Interest on Capital and Remuneration to Partners in case of partnership firm, which were available earlier, is not there in the budget proposal.

A. TDS – Changes in Existing Threshold Limits

Present Section	Heads	Existing threshold limits	Proposed threshold limits
192A	Payment of accumulated balance due to an employee in EPF	Rs.30,000/-	Rs.50,000/-
194BB	Winnings from Horse Race	Rs.5,000/-	Rs.10,000/-
194C	Payments to Contractors	Aggregate annual limit of Rs.75,000/-	Aggregate annual limit of Rs.1,00,000/-
194LA	Payment of Compensation on acquisition of certain Immovable Property	Rs.2,00,000/-	Rs.2,50,000/-
194D	Insurance Commission	Rs.20,000/-	Rs.15,000/-
194G	Commission on sale of lottery tickets	Rs.1,000/-	Rs.15,000/-
194H	Commission on Brokerage	Rs.5,000/-	Rs.15,000/-

 

 

B. TDS – Proposed Changes in Rates

Present Section	Heads	Existing Rate of TDS (%)	Proposed Rate of TDS (%)
194DA	Payment in respect of Life Insurance Policy	2%	1%
194EE	Payment in respect of NSS Deposits	20%	10%
194D	Insurance Commission	10%	5%
194G	Commission on sale of lottery tickets	10%	5%
194H	Commission of Brokerage	10%	5%
194K	Income in respect of units	To be omitted w.e.f. 01-06-2016
194L	Payment of compensation of acquisition of capital asset	To be omitted w.e.f. 01-06-2016

C. Non Resident: TDS shall not be deducted at a higher rate in case of non-residents not having PAN, subject to prescribed condition.

The facility for revision of return, hitherto available to a service tax assessee only, is being extended to Central Excise assessees also.

I. Return Filing – The amendments proposed in Section 139 of Income Tax Act are as follows:

• A person shall be required to furnish his return of income if this total income during the previous year without claiming exemption under section 10(38) [income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund] exceeds the maximum amount which is not chargeable to tax.
• Revision of return possible if filed after the due date but before the end of the relevant assessment year or completion of assessment which ever is earlier. Revised return can be filed  before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
• A return furnished in response to a notice issued under section 142 (1) of the Income-tax Act cannot be revised.
• A return which is otherwise valid would not be treated defective merely because self-assessment tax and interest payable in accordance with the provisions of section 140A, has not been paid on or before the date of furnishing of the return.

II. Advance Tax

• The number of instalments and due dates for payment of advance tax in the case of individuals, HUFs, firms, etc. shall be the same as is applicable to companies. i.e., similar to company advance tax need to be paid as follows:

On or before 15th June                    : not less than 15% of tax liability

On or before 15th September       : not less than 45% of tax liability

On or before 15th December         : not less than 75% of tax liability

On or before 15th March                : 100% of tax liability

• Taxpayer eligible for presumptive taxation scheme under section 44AD of the Income-tax Act shall pay whole amount of advance tax in one instalment on or before the 15th March of the financial year.

The provisions of section 44AD of the Income-tax Act, the threshold limit of presumptive taxation increased from ` 1 crore to Rs 2 crore. If the taxpayer opts for the presumptive taxation scheme, he has to remain in that scheme for 5 years. If he does not offer the income as per the said scheme in any of the five years, he shall not be eligible to claim the benefit under the scheme for next 5 years.

Taxpayer eligible for presumptive taxation scheme under section 44AD of the Income-tax Act shall pay whole amount of advance tax in one instalment on or before the 15th March of the financial year.

Presumptive taxation scheme extended to professionals with gross receipts up to `50 lakh with the presumption of profit being 50% of the gross receipts.

• The determination of residency of foreign company on the basis of Place of Effective Management is proposed to be deferred by one year. It shall now apply with effect from1.04.2017.
• The provisions of section 115JB of the Income-tax Act so as to provide that Minimum Alternate Tax (MAT) shall not be applicable to a foreign company, w.e.f. 01.04.2001 if the foreign company does not have as a permanent establishment under relevant Double Taxation Avoidance Agreement (DTAA) or a place of business in India
• Capital gain arising from transfer of a long term asset being share of a private limited company shall be chargeable to tax at the rate of ten per cent.
• Acquisition of shares by an individual or HUF as a consequence of demerger or amalgamation of a company shall not attract tax liability under section 56(2)(vii) of the Income tax Act.
• A monetary limit of `1.5 lakh is proposed to be provided for annual contribution by an employer to a recognised provident fund as well as superannuation fund.
• Exemption is proposed to be provided for one-time portability from a recognised provident fund or superannuation fund to National Pension System.
• The date of agreement fixing the amount of consideration for the transfer of immovable property and not the date of registration shall be taken for the purposes of computing capital gains in case of transfer of immovable property if any payment in consequence of such agreement has been made by the purchaser of the property through any mode other than cash.
• Fees paid for obtaining right to use the spectrum is to be amortized over the period for which the right to use the spectrum has been granted.
• No set off of losses shall be allowed against deemed undisclosed income u/s 68 to 69D (Unexplained Income & Expenditure) of the Income-tax Act
• where a trust or institution registered u/s 12AA of the Income-tax Act ceases to be charitable organisation or if on dissolution a charitable trust or institution does not transfer all its assets within one year of dissolution to another charitable organization, the amount of accreted income to the extent not transferred shall be charged to additional income-tax at the maximum marginal rate

• The companies located in international financial services centre shall not be liable to dividend distribution tax.
• Minimum Alternate Tax shall be charged at the rate of nine per cent from units located in international financial services centre.
• The transaction in foreign currency of sale of equity share or units of equity oriented funds or units of a business trust taking place on a recognised stock exchange established in international financial services centre shall not be liable to securities transaction tax.
• It is also proposed that the gains arising from transfer of such long term capital asset shall be exempt from tax.
• The transaction in foreign currency of sale of commodity derivatives taking place on a recognised association established in international financial services centre shall not be liable to commodity transaction tax.

I. Foreign Direct Investment (FDI) through Automatic route.

• 49% in Insurance and Pension Sectors
• 100% in Asset Reconstruction Companies

II. 100% FDI will be allowed through FIPB route in marketing of food products produced and manufactured in India

III. Investment limit for foreign entities in Indian stock exchanges will be enhanced from 5 to 15% on par with domestic institutions

IV. The existing 24% limit for investment by FPIs in Central Public Sector Enterprises, other than Banks, listed in stock exchanges, will be increased to 49% to obviate the need for prior approval of Government for increasing the FPI investment.

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.