Key Highlights of Budget 2016-17
Although FM Jaitley did not make any changes to the Tax Slabs in this year’s budget, he had a suitcase full of small changes that will make a significant impact to your tax Outgo in 2016-17. Here are some of the major announcement he has made:
1. INCREASE IN TAX REBATE U/S 87A:
Those earning up to Rs 5 lakh a year will now get a Tax Relief of Rs 5,000, up from Rs 2,000 previously. This hike in relief effectively raise the basic exemption for these taxpayers up to Rs 3 lakh.
2. HOME BUYERS BENEFITS:
First home buyers to get additional deduction of Rs 50,000. However, this benefit is only for loans up to Rs.35 lakhs where the cost of house is less than Rs 50 lakh.
3. PENSION SCHEMES:
Withdrawal from NPS corpus of up to 40% at the time of retirement has been made tax exempt. Similarly, 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 after 1 April 2016.
This won’t apply to those earning less than Rs 15,000 a month. Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases.
4. HRA ALLOWANCE INCREASED
Deduction for rent paid will be raised from Rs 20,000 to Rs 60,000 to benefit those living in rented houses.
5. INCREASE IN SERVICE TAX
0.5% Krishi Kalyan surcharge cess on all taxable services from 1 June 2016, to be given to agriculture development.
6. CORPORATE TAX
The corporate tax rate has been lowered, 25% plus surcharge and a cess, for new manufacturing companies incorporated from March this year, provided they do not claim any tax break.
Corporate tax rate for other establishments with turnover less than Rs.5 crore lowered to 29% of surcharge plus cess.
7. INCREASE IN EXCISE
Excise duty raised from 10% to 15% on tobacco products other than beedis
Arun Jaitley proposed 1% excise duty on gold and studded jewellery besides introducing a 2% excise duty on readymade garments with retail price of Rs 1,000 and above.
8. TAX ON DIVIDEND INCOME
Dividend in excess of Rs. 10 lakh per annum to be taxed at additional 10 per cent.
9. INCREASE IN SURCHARGE
15 per cent surcharge on income above Rs. 1 crore. This surcharge was 12 percent until now.
10. TAX ON CARS:
– 1 % Infra Cess on small Petrol/LPG/CNG cars of length not exceeding 4-metre with an engine capacity below 1200cc
– 2.5 % Additional Tax on sub-4 Meter Diesel Cars with engine not exceeding 1500cc
– 1% Luxury Tax on all the cars above Rs 10 lakh
– 4 % Tax on bigger sedans, MPVs and SUVs with higher engine capacity.
10. NRIs
Now NRIs who do not have PAN cards would not be subjected to a higher TDS of 20% on furnishing of alternate ID.
11. HOUSING
Service tax exempted for housing construction of houses less than 60 square metres
12. MAKE IN INDIA
100% deduction of profits for start-ups adhering to certain conditions; MAT will apply
13. SMALL BUSINESS, FREELANCERS AND PROFESSIONALS
The limit of turnover under the presumptive taxation scheme revised from Rs 1 crore to Rs 2 crore for medium or small enterprises. So, anyone with a business of Rs 2 crore can presume that an income of 8% and would not require to maintain books, profit & loss statements or audits. As per Section 44AD of the Income-Tax Act, under the presumptive method, the tax liability is calculated on the basis of a ‘presumed business income’, irrespective of what your actual income may be.Moreover, Section 44AD now extended to Professionals as well. This frees them from burden of books of accounts and getting audit done. Professionals with gross receipts up to Rs 50 lakh can now avail this benefit by paying tax at 50% of gross receipts.
14. TAX DECLARATION WINDOW:
A limited period Compliance Window for domestic taxpayers will be created between 1 June to30th September to declare undisclosed income or income. To clear up their past tax transgressions taxpayers will have to pay tax at 30%, and Krishi Kalyan surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. They will have to pay up the taxes within two months of declaration.
15. CATEGORISED PENALTIES
The penalties will be steeper for tax evaders. FM plans to modify the entire scheme of penalty by providing different categories of misdemeanor with graded penalty and thereby substantially reducing the discretionary power of the tax officers. The penalty rates will now be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts. Currently, the Income-tax Officer has discretion to levy penalty at the rate of 100% to 300% of tax sought to be evaded.