes

into about 300 Central Sector and 30 Centrally Sponsored Schemes.

 Committee to review the implementation of the FRBM Act.

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RELIEF TO SMALL TAX PAYERS

 Raise the ceiling of tax rebate under section 87A from `2000 to `5000

to lessen tax burden on individuals with income upto `5 laks.

 Increase the limit of deduction of rent paid under section 80GG from

`24000 per annum to `60000, to provide relief to those who live in

rented houses.

BOOST EMPLOYMENT AND GROWTH

 Increase the turnover limit under Presumptive taxation scheme under

section 44AD of the Income Tax Act to ` 2 crores to bring big relief to a

large number of assessees in the MSME category.

 Extend the presumptive taxation scheme with profit deemed to be 50%,

to professionals with gross receipts up to `50 lakh.

 Phasing out deduction under Income Tax:

 Accelerated depreciation wherever provided in IT Act will be

limited to maximum 40% from 1.4.2017

 Benefit of deductions for Research would be limited to 150% from

1.4.2017 and 100% from 1.4.2020

 Benefit of section 10AA to new SEZ units will be available to those

units which commence activity before 31.3.2020.

 The weighted deduction under section 35CCD for skill development

will continue up to 1.4.2020

 Corporate Tax rate proposals:

 New manufacturing companies incorporated on or after 1.3.2016

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.

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 Lower the corporate tax rate for the next financial year for

relatively small enterprises i.e companies with turnover not

exceeding ` 5 crore (in the financial year ending March 2015), to

29% plus surcharge and cess.

 100% deduction of profits for 3 out of 5 years for startups setup during

April, 2016 to March, 2019. MAT will apply in such cases.

 10% rate of tax on income from worldwide exploitation of patents

developed and registered in India by a resident.

 Complete pass through of income-tax to securitization trusts including

trusts of ARCs. Securitisation trusts required to deduct tax at source.

 Period for getting benefit of long term capital gain regime in case of

unlisted companies is proposed to be reduced from three to two 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.

 Determination of residency of foreign company on the basis of Place of

Effective Management (POEM) is proposed to be deferred by one year.

 Commitment to implement General Anti Avoidance Rules (GAAR) from

1.4.2017.

 Exemption of service tax on services provided under Deen Dayal

Upadhyay Grameen Kaushalya Yojana and services provided by

Assessing Bodies empanelled by Ministry of Skill Development &

Entrepreneurship.

 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.

 Basic custom and excise duty on refrigerated containers reduced to 5%

and 6%.

MAKE IN INDIA

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 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 & mineral oils, chemicals & petrochemicals,

paper, paperboard & newsprint, Maintenance repair and overhauling

[MRO] of aircrafts and ship repair.

MOVING TOWARDS A PENSIONED SOCIETY

 Withdrawal up to 40% of the corpus at the time of retirement to 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

1.4.2016.

 Limit for contribution of employer in recognized Provident and

Superannuation Fund of ` 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.

 Reduce service tax on Single premium Annuity (Insurance) Policies from

3.5% to 1.4% of the premium paid in certain cases.

PROMOTING AFFORDABLE HOUSING

 100% deduction for profits to an undertaking in 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 completed in three

years. MAT to apply.

 Deduction for additional interest of `50,000 per annum for loans up to

`35 lakh sanctioned in 2016-17 for first time home buyers, where

house cost does not exceed ` 50 lakh.

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 Distribution made out of income of SPV to the REITs and INVITs having

specified shareholding will not be subjected to Dividend Distribution

Tax, in respect of dividend distributed after the specified date.

 Exemption from service tax on construction of affordable houses up to

60 square metres under any scheme of the Central or State

Government including PPP Schemes.

 Extend excise duty exemption, presently available to Concrete Mix

manufactured at site for use in construction work to Ready Mix

Concrete.

RESOURCE MOBILIZATION FOR AGRICULTURE, RURAL ECONOMY AND

CLEAN ENVIRONMENT

 Additional tax at the rate of 10% of gross amount of dividend will be

payable by the recipients receiving dividend in excess of ` 10 lakh per

annum.

 Surcharge to be raised from 12% to 15% on persons, other than

companies, firms and cooperative societies having income above ` 1

crore.

 Tax to be deducted at source at the rate of 1 % on purchase of luxury

cars exceeding value of ` ten lakh and purchase of goods and services in

cash exceeding ` two lakh.

 Securities Transaction tax in case of ‘Options’ is proposed to be

increased from .017% to .05%.

 Equalization levy of 6% of gross amount for payment made to nonresidents exceeding ` 1 lakh a year in case of B2B transactions.

 Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016.

Proceeds would be exclusively used for financing initiatives for

improvement of agriculture and welfare of farmers. Input tax credit of

this cess will be available for payment of this cess.

 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

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and SUVs. No credit of this cess will be available nor credit of any other

tax or duty be utilized for paying this cess.

 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 ` 6 crores and ` 12 crores

respectively.

 Excise on readymade garments with retail price of ` 1000 or more

raised to 2% without input tax credit or 12.5% with input tax credit.

 ‘Clean Energy Cess’ levied on coal, lignite and peat renamed to ‘Clean

Environment Cess’ and rate increased from `200 per tonne to `400 per

tonne.

 Excise duties on various tobacco products other than beedi raised by

about 10 to 15%.

 Assignment of right to use the spectrum and its transfers has been

deducted as a service leviable to service tax and not sale of intangible

goods.

PROVIDING CERTAINITY IN TAXATION

 Committed to providing a stable and predictable taxation regime and

reduce black money.

 Domestic taxpayers 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. Declarants will have immunity from prosecution.

 Surcharge levied at 7.5% of undisclosed income will be called Krishi

Kalyan surcharge to be used for agriculture and rural economy.

 New Dispute Resolution Scheme to be introduced. No penalty in

respect of cases with disputed tax up to ` 10 lakh. Cases with disputed

tax exceeding ` 10 lakh to be subjected to 25% of the minimum of the

imposable penalty. Any pending appeal against a penalty order can also

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be settled by paying 25% of the minimum of the imposable penalty and

tax interest on quantum addition.

 High Level Committee chaired by Revenue Secretary to oversee fresh

cases where assessing officer applies the retrospective amendment.

 One-time scheme of Dispute Resolution for ongoing cases under

retrospective amendment.

 Penalty rates to be 50% of tax in case of underreporting of income and

200% of tax where there is misreporting of facts.

 Disallowance will be limited to 1% of the average monthly value of

investments yielding exempt income, but not exceeding the actual

expenditure claimed under rule 8D of Section 14A of Income Tax Act.

 Time limit of one year for disposing petitions of the tax payers seeking

waiver of interest and penalty.

 Mandatory for the assessing officer to grant stay of demand once the

assesse pays 15% of the disputed demand, while the appeal is pending

before Commissioner of Income-tax (Appeals).

 Monetary limit for deciding an appeal by a single member Bench of

ITAT enhanced from ` 15 lakhs to ` 50 lakhs.

 11 new benches of Customs, Excise and Service Tax Appellate Tribunal

(CESTAT).

SIMPLIFICATION AND RATIONALIZATION OF TAXES

 13 cesses, levied by various Ministries in which revenue collection is

less than ` 50 crore in a year to be abolished.

 For non-residents providing alternative documents to PAN card, higher

TDS not to apply.

 Revision of return extended to Central Excise assesses.

 Additional options to banking companies and financial institutions,

including NBFCs, for reversal of input tax credits with respect to nontaxable services.

 Customs Act to provide for deferred payment of customs duties for

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importers and exporters with proven track record.

 Customs Single Window Project to be implemented at major ports and

airports starting from beginning of next financial year.

 Increase in free baggage allowance for international passengers. Filing

of baggage only for those carrying dutiable goods.

TECHNOLOGY FOR ACCOUNTABILITY

 Expansion in the scope of e-assessments to all assessees in 7 mega

cities in the coming years.

 Interest at the rate of 9% p.a against normal rate of 6% p.a for delay in

giving effect to Appellate order beyond ninety days.

 ‘e-Sahyog’ to be expanded to reduce compliance cost, especially for

small taxpayers.