1)The ceiling of tax rebate under Section 87A of IT Act has been proposed to be raised to Rs. 5,000 from Rs. 2,000 for individuals with income less than Rs. 5 lakhs.
2)The limit of deduction of house rent paid under section 80GG has also been raised to Rs. 60,000 from the existing Rs. 24,000 per annum to give relief to employees who live in rented houses.
3) Under the presumptive taxation scheme under Section 44AD of the Income tax Act, the limit of turnover or gross receipts has been raised to two crore rupees from the exiting one crore rupees to benefit about 33 lakh small business people. It frees a large number of such assesses in the MSME category from the burden of maintaining detailed books of account and getting audit done.
4) The presumptive taxation scheme is to be now extended to professionals with gross receipts up to Rs. 50 lakh with the presumption of profit being 50% of the gross receipts.
5) Withdrawal up to 40% of the corpus at the time of retirement tax exempt in the case of National Pension Scheme(NPS). 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 1.4.2016. Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases.
6) The monetary limit for contribution of employer in recognized Provident and Superannuation Fund of Rs. 1.5 lakh per annum for taking tax benefit.
7) Annuity services provided by the National Pension Scheme (NPS) and Services provided by EPFO to employees will be exempt from service tax. Also service tax on Single premium Annuity (Insurance) Policies will be reduced from 3.5% to 1.4% of the premium paid in certain cases.
8) 100% deduction for profits to an undertaking from a 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 is completed within three years of the approval. Minimum Alternate Tax will however apply to these undertakings.
9) Distribution made out of income of SPV to the REITs and INVITs having specified shareholding will not be subjected to Dividend Distribution Tax.
10) For the ‘first – home buyers’, there will be a deduction for additional interest of Rs. 50,000 per annum for loans up to Rs. 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed Rs. 50 lakh.
11) Exemption from service tax on construction of affordable houses up to 60 sq. metres under any scheme of the Central or State Government including PPP Schemes. Alongside, extension of excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work at such site to Ready Mix Concrete.
12) A Bill shall be introduced in the current Budget session of the Parliament in order to amend the Companies Act 2013. This will remove the difficulties and impediments to ease of doing business. The Bill would also improve the enabling environment for start-ups. The registration of companies will also be done in one day.
13) In order to reduce multiplicity of taxes, associated cascading and to reduce cost of collection, abolition of 13 cesses, levied by various Ministries in which revenue collection is less than Rs.50 crore in a year, is proposed.
14) Measures to rationalize TDS provisions for Income Tax have been proposed to improve cash flow position of small tax payers who get their funds blocked due to current TDS provisions. Also, Non-residents without PAN are currently subjected to a higher rate of TDS, however with amendment to relevant provision will allow that on furnishing of alternative documents, such higher rate will not apply. The facility for revision of return hitherto available to service tax assesses only will be extended to Central Excise assesses also.
15) Additional options for reversal of input tax credits with respect to non-taxable services provided by banking companies and financial institutions, including NBFCs, by way of extending deposits, loans and advances are proposed in Budget 2016-17.
16) Government of India has taken steps to reduce the cargo release time and transaction costs of EXIM trade. Shri Jaitley also proposed to amend the Customs Act so as to provide for deferred payment of customs duties for importers and exporters with proven track record.
17) Indian Customs Single Window Project would be implemented at major ports and airports starting from beginning of next financial year. Also, customs baggage for international passengers are simplified as filing of baggage declaration will be required only for those passengers who carry dutiable goods.
18) General Insurance Companies will be listed in stock exchanges for improving transparency, accountability and efficiency. Comprehensive Central legislation to deal with Illicit Deposit Taking schemes will be enacted.
19) To provide better access to financial services, especially in rural areas, the government will undertake a massive nationwide rollout of ATMs and Micro ATMs in Post Offices over the next three years.
20) SARFAESI Act is to be amended to strengthen Asset Reconstruction Companies. This will help in dealing with stressed assets of Banks.
21) 100% deduction of profits for 3 out of 5 years for start-ups, during April, 2016 to March 2019, with certain riders. Similarly to promote innovation, a special patent regime with 10% rate of tax on income from worldwide exploitation of patents developed and registered in India was proposed.
22) 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.
23) The corporate income tax rate for the next financial year of relatively small enterprises i.e companies with turnover not exceeding Rs. 5 crores (in the financial year ending March 2015) is proposed to be lowered to 29 % plus surcharge and cess.
24) The new manufacturing companies which are incorporated on or after 1.3.2016 are proposed to be given an option to be taxed at 25% plus surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation.
25) Service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development and Entrepreneurship are also proposed to be exempted.
26) The determination of residency of foreign company on the basis of Place of Effective Management (POEM) is deferred by one year.
27) To get more investment in Asset Reconstruction Companies (ARCs), which play a very important role in resolution of bad debts, a complete pass through income-tax to securitization trusts including trusts of ARCs has been proposed. The income will be taxed in the hands of the investors instead of the trust.
28) The Finance Minister also enunciated a plan for phasing-out various exemptions as the corporate tax is proposed to be reduced from 30% to 25 % over a period. Such graduated plan includes
- a) The accelerated depreciation provided under IT Act will be limited to maximum 40 % from 1.4.2017.
- b) The benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020
- c) The benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020.
- d) The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020.