Budget 2016: Tax sops for small I-T payers, hike in super-rich surcharge

Finance Minister Arun Jaitley presented the union budget for the year 2016-17 in parliament, amid worries over the country's stagnating growth rate, government finances and direction of reforms. Here are the highlights of Jaitley's third budget

New Delhi: The Budget for 2016-17 on Monday offered sops for small and marginal income tax payers, hiked the surcharge by 3 per cent on earnings above Rs 1 crore, levied a pollution cess on petrol, diesel cars and SUVs and offered a one-time compliance window for domestic black money holders slapping a tax and penalty of 45 per cent.

Arun JaitleyArun Jaitley. Pic/PTI

Presenting the third Budget, Finance Minister Arun Jaitley also proposed a 'Krishi Kalyan' cess of 0.5 per cent on all taxable services to improve agriculture and reduction of duties on project imports for cold room for cold chain, refrigerated containers and a number of other items.

Cigarette and tobacco products will become costlier with the hike in excise duty by 10 to 15 per cent. While the revenue loss on direct taxes will be Rs 1060 crore, his indirect tax proposal will mobilise an additional Rs 20,670 crore. Net revenue gain will be Rs 19,610 crore. In a bid to shore up the economy hit by global slowdown, the Budget proposes a 15.3 per cent higher expenditure at Rs
19.78 lakh crore in 2016-17, consisting of Rs 5.50 lakh crore under Plan and Rs 14.28 lakh crore under non-Plan.

The Budget provides an outlay of Rs 162,759 crore for defence in 2016-17, up by 13 per cent from Rs 143,236 crore in the revised estimates for the current year. Capital expenditure on defence has been put at Rs 86,340 crore against Rs 81,400 crore in the current year's revised estimates. Interest payment will account of Rs 492,670 crore against Rs 442,620 crore. Subsidies will marginally lower at Rs 250,433 crore as opposed to Rs 257,801 crore in the revised estimates.

In relief to small tax payers, the Budget proposes to raise the ceiling of tax rebate under Section 87(A) from Rs 2000 to Rs 3000 for incomes not exceeding Rs 5 lakh per annum. There are two crore tax payers in this category who would get a relief of Rs 3000 in their tax liability.

Those who do not have house of their own and do not get house rent allowance from employers will get a deduction of Rs 60,000 per year as against existing Rs 24,000. First time home buyers will get a deduction of an additional interest of Rs 50,000 per annum for loan upto Rs 35 lakh, during 2016-17, provided the house value does not exceed Rs 50 lakh.

The Budget proposes to extend the presumptive taxation scheme to professionals with gross receipt up to Rs 50 lakh with the presumption of profit being half of the gross receipt.

After pursuing blackmoney abroad, Jaitley today offered a limited period compliance window for domestic holders of unaccounted income and assets to declared their undisclosed income and assets and clear past transgressions by paying tax at 30 per cent plus 7.5 per cent penalty and 7.5 per cent of interest, a total of 45 per cent. For the foreign blackmoney holders, the total tax and penalty was 60 per cent for those came clean.

In the domestic scheme, the Minister declared that there will be no scrutiny or inquiry regarding income tax declared under the scheme under I-T and Wealth Tax Act and they will have immunity from prosecution. Immunity from benami transaction act of 1998 is also
proposed subject to certain conditions.

The 7.5 per cent surcharge will be called Krishi Kalyan Surcharge to be used for agriculture and rural economy. "We plan to open the window under this Income Disclosure Scheme from June 1 to September 30, 2016 with an option to pay amount due within two months of declaration," he said. A Krishi Kalyan Cess of 0.5 per cent would cover all services, proceeds of which will be used for financing incentives for improvement of agriculture and welfare of farmers. The cess will come into effect from June 1.

Raising concern over pollution and traffic situation in cities, Jaitley said he propose to levy infrastructure cess of 1 per cent on small petrol, LPG, CNG cars, 2.5 per cent on diesel cars of certain capacity and 4 per cent on higher engine capacity vehicles and SUVs.

Recalling his last year's promise of reducing corporate tax from 30 to 25 per cent over a period accompanied by rationalisation and removal of exemptions and incentives, Jaitley on Monday limited accelerated depreciation provided under I-T Act to a maximum of 40 per cent from April 1, 2017. The benefit of deduction for research would be limited to 150 per cent from April 1, 2017 and 100 per cent from April 2020.

To boost domestic manufacturing and job creation, he allowed new units incorporated on or after March 1, 2016 an option of being taxed at 25 per cent plus surcharge and cess provided they do not claim profit linked or investment linked deductions. He also proposed lower corporate income tax rate for next financial year of relatively small enterprises with a turnover not exceeding Rs 5 crore in fiscal 2016 to 29 per cent plus surcharge and cess. At present they pay 30 per cent plus surcharge and cess.

In a bid to promote employment through startups under the Make-in-India programme, the Budget proposes to assist their propagation through 100 per cent deduction of profit for three out of five years for companies set up between April 2016 and March 2019. Minimum Alternate Tax will apply in such cases. Capital gains will not be invested in regulated/ notified fund or funds and by individuals in notified startups in which they hold majority shares.

As part of an attempt to incentivise domestic value addition in the Make in India campaign, he proposed to suitable changes in customs and excise duty rates on certain inputs, raw material, intermediaries and components to reduce cost and improve competitiveness of domestic industry in various sectors including IT, IT hardware, capital goods, defence production, MRO of aircrafts and ships, and textiles. The period of getting benefit of long term capital gain regime in case of unlisted companies is proposed to be reduced from 3 to 2 years.

The controversial General Anti Avoidance Rules or GAAR will be implemented from April 1, 2017, he said. The 12 per cent surcharge on personal income above Rs 1 crore has been raised to 15 per cent. The Budget also proposes to collect tax at source at the
rate of one 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. It also seeks to impose an excise duty of 1 per cent without input tax credit or 12 per cent with input tax credit, on articles of jewellery excluding silver other than studded with diamond or some other precious stone with a higher exemption and eligibility limit of Rs 6 crore and Rs 12 crore respectively.

As an additional resource mobilisation for agriculture and rural economy, the Finance Minister proposed a 10 per cent additional dividend distribution tax on individuals, HUFs and firms receiving dividend in excess of Rs 10 lakh per annum. He also proposed a number of measures as part of financial sector reforms that includes enactment of a comprehensive Code on Resolution of Financial Firms to provide with a mechanism to deal with bankruptcy situations in banks, insurance companies and financial sector entities.

This Code together with the Insolvency and Bankruptcy Code 2015, when enacted, will provide a comprehensive resolution mechanism for the economy. The other steps include amendment of RBI Act to provide statutory basis for a Monetary Policy Framework and a Monetary Policy Committee through the Finance Bill 2016.

He also announced that a comprehensive central legislation will be brought to deal with the menace of illicit deposit taking schemes. Jaitley proposed Rs 25,000 crore for bank recapitalisation and said the government will also consider the option of reducing its stake to below 50 per cent.

Highlights of Union Budget 2016-17

Ceiling of tax rebate for tax payers with up to Rs 5 lakh annual come to be raised to Rs 5000 from Rs 2000 currently. Relief will amount to Rs 3000 per annum; 1 cr tax payers to benefit

Deduction for rent paid will be raised from Rs 20,000 to Rs 60,000 to benefit those living in rented houses

1st home buyers to get addl deduction of Rs 50,000 on interest for loan upto Rs 35 lakh. Cost of house should not be more than Rs 50 lakh

Presemtive income tax scheme to be extended to all professionals with income of Rs 50 lakh with a presumption of 50 per cent profit

15 per cent surcharge on income above Rs 1 cr: Jaitley

Service tax exemption for construction of affordable housing upto 60 sq m under state and central housing schemes: FM

New grading system of imposing penalties to be introduced for under-reporting or concealment of income: FM

Excise duty on Tobacco products increased by 10-15%: FM

Tax on blackmoney declared will be 30 pc plus 7.5 pc penalty and 7.5 pc surcharge

Limited tax compliance window from June 1 to September 30 for declaring undisclosed income: Jaitley

Clean Energy cess on coal doubled to Rs 400 per ton

Indian economy has held ground firmly despite global crisis: FM

GDP stands at 7.6%; Inflation has come down despite fall in monsoons: FM

Foreign reserves at highest level at $350 Billion: FM

Rs 9000 cr alloted to Swachch Bharat Mission: FM

Rs 1000 cr provided for LPG connection to rural households in name of women; scheme to go on for 2 yrs to cover 5cr BPL households

75 lakh people have given up LPG subsidy 

3,500 medical stores will be opened under Pradhan Mantri Jan Aushodi Yojana to make quality medicine available

A new health protection scheme to provide cover up to Rs one lakh per family; top up of Rs 35,000 for people above 60 yrs

Govt to provide Rs 500 crore for Stand Up India scheme: FM

Govt to pay 8.33 pc towards employee pension fund

Govt to spend Rs 1,700 crore to set up 1,500 multi-skill training institutes: Jaitley

Excise 1 pc imposed on articles of jewellery excluding silver

Pollution cess of 1 per cent on small petrol, LPG and CNG cars; 2.5 per cent on diesel cars of certain specifications; 4 per cent on higher capacity vehicles

Direct tax proposal to result in revenue loss of Rs 1060 cr;indirect tax proposals to raise Rs 20,670 cr; net gain of Rs 19,610 cr

Dividend in excess of Rs 10 lakh per annum to be taxed at additional 10 pc

Rate of securities transaction tax to be raised from 0.017 pc to 0.05 pc

TDS provisions to be rationalised. Non resident Indians providing alternate documents will not be subject to higher tax rate

0.5 pc Krishi Kalyan Cess to be levied on all services

1500 multi-skill training institutes to be opened to train youths under Skill Development programme; Rs 1.7K crore earmarked: FM

Shopping malls to be allowed to open on all seven days of week; a model shops and establishment bill to be circulated to states

160 airports and airstrips can be revived at a cost of Rs 50-100 crore each, says Jaitley

Start-ups to get 100 per cent tax exemption for 3 years except MAT which will apply from April 2016-2019 for creation of jobs

Long term capital gains period for unlisted companies to be reduced from 3 to 2 years

FM introduces one-time dispute resolution scheme for retro tax cases, payment of tax arrears to lead to waiving of penalty and interest

Plan and non-Plan classification of Budget will be done away with from Fiscal 2017-18: Jaitley

Jaitley says levying heavy penalty for non-payment of tax has led to high litigation. Proposes to modify penalties scheme

Comitted to implement GAAR from April 1, 2017: Jaitley

Govt to allocate Rs 100 crore each for celebrating birth anniversaries of Guru Gobind Singh and Deen Dayal Upadhyay

New manufacturing companies incorporated after March 2016 will be given option of being taxed at 25 pc plus cess plus surcharges

Fiscal deficit target for 2015-16 and 2016-17 retained at 3.9 pc and 3.5 pc respectively

Govt plans to spend Rs 19.78 lakh crore in 2016-17 - Rs 5.5 lakh crore under plan head, Rs 14.28 lakh crore under non-plan head

Revenue deficit target improved from 2.8 pc to 2.5 pc in current fiscal

Rs 25,000 cr to be provided for recapitalisation of public sector banks

Govt to increase ATMs, micro-ATMs in post offices in next three years

More FDI reforms proposed in insurance, pension, asset restructuring companies and stock markets

A new credit rating system for infrastructure will be developed: FM

The Banking Boards Bureau will be operationalised next fiscal, says Jaitley

In 2016-17, govt eyes Rs 1,80,000 crore credit target through Mudra bank: FM

Target delivery of financial, other intermediary services will be introduced using Aadhar in this Budget session

Service Tax to be exempted on general insurance schemes under NIRMAYA Scheme

85 pc of stuck road projects have been put back on track; highest ever contracts awarded in current fiscal

Rs 97,000 cr allocation for road sector including rural roads

Total outlay for infrastrucutre at Rs 2.21 lakh crore for 2016-17

Proposed to allocated Rs 55,000 crore for roads and highways

Abolition of permit law will be our medium-term goal in public transport

2,000 kilometres of state highways to be converted into national highways

Total allocation for road and rail in 2016-17 is Rs 2.18 lakh crore: FM

Rs 8000 cr provided for Sagarmala project

Certain parts of dylasis machines to be exempt from all forms of customs duty; national dylasis service programme to be launched in all district hospitals

62 new Navodaya vidyalayas to be opened in next two years

CPI inflation was 9.4 per cent in the last 3 years of previous government. It has come down to 5.5 per cent now: FM

Our external situation is robust, CAD has declined to USD 14.4 bn this year, will be 1.4 pc of GDP at the end of fiscal: FM

We will enact a law to confer benefits on deserving sections on aadhar platform: FM

Govt to provide incentive for deepwater gas exploration: FM

We will work for passage of insolvency and bankruptcy laws. We will undertake significant reforms: FM

FY 16-17 will have the additional burden of implementing the VII pay commission and the defence OROP

Focus on Banking and FDI reforms

Govt to bring new policy for strategic sale of CPSE assets

Govt to allow 100 per cent FDI through FIPB in marketing of food products produced and manufactured in India

Department of Disinvestment to be remained Department of Investment and Public Asset Management

Jaitley accepts Rahul Gandhi's suggestion of giving tax exemption to Braille paper

Service tax exempted for General Insurance Schemes under Niramaya Swasthaya Bima Yojana: FM

Consolidation roadmap for public sector banks to be spelt next year; govt open to reducing its stake in PSBs below 50 pc

Accelerated depreciation to be limited to 40 pc wef from Apr 1, 2017 as part of phasing out of exemptions to industry

Govt will undertake 9-point reforms including steps to ensure ease of business in governance, fiscal discipline to ensure benefits for people and tax reforms to ensure compliance

Five lakh acres of land to be brought under Organic farming in three years under Krishi Vikas Yojana, says Jaitley

Allocation of Rs 35,984 crore for farm sector: FM

A dedicated long term irrigation fund will be created in NABARD with a corpus of Rs 20,000 cr

28.5 lakh hectares will be brought under irrigation under the Pradhan Mantri Krishi Sichai Yojana: Jaitley

To increase crop yield in rainfed areas, two schemes launched to promote organic farming

Rs 60,000 crore for recharging of ground water recharging

Govt to set apart Rs 412 crore to encourage organic farming, says Jaitley

2.87 lakh crore to be given grant-in-aid for gram panchayats and municipalities; it is quantum jump of 228 per cent: FM.

Rs 19,000 cr allocated for Pradhan Mantri Gramin Sadak Yojana in 2016-17; in all, Rs 27,000 cr after state contribution

Record agri credit target of Rs 9 lakh crore in 2016-17 set

Rs.5,500 crore for crop insurance scheme: Jaitley

Rs.38,500 crore to be disbursed under MNREGA next fiscal

Govt to develop 300 'rurban' clusters

5,542 of 18,542 unelectrified villages electrified; govt committed to achieving 100 pc electrification of villages by May 2018

Digital literacy scheme to be launched to cover 6 cr additional rural households: FM

Clean energy cess increased from Rs 200/ton to 400/ton on coal, lignite and peat

A fund of Rs 900 crore started for stabilising market crisis of pulses: Jaitley

High level committee headed by Revenue Secretary to oversee creation of fresh liability using retrospetive tax legislation

DBT to be used to transfer subsidy on fertilizer in select districts on pilot basis

Service tax on single premium annuity to be reduced to 1.5 per cent from 3.5 per cent

Rs 900 cr provided to buffer fund created to moderate prices of pulses

Govt to introduce bill to amend Companies Act for ease of doing business; to enable registration of cos. in a day: FM

Rs 87,765 cr allocated for rural development

Govt to create digital depository for school leaving certificates: FM

One cr youth to be skilled over next three years

Govt to enhance expenditure for social, rural and agri sector

We had to work in an unsupportive global environment and obstructive political atmosphere: FM

Govt is launching a new initiative to provide cooking gas to BPL families with state support

Next financial year will cast an additional burden due to implementation of 7th Pay Commission and OROP: FM

Govt considering to provide calibrated market freedom to new gas production from deep sea, ultra deep sea to boost stagnant domestic output

Govt preparing a comprehensive plan for nuclear power generation and allocation could be up to Rs 3,000 crore per annum: FM

A Public Utility Resolution of Disputes Bill to be passed to solve problems in infrastructure contracts, PPP and public utilities

Duty drawback scheme widened and deepened to include more products and countries

Govt to bring new policy for strategic sale of CPSE assets

Govt to allow 100 per cent FDI through FIPB in marketing of food products produced and manufactured in India

Department of Disinvestment to be remained Department of Investment and Public Asset Management

RBI Act to be amended to provide statutory backing for monetary policy framework and monetary policy committee (MPC)

SEBI to develop new derivatives products as well as products for corporate bond market

Time has come to review the FRBM Act; a committee to be constituted for the purpose

(Infographics courtesy: Jagran Post)

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1 Comments

  • anil kumar02-Mar-2016

    EPF is mandatory for all employees and not done by their choice. Contributions made by employee to EPF is tax free up to 1.5 lakhs and this includes other investments like LIC NSC PPF etc. Hence most of the time contributions made by employees in EPF are already tax deducted. Why tax again at time of with drawl. This would amount to double tax. The only component tax free here is the interest earned on EPF. Hence EPF or its interest should not be taxed.

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