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Top 30 Changes Proposed in Budget 2016 for Income Tax

Source : CA Mehul Shah

Issue : Top 30 Changes Proposed in Budget 2016 for Income Tax

1. Registration of Companies should be given in one day - Companies Act proposed to be amended.

2. Relief under Section 87A proposed to be increased from Rs. 2,000 to Rs. 5,000

3. Deduction under Section 80GG for individuals paying rent but not receiving HRA proposed to be increased from Rs. 24,000 to Rs. 60,000.

4. FM increases the turnover limit of presumptive taxation Scheme to 2 crores. (Consequently limit u/s 44AB also increased to 2.00 Crore for business)

5. Presumptive taxation scheme introduced for all professionals with receipts upto Rs. 50 lakhs. (Consequently limit u/s 44AB also increased to 50.00 lac for professional) 

6. Additional tax at the rate of 10 per cent of gross amount of dividend will be payable by the recipients receiving dividend in excess of Rs 10 lakh per annum. 

7. Domestic taxpayers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30 per cent, and surcharge at 7.5 per cent and penalty at 7.5 per cent, which is a total of 45 per cent of the undisclosed income. Declarants will have immunity from prosecution. 

8. Reduction in corporate tax - New manufacturing companies after March 1, 2016 have to pay tax at 25%.

9. Corporate tax reduced to 29% for small business having turnover less than 5 crores.

10. Tax to be deducted at source at the rate of 1 per cent on purchase of luxury cars exceeding value of Rs 10 lakh and purchase of goods and services in cash exceeding Rs 2 lakh. 

11. Expansion in the scope of e-assessments to all assessees in 7 mega cities in the coming years. 

12. Sec. 80JJAA deduction extended from only manufacturing units to all assessees who are subject to tax audit.

13. Capital gain exemption proposed for investment in start-up.

14. POEM proposed to be deferred by 1 year.

15. FM has proposed to provide tax exemption on withdrawal of 40% from national pension Scheme at the time of retirement.

16. Krishi Kalyan Cess 0.5%to be levied on all taxable services from 01/06/2016.

17. Additional exemption of Rs. 50,000 for housing loans up to Rs. 35 lakh, provided cost of house is not above Rs. 50 lakh.

18. Surcharge raised from 12 to 15% on incomes above 1 Crore.

19. FM proposed to introduce limited period compliance window for domestic taxpayer to declare domestic black Money. Tax rate around 30% with interest and penalty capped at 7.5%. More details to follow.

20. FM has announced introduction of one time dispute resolution Scheme for cases already pending due to retro-amendment

21. A new dispute resolution scheme is introduced, no penalty upto disputed amount of 10 lacs.

22. Mandatory for the assessing officer to grant stay of demand once the assesse pays 15 per cent of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals). 

23. Penalty u/s 271(1)(c) to be rationalised. Penalty of 50% to 200% of tax sought to be evaded.

24. FM proposes to amend Section 14A; disallowance under Sec. 14A should not increase the actual expenditure.

25. No higher withholding tax if non-resident does not have PAN but furnishes an alternative document.

26. Interest @ 9% on refunds if tax effect not given in 90 days and concerned ITO to be held accountable.

27. 10% Tax on income for worldwide exploitation of patents developed in India.

28. Unlisted Investments to become Long Term after 2 years.

29. STT in case of "Options" is increased from 0.017 to 0.05.

30. Settle any tax penalty appeal by paying 25%.