Highlights of Indian Union Budget 2016-2017 – Announced on 29th February 2016
- Income tax slabs for the financial year 2016-17 has remained unchanged
- Tax exemption for house rent will be raised to Rs 60,000 from the current Rs 24,000-level. This deduction is for those, who don’t get the house rent allowance from their employer. Such person can avail this deduction according the specified rules.
- Under the National Pension Scheme, the government announced an exemption for withdrawal of up to 40% of the corpus at the time of retirement.
- WITHDRAWN – Meanwhile, in case of recognized provident funds, including the EPF, the same norm as NPS will be applied. It implies introduction of taxes on withdrawals from such instruments, which had a total tax-free withdrawal, will now come under the tax ambit. It will apply in respect of corpus created out of contributions made after 1 April 2016. On 1st March, Revenue Secretary Hasmukh Adhia said, “Only interest accrued on 60 per cent contribution to EPF after April 1, 2016 will be taxed; principal amount to remain tax exempt.” A clarification will be issued soon. PPF withdrawals will be fully exempt.
on 8th march, Finance minister announced that government has decided to withdraw this proposal to tax EPF withdrawals.
- The budget also proposed to increase the threshold for tax deducted at source (tds) on payment of accumulated balance due to an employee in EPF to Rs 50000 from existing Rs 30000.
- Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases. The FM has also reduced the service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid.
- In the Union Budget for 2016-17, decided to keep service tax rates unchanged at 14.5% (14% service tax + 0.5% Swach Bharat Cess)
- INCREASE IN TAX REBATE: Those earning below Rs 5lakhs to save an additional Rs 3,000 in taxes. Tax rebate under Section 87A has been raised from Rs 2,000 to Rs 5,000. Effectively, this means now the basic exemption is of Rs 3 lakh.
- HOME LOANS: 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.
- NRIs: As recommended by The Easwar committee, now NRIs who do not have PAN cards would not be subjected to a higher TDS of 20% if they submit Tax Identification Number.
- Govt to pay 8.33 pc towards employee pension fund – Govt to pay new subscribers’ contribution to EPF for the first 3 years: FM Jaitley
- Scope of e-assessment to be expanded to 7 mega cities, to simplify compliance for taxpayers: FM
- Penalty to be 50% of tax in income under-reporting cases, 200% in misreporting of facts: FM
- Free baggage allowance for international passengers to be increased. Filing of baggage only for those carrying dutiable goods.
- 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. This is a significant development for small enterprises and professionals such as lawyers and doctors, interior designers etc. “Instead of filing the cumbersome ITR-4, they can file a much simpler 3-pages long ITR 4S.
- CAR, CLOTHES AND CIGARETTES TO COST MORE: The FM has proposed a tax at source at the rate of 1% on purchase of luxury cars exceeding value of Rs. 10 lakh and purchase of goods and services in cash exceeding Rs. 2 lakh.
- An 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 and SUVs will also be levied.
- The excise duty on branded readymade garments and other items made of textiles with a retail sale price of Rs 1,000 and cigarettes along with other tobacco products (other than beedi) has also been increased.
- Krishi Kalyan Tax – Jaitley announced a 0.5% tax on all taxable services under the Krishi Kalyan tax in a bid to benefit the farming community.
Other Key Proposals
- Infrastructure gets total outlay of Rs 2,21,246 crore.
- Jan Aushadhi Yojana will see setting up of 3,000 stores during 2016-17.
- Roads sector gets a total investment of Rs 97,000 crore during 2016-17.
- Tax on tobacco products up from 10% to 15%, all tobacco products except beedis to be expensive
- 100% deduction for profits of undertakings from housing projects in cities during Jun ’16 – Mar ’19
- No tax on Start Up for first 3 years
- Lowering of Corporate IT rate for companies not exceeding Rs. 5 crore turnover to 25% plus surcharge.
- Rs. 100 crore for Deendayal Upadhyay’s birthday celebrations and Guru Gobind Singh 300th birth anniversary.
- Small shops should be given the choice to remain open on all 7 days a week.
- Government to provide health insurance of upto Rs. 1 lakh per family; top up of Rs. 35,000 for people above 60 years. 3,000 stores to be opened for generic drugs.
- Rs. 9,000 crore for Swachch Bharat Abhiyan.
- Rs. 38,500 crore for MNREGA. Highest ever for the rural employment scheme.
- FM proposes implementation of General Anti Avoidance Rules (GAAR) from April 1, 2017