Highlights of Changes in Direct & Indirect Taxes in 2016-2017 budget Direct Tax include Income tax,CHANGES IN INDIRECT TAXES - (CUSTOMS ACT, 1962 ,CENTRAL EXCISE ACT, 1944 ,AMENDMENTS IN SERVICE TAX )

1. Budget 2016 -2017:
Highlights of Changes in
Direct & Indirect Taxes

2. Direct Tax include Income tax. Income Tax is changed by
relevant finance Act of the year. In Budget 2016, the relevant
finance act will be Finance Act 2016. So Finance Act 2016 will
bring changes in Income tax Act, 1961.
Changes in Direct Taxes / Amendments in Income tax Act,
1961
Slab rates of income-tax are not changed. It is same as it was
in financial year 2015-16.
Surcharge remain same as it was in financial year 2015-16.
Education Cess & SHEC remain same as it was in financial year
2015-16.
In case of domestic company, the rate of Income-tax shall be
twenty nine per cent. of the total income if the total turnover or
gross receipts of the company in the previous year 2014-15 does
not exceed five crore rupees and in all other cases the rate of
Income tax shall be thirty per cent. of the total income.

3. In order to provide relief to newly setup domestic companies engaged
solely in the business of manufacture or production of article or thing, it is
proposed to amend the Act by way of insertion of new section 115BA, to
provide that the income-tax payable in respect of the total income of a domestic
company for any previous year relevant to the assessment year beginning on or
after the 1st day of April, 2017 shall be computed @ 25% at the option of the
company.
Earlier the dividend received was exempt U/s 10(34), now it is taxed
@10% if the dividend received exceeds Rs. 10 Lac.
Change in rate of Securities Transaction tax in case where option is not
exercised from 0.017 % to 0.05%. This is effective from 1st June 2016.
It is proposed to insert a new Chapter titled “Equalisation Levy” in the
Finance Bill, to provide for an equalisation levy of 6 % of the amount of
consideration for specified services received or receivable by a non-resident not
having permanent establishment (‘PE’) in India, from a resident in India who
carries out business or profession, or from a non-resident having permanent
establishment in India provided the consideration exceeds Rs. 1 Lac.

4. TCS: It is proposed to amend the aforesaid section to provide that the
seller shall collect the tax at the rate of one per cent from the
purchaser on sale of motor vehicle of the value exceeding ten lakh
rupees and sale in cash of any goods (other than bullion and jewellery),
or providing of any services (other than payments on which tax is
deducted at source under Chapter XVII-B) exceeding two lakh rupees.
The amendment will take effect from 1st June, 2016.
It is proposed to provide that for the purpose of computing distributed
income u/s 115QA, the amount received by the Company in respect of
the shares being bought back shall be determined in the prescribed
manner. The amendment will take effect from 1st June, 2016.
It is proposed to amend the provisions of the Act and introduce a new
Chapter to provide for levy of additional income-tax in case of
conversion into, or merger with, any non-charitable form or on
transfer of assets of a charitable organisation on its dissolution to a non-
charitable institution. These amendments will take effect from 1st June,
2016.

5. Accelerated depreciation is restricted to 40% for all assets.
In order to facilitate the FMCs ( Foreign Mining Companies) to undertake
activity of display of uncut diamond (without any sorting or sale) in the special
notified zone, it is proposed to amend section 9 of the Act to provide that in the
case of a foreign company engaged in the business of mining of diamonds, no
income shall be deemed to accrue or arise in India to it through or from the
activities which are confined to display of uncut and unassorted diamonds in a
Special Zone notified by the Central Government in the Official Gazette in this
behalf.
Extending the benefit of initial additional depreciation under section
32(1)(iia) for power sector engaged in the business of transmission of power.
it is proposed to insert new section 115BBF to provide that where the total
income of the eligible assesses income includes any income by way of royalty
in respect of a patent developed and registered in India, then such royalty shall
be taxable at the rate of ten per cent ( plus applicable surcharge and cess) on
the gross amount of royalty. No expenditure or allowance in respect of such
royalty income shall be allowed under the Act.

6. it is proposed to insert a new Section 54EE to provide
exemption from capital gains tax if the long term capital gains
proceeds are invested by an assessee in units of such specified
fund, as may be notified by the Central Government in this behalf,
subject to the condition that the amount remains invested for three
years failing which the exemption shall be withdrawn. The
investment in the units of the specified fund shall be allowed up
to Rs. 50 lakh.
it is proposed to amend section 54GB so as to provide that long
term capital gains arising on account of transfer of a residential
property shall not be charged to tax if such capital gains are
invested in subscription of shares of a company which qualifies to
be an eligible start-up subject to the condition that the individual or
HUF holds more than fifty per cent shares of the company and
such company utilises the amount invested in shares to purchase
new asset before due date of filing of return by the investor.

7. it is proposed to amend Section 47 of the Income-tax Act, so as to provide
that any redemption of Sovereign Gold Bond under the Scheme, by an
individual shall not be treated as transfer and therefore shall be exempt from
tax on capital gains.
it is proposed to amend section 48 of the Act so as to provide that the capital
gains, arising in case of appreciation of rupee between the date of issue and
the date of redemption against the foreign currency in which the investment is
made shall be exempt from tax on capital gains.
it is proposed to amend Section 47 so as to provide that any transfer by a unit
holder of a capital asset, being a unit or units, held by him in the consolidating
plan of a mutual fund scheme, made in consideration of the allotment to him of
a capital asset, being a unit or units, in the consolidated plan of that scheme of
the mutual fund shall not be considered transfer for capital gain tax purposes
and thereby shall not be chargeable to tax.
it is proposed to amend section 80GG so as to increase the maximum limit
of deduction from existing Rs. 2000 per month to Rs. 5000 per month.

8.  it is proposed to amend Clause (14) of section 2, so as to
exclude Deposit Certificates issued under Gold Monetisation
Scheme, 2015 notified by the Central Government, from the
definition of capital asset and thereby to exempt it from capital
gains tax.
it is proposed to amend the Act so as to provide that any shares
received by an individual or HUF as a consequence of demerger
or amalgamation of a company shall not attract the provisions of
clause (vii) of sub-section (2) of section 56.
With the objective to provide relief to resident individuals in the
lower income slab, it is proposed to amend section 87A so as to
increase the maximum amount of rebate available under this
provision from existing Rs.2,000 to Rs.5,000.

9. Present Section Heads
Existing Threshold Limit
(Rs.)
Proposed Threshod Limit
(Rs.)
192A Payment of accumulated
balance due to an employee
30000 50000
194BB Winnings from Horse Race 5000 10000
194C Payments to Contractors Aggreagate annual limit of
75,000
Aggreagate annual limit of
1,00,000
194LA Payment of Compensation on
acquisition of certain
Immovable Property
2,00,000 2,50,000
194D Insurance commission 20000 15000
194G Commission on sale of lottery
tickets
1000 15000
 Rationalization of tax deduction at Source (TDS) provisions. Changes in limit of TDS by budget 2016

10. Section Heads
Existing Rate of TDS
(%)
Proposed Rate of TDS
(%)
194DA Payment in respect of
Life Insurance Policy
2% 1%
194EE Payments in respect of
NSS Deposits
2% 1%
194D Insurance commission Rate in force -10% 5%
194G Commission on sale of
lottery tickets
1% 5%
194H Commission or
brokerage
1% 5%
 Changes in rate of TDS by budget 2016 (changes will take effect from 1st June 2016)

11. CHANGES IN INDIRECT TAXES:-
AMENDMENTS IN THE CUSTOMS ACT, 1962:
Subsection (43) of Section 2 is being amended so as to add a new class of
warehouses for enabling storage of specific goods under physical control of the
department, as control over the other types of warehouses would be only record based.
Subsection (45) of Section 2 which defines “warehousing station” is being omitted.
Chapter heading of Chapter III is being amended to omit the word “warehousing
station”.
Section 9 is being omitted.
Section 25 is being amended so as to omit the requirement of publishing and offering
for sale any notification issued, by the Directorate of Publicity and Public Relations of
CBEC.
Sections 28, 47, 51 and 156 are being amended so as to: a) increase the period of
limitation from one year to two years in cases not involving fraud, suppression of facts,
willful mis-statement, etc. b) provide for deferred payment of customs duties for
importers and exporters to certain class of importers and exporters.

12. Section 62 relating to physical control over warehoused goods is being
omitted since the conditions for licensing different categories of warehouses
and exercising control over the same are being provided under sections 57, 58
and 58A.
Section 63 relating to payment of rent and warehouse charges is being
omitted in view of the privatization of services, and free market determination of
rates, including those by facilities in the public sector.
The existing section 64 relating to owner’s rights to deal with warehoused
goods is being substituted so as to rationalize the facilities and rights extended
under the section.
Section 65 is being amended to delete the payment of fees to Customs for
supervision of manufacturing facilities under Bond; and empower Principal
Commissioner or Commissioner of Customs to licence such facilities.
Section 68 is being amended to omit rent and other charges on account of
omission of section 63.

13. Section 69 is being amended to omit rent and other charges on
account of omission of section 63.
Section 71 is being amended so as to substitute the word
“exportation” with the word “export” to align with definition
contained in sub section (18) of section 2.
Section 72 is being amended to delete clause (c) regarding
improper removal of samples
Section 73 is being amended to provide for cancellation bond in
case of transfer of ownership of the goods, and is thus aligned
with sub-section (5) of section 59.
New section 73A is being inserted so as to provide for custody
of warehoused goods and responsibilities including the liabilities
of warehouse keepers.

14. AMENDMENTS IN THE CENTRAL EXCISE ACT, 1944:
Section 5A is being amended so as to omit the requirement of
publishing and offering for sale any notification issued, by the
Directorate of Publicity and Public Relations of CBEC.
Section 11A is being amended so as to increase the period of
limitation from one year to two years in cases not involving fraud,
suppression of facts, willful mis-statement, etc.
Section 37B is being amended so as to empower the Board for
implementation of any other provision of the said Act in addition to
the power to issue orders, instructions and directions.

15. The Third Schedule is being amended so as to: a) make some
editorial changes, consequent to 2017 Harmonized System of
Nomenclature. b) include therein:
1) All goods falling under heading 3401 and 3402;
2) Aluminium foils of a thickness not exceeding 0.2 mm;
3) Wrist wearable devices (commonly known as ‘smart watches’);
and
4) Accessories of motor vehicle and certain other specified goods.
Changes at (b) above will come into effect immediately owing to a
declaration under the Provisional Collection of Taxes Act, 1931.

16. AMENDMENTS IN SERVICE TAX
There is no act for service tax, it is governed by Finance Act, 1992. So to
change service tax, amendments are made in Finance Act, 1992.
An enabling provision is being made to levy Krishi Kalyan Cess on all
taxableservices with effect from 1st June, 2016, to finance and promote
initiatives to improve agriculture @0.5%.
Exemption on services provided by,-
(i) a senior advocate to an advocate or partnership firm of advocates providing
legal service; and
(ii) a person represented on an arbitral tribunal to an arbitral tribunal, is being
withdrawn with effect from 1st April, 2016 and Service Tax is being levied under
forward charge. Now chargeable @ 14%.
Exemption on construction, erection, commissioning or installation of
original works pertaining to monorail or metro, in respect of contracts entered
into on or after 1stMarch 2016, is being withdrawn with effect from 1st March,
2016. Now chargeable @5.6%.

17. •Exemption on the services of transport of passengers, with or
without accompanied belongings, by ropeway, cable car or aerial tramway is
being withdrawn with effect from 1st April, 2016. Now chargeable @14%.
•The Negative List entry that covers ‘service of transportation of passengers,
with or without accompanied belongings, by a stage carriage’ is being omitted
with effect from 1st June, 2016. Service Tax is being levied on transportation of
passengers by air conditioned stage carriage with effect from 1st June, 2016, at
the same level of abatement as applicable to the transportation of passengers
by a contract carriage, that is, 60% without credit of inputs, input services and
capital goods. Now chargeable @5.6%.
•Some new exemption is also introduced by Finance Bill 2016.
Interest rates on delayed payment of duty/tax across all indirect taxes are
being rationalized and made uniform at 15%, except in case of Service Tax
collected but not deposited to the exchequer, in which case the rate of interest
will be 24% from the date on which the Service Tax payment became due. In
case of assessees, whose value of taxable services in the preceding year/years
covered by the notice is less than Rs. 60 Lakh, the rate of interest on delayed
payment of Service Tax will be 12%.