The document discusses key expectations from the upcoming Union Budget 2016 in India. It is expected that the budget will provide tax benefits for start-ups and simplify income tax laws. It may offer clarity on issues related to indirect taxation such as the implementation of GST and rationalization of service tax rates. The budget could also target reforms such as reducing corporate tax rates and resolving legacy tax disputes to improve India's business environment and help attract more foreign investment. Overall, the budget aims to balance the need for economic growth with political pressures through targeted reforms and incentives.

1. Union Budget 2016 - Key Expectations
Presented by: Sandeep Jhunjhunwala, FCA
February 26, 2016

2. Expectations from Budget running high!
First 21 months of the Narendra Modi- led
Government has seen tremendous action on the
reform front
While politics continue to dominate and dilute the
reforms agenda of the Government, there is
expectation that the Government finds a way to
rescue itself from a potential deadlock situation
Flagship programs released and key bills tabled -
Make in India, Digital India, Skill India, Startup
India, Ease of doing business, Smart cities,
Financial inclusion, Real Estate Bill, Arbitration
and Conciliation (Amendment) Bill, Black Money
Act, FDI liberalisation
India emerged as the top FDI destination in 1H
2015, receiving USD 31 billion – Need to maintain
this momentum
IMF predicted that India would retain the status of
fastest growing large economy until 2020
Jump of 16 positions in the World Economic
Forum’s Global Competitiveness Index and 12
position in World Bank’s Doing Business Report

3. Budget - Key Expectations

4. Direct tax expectations
Tax benefits for Start-ups
Simplification of income-tax law - First report of Justice Easwar Committee
Budget 2015 had announced cut in IT rate to 25 per cent over a period of 4 years - Clear roadmap needed
Deferment of General anti-avoidance rule (GAAR) - Not likely though!
Rationalisation of tax holiday/ incentive regime - taking into account stakeholder inputs
Further clarity on Place of Effective Management (POEM), postponement if possible
Guidelines on Foreign Tax Credits (FTC)
Carry forward of losses in case of merger - extend to all companies
Reduction/ Removal of Minimum Alternate Tax (MAT) for SMEs and SEZ units
Retrospective taxation - settling old legacies (Vodafone, Cairn) to drop ‘tax terrorism’ tag
Income Computation and Disclosure Standards (ICDS) and Ind AS - Consultative process/ deferment
Advance rulings - Increase number of benches
Will group consolidation of tax returns become a reality?

5. Direct tax expectations
Base Erosion and Profit Shifting (BEPS) Action Plan -
− Overall alignment with international practices
− New country by country reporting (CbCR)
− 3 tier approach to TP documentation
− CFC implementation?
− Cash box - entitled only to risk-free return
Realign safe harbour margins - Make rates more attractive and practical
Mutual Agreement Procedures (MAP) - Replicate US success experience with other jurisdictions
Bilateral Advance Pricing Agreement (APA) - should cover countries such as Germany, France, Singapore, Italy
with whom India has significant international transactions - even in absence of Article 9(2) in tax treaty dealing with
correlative relief
Making it easier for offshore funds to avail tax exemptions
Personal taxes (Aam Aadmi's wish list):
− Basic exemption limit requires a re-look
− Re-instate standard deduction for salaried taxpayers
− Restructuring the current income tax slabs
− Enhancement of investment limits under Section 80C
− Expand exemptions for spending on education and healthcare

6. Indirect tax expectations
GST implementation - the question is when rather than whether it is a possibility? Is this reality or mirage?
Clarification on taxability of e-commerce transactions
Steps to boost Make in India and Start-up India initiatives
Robust alternate scheme of upfront exemption/ drawback for IT/ ITeS services, particularly services exported from
registered EOUs
Addressing dual tax levy on software ahead of GST by removal of service tax levy on electronic supply of
packaged software that is liable to VAT /Sales tax
Rationalisation of CENVAT credit scheme - withdrawing time limit for availment, utilization of credit for Education
cess & Secondary higher education cess etc
Time Limit for adjudication of show cause notices - Customs, Central Excise and Service Tax
Increase in exemption limit for levy of Service tax
Clarity on applicability of Service tax on group companies transactions/ reimbursements
Allowing payment of Service Tax on import of services through CENVAT credit
Reduction in the rate of Central Sales Tax (CST) to 1 percent

7. OPEN HOUSE & DISCUSSIONS
THANK YOU
Views expressed in the presentation are personal
Sandeep Jhunjhunwala, FCA
E: Jhunjhunwala.sandeepr@gmail.com
M: +91 97401 55469