Hi Folks
Budget 2016-17 was presented on the 29th Feb, 2016. Enough and more has been said about it. It has been analysed, dissected, discussed, torn apart, appreciated and some provisions even withdrawn. Is it done and dusted ? Not yet, because the implications are ongoing. Infact some of the provisions are to take effect only in April, some in June and some when the Finance Bill gets passed. We have carried the highlights for a quick read.
Summer has set in. Temperatures are soaring. Heat is on – because of the soaring bad loans in bank books and falling valuations for startups. You think this has in any way dampened entrepreneurs ? No, not at all. In the last few months, I see a sudden surge in people wanting to set up something, start afresh, come up with new ideas, risk their savings, invest, borrow, pitch to investors to get money and live up to the Startup dream. I wish them good luck but also caution on functioning within the framework of law and following the path of dharma / good governance. It is tough but it pays in the end.
With that quick dose, let me allow you to read this issue. Should you wish to refer to any of our older issues of LexSpeak, do visit our Resource Centre at sharadasc.com
Warm regards

Select Finance Bill, 2016 and enclosed D.O. letter which explain the Budget changes can be downloaded.

Corporate

  • Corporate Tax rates remain unchanged
  • Companies with revenue less than Rs 5 crore to be taxed at 29% plus surcharge
  • Dividend in excess of Rs. 10 lakh per annum to be taxed at additional 10% in the hands of shareholder
  • Start-ups to get 100% tax exemption for 3 years except MAT
  • No LTCG if investment proceeds from sale of residential property is invested in shares of MSME company or start up (as defined under Startup India Action Plan)
  • Buy Back Distribution Tax (BBDT) of 20 % continues. Whatever be the mode of acquisition of shares which have been bought back by the company and whatever be the consideration BBDT will applicable with separate Rules to prescribed the same
  • If R&D happens in India and patent is registered in India first, any royalty received by such resident patentee will be taxed at concessional rate of 10%
  • Place of Effective Management (POEM) is proposed to be differed by 1 year
  • Benefit of lower withholding tax for VC funding
  • Shares of Private Limited Company will be treated as security for availing concessional rate of long term capital gain tax @10% by non-resident investee in unlisted security.
  • New condition to have tax neutral condition, new condition imposed under IT Act, wherein total book value of the assets of the company should not exceed 5 crore of preceding 3 years, in case of conversion of company into LLP.

Individual

  • Govt. will pay EPF contribution of 8.33% for all new employees for first 3 years.
  • TCS @ 1% on purchase of luxury cars exceeding vale of Rs. 10 lakh and purchase of goods and services over Rs. 2 lakh. Sellers to collect source and deposit from Govt.
  • 45% tax (including surcharge and penalty) on undisclosed income declared under new window between 1st June – 30th September
  • 15% surcharge on persons other than companies, firms and cooperative societies having income above Rs 1 crore
  • Ceiling of tax rebate under section 87A increased from Rs. 2,000 to Rs.5,000
  • Limit of deduction of rent paid under section 80GG increased from Rs. 24,000 per annum to Rs.60,000
  • Non-resident Indians providing alternate documents would not be subject to higher tax rate
  • Additional exemption of Rs. 50,000 for housing loans up to Rs. 35 lakh, provided cost of house is not above Rs. 50 lakh
  • Professionals eligible for presumptive tax to reduce compliance burden. Threshold limit increased from Rs. 25 lakh to Rs.50 lakh with presumptive income @ 50 % of gross receipt.
  • And a few more changes…

Customs Duty

  • Government to simplify customs baggage rules for international travellers
  • No major changes….

Excise Duty

  • Excise duty on tobacco products increased by 10-15%
  • Excise duty @ 1% imposed on articles of jewellery excluding silver
  • Excise on readymade garments with retail price of Rs.1000 or more raised to 2% without input tax credit or 12.5% with input tax credit
  • No major changes….

Service Tax

  • OPC and HUF can pay ST on quarterly basis instead of monthly basis w.e.f. 1st April, 2016
  • OPCs can pay ST on receipt basis
  • ST exemption on IT software on media bearing Retail Sales Price (RSP), if excise duty is paid on RSP
  • Points of taxation Rules, 2011 is being amended – to provide that point in time when service has been provided or agreed to be provided by Rules made in this regard
  • 0.5% Krishi Kalyan Cess to be levied on all services w.e.f.1st June, 2016
  • Service tax on Single premium Annuity (Insurance) Policies reduced from 3.5% to 1.4% of the premium paid in certain cases
  • Service tax exempted for construction of houses less than 60 sq. m
  • Exemption available retrospectively for services used outside factory / manufacturing area, used for the export of goods (1st July, 2016)
  • Services provided by senior advocates to advocates / partnership firm of advocates and arbitrator will be taxed now under reverse charge mechanism viz. service receiver liable to pay ST


  • Special provision for exemption in certain cases relating to construction of airport, port etc.
  • PGPF, IPM courses of IIM not to attract ST
  • Some of the services like vocational education course, transportation services moved from negative list to notification
  • Collecting but not deposited ST with Govt. will attract higher rate of interest @ 24%
  • Uniform interest rate on excise, customs, service tax @ 15%
  • Limitation period raised from 18 months to 30 months for recovery of ST in cases not involving fraud, collusion, suppression, etc.
  • To reduce compliance cost, lesser returns to be filed i.e. 1 annual & 12 monthly returns
  • Service tax assessees above a certain threshold will also be required to file an annual return w.e.f. 1st April, 2016.

FDI

  • More FDI reforms proposed in insurance, pension, asset restructuring companies and stock markets.
  • 100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.

Other announcements relating to Infrastructure, Education, Health, Financial and Banking Sector etc are in the “Key features of Budget 2016-17”.


Appeals before IT Commissioner in Form No. 35 to be made electronically or through electronic verification code, as the case may be. Paper form also continues.

Central Board of Excise and Customs (CBEC) has revised Service Tax Return Form ST – 3 to include Swachh Bharat Cess.

Note: The contents of this
Newsletter are only a summary and has not dealt with any issue in detail. Any action
taken or proposed to be taken must be in consultation with professionals and not
merely based on the articles / news updates. Lex Valorem disclaims all liability on action taken without professional advice.

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