Publication - RSM India Budget 2016 Key Aspects

THE POWER OF BEING UNDERSTOOD
INDIA BUDGET 2016
- Key Aspects
Let’s understand the India
Budget

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INDIA BUDGET 2016
- Key Aspects

RSM INDIA BUDGET 2016 - Key Aspects
Table of Contents
Executive Summary 1
Chapter 1 : Introduction 8
Chapter 2 : Indian Economy - An Overview 12
Chapter 3 : Tax Rates 15
Chapter 4 : G-20 Countries - Comparative Corporate And Personal Tax Rates 22
Chapter 5 : Tax Incentives For Businesses 23
Chapter 6 : Direct Taxes - Significant Changes 39
6.1 Business Entities
6.2 Personal 46
6.3 Non Residents 49
6.4 Transfer Pricing 51
6.5 General 54
Chapter 7 : Indirect Taxes - Significant Changes 59
7.1 Service Tax 60
7.2 Customs Duty 65
7.3 Central Excise 67
7.4 Central Sales Tax Act 71
Chapter 8 : Other Significant Proposals 72
Chapter 9 : Impact On Select Industries 76
Chapter 10 : DTAA Rates 87
Chapter 11 : TDS Rates 96
Chapter 12 : Direct Tax And Service Tax Compliance Calendar 99
Abbreviations 102
39

RSM 1INDIA BUDGET 2016 - Key Aspects
Executive Summary
1.0 DIRECT TAXES
1.1 Effective Tax Rates
1.1.1 Personal taxation
nThe Bill proposes no change in personal tax
rates and basic exemption limit continues at
Rs.2,50,000. However, there is an increase in
surcharge from 12% to 15% for Individuals /
HUFs having income above Rs. 1,00,00,000.
This will result in maximum marginal rate of
35.535% {(30%+15% surcharge thereon)+3% cess} for FY 2016-17 as
against 34.608% {(30%+12% surcharge thereon)+3% cess} at present.
1.1.2 Corporate taxation
nNew manufacturing domestic companies incorporated on or after 1
March 2016 may opt for corporate tax rate of 25% plus applicable
surcharge and cess provided profit linked incentives / investment linked
deductions / investment allowance / accelerated depreciation are not
claimed.
nCorporate tax rate for relatively smaller domestic companies with
turnover not exceeding Rs. 5,00,00,000 (For FYE 31 March 2015) to be
29% plus applicable surcharge and cess.
nCorporate tax rate for other domestic companies remains unchanged
@30% plus applicable surcharge and cess.
nSurcharge on corporate tax / MAT of domestic company remain
unchanged @7% where income exceeds Rs. 1,00,00,000 not exceeding
Rs. 10,00,00,000 and @12% where income exceeds Rs. 10,00,00,000.
nCorporate tax rate for foreign companies remains unchanged @40% plus
applicable surcharge and cess.
1.1.3 Partnership firms / LLP
nFor total income exceeding Rs. 1,00,00,000, tax is chargeable @34.608%
[(tax rate 30% plus surcharge 12% thereon) plus education cess 3%
thereon]. In other cases, effective tax rate remains unchanged @ 30.90%.
nAMT remains unchanged @21.346% [(tax rate 18.50% plus surcharge 12%
thereon) plus education cess 3% thereon] in case the adjusted total
income exceeds Rs. 1,00,00,000. In other cases, the effective tax rate
remains unchanged @ 19.055%.
nDeduction up to 100% of the profits allowed for 3 out of 5 years for start-
ups setup during April 2016 to March 2019. However, MAT will apply in
such cases.
1.2 Tax Incentives and Proposals for Businesses
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Executive Summary
nDeduction up to 100% of profits allowed to an undertaking in housing
project for flats upto 30 sq. meters in 4 metro cities and 60 sq. meters in
other cities, approved between June 2016 and March 2019 and completed
within 3 years. However, MAT / AMT will apply in such cases.
nIn respect of foreign company engaged in the business of mining of
diamonds, it is proposed that no income shall be taxed from the activities
confined to display of uncut and unassorted diamonds in a Special
Notified Zone.
nThe new tax regime provides pass through treatment of income of the
securitisation trust wherein the income would be directly taxable in the
hands of its investors. The securitisation trust shall be required to deduct
tax at source @25% in case of payment to resident investors which are
individual or HUF and @30% in case of others excluding non-residents. In
case of payments to non-resident investors, TDS shall be at the rates in
force.
nIt is proposed to amend section 10 of the IT Act to provide units located in
an International Financial Services Centre for exemption from tax on
capital gains to the income arising from transaction undertaken in foreign
currency on a recognised stock exchange even when STT is not paid in
respect of such transactions. However, MAT shall be chargeable @9%.
Further, DDT shall not be applicable.
nPresumptive taxation scheme extended to professionals having gross
receipts up to Rs. 50,00 000 with profit deemed to be 50%.
nThe threshold limit of gross receipts for applicability of tax audit in case
of professionals, increased from Rs. 25,00,000 to Rs. 50,00,000.
nDeduction under section 80JJAA of the IT Act for additional wages is now
available to all assessees who are subject to tax audit.
nConcessional tax rate of 10% for Indian residents on royalty income on
gross basis from worldwide exploitation of patents developed and
registered in India.
nDividend distributed by SPVs out of its income to the REITs / InvITs, not to
suffer DDT.
nNon-banking financial companies shall be eligible for deduction to the
extent of 5% of its income in respect of provision for bad and doubtful
debts.
nIn order to provide clarity, it is proposed to insert a new section 35ABA in
the IT Act to provide for tax treatment of spectrum fee. The spectrum
fee will be allowed as a deduction in equal installments over the period for
which the right to use spectrum remains in force.
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Executive Summary
nSection 43B of the IT Act is proposed to be amended to include
payments made to Indian Railways for use of Railway assets within its
ambit.
nOne time window provided for domestic taxpayers to declare
undisclosed income or such income represented in the form of any
asset by paying tax @30%, surcharge @7.5% and penalty @ 7.5%,
aggregating to 45% of the undisclosed income. Declarants will have
immunity from prosecution.
nDirect Tax Dispute Resolution Scheme 2016 proposed to be introduced
for tax arrears and specified tax where the assessee has the option to
settle the case by paying tax, interest and penalty as under:
– Where the appeal is pending before the CIT(Appeals), pay tax
arrears along with interest up to date of assessment and no
penalty where tax arrears are less than Rs. 10,00,000 whilst 25%
penalty where tax arrears exceed Rs. 10,00,000.
– Where appeal is pending before any appellate authorities and tax
was determined pursuant to retrospective amendments, only tax
amount to be paid and immunity from interest, penalty and
prosecution.
nExisting penalty provisions of section 271(1)(c) are rationalized and new
section 270A is introduced where it is proposed to levy a penalty @50%
of taxes payable on the underreporting of income and @200% of taxes
payable on the misreporting of income.
nPetitions of the tax payers seeking waiver of interest and penalty to be
disposed off within a year.
nThe AO to grant stay of demand once assessee pays 15% of the disputed
demand, while the appeal is pending before CIT(Appeals).
nGovernment to pay interest at 9% p.a. for delay in giving effect to
Appellate Order beyond 90 days.
nAs per the Budget speech, section 14A read with rule 8D is proposed to
be amended wherein disallowance would be limited to 1% of the average
monthly value of investments yielding exempt income, but not exceeding
actual expenditure claimed.
nDividend income of more than Rs.10,00,000 p.a. would be liable to tax
@10% of gross amount of dividends in the hands of Individuals / HUFs /
Firms despite the fact that DDT is already paid by companies declaring
such dividends.
nTax to be collected at source @1% on purchase of luxury cars exceeding
value of Rs.10,00,000 and purchase of goods and services in cash
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Executive Summary
exceeding Rs.2,00,000.
nSTT in case of ‘Options’ increased from 0.017% to 0.05%.
nIn addition to existing conditions for availing tax neutral conversion from
Company to LLP, value of total assets as per books in any preceding 3
years not to exceed Rs.5,00,00,000.
nThe time limit for assessment, reassessment, re-computation has been
advanced by 3 months.
nGAAR to be effective from 1 April 2017.
nThe tax rebate under section 87A has been increased from Rs. 2,000 to
Rs. 5,000 for Individuals having income up to Rs. 5,00,000.
nWithdrawal up to 40% of the corpus at the time of closure to be tax
exempt in the case of National Pension Scheme (NPS) and the Annuity
fund which goes to legal heir will also be exempt.
nIn 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 after 1 April
2016.
nHigher rate of TDS for non-provision of PAN in case of non-residents, not
to apply where alternative documents are provided by such non-
residents.
nEqualization levy of 6% proposed on payment (exceeding Rs.1,00,000
p.a.) made to non-residents not having a PE, in respect of online
advertising or space for digital advertising, in case of B2B transactions.
nAny income accruing or arising to a foreign company on account of
storage of crude oil in a facility in India and sale of crude oil therefrom to
any person resident in India shall not be included in the total income.
nApplicability of rules of POEM for determining the status of residency of
a foreign company deferred by 1 year. (Applicable w.e.f. FY 2016-17)
nBased on OECD Action plan 13 of BEPS, it is proposed to provide
specificreporting regime in respect of Country by Country reporting and
also a standardized master file for all group members of Multinational
Enterprises. Penal implications introduced for non-compliance.
nTime limit for assessment, reassessment, re-computation has been
advanced by 3 months
nTo facilitate the “Stand Up India Scheme” at least 2 projects per bank
1.3 Personal Taxation
1.4 Proposals for Non-residents
1.5 Proposal for Transfer Pricing
1.6 Other Proposals
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Executive Summary
branch to be approved. This will benefit at least 2,50,000 entrepreneurs.
nGovernment to contribute 8.33% for all new employees (where basic
salary is less than Rs.15,000 p.m.) enrolling in EPFO for the first 3 years of
their employment. Budget provision of Rs. 1,000 crore for this scheme.
nAmendments in Companies Act to improve enabling environment for
start-ups.
nReforms in FDI policy in the areas of Insurance and Pension, ARC, SEs.
Further, 100% FDI allowed through FIPB route in marketing of food
products produced and manufactured in India.
nTo continue with the ongoing reform programme and ensure passage of
the GST bill and Insolvency and Bankruptcy law.
nNew model Shops and Establishments Bill to be circulated to the state
governments.
nEffective service tax rate to increase from 14.5% to 15% (including
Swachh Bharat Cess) in view of the proposal to levy an additional cess
@ 0.5% as Krishi Kalyan Cess w.e.f. 1 June 2016 on all or any of the taxable
services.
nExemption to construction and maintenance in relation to various
projects, contracts etc., which was removed w.e.f. 1 April 2015 has been
restored and given retrospective exemption.
nRate of interest rationalized @24% in case of amount collected but not
paid and @15% in all other cases, as against the present rate of 18% to
30%, as the case may be.
nLegal services provided by a senior advocate to an advocate or
partnership firm of advocates made liable to service tax.
nRationalization of abatement to construction of complex, building civil
structure or part thereof @70% as against existing rate of 70% and 75%
as the case may be.
nServices provided by mutual fund agent/distributor to mutual
fund/asset management company to be liable as forward charge.
nOne Person Company whose aggregate value of services during
previous financial year is up to Rs. 50,00,000 or HUF shall be required to
pay service tax as per the due date as applicable to individual or
partnership firms.
nThe limitation period for issuance of show cause notice is proposed to be
increased from 18 months to 30 months.
nAmendment in CENVAT Credit Rules, 2004 particularly relating to
2.0 INDIRECT TAXES
2.1 Service Tax
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Executive Summary
apportionment of credit between exempted and non-exempted final
products/services.
nAmendment in provisions relating to Input Service Distributor (ISD)
including extension of this facility to transfer input services credit to
outsourced manufacturers under certain circumstances.
nBanking and other financial institution to have an option of reversing
CENVAT credit in respect of exempted services on actual basis, in
addition to an option of reversal of 50% of CENVAT credit.
nLevy of service tax and excise duty/CVD to be mutually exclusive on
informational technology software.
nIt is clarified that point of taxation in case of new levy on services will be
as per Rule 5 of Point of Taxation Rules, 2011 and that that transactions
other than those falling under two scenarios specified in Rule 5 shall be
liable to new levy.
nThe optional service tax rate in case of single premium annuity policies is
being rationalized @1.4% of the total premium charged, where the
amount allocated for investment is not intimated to policy holder.
nIndirect Tax Dispute Resolution Scheme, 2016 is proposed to be
introduced w.e.f. 1 June 2016 for Service Tax, Excise and Customs
assessee who has filed an appeal before Commissioner (Appeals) and is
pending for adjudication as on 1 March 2016.
nTransportation of goods by a vessel from customs station of clearance in
India to place outside India, not to be treated as exempted services for
the purpose of CENVAT Credit Rules.
nIt is proposed to levy service tax on transportation of goods by a vessel
from outside India up to the customs station in India w.e.f. 1 June 2016.
nNo change in general effective rate of Basic Excise Duty (‘BED’).
nInfrastructure Cess as duty of excise ranging from 1% to 4% is being
imposed on motor vehicles (depending upon type of motor vehicle)
falling under chapter heading 8703.
nExcise duty of 1% without input tax credit or 12.5% with input tax credit
on articles of jewellery (excluding silver jewellery, other than studded
with diamonds and some other precious stones) with a higher exemption
and eligibility limits of Rs. 6 crores and Rs. 12 crores respectively.
nExcise duty on ready-made garments with retail price of Rs. 1,000 or
more, raised to 2% without CENVAT credit or 12.5% with CENVAT credit
nBED on refrigerated containers reduced from 12.5% to 6%.
nOption for revising periodical returns to be provided to central excise
2.2 Excise Duty
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Executive Summary
assesses.
nChanges in excise duty rates on certain inputs in sectors like information
technology hardware, capital goods, defense production, textiles, mineral
fuels & mineral oils, chemicals & petrochemicals, paper, paperboard and
newsprint, maintenance repair and overhauling of aircrafts and ship
repair.
nReduction in number of returns under central excise by an assessee
above a certain threshold from 27 to 13.
nExemption from excise duty on ready mix concrete manufactured at
construction sites.
nRate of duty increased from 9% to 9.5% in case of refined gold bars
manufactured from gold dore bar, silver dore bar, gold ore or concentrate,
silver ore or concentrate, copper ore or concentrate. Excise duty
exemption under the existing area based exemptions on refined gold is
withdrawn.
nFor refined silver manufactured from silver ore or concentrate, silver dore
bar, or gold dore bar, the excise duty exemption under the existing area
based exemptions is being withdrawn – rate of duty to increase from 8%
to 8.5%.
nNo change in peak rate of Basic Custom Duty (BCD).
nBCD on import of imitation jewellery is increased from 10% to 15%.
nInterest rate for delayed payment of customs duty has been reduced
from 18% p.a. to 15% p.a.
nImport of Printed Circuit Boards (PCBs) of mobile phones and tablet
computers subjected to Customs Duty.
nSpecial Additional Duty (SAD) to be levied on import of inputs and raw
materials used in manufacture of personal computers and tablets.
nSelf–declaration sufficient for availing duty exemptions to import goods
at concessional rate to be used in manufacture of excisable goods.
nCustoms baggage declaration to be filed only by passengers carrying
dutiable or prohibited goods.
nCVD increased on gold dore bars from 8% to 8.75%.
nCVD increased on silver dore from 7% to 7.75%.
nGas transported through a common carrier pipeline or transport or
distribution system and which becomes comingled or fungible,
introduced in the system in one state and taken out from the pipeline in
the other state is deemed to be sold in the inter-state trade.
2.3 Customs
2.4 Central Sales Tax
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Chapter 1 Introduction
1.1 Background
In the midst of an uncertain global economic
outlook, India is emerging as the new ‘global
economic hotspot’. The Indian economy is
estimated to grow at 7.6% in FY 2015-16 and is
expected to grow at 7% to 7.75% in FY 2016-17,
making it the fastest growing major economy in
the world. Further, India’s other macroeconomic
parameters like inflation; fiscal deficit and current account balance have
exhibited distinct signs of improvement. The World Economic Forum has said
that India’s growth is ‘extraordinarily high’.
The Union Budget 2015 is primarily driven with the objective of accelerating
investment in infrastructural sector, fiscal consolidation and reducing litigation.
The total investment in infrastructure sector is projected at a whopping Rs.
2,21,000 crores. The fiscal deficit for FY 2015-16 is expected to be at 3.9% of
GDP which is expected to come down to 3.5% for FY 2016-17.
The most striking feature of the Budget is the concerted effort at reducing
litigation and ease of doing business. The Budget contains “The Direct Tax
Dispute Resolution Scheme 2016” which would permit the taxpayers whose
appeals are pending before the first appellate authority to pay the tax and
interest up to the date of assessment where disputed tax is up to Rs. 10 lacs. In
cases where disputed tax exceeds Rs. 10 lacs, 25% of the minimum penalty
leviable shall be payable. There will be no further penalty or prosecution nor
interest for the period after assessment. The total disputed amount in litigation
is estimated at Rs.5.50 lac crores with over 3 lac cases. The Budget also
contains “The Income Declaration Scheme 2016” which will provide a window to
the taxpayers who have not paid full taxes in the past to ensure compliance by
paying 45% of declared income as tax and penalty. This will result in no further
interest or penalty or prosecution. The scheme will be open from June 2016 to
September 2016 and will be subject to specified conditions. In the case of tax
disputes due to retrospective changes of law (such as Vodafone for indirect
transfer of shares), it is proposed to permit the settlement of dispute subject to
the payment of tax which will ensure complete immunity from interest, penalty
and prosecution. This can help restore confidence of international investors.
There is a widespread disappointment on the tax rates. In the last Budget 2015,
a roadmap to lower the corporate tax rates over 4 years from 30% to 25% was
announced with the phasing out of the tax exemptions. However, the corporate
tax rate has been kept unchanged at 30% plus applicable surcharge and cess
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resulting in effective tax rate of 34.608%. The only relief is for specific
manufacturing companies set up after 1 April 2016 where a lower rate (i.e. 25%
plus applicable surcharge and cess) and Specified small companies having
annual turnover of less than Rs. 5 cores (i.e. 29% plus applicable surcharge and
cess) would apply, although MAT shall be applicable to them. In turn, it has
proposed phased elimination of deductions and exemptions including sunset
clause for setting up of SEZ units, infrastructure facilities and developers of
SEZs. The Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT)
rates have remained unchanged at 21.3416% {(18.5%+12% surcharge) x3% cess}
and 20.358% {(15%+12% surcharge) x3% cess with grossing up} respectively.
The personal tax rates have remained unchanged except for high income tax
payers wherein the surcharge on income-tax is proposed to be increased from
12% to 15% in case income exceeds Rs. 1,00,00,000. This will result in maximum
marginal rate of 35.535% {(30%+15% surcharge thereon)+3% cess} for FY
2016-17 as against 34.608% {(30%+12% surcharge thereon)+3% cess} at
present. It is also proposed to tax any income by way of dividend in excess of Rs.
10,00,000 in the case of an individual, HUF or a firm who is resident in India @
10% on gross basis. However, HNIs can heave a sigh of relief that the much
talked about long term capital gains tax exemption period for shares sold on the
stock exchange continues at 1 year and has not been increased to 3 years. The
limit for deduction under Section 80C of Rs. 1,50,000 remains unchanged.
Section 80C provides for tax deduction in respect of investment in eligible
savings such as Provident fund, ELSS, life insurance premium, housing loan
repayment, 5 year bank deposits, NSC, ULIP to promote growth.
Certain Foreign Direct Investment reforms have been announced in areas of
Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges, etc.
100% FDI will be allowed through FIPB route in marketing of food products
produced and manufactured in India. To incentivize Sovereign Gold Bond and
Gold monetization scheme, the capital gains on redemption and interest
thereon is proposed to be exempt under the IT Act.
The determination of tax residency of foreign company on the basis of Place of
Effective Management (POEM) is proposed to be deferred by 1 year. It is hoped
that the Income Computation and Disclosure Standards (ICDS) would also be
deferred as per recommendation of the Easwaran Committee. To meet with the
commitment to BEPS initiative of OECD and G-20, the Finance Bill, 2016 has
included the provision for requirement of country by country reporting for
companies with consolidated revenue of more than Euro 750 million. General
Anti Avoidance Rules (GAAR) would be effective from 1 April 2017 as proposed
earlier. A new provision (section 35ABA) is proposed to be introduced to provide
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clarity for amortization of spectrum fees. For a foreign company engaged in
business of mining of diamonds, it is proposed that, no income shall be taxed
from the activities confined to display of uncut and unassorted diamonds in a
Special Notified Zone.
It is proposed to promote employment generation, incentive available under
Section 80JJAA of the IT Act will be available not only to assessees deriving
income from manufacture of goods in a factory but to all assessees who are
subject to statutory audit under the Act. Thus, a deduction of 30% of the
emoluments paid to such employees can be claimed for 3 years for employees
whose monthly emoluments do not exceed Rs.25,000. Also, no deduction will
be admissible in respect of employees for whom the Government is paying the
entire EPS contribution.
Deduction up to 100% of the profits is proposed to be allowed for 3 out of 5
years for start-ups setup during April 2016 to March 2019. Deduction up to
100% of profits is proposed to be allowed to an undertaking in housing project
for flats upto 30 sq. metres in 4 metro cities and 60 sq. metres in other cities,
approved between June 2016 and March 2019 and completed within 3 years.
However, MAT / AMT will apply in both the cases.
Under the existing provisions of the Income-tax Act, tax treatment for the
National Pension System (NPS) referred to in section 80CCD is Exempt, Exempt
and Tax (EET). It is proposed that withdrawal up to 40% of the corpus at the
time of retirement shall be tax exempt in the case of National Pension Scheme.
In case of superannuation funds and recognized provident funds, including
employees provident Fund, 40% of corpus created out of contributions made on
or from 1.4.2016 shall be tax exempt upon withdrawal. It may be pointed out that
presently withdrawals from recognized Provident Funds are generally exempt
from tax altogether whereas withdrawals from NPS are taxable entirely.
It is proposed to provide for presumptive taxation regime for professionals
having gross receipts upto Rs. 50,00,000 per annum wherein profit of 50% shall
be deemed to be his income.
Effective service tax rate (including Swachh Bharat Cess) and the proposed
additional levy @ 0.5% as Krishi Kalyan Cess effective 1 June 2016 on the taxable
services, would result in effective service tax rate to 15%. This will have far
reaching implications. Excise duty of 1% without input tax credit or 12.5% with
input tax credit is proposed on articles of jewellery (excluding silver jewellery,
other than studded with diamonds and some other precious stones) with a
higher exemption and eligibility limits of Rs. 6 crores and Rs. 12 crores
respectively.
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A Committee shall be formed to review the implementation of the FRBM Act
and give its recommendations on the way forward. As mentioned in the Budget
Speech, the Government shall also endeavour to continue with the ongoing
reform programme and ensure passage of the Constitutional amendments to
enable implementation of the Goods and Service Tax, the passage of Insolvency
and Bankruptcy law and other important reform measures which are pending
before the Parliament. Amendments in Companies Act are proposed to improve
enabling environment for start-ups. Comprehensive central legislation to deal
with illicit deposit taking schemes is proposed to be introduced. A new model
Shops and Establishments Bill is proposed to be circulated to the state
governments and the passenger road transport segment is proposed to be
revamped with reforms.
The Budget is a serious Policy Statement for putting India back on the path of
long term sustained economic growth and stable tax regime.
In this booklet compiled by us, we intend to offer a broad outline of the highlights
of the Union Budget 2016 presented on 29 February 2016. We have discussed
the significant proposals of general interest in respect of direct taxes. In respect
of indirect taxes and other policy initiatives, only the highlights have been
briefly enumerated. Preceding the budget proposals are the macro indicators of
Indian economy which provide a backdrop to the legal and financial proposals.
This booklet is not an offer, invitation or solicitation of any kind and it does not
purport to be comprehensive, or to render legal, economic or financial advice.
This booklet should not be relied upon for taking actions or decisions without
appropriate professional advice as the facts of each case have to be studied and
the legal position analysed properly before taking any action or decision in the
matter. Further, this booklet contains only the proposals and amendments as
given in the Finance Bill, 2016, which may be modified before it receives the
approval and assent of the Parliament and the President. The proposals
regarding direct taxes would become effective from AY 2017-18 (FY 1 April 2016
to 31 March 2017), unless otherwise specified. In this booklet, the terms 'IT Act',
'the Rules' and 'the Bill' are used for the "Income-tax Act, 1961", ''Income-tax
Rules, 1962'' and "Finance Bill, 2016" respectively.
While all reasonable care has been taken in preparation of this booklet, we
accept no responsibility for any errors it may contain or for any omissions or
otherwise or for any loss, howsoever caused or sustained, by the person who
relies on it.
1.2 Scope and Limitations
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Chapter 2 Indian Economy – An Overview
2.1 India At A Glance – The Macro-Economic Perspective
GDP - 2015
lUS$ 8 trillion in terms of Purchasing
Power Parity (PPP) - 3rd largest in the
world
Rapid Advancement
lIndia hailed as a 'bright spot' amidst a
slowingglobaleconomybyIMF
lThe World Economic Forum has said that
India'sgrowthis'extraordinarilyhigh’
GDP Growth Rate
l7.6%forFY2015-16(AdvanceEstimate)
l7%to7.75%forFY2016-17(Projection)
Demography
l1.271 billion (2015) with more than 65%
populationagedunder35years
lWorld’slargestdiasporaof16million
Forex Reserves
lForexReservesofUS$350billion
Exchange Rate
l1 US$ = INR 68.616 (as on 29 February
2016)
Market Capitalization
(as on 29 February 2016)
lUS$1.25trillion
Political System
lFederal Republic with Parliamentary
democracy
lLargestDemocracyintheworld.
2.2 General Review
The global economic outlook is currently very uncertain due to weak growth of
world output, declining prices of a number of commodities, turbulent financial
markets and volatile exchange rates. In spite of such unsupportive
macroeconomic landscape, India has grown at 7.6% in FY 2015-16 and is
expected to grow at 7% to 7.75% in 2016-17, making it the fastest growing major
economy in the world. Further, India’s other macroeconomic parameters like
inflation, fiscal deficit and current account balance have exhibited distinct signs
of improvement. As a result, India is emerging as the new ‘global economic
hotspot’.
GDP Growth
5.1
2014-15 2015-162013-142012-13 2016-17*
* Projection
6.9
7.2
7.6 7.75
9
8
7
6
5
4
3
2
1
0
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The year 2015-16 continues to experience moderation in general price levels in
the country following the global trend of declining commodity and producers
prices. Headline inflation based on the Consumer Price Index, dipped to 4.9%
during 2015-16 (April-January) as against 5.9 % in 2014-15. Similarly, headline
Wholesale Price Index inflation was -2.8% in 2015-16 (April-January) as
compared to 2.0% in 2014-15.
During 2015-16 (April-January), India’s exports declined year-on-year by 17.6 %
to US$ 217 billion owing to sluggish global demand and low global commodity
prices. In keeping with the global trends of slow growth, imports have also
declined by 15.5 % in 2015-16 (April-January) to US $ 324 billion. Lower imports
of petroleum, oil and lubricants were the main reasons for the decline in total
imports this year so far. In spite of the decline in exports during 2015-16, India’s
BoP position remained comfortable.
During 2015-16 (April-January), the average exchange rate of the Rupee
depreciated to INR 65.04/US$ as against INR 60.92/US$ in 2014-15 (April-
January).
While 2014-15 saw the Indian equity markets witnessing a dream run to reach
an all-time high of 29448.95, 2015-16 has seen substantial erosion with the
BSE Sensex reaching a year low of 23,002 as on 29 February 2016.
The new foreign Trade Policy for the period 2015-20, announced on 1 April 2015
focuses on supporting both manufacturing and services exports and improving
ease of doing business. It aims to increase India’s exports to US$ 900 billion by
2019-20 and it also provides the road map by the government to align it with
the ‘Make in India’ and ‘Digital India’ programmes and to ease trade.
The Indian economy has made substantial improvements in its
macroeconomics fundamentals and impressive strides in reducing in key areas,
pursuit of fiscal prudence and consolidation, focus on price stability and the
resultant benign price situation and comfortable level of external current
account.
RSM 13INDIA BUDGET 2016 - Key AspectsBack to Content

Absolute values % change over previous period
Items 2013-14 2014-15 2015-16
2.3 India – Key Economic Indicators
2013-14 2014-15 2015-16
Gross Domestic Product
(Rs. thousand crore)
2R 1R 1AE
-At constant market prices 9,839 10,552 11,35 6.6 7.2 7.6
GVA at basic prices
2R 1R AE
(2011-12 prices) 9,084 9,727 10,438 6.3 7.1 7.3
1
At constant market prices
(US $ billion – Annual
Average exchange rate) 1,626 1,726 1,745 -4.1 6.1 1.1
Food grains production
a
(million tons) 265 252 253 3.1 -4.9 0.5
Index of industrial production
b
(Base: 2004-05 = 100) 172 176 182 -0.1 2.8 3.1
Electricity generation
b
(billion KWH) 1175 1274 1330 6.0 8.4 4.4
Wholesale Price Index
c
(Average) 177 181 176 6.0 2.0 -2.8
Imports
P
(US $ billion) 450 448 379 -8.3 -0.5 -15.5
Exports
P
(US $ billion) 314 310 256 4.7 -1.3 -17.6
Foreign exchange reserves
d
(in US $ billion) 304 341 349 4.2 12.3 2.3
Average exchange rate
e
(Rs/US $) 60.51 61.14 65.03 11.2 1.0 6.4
Gross fiscal deficit
f g
(of GDP) 4.5 4.0 3.9
1
Calculated based on available figures.
2R
Second Revised Estimates
1R
First Revised Estimates
AE
Advance Estimates
a
2nd Advance Estimates
b
April-December 2015-16
c
April-January 2015-16
d
As at end-January 2016l
e
April-January 2015-16
f
Provisional Actuals
g
Budget Estimate
P
Provisional
na
Not available
Back to Content

Chapter 3 TAX RATES
3.1 Individuals, HUFs, AOPs and BOIs
3.1.1 Tax rates
The Bill proposes certain marginal modifications to
the tax structure for individuals, HUFs, AOPs and
BOIs. Consequently, the effective proposed and
present tax rates for the FYs 2016-17 and 2015-16, in
case of individuals, HUFs, AOPs and BOIs are as
follows:
Income Slabs
(Rs.)
Income Slabs
(Rs.)
Proposed
Tax Rates
Tax Rates
FY 2016-17 FY 2015-16
Nil
10.30% [tax rate 10%
plus education cess
3% thereon] of income
exceeding
Rs. 2,50,000
Rs. 25,750 plus
20.60% [tax rate 20%
plus education cess
3% thereon] of
income exceeding Rs.
5,00,000
Rs. 1,28,750 plus
30.90% [tax rate 30%
plus education cess
3% thereon] of
10,00,000
0 - 2,50,000#
2,50,001# - 5,00,000*
5,00,001 - 10,00,000
10,00,001 - 1,00,00,000
Nil
10.30% [tax rate
10% plus education
cess 3% thereon] of
income exceeding
Rs. 2,50,000
Rs. 25,750 plus
20.60% [tax rate
20% plus education
cess 3% thereon] of
income exceeding
Rs. 5,00,000
Rs. 1,28,750 plus
30.90% [tax rate 30%
plus education cess
3% thereon] of
10,00,000
0 - 2,50,000#
2,50,001# - 5,00,000*
5,00,001 - 10,00,000
10,00,001 - 1,00,00,000
Rs. 32,58,920 plus
34.608% [(tax rate
30% plus surcharge
12% thereon) plus
education cess 3%
thereon] of income
exceeding Rs.
1,00,00,000
1,00,00,001^ and aboveRs. 32,58,920 plus
35.535% [(tax rate
30% plus surcharge
15% thereon) plus
education cess 3%
thereon] of income
exceeding Rs.
1,00,00,000
1,00,00,001^ and above
# Basic exemption income slab in case of a resident individual of the age of
60 years or more (senior citizen) & resident individual of the age of 80
years or more (very senior citizens) at any time during the previous year,
continues to remain the same at Rs. 3,00,000, Rs. 5,00,000 respectively.
The tax for other slabs will change accordingly.
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Chapter 3 TAX RATES
* A resident individual having income upto Rs. 5,00,000 is entitled to a
rebate of tax payable [excluding education cess] or Rs. 5,000 (Rs. 2,000
in FY 2015-16) whichever is less.
^ Marginal relief is available to ensure that the additional income tax
payable, including surcharge of 15% on the excess of income over Rs.
1,00,00,000 is limited to the amount by which the income is more than
Rs. 1,00,00,000. However, no marginal relief shall be available in respect
of the education cess.
3.1.2 Proposed tax incidence
The proposed incidence of income-tax for FY 2016-17 on individuals, senior
citizens and very senior citizens, having different income levels can be
exemplified as follows:
* The tax incidence for HUFs, AOPs and BOIs will be same as that of individuals.
3.2.1 Domestic companies
The Bill proposes to reduce the corporate tax rate to 29% [plus applicable
surcharge and education cess thereon], in case of company having total
turnover or gross receipts in FY 2014-15 upto Rs.5,00,00,000.
Further, the Bill proposes the tax rate of 25% in case of newly setup domestic
company registered on or after 1 March, 2016 engaged solely in the business of
manufacture or production of article or thing and not claiming any specified.
benefit/deduction.
3.2 Companies
Annual
Income (Rs.)
Tax Liability (Rs.)
Individuals
(including women)*
Senior
Citizens
Very Senior
Citizens
2,50,000 - - -
3,00,000 - - -
4,00,000 10,300 5,150 -
5,00,000 20,600 15,450 -
8,00,000 87,550 82,400 61,800
10,00,000 1,28,750 1,23,600 1,03,000
25,00,000 5,92,250 5,87,100 5,66,500
50,00,000 13,64,750 13,59,600 13,39,000
1,00,00,000 29,09,750 29,04,600 28,84,000
1,50,00,000 51,22,963 51,17,040 50,93,350
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Chapter 3 TAX RATES
Except for the above, there are no changes proposed in the corporate tax rates
for FY 2016-17. The effective tax rates and MAT rates for other domestic
companies for FYs 2016-17 and 2015-16 are as follows:
Marginal relief is available to ensure that the additional income-tax payable,
including surcharge of 7% on the excess of income over Rs. 1,00,00,000, is
limited to the amount by which the income is more than Rs. 1,00,00,000.
Similarly, marginal relief is available to ensure that the additional income-tax
10,00,00,000, is limited to the amount by which the income is more than Rs.
10,00,00,000. However, no marginal relief shall be available in respect of the
education cess.
3.2.2 Foreign companies
No changes are proposed in the tax rate and surcharge. As such, the effective
tax rates for foreign companies for FYs 2016-17 and 2015-16 are as follows:
Domestic
Company
Effective Tax Rates
FY 2016-17 FY 2015-16 FY 2016-17
Having total income
exceeding Rs.
10,00,00,000
Effective MAT Rates
FY 2015-16
34.608% [(tax
rate 30% plus
surcharge 12%
thereon) plus
education cess
3% thereon]
34.608% [(tax
rate 30% plus
surcharge 12%
thereon) plus
education cess
3% thereon]
21.3416% [(tax
rate 18.5% plus
surcharge 12%
thereon) plus
education cess
3% thereon]
21.3416% [(tax
rate 18.5% plus
surcharge 12%
thereon) plus
education cess
3% thereon]
Having total income
exceeding Rs.
1,00,00,000 but not
exceeding Rs.
10,00,00,000
33.063% [(tax
rate 30% plus
surcharge 7%
thereon) plus
education cess
3% thereon]
33.063% [(tax
rate 30% plus
surcharge 7%
thereon) plus
education cess
3% thereon]
20.38885% [(tax
rate 18.5% plus
surcharge 7%
thereon) plus
education cess
3% thereon]
20.38885% [(tax
rate 18.5% plus
surcharge 7%
thereon) plus
education cess
3% thereon]
Having total income
upto Rs.
1,00,00,000
30.90% (tax rate
30% plus
education cess
3% thereon)
30.90% (tax rate
30% plus
education cess
3% thereon)
19.055% (tax rate
18.5% plus
education cess
3% thereon)
19.055% (tax rate
18.5% plus
education cess
3% thereon)
Foreign Company
Effective Tax Rates
FY 2016-17 FY 2015-16
Having total income exceeding
Rs. 10,00,00,000
43.26% [(tax rate 40% plus surcharge 5% thereon) plus
education cess 3% thereon]
Rs. 1,00,00,000 but not
exceeding Rs. 10,00,00,000
Having total income upto Rs.
1,00,00,000
41.20% (tax rate 40% plus education cess 3% thereon)
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Chapter 3 TAX RATES
Similarly, marginal relief is available to ensure that the additional income-tax
10,00,00,000, is limited to the amount by which the income is more than Rs.
education cess.
3.2.3 Tax on Dividend / Income distributed by domestic companies
No changes are proposed in the DDT rates for FY 2016-17 (the effective DDT
rates for FY 2016-17 and 2015-16 are tabulated below). However, the Bill
proposes to tax dividend at the rate of 10% in the hands of recipient i.e.
individual, HUF or Firm, who is resident in India if dividend received is in excess of
Rs.10,00,000. The rate (plus surcharge and education cess thereon) is on gross
basis on the amount of dividend.
The effective DDT rates for FY 2016-17 and 2015-16 are as follows:
No changes are proposed in the tax rates. The effective tax rates for partnership
firms/LLPs for FYs2016-17 and 2015-16 are as follows:
including surcharge of 12% on the excess of income over Rs.1,00,00,000, is
limited to the amount by which the income is more than Rs.1,00,00,000.
However, no marginal relief shall be available in respect of the education cess.
3.3 Partnership Firms/LLPs
Dividend Distribution
Tax Rate
Effective Tax Rates
FY 2016-17 FY 2015-16
Rate of DDT on the amount of
dividend received by the
shareholders
education cess 3% thereon considering the grossing up
provisions]
Partnership
Firms / LLPs
Effective Tax Rates
FY 2016-17 FY 2015-16
Rs. 1,00,00,000
1,00,00,000
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Chapter 3 TAX RATES
3.4 AMT on Non-corporate Assessees
3.5 Tax on Dividend Distributed by Mutual Funds
AMT continues on non-corporate assessees such as partnership firms, sole
proprietorships, AOPs, HUFs, BOIs, etc. AMT is to be calculated on adjusted total
income (if the adjusted total income of such person exceeds Rs. 20,00,000) if
the regular income tax payable by such person is less than AMT. No change has
been proposed in the AMT rates. However, surcharge rate for assessees other
than firms is proposed to be increased from 12% to 15% in case the total income
exceeds Rs. 1,00,00,000. As such, the effective tax rates for FYs 2016-17 and
2015-16 are as follows:
including surcharge of 12% / 15% (as applicable) on the excess of income over
Rs. 1,00,00,000, is limited to the amount by which the income is more than Rs.
education cess.
No change has been proposed in the income distributed by mutual funds.
However, surcharge rate for Individuals, HUF, AOP, BOI etc. is proposed to be
increased from 12% to 15% in case the total income exceeds Rs. 1,00,00,000. As
such, the effective tax rates for FYs 2016-17 and 2015-16 are as follows:
Non-corporate
assessee
Effective AMT Rates
FY 2016-17 FY 2015-16
Individuals, HUF, AOP, BOI etc.
having total income exceeding
Rs. 1,00,00,000
21.9133 % [(tax rate 18.50% plus
surcharge 15% thereon) plus
21.3416% [(tax rate 18.50% plus
surcharge 12% thereon) plus
Firms / Others - having total
income exceeding
Rs. 1,00,00,000
21.3416% [(tax rate 18.50% plus surcharge 12% thereon) plus
1,00,00,000
19.055% (tax rate 18.50% plus education cess 3% thereon)
42.07%* (considering
the grossing up
provisions)
the grossing up
provisions)
the grossing up
provisions)
the grossing up
provisions)
Income distributed by a money market mutual
fund or a liquid mutual fund to
- an Individual or a HUF
- others
Type of Income
Effective Tax Rate
FY 2016-17 FY 2015-16
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Chapter 3 TAX RATES
* The tax rates are inclusive of surcharge of 15% and education cess of 3%
for Individual and HUF and surcharge of 12% and education cess of 3%
thereon for others i.e. company, Firm, local authorities and co-operative
society.
No change being proposed, the effective tax rate for distributed income of
domestic companies for buy-back of shares for FY 2016-17 and FY 2015-16 are
as follows:
The bill proposes that tax on distributed income by Securitization Trust would
not be applicable from 1 June 2016 and the same would be included as income in
the hands of the investor directly.
3.8.1 Co-operative societies
No change is proposed in the tax rate. As such, the tax rates for co-operative
3.6 Tax on Distributed Income of Domestic Company for Buy-back of Shares:
3.7 Tax on distributed income by Securitization Trust:
3.8 Other Entities
Rate of Tax
Effective Tax Rates
FY 2016-17 FY 2015-16
On the distributed income of
domestic company
23.072%* [(tax rate 20% plus surcharge 12% thereon) plus
Type of Income
Effective Tax Rate
FY 2016-17 FY 2015-16
the grossing up
provisions)
the grossing up
provisions)
the grossing up
provisions)
the grossing up
provisions)
Income distributed by a mutual fund (including
debt fund) other than a money market mutual
fund or a liquid mutual fund to
-an Individual or a HUF
- others
6.12%* (considering the
grossing up provisions)
6.12%* (considering the
grossing up provisions)
Income distributed by a mutual fund to non-
residents (not being company) under
infrastructure debt scheme
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Chapter 3 TAX RATES
societies for FYs 2016-17 and 2015-16 are as follows:
3.8.2 Local authorities
No change is proposed in the tax rate. As such, the tax rates for local authorities
for FYs 2016-17 and 2015-16 are as follows
including surcharge of 12% on the excess of income over Rs. 1,00,00,000 is
It is proposed to insert a new section 115BBF of the IT Act to provide that if the
total income of the eligible assessee 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 10% (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 IT Act.
An eligible assessee means a person resident in India, who is the true and first
inventor of the invention and whose name is entered on the patent register as
the patentee in accordance with Patents Act, 1970.
3.9 Taxation of Income from Patents
Income slab
(Rs.)
Effective Tax Rates
FY 2016-17 FY 2015-16
0 - 10,000 10.30%
10,001 - 20,000 Rs. 1,030 plus 20.60% of income exceeding Rs. 10,000
20,001 - 1,00,00,000 Rs. 3,090 plus 30.90% of income exceeding Rs.20,000
Above 1,00,00,000 Rs. 34,57,339 plus 34.608% of income exceeding Rs. 1,00,00,000
Local authorities
Effective Tax Rates
FY 2016-17 FY 2015-16
Rs. 1,00,00,000
Having total income up to Rs.
1,00,00,000
Back to Content

Chapter 4 G-20 Countries - Comparative
Corporate And Personal Tax Rates
The G-20 economies comprising of 19 countries and the EU, account
for almost 90% of the global GDP, 80% of world trade (including EU
intra-trade) and two-third of the world population. Considering the
significance of these economies and in order to provide an indicative
overview of the prevailing tax rates in these key economies, a brief
comparative matrix is tabulated below.
Notes:
1. The above rates are MMR and inclusive of provincial or local taxes as may be applicable to domestic
companies/residentindividualsinrespectivecountries.
2. The taxation regime for personal taxes is progressive for all the G-20 economies except Russia and
SaudiArabia.
3. Corporate tax @ 33.06% is indicative effective rate of tax. In addition, size based business tax is also
leviedoncompanies.
4. Corporate Tax @ 20% is payable on the pro-rata income to the extent of non-resident shareholding.
Saudi and the Gulf Cooperation Council (GCC) nationals or companies owned by them have to pay
Zakat(i.e.areligioustax)at2.5%.
5. Corporatetaxcomprisesoffederaltax(35%)aswellasstateandlocalgovernmenttaxeswhichvary
from state to state. Personal tax comprises of federal tax (39.6%) and further each state and local
governmentcanalsolevytaxonincome.
6. The above rates are general rates to provide a comparative matrix. The detailed regulations in the
relevantcountriesneedtobereferredfordeterminingexactrates.
Sr. Country Corporate Tax Rate Personal Tax Rate
[Note 1] [Notes 1 and 2]
2. Australia 30% 49%
3. Brazil 34% 27.50%
4. Canada 31% 50%
5. China 25% 45%
6. France 38.11% 45%
7. Germany 32.98% 47.50%
8. India 34.608% 35.535%
9. Indonesia 25% 30%
10. Italy 31.40% 43%
11. Japan [Note 3] 33.06 % 55%
12. Mexico 30% 35%
13. Russia 20% 13%
14. Saudi Arabia [Note 4] 0% 0%
15. South Africa 28% 40%
16. South Korea 24.20% 41.80%
17. Turkey 20% 35%
18. United Kingdom 20% 45%
19. United States of America
No.
[Note 5] 35% 39.60%
1. Argentina 35% 35%
Back to Content

Chapter 5 Tax Incentives For Businesses
The IT Act provides for far reaching tax holidays and other tax
incentives for businesses. We have briefly enumerated below, the
significant tax holidays and incentives available to businesses along
with the nature of deductions, eligibility criteria, quantum of
deduction and period for which the deductions are available. The tax
holidays and incentives are subject to fulfillment of specified
conditions. The Finance Bill 2016 has set-out a plan to gradually
phase out exemptions, deductions and incentives in order to bring
down the rate of corporate tax to 25% as announced in Budget
Speech 2015. The changes proposed by the Finance Bill, 2016 are
highlighted in BOLD font.
(As updated up to the Finance Bill, 2016)
Section Details of Exemption / Deduction ^ Period Quantum of
Deduction
10AA First 5 years
Next 5 years
Next 5 years+
100%
50%
50%
New eligible unit set up in SEZ on or after 1 April 2005
nExemption is available to the entrepreneur as referred
to in Section (2j) of SEZ Act, 2005 for profits derived
from export of articles or things or services,
manufactured, or produced or provided by an eligible
unit.
nThe profits and gains derived from on-site
development of computer software (including
services for development of software) outside India
shall be deemed to be the profits and gains derived
from the export of computer software outside India.
nThe benefit is also available to units engaged in cutting
and polishing of precious and semi-precious stones.
nThe deduction under this section is to be computed in
the same proportion, which the export turnover of
the eligible unit bears with the total turnover of the
said unit.
nThe eligible units availing these deductions will be
subject to MAT / AMT @ 18.50% (plus applicable
surcharge and education cess)
nMAT / AMT paid shall be allowed to be carried forward
upto 10 years and credit of MAT / AMT paid shall be
available for set-off against the tax as per normal
provisions in subsequent years.
nIn case deduction has been claimed under section
10AA for the specified business mentioned in section
35AD(8)(c), no deduction under section 35AD shall be
available in the same or any other assessment year in
respect of such specified business.
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Section Details of Exemption / Deduction ^ Period Quantum of
Deduction
nIt is proposed that no deduction shall be available to
units commencing manufacture or production of
article or thing / providing services on or after 1 April
2020.
+ The deduction is allowed only on creation of a
specified reserve, which is required to be utilized for
specified purposes.
33AB Available for
every AY
Up to 40% of
profits or
amount
deposited,
whichever is
less
Tea / Coffee / Rubber / development allowance
nDeduction is available to assessee engaged in the
business of growing and manufacturing tea, coffee or
rubber in India.
nFor claiming the deduction, the amount has to be
deposited in a special account with NABARD or any
Deposit Account opened by the assessee and
approved by the Tea Board or Coffee Board or Rubber
Board within 6 months from the end of the financial
year or before the due date of furnishing the return of
income, whichever is earlier.
nThe amount has to be utilized by the assessee for
specified purposes.
33ABA Available for
every AY
Up to 20% of
profits or
amount
deposited,
whichever is
less.
Site Restoration Fund – Petroleum or Natural Gas
nDeduction is available to assessee engaged in the
business of prospecting for, or extraction or
production of petroleum or natural gas or both in India
and in relation to which the Central Government has
entered into an agreement with such assessee.
nFor claiming the deduction, the amount has to be
deposited in a special account with SBI opened by the
assessee and approved by the Ministry of Petroleum
and Natural Gas before the end of the financial year.
nThe amount has to be utilized by the assessee for
specified purposes.
Section
32(1)
(iia)
Additional Depreciation
nGeneral rate of depreciation for plant and machinery is 15% (other than certain specified
types of plant and machinery).
nAn assessee engaged in the business of manufacture or production of any article or
thing or in the business of generation or generation and distribution or transmission of
power can claim the additional depreciation of 20% on the cost of new plant and
machinery (other than ships and aircraft) which are acquired and installed after 31 March
2005.
nFurther, higher additional depreciation @ 35% (instead of above 20%) in respect of the
actual cost of eligible new machinery or plant acquired and installed by a manufacturing
undertaking or enterprise which is set up in the notified backward area of the State of
Eligibility Criteria, Quantum and Period of Deduction ^
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Section
Andhra Pradesh or Telangana or Bihar or West Bengal on or after the 1 April 2015 and
ending before the 1 April 2020. The eligible machinery or plant is mentioned in existing
proviso to section 32(1)(iia) of the IT Act.
nThe above additional depreciation shall be allowed only to the extent of 50% (i.e. 10% or
17.5%) if the machinery is put to use for a period less than 180 days in the year of its
acquisition and installation and the balance 50% shall be allowed in the immediate next year.
Eligibility Criteria, Quantum and Period of Deduction ^
32AC
(1A)
(1B)
(2)
Investment in new plant or machinery
nWhere a company is engaged in the business of manufacture or production of an article
or thing, acquires new assets in any financial year exceeding Rs. 25,00,00,000 and such
assets are installed before 31 March 2017, then there shall be allowed a deduction of 15%
of the actual cost of such new assets over and above the normal depreciation under
section 32 of the IT Act in the year in which such assets are installed.
nThe said deduction is available for investment made in new plant and machinery up to 31
March 2017.
nIn case any new asset is sold or otherwise transferred within a period of 5 years, the
deduction allowed above shall be deemed to be the income chargeable under the head
‘Profits and Gains of business or profession’ of the financial year in which such new asset
is sold or otherwise transferred (In addition to taxability of gains on transfer of such new
asset).
32AD Investment in new plant or machinery in certain states
nAdditional investment allowance of an amount equal to 15% of the cost of new asset
acquired and installed by an assessee, if:
I. It sets up an undertaking or enterprise for manufacture or production of any article
or thing on or after 1 April 2015 in any notified backward areas in the State of Andhra
Pradesh or Telangana or Bihar or West Bengal; and
ii. The new assets are acquired and installed for the purposes of the said undertaking
or enterprise during the period 1 April 2015 to 31 March 2020.
nThe above deduction will be allowed over and above the existing deduction under section
32AC of the IT Act.
nIn case any new asset is sold or otherwise transferred within a period of 5 years, the
deduction allowed above shall be deemed to be the income chargeable under the head
‘Profits and Gains of business or profession’ of the financial year in which such new asset
is sold or otherwise transferred (In addition to taxability of gains on transfer of such new
asset).
35AC Expenditure on eligible projects or scheme
nDeduction is available for expenditure incurred for promoting social and economic
welfare.
nAny assessee can claim deduction as under:
nIt is proposed that no deduction shall be available for expenditure incurred on or after 1
April 2017.
To whom payment should be madeAssessee Direct Expenditure
Company Public sector company, or a local authority
or to an association or institution approved
by the National Committee for carrying out
any eligible project or scheme
A company can also directly incur
expenditure in respect of eligible
project and scheme
Others Same as above Not permitted
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Section Eligibility Criteria, Quantum and Period of Deduction ^
35AD Deduction in respect of expenditure on specified businesses
nAny expenditure of capital nature (other than expenditure incurred on the acquisition of
any land or goodwill or financial instrument) incurred, wholly and exclusively, during the
year for specified business shall be allowed as deduction subject to the specified
provisions.
nSpecified business and the year (in which the operations to be commenced) for availing
deduction under this section are tabulated as under:
Specified BusinessSr.
No
Specified year
of Commencement
1 Settingupandoperatingacoldchainfacility From 1 April 2009 onwards *
2 Setting up and operating a warehousing facility for
storing agricultural produce
From 1 April 2009 onwards *
3 Laying and operating a cross-country natural gas or crude
or petroleum oil pipeline network for distribution, including
storage facilities being an integral part of such network
From 1 April 2007 onwards
4 Building and operating a hotel of 2 star or above category
as classified by the Central Government anywhere in India
From 1 April 2010 onwards **
5 Building and operating a hospital with at least 100 beds
for patients anywhere in India
6 Developing and building a housing project under a scheme
for slum redevelopment or rehabilitation framed by the
Central or State Government, as the case may be, and
which is notified by the Board in this behalf in accordance
with the guidelines as may be prescribed
7 The Business of developing and building a housing project
under a scheme for affordable housing framed by the
Central Government or a State Government, as the case
may be, and notified by the Board in this behalf in
accordance with the guidelines as may be prescribed
8 Production of fertilizers in India through a new plant or a
newly installed capacity in an existing plant
9 Setting up and operating an inland container depot or a
container freight station notified or approved under the
Customs Act, 1962
10 Bee-keeping and production of honey and beeswax From 1 April 2012 onwards
11 setting up and operating a warehousing facility for storage
of sugar
12 Laying and operating a slurry pipeline for transportation of
iron ore
13 Setting up and operating a semiconductor wafer
fabrication manufacturing unit, if such unit is notified by
the Board in accordance with the prescribed guidelines
* Specified business referred at Sr. No. 1, 2, 5, 7 and 8 in the above table commencing
operations on or after 1 April 2012 shall be eligible for deduction of 150% of capital expenditure
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35CCA Deduction for payment towards rural development programmes
n100% Deduction is allowed subject to fulfillment of certain conditions for any sums paid to:
i. An association or institution for carrying out any programme of rural development
ii. An association or institution for training of persons for implementation of rural
development programme
iii. National Fund for Rural Development
iv. National Urban Poverty Eradication Fund
35CCC Weighted deduction of expenditure incurred on agriculture extension project
nThis section provides for weighted deduction of 150% of the expenditure incurred on
agricultural extension project. The conditions for eligibility of agricultural extension
project have been provided under Rule 6AAD and Rule 6AAE of the IT Rules.
nFurther, where a deduction under this section is claimed and allowed for any assessment
year, in respect of any expenditure on agricultural extension project, no deduction shall
be allowed in respect of such expenditure under any other provisions of the IT Act for the
same or any other assessment year.
April 2017.
35CCD Weighted deduction of expenditure incurred on skill development project
nAny expenditure (not being expenditure in the nature of cost of any land or building)
incurred on skill development project shall be eligible for weighted deduction of 150% in
the hands of a company. The conditions of eligibility of skill development project have
been provided under Rule 6AAF to Rule 6AAH of the IT Rules.
incurred. It is proposed that deduction shall be restricted to 100% of capital expenditure
incurred on or after 1 April 2017.
** Where the assessee builds a hotel of 2 star or above category as classified by the Central
Government and subsequently, while continuing to own the hotel, transfers the operation
thereof to another person, the said assessee shall be deemed to be carrying on the ‘specified
business’ of building and operating hotel as referred at Sr. No. 4 in the above table, with
retrospective effect from AY 2011-12.
nAny asset, in respect of which a deduction is claimed and allowed under this section, shall
be used only for the specified business for a period of 8 years beginning with the financial
year in which such asset is acquired or constructed.
nWhere such asset is used for any purpose other than the specified business, then, the
total amount of deduction so claimed and allowed in any financial year in respect of such
asset (after reducing the depreciation allowable under section 32 of the IT Act on
deduction allowed under section 35AD of the IT Act), shall be deemed to be income of the
assessee chargeable under the head ‘Profits and gains of business or profession’.
nWhile computing AMT, adjusted total income shall be increased by the deduction claimed
under section 35AD of the IT Act as reduced by the amount of depreciation allowable
under section 32 of the IT Act.
nIn case deduction has been availed under section 35AD of the IT Act on account of capital
expenditure incurred for the purposes of specified business in any assessment year, no
deduction under section 10AA of the IT Act or under the provisions of Chapter VI-A or
under any other provisions of the IT Act shall be available in the same or any other
assessment year in respect of such specified business.
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nFurther, where a deduction under this section is claimed and allowed for any assessment
year in respect of any expenditure on skill development project, no deduction shall be
allowed in respect of such expenditure under any other provisions of the IT Act for the
same or any other assessment year.
April 2020.
Section Details of Deduction ^
35(1)(i)
35(1)(ii)
35(1)(iia)
35(1)(iii)
35(1)(iv)
35(2AA)
35(2AB)
Proposed
Quantum of
deduction of
sum paid /
expenditure
incurred
Existing
Quantum of
deduction of
sum paid /
expenditure
incurred
Weighted deduction on various expenditure incurred on
scientific research
Any expenditure (not being in nature of capital expenditure) laid
or expended on scientific research related to business carried on
by the assessee.
Any sum paid to an approved research association, (which has
its object of undertaking scientific research) or to a university,
college or other institution to be used for scientific research.
Any sum paid to an approved company to be used by it for
scientific research. Such approved company will not be entitled
to claim weighted deduction under section 35(2AB) of the IT
Act. However, deduction to the extent of 100% of the sum spent
as revenue expenditure on scientific research, which is available
under section 35(1)(I) of the IT Act will continue to be allowed.
Any sum paid to approved research association (which has its
object of undertaking research) or university, college or other
institution to be used for research in social science or statistical
research.
Any capital expenditure (other than expenditure on land and
building) incurred on scientific research related to the business
carried on by the assessee.
Any sum paid to a National Laboratory or a University or an
Indian Institute of Technology or a specified person with a
specific direction that the said sum shall be used for scientific
research undertaken under a programme approved by the
prescribed authority,
Any expenditure incurred up to 31 March 2017 (other than
expenditure on cost of land and building), on in-house research
and development facility, as approved by the prescribed
authority, incurred by the company, engaged in the business of
bio-technology or manufacture or production of article or thing
(except those specified in the Eleventh Schedule).
100%
175%
125%
125%
100%
200%
200%
100%
150%*
100%**
100%***
100%***
100%
150%*
100%**
150%*
100%**
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Section Details of Deduction ^ Proposed
Quantum of
deduction of
sum paid /
expenditure
incurred
Existing
Quantum of
deduction of
sum paid /
expenditure
incurred
Deduction under the said section shall be allowed only if the
company enters into an agreement with the prescribed
authority for co-operation in such research and development
facility and fulfills prescribed conditions with regard to
maintenance and audit of accounts and also furnishes
prescribed reports.
* From FY 2017-18 to FY 2019-20
** From FY 2020-21 onwards
*** From FY 2017-18 onwards
Section Eligibility Criteria, Quantum and Period of Deduction
54G Capital gains arising on transfer of plant, machinery, land, building or any rights in land /
building effected in course of or in consequence of the shifting of an industrial undertaking
situated in an urban area to any area (other than an urban area) shall be eligible for
exemption. This exemption shall be least of the following:
nAmount of capital gains;
nAmount of capital gains utilized within a period of 1 year before or 3 years after the
date of transfer of the above assets, for purchase of new plant and machinery, land
and building and for shifting expenses, subject to specified conditions.
Exemptions from Capital Gains in certain cases ^
54GA Capital gains arising on transfer of plant, machinery, land, building or any rights in land /
building effected in course of or in consequence of the shifting of an industrial undertaking
situated in an urban area to any SEZ shall be eligible for exemption. This exemption shall be
least of the following:
nAmount of capital gains;
nAmount of capital gains utilized within a period of 1 year before or 3 years after the
date of transfer of the above assets, for purchase of new plant and machinery, land
and building and for shifting expenses, subject to specified conditions.
54GB nLong term capital gains shall be exempt in the hands of an individual or an HUF on sale of
a residential property (house or plot of land) on or before 31 March 2017 in case of re-
investment of the net consideration in the equity of a newly start-up SME company in
the manufacturing sector and the SME company utilizes the said funds for purchase of
new plant and machinery, subject to the certain conditions.
nIt is proposed to amend section 54GB so as to provide that long term capital gains
arising on account of transfer of a residential property before 31 March 2019 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.
nIndividual or HUF should hold more than 50% shares of the company and such company
should utilize the amount invested to purchase new asset (including computers or
computer software for technology driven eligible start-up) before due date of filing of
return by the investor.
nEligible start-up and eligible business shall have the same meanings as assigned in
section 80-IAC(4).
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Section Eligibility Criteria, Quantum and Period of Deduction
Exemptions from Capital Gains in certain cases ^
54EC nCapital gain on transfer of a long term capital asset shall be exempt from tax, if an
assessee invests, within a period of 6 months from the date of transfer of a long-term
capital asset, the capital gains in the specified asset. The specified asset must be held
for a period of 3 years from the date of its acquisition. This exemption shall be least of
the following:
– Investment in specified assets viz. bonds issued by NHAI and the RECL. The
investment is restricted up to Rs. 50,00,000 per assessee per financial year.
– Amount of capital gains.
nFurther, the exemption in respect of capital gains upon aforesaid investments made
during the financial year in which the original asset or assets are transferred and in the
subsequent financial year shall not exceed Rs. 50,00,000.
Section Eligibility Criteria, Quantum and Period of Deduction / Exemption ^
10(34)/
10(35)
Dividend referred to in section 115-O and income received in respect of units of mutual fund
or shares shall not be included in the total income of assessee (other than individual, HUF
and firm earning dividend income from shares exceeding Rs. 10,00,000 in a financial year).
10
(34A)
Any income arising to an assessee, being a shareholder on account of buy back of shares as
referred in section 115QA (not being listed on a recognized stock exchange) by the company
shall not be included in the total income of assessee.
10(38) Capital gain arising from transfer of long term capital asset being an equity share in a
company or a unit of an equity oriented fund or unit of a business trust, on which securities
transaction tax is charged, is exempt from tax. However, this exemption is not available for
computation of MAT.
54EE nCapital gain on transfer of a long term capital asset shall be exempt from tax, if an
assessee invests the capital gains in the specified assets within a period of 6 months
from the date of transfer of a long-term capital asset.
nThis exemption shall be least of the following:
- Investment in specified assets viz. a unit or units, issued before the 1 April, 2019 of
fund notified by the Central Government.
- Rs. 50,00,000 per assessee per financial year
- Amount of capital gains.
nFurther, the exemption in respect of capital gains upon aforesaid investments made
during the financial year in which the original asset or assets are transferred and in the
subsequent financial year shall not exceed Rs. 50,00,000.
nThe specified asset must be held for a period of 3 years from the date of its acquisition.
Further, in a case an assessee takes any loan or advance on the security of such
specified asset, he shall be deemed to have transferred such specified asset on the date
on which such loan or advance is taken.
9(1)(i) -
Explan-
ation
(1)(e)
It is proposed to provide that in the case of a foreign company engaged in the business of
mining of diamonds, no income shall be taxed from the activities which are confined to the
display of uncut and unassorted diamond in any special notified zone by the Central
Government.
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Section Eligibility Criteria, Quantum and Period of Deduction / Exemption ^
It is further proposed that any long term capital gains arising out of transaction undertaken
on a recognised stock exchange located in any International Financial Services Centre and
where the consideration for such transaction is paid or payable in foreign currency shall also
be exempt under the said section. Further, MAT under section 115JB shall be applicable at
the concessional rate of 9% plus applicable surcharge and cess.
10
(48A)
It is proposed to provide that any income accruing or arising to a foreign company on
account of storage of crude oil in a facility in India and sale of crude oil therefrom to any
person resident in India shall not be included in the total income subject to approval of
Central Government.
115
BBD
Any dividend declared, distributed or paid by the specified foreign company to Indian
company shall be taxable at a concessional tax rate of 15%.
115BBF It is proposed to provide that any royalty income earned by resident patentee in India in
respect of a patent developed and registered in India shall be taxable at the concessional
rate of 10% (plus applicable surcharge and cess) on the gross amount of royalty.
115-O In computing DDT liability, dividend declared by the domestic holding company to its
shareholders shall be reduced to the extent of:
i. Dividend received from the domestic subsidiary company during the year on which
DDT has already been paid by subsidiary under this section.
ii. Dividend received from the specified foreign subsidiary during the year on which tax
is payable by the holding company under section 115BBD of the IT Act.
It is proposed that no tax on distributed profits shall be chargeable in respect of the total
income of a company, being a unit of an International Financial Services Centre, deriving
income solely in convertible foreign exchange.
Sr.
No.
Nature of Activity and Location Number of
Years
Deductions of Profits derived by Newly Established Industrial Undertakings / Infrastructure
Projects / Facilities / Developers of SEZs / Banking units, etc.( Sections - 80-IA / 80- IAB / 80-
IAC/ 80- IB / 80-IBA/ 80- IC / 80- ID / 80- IE / 80JJA /80LA) ^
Type of
Organization
Quantum
of Deduction
1. Specified Infrastructure Projects
[Section 80-IA(4)(i)
Enterprise being company or consortium of
companies registered in India or any authority
or board or a corporation or any other body
established or constituted under any Central
or State Act, for carrying on business of (i)
developing or (ii) operating and maintaining or
(iii) developing, operating and maintaining of
any infrastructure facility (such as road
including toll road, bridge, rail system, highway
project, water supply project, water treatment
system, irrigation project, sanitation and
sewage system or solid waste management
system, airport, port, inland waterways and
inland ports or navigational channel in the
Company /
Any other
body
established or
constituted
under any
Central or
State Act
100% For any 10
consecutive
years out of first
15 years
(20 years for road,
bridge, rail
system, highway
project, water
supply project,
water treatment
system, irrigation
project, sanitation
and sewerage
system or solid
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Sr.
No.
Years
Type of
Organization
Quantum
of Deduction
sea) commencing its operations on or after 1
April 1995. Widening of an existing road by
constructing additional lanes as a part of
highway project is also regarded as a new
infrastructure facility eligible for deduction as
per Circular No. 4/2010 dated 18 May 2010.
Deduction shall not be available to a person
executing above referred activities as a works
contract.
It is proposed that no deduction shall be
available if the specified activity commences
on or after 1 April 2017.
waste
management
system).
2. Telecommunication Service Providers
[Section 80-IA(4)(ii)]
Any undertaking which starts providing
telecommunication services, whether basic
or cellular, including radio paging, domestic
satellite service or network of trunking,
broadband network and internet services on
or after 1 April 1995 but before 31 March 2005.
Deduction shall not be available to a person
executing the above referred services as a
works contract.
All 100%
30%
First 5 years
Next 5 years
Any 10
consecutive
years out of first
15 years
3. Development of Industrial Park
[Section 80-IA(4)(iii)]
Any undertaking which begins to develop or
develops and operates or maintains and
operates an industrial park which has
commenced operations during 1 April 1997 to
31 March 2011.
Deduction shall not be available to person
executing the above referred services as a
works contract.
All 100% Any 10
consecutive
years out of first
15 years
4.(a) Power Undertakings
[Section 80-IA(4)(iv)]
nUndertaking set up in any part of India for
the generation or generation and
distribution, of power, which has
commenced operations during 1 April
1993 to 31 March 2017.
nUndertaking which starts transmission or
distribution by laying a network of new
transmission or distribution lines between
1 April 1999 and 31 March 2017.
All 100% Any 10
consecutive
years out of first
15 years
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Sr.
No.
Years
Type of
Organization
Quantum
of Deduction
4.(b) Undertakings for revival of Power Generating
Units
[Section 80-IA(4)(v)]
Undertaking owned by Indian Company
(formed before 30 November 2005 and
notified before 31 December 2005) set up for
reconstruction or revival of a power
generating unit, which has commenced
operations in power before 31 March 2011.
Deduction shall not be available to person
executing the above referred activities as a
works contract.
Indian
Company
100% Any 10
consecutive
years out of first
15 years
5. Developer of SEZ
[Section 80-IAB]
Any assessee being developer of a SEZ
notified by the Central Government after 1
April 2005 can claim deduction under section
80-IAB.
All 100% Any 10
consecutive
years out of first
15 years
nUndertaking which undertakes
substantial renovation and modernization
of the existing network of transmission
or distribution lines between 1 April 2004
and 31 March 2017.
nDeduction shall not be available to a
person executing the above referred
activities as a works contract.
6. Start-up Undertaking
[Section 80-IAC]
nUndertaking being an eligible start-up in
business which involves innovation,
development, deployment or
commercialisation of new products,
processes or services driven by
technology or intellectual property.
nThe total turnover of the company should
not exceed Rs. 25,00,00,000 in any of
the previous years beginning on or after 1
April 2016 and ending on 31 March 2021.
nIt holds a certificate of eligible business
from the Inter-Ministerial Board of
Company
incorporated
between 1
April 2016 to 1
April 2019
100% Any 3
consecutive
years out of first
5 years
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Sr.
No.
Years
Type of
Organization
Quantum
of Deduction
Certification as notified in the Official
Gazette by the Central Government.
nIt is not formed by the transfer to a new
business of machinery or plant
previously used for any purpose (except
if such transfer value does not exceed
20% of the total value of plant and
machinery).
nIt is not formed by splitting up, or the
reconstruction, of a business already in
existence.
7. Scientific and Industrial Research Company
[Section 80-IB(8A)]
Any company registered in India with its main
object being scientific and industrial research
and development which is for the time being
approved by the DSIR at any time after 31
March 2000 but before 1 April 2007.
Company 100% First 10 years
8. Production of mineral oil and natural gas
[Section 80-IB(9)]
nAny undertaking which is engaged in
refining of mineral oil and begins such
refining on or after 1 October 1998 but not
later than 31 March 2012 subject to
specified conditions.
nThe tax holiday is also available in respect
of profits arising from commercial
production of natural gas from blocks
which are licensed under the VIII Round of
bidding for award of exploration contracts
under the New Exploration Licensing
Policy announced by the Government of
India and IV Round for Coal Bed Methane
and begins commercial production of
natural gas on or after 1 April 2009.
All 100% First 7 years
9. Undertaking engaged in processing
/preservation / transportation of specified
food items
[Section 80-IB(11A)]
nAn undertaking deriving profit from the
integrated business of handling, storage
Company
Others
100%
30%
100%
25%
First 5 years
Next 5 years
First 5 years
Next 5 years
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Sr.
No.
Years
Type of
Organization
Quantum
of Deduction
and transportation of food grains subject
to such business beginning its operations
nThe benefit is extended to undertakings
engaged in the business of processing,
preservation and packaging of fruits and
vegetables.
nFurther, the benefit is extended to the
undertakings engaged in the business of
meat and meat products or poultry or
marine or dairy products which begin to
operate such business on or after 1 April
2009.
10. Operating and Maintaining Hospital
[Section 80-IB(11C)]
nAny undertaking engaged in the business
of operating and maintaining a hospital in
India other than specified excluded areas.
nThe undertaking shall be eligible for the
deduction if such hospital is constructed
in accordance with the local regulations in
force; and has at least 100 beds for
patients.
nThe said tax benefit is available to a
hospital which is constructed and has
started or starts functioning at any time
during the period beginning 1 April 2008
and ending on 31 March 2013.
11. Affordable Housing Project
[Section 80-IBA]
nAny undertaking engaged in the business
of developing and building housing
projects approved by the competent
authority between 1 June 2016 and 31
March 2019.
nThe project should be completed within a
period of 3 years from the date of
approval.
nIn case of multiple approvals, the date of
first approval shall be considered for the
calculation of the time limit of completion
of project.
All 100% Not Applicable
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Sr.
No.
Years
Type of
Organization
Quantum
of Deduction
nThe deduction is allowed subject to
fulfillment of various conditions like
minimum area of land, minimum floor
area ratio of land, maximum built-up area
of residential and commercial unit etc.
nSeparate books of account in respect of
the housing project
nNot more than 1 residential unit is allotted
to any individual or the spouse or the
minor children of such individual.
nDeduction shall not be available to a
person executing the housing project as
works contract.
12. Undertakings in special category states
[Section 80-IC]
nUndertakings and enterprises, which
begins to manufacture or produce any
article or thing which is not specified in
Thirteenth Schedule or undertakings and
enterprises, which manufactures or
produces any article or thing which is not
specified in Thirteenth Schedule and
undertake substantial expansion of
existing undertakings.
Undertakings and enterprises, which
begin to manufacture or produce any
article or thing which is specified in
Fourteenth Schedule or commences any
operation specified in that Schedule or
undertakings and enterprises, which
manufactures or produces any article or
thing which is specified in Fourteenth
Schedule or commence any operation
specified in that Schedule and undertake
substantial expansion.
i. If located in Sikkim, from 23
December 2002 to 31 March 2007.
ii. If located in North Eastern States*,
from 24 December 1997 to 31 March
2007.
iii. If located in Himachal Pradesh and
Uttaranchal, from 7 January 2003 to
31 March 2012.
* States of Assam, Tripura,
Meghalaya, Mizoram, Nagaland,
Manipur and Arunachal Pradesh.
}
Company First 5 years
Next 5 years
100%
30%
Others First 5 years
Next 5 years
100%
25%
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Sr.
No.
Years
Type of
Organization
Quantum
of Deduction
13. Convention Centre and Hotels in notified
areas
[Section 80-ID]
nAny undertaking engaged in business of
hotels in specified area of the National
Capital Territory subject to fulfillment of
certain conditions:
a. Engaged in the business of hotel
located in specified area; or
b. Engaged in the business of building,
owning and operating a convention
centre located in specified area,
which has started its operations
from 1 April 2007 to 31 July 2010.
nThe aforesaid deduction has been
extended to any undertaking engaged in
the business of hotel located in specified
districts having 'World Heritage Sites' if
such hotel is constructed and has started
functioning during the period beginning 1
April 2008 and ending on 31 March 2013.
nThe benefit is available to 2 star, 3 star or
4 star hotels.
14. Undertakings in North Eastern States
[Section 80-IE]
nNew undertakings and enterprises, which
begin to manufacture or produce any
eligible article or thing or provide any
services or undertake substantial
expansion or carry on any eligible
business in any of the North Eastern
states beginning from 1 April 2007 to 31
March 2017.
nThe eligible businesses for this purpose
are hotel (not below 2 star category),
adventure and leisure sports including
ropeways, providing medical and health
services in the nature of nursing home
with a minimum capacity of 25 beds;
running an old-age home; operating
vocational training institute for hotel
management, catering and food craft,
entrepreneurship development, nursing
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Sr.
No.
Years
Type of
Organization
Quantum
of Deduction
and para-medical, civil aviation related
training, fashion designing and industrial
training; running information technology
related training centre; manufacturing of
information technology hardware and
bio-technology.
15. Deduction of Additional Wages
[Section 80JJAA]
nDeduction of an amount equal to 30% of
additional employee cost of any new
employee (whose total emolument is less
than or equal to Rs. 25,000 per month).
nHowever, no deduction shall be allowed in
respect of employees for whom the
entire contribution under notified
Employees' Pension Scheme is paid by
the Government.
nThe minimum number of days of
employment in a financial year is reduced
from 300 days to 240 days. Further, the
condition of 10% increase in number of
employees each year is proposed to be
deleted.
nIn the case of an existing business,
emoluments are to be paid by an account
payee cheque or account payee bank
draft or by use of electronic clearing
system through a bank account.
* 30% of employees’ cost in case of first
year of business
All assessee
covered under
tax audit
provisions
30% of
additional
employee
cost of new
employee *
3 AYs including
the AY relevant to
the FY in which
such employment
is provided
16. Offshore banking unit in SEZ and International
Financial Services Centre
[Section 80LA]
Income from:
nOffshore banking unit in SEZ or
nThe business referred to in section 6(1) of
the Banking Regulation Act, 1949 or
nAny unit of the International Financial
Services Center from its approved
business.
Scheduled
Bank or any
bank
incorporated
by or under
the law of a
country
outside India
or a unit of an
International
Financial
Services
Center.
100% First 5 years
(beginning with
the year in which
prescribed
permissions are
obtained)
Next 5 years50%
*The above deduction, exemption, incentive and allowance are subject to fulfillment of specified
conditions mentioned in the IT Act.
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Chapter 6 Direct Taxes – Significant Changes
6.1 Business Entities
6.1.1 100% deduction of the profit and gains derived from
eligible start-up business
It is proposed to insert new section 80IAC in the IT Act to
provide deduction of 100% of the profits and gains
derived by an eligible start-up from eligible business for
any 3 consecutive assessment years out of 5 years
beginning from the year in which the eligible start-up
business is incorporated.
Eligible start-up means a company engaged in eligible
business which fulfills the following conditions,
nIt is incorporated on or after 1 April 2016 but before 1 April 2019
nThe total turnover of the company should not exceed Rs. 25,00,00,000 in
any of the previous years beginning on or after 1 April 2016 and ending on
31 March 2021
nIt holds a certificate of eligible business from the Inter-Ministerial Board
of Certification as notified in the Official Gazette by Central Government.
6.1.2 Incentivise builders undertaking affordable housing projects
It is proposed to insert section 80-IBA in the IT Act so as to provide for 100%
deduction of the profits of an assessee developing and building affordable
housing projects if the housing project is approved by the competent authority
after 1 June 2016 but on or before 31 March 2019 subject to certain specified
conditions.
6.1.3 Tax on income from Patents
It is proposed to insert a new section 115BBF in the IT Act so as to provide that,
where the total income of the eligible assessee being resident in India and who
is the true and first inventor of the invention includes any income by way of
royalty in respect of a patent developed and registered in India, then such royalty
shall be taxable @10% (plus applicable surcharge and cess) on the gross basis.
No expenditure or allowance in respect of such royalty income shall be allowed
under the IT Act.
6.1.4 Tax incentive for employment generation
As per the existing provisions of Section 80JJAA of the IT Act, deduction is
allowed @ 30% of additional wages paid to new regular workmen in a factory for
3 years where the assessee is engaged in the business of manufacture of goods
in a factory and 'workmen' are employed for not less than 300 days in a previous
year. Further, benefits are allowed only if there is an increase of at least 10% in
total number of workmen employed on the last day of the preceding year.
It is proposed to substitute this section and provide that the deduction under
the said provisions to the extent of 30% of additional employee cost incurred in
the course of such business in the previous year, for 3 assessment years shall
be available to those assessee to whom section 44AB (tax audit) applies.
6.1.5 Tax incentives to units in International Financial Services Centre
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It is proposed to amend section 10 of the IT Act to provide for exemption from
tax on capital gains to the income arising from transaction undertaken in foreign
currency on a recognised stock exchange located in an IFSC even when STT is
not paid in respect of such transactions.
It is further proposed that in case ofunits located in IFSC and deriving its income
solely in convertible foreign exchange would be exempt, though MAT shall be
chargeable @ 9% and DDT shall not be applicable in respect of such entities
Further, it is proposed to exempt from levy of STT and CTT in respect of taxable
transactions entered into by any person on a recognized association located in
unit of IFSC where the consideration for such transaction is paid or payable in
foreign currency.
The above amendments related to exemption from STT and CTT will be
effective from 1 June 2016.
6.1.6 Exemption from DDT on distribution made by an SPV to Business Trust (REITs
and InvITs)
In order to rationalize the taxation regime for business trusts (REITs and InvITs)
and their investors, it is proposed to provide a special dispensation and
exemption from levy of DDT subject to specified conditions.
The amendment will be effective from 1 June 2016.
6.1.7 Tax treatment of spectrum fee for purchase of spectrum
In order to provide clarity on whether spectrum fee paid for purchase of
spectrum is eligible for depreciation under section 32 of the IT Act or whether it
is in the nature of a 'license to operate telecommunication business' and eligible
for deduction under section 35ABB of the IT Act, it is proposed to insert a new
section 35ABA in the IT Act to provide for tax treatment of spectrum fee. The
section seeks to provide:
nany capital expenditure incurred and actually paid by an assessee on
acquisition of any right to use spectrum for telecommunication services
by paying spectrum fee, will be allowed as a deduction in equal
instalments over the period for which the right to use spectrum remains
in force.
nwhere the spectrum is transferred and proceeds of the transfer are less
than the expenditure remaining unallowed, a deduction equal to the
expenditure remaining unallowed as reduced by the proceeds of transfer,
shall be allowed in the previous year in which the spectrum has been
transferred.
nif the spectrum is transferred and proceeds of the transfer exceed the
amount of expenditure remaining unallowed, the excess amount shall be
chargeable to tax as profits and gains of business in the previous year in
which the spectrum has been transferred.
nunallowed expenses in a case where a part of the spectrum is transferred
would be amortised.
nunder the scheme of amalgamation, if the amalgamating company sells
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or transfer the spectrum to an amalgamated company, being an Indian
company, then the provisions of this section will apply to amalgamated
company as they would have applied to amalgamating company if later
has not transferred the spectrum.
6.1.8 The Direct Tax Dispute Resolution Scheme, 2016
In order to reduce the huge backlog of cases and to enable the Government to
realize its dues expeditiously, it is proposed to bring the Direct Tax Dispute
Resolution Scheme, 2016 in relation to tax arrears and specified tax.
The salient features of the proposed scheme are as under
nThe scheme be applicable to "tax arrears" which is defined as the
amount of tax, interest or penalty determined under the IT Act or the WT
Act in respect of which appeal is pending before the Commissioner of
Income tax (Appeals) or the Commissioner of Wealth tax (Appeals) as on
29 February 2016.
nThe pending appeal could be against an assessment order or a penalty
order.
nThe declarant under the scheme be required to pay tax at the applicable
rate plus interest up to the date of assessment.
nHowever, in case of disputed tax exceeding Rs.10,00,000, 25% of the
minimum penalty leviable shall also be required to be paid.
nIn case of pending appeal against a penalty order, 25% of minimum
penalty leviable shall be payable along with the tax and interest payable
on account of assessment or reassessment.
nConsequent to such declaration, appeal in respect of the disputed income
and disputed wealth pending before the Commissioner (Appeals) shall be
deemed to be withdrawn.
In addition to the above, the scheme proposes that person may also make a
declaration in respect of any tax determined in consequence of or is validated by
an amendment made with retrospective effect in the IT Act or WT Act, as the
case may be, for a period prior to the date of enactment of such amendment
and a dispute in respect of which is pending as on 29 February 2016 (referred to
as specified tax). For availing the benefit of the Scheme, such declarant shall be
required to withdraw any writ petition or any appeal filed against such specified
tax before the Commissioner (Appeals) or the Tribunal or High Court or
Supreme Court, before making the declaration and shall also be required to
furnish a proof of such withdrawal. Further, if any proceeding for arbitration
conciliation or mediation has been initiated by the declarant or he has given any
notice under any law or agreement entered into by India, whether for protection
of investment or otherwise, he shall be required to withdraw such notice or
claim for availing benefit under this Scheme.
It is proposed that person making declaration in respect of specified tax shall be
required to furnish an undertaking in the prescribed form and verified in the
prescribed manner, waiving the right, whether direct or indirect, to seek or
pursue any remedy or claim in relation to the specified tax which otherwise be
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available to them under any law, in equity, by statute or under an agreement,
whether for protection of investment or otherwise, entered into by India with a
country or territory outside India. It is proposed that no appellate authority or
Arbitrator or Conciliator or Mediator shall proceed to decide an issue relating to
the specified tax in the declaration in respect of which an order is made by the
designated authority or in respect of the payment of the sum determined to be
payable.
It is proposed that where the declarant violates any of the conditions referred to
in the scheme or any material particular furnished in the declaration is found to
be false at any stage, it shall be presumed as if the declaration was never made
under this Scheme and all the consequences under the IT Act or WT Act under
which the proceedings against declarant were or are pending, shall be deemed
to have been revived.
The declarant under the scheme shall get immunity from institution of any
proceeding for prosecution for any offence under the IT Act or the WT Act. In
case of specified tax, the declarant shall also get immunity from imposition of
penalty under the IT Act or the WT Act. However, in case of tax arrears
immunity from penalty is proposed to be of the amount that exceeds the
penalty payable as per the scheme. The scheme provides waiver of interest
under the IT Act or the WT Act in respect of specified tax. However, waiver of
interest in respect of tax arrears is to the extent the interest exceeds the
amount of interest referred in the scheme.
In the following cases a person shall not be eligible for the scheme:-
nCases where prosecution has been initiated before 29 February 2016.
nSearch or survey cases where the declaration is in respect of tax arrears.
nCases relating to undisclosed foreign income and assets.
nCases based on information received under DTAA under section 90 or
90A of the IT Act where the declaration is in respect of tax arrears.
nPerson notified under Special Courts Act, 1992.
nCases covered under Narcotic Drugs and Psychotropic Substances Act,
Indian Penal Code, Prevention of Corruption Act or Conservation of
Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
6.1.9 The Income Declaration Scheme, 2016
An opportunity is proposed to be provided to persons who have not paid full
taxes in the past to come forward and declare the undisclosed income and pay
tax, surcharge and penalty of such undisclosed income declared. For this, the
Income Declaration Scheme, 2016 is proposed to be brought into effect from 1
June 2016 and will remain open up to the date to be notified by the Central
Government in the official gazette. The scheme is proposed to be made
applicable in respect of undisclosed income of any financial year up to FY 2015-
16.
Tax is proposed to be charged @ 30% on the declared income as increased by
surcharge @ 25% of tax payable (to be called the Krishi Kalyan cess) and a
penalty @ 25% of tax payable aggregating to 45% on undisclosed income
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declared under the scheme.
It is proposed that following cases shall not be eligible for the scheme:
nwhere notices have been issued under section 142(1) or 143(2) or 148 or
153A or 153C or
nwhere a search or survey has been conducted and the time for issuance
of notice under the relevant provisions of the IT Act has not expired or
nwhere information is received under an agreement with foreign countries
regarding such income or
ncases covered under the Black Money Act, 2015 or
npersons notified under Special Court Act, 1992 or
ncases covered under Indian Penal Code, the Narcotic Drugs and
Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention)
Act, 1967, the Prevention of Corruption Act, 1988.
It is proposed that payment of tax, surcharge and penalty may be made on or
before a date to be notified by the Central Government in the Official Gazette
and non-payment up to the date so notified shall render the declaration made
under the scheme void.
It is proposed to provide that declarations made under the scheme shall be
exempt from wealth-tax in respect of assets specified in declaration. It is also
proposed that no scrutiny and enquiry under the IT Act and Wealth-tax Act be
undertaken in respect of such declarations and immunity from prosecution
under such Acts be provided. Immunity from the Benami Transactions
(Prohibition) Act, 1988 is also proposed for such declarations subject to certain
conditions.
It is proposed to provide that where a declaration under the scheme has been
made by misrepresentation or suppression of facts, such declaration shall be
treated as void.
It is also proposed that nothing contained in the Scheme shall be construed as
conferring any benefit, concession or immunity on any person other than the
person making the declaration under this Scheme. In cases where any
declaration has been made but no tax and penalty referred to the scheme has
been paid within the time specified, the undisclosed income shall be chargeable
to tax under the IT Act in the previous year in which such declaration is made.
6.1.10 Presumptive taxation scheme for professionals
A new Section 44ADA of the IT Act is proposed for assessees engaged in any
profession referred to in Section 44AA(1) or any other profession as notified by
the Board and whose total gross receipts does not exceed Rs. 50,00,000 in a
previous year, at a sum equal to 50% of the total gross receipts, or, as the case
may be, a sum higher than the aforesaid sum earned by the assessee. The
scheme will only apply to resident individual, HUF and partnership firm excluding
LLP.
Further, the assessee will not be required to maintain books of account under
section 44AA(1) of the IT Act and get the accounts audited under section 44AB
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in respect of such income unless, the assessee claims that the profits and gains
from the aforesaid profession are lower than the profits and gains deemed to be
his income under section 44ADA(1) and his income exceeds the maximum
amount which is not chargeable to income tax.
6.1.11 Increase in threshold limit for tax audit for persons having income from
profession
It is proposed to increase the threshold limit for tax audit from Rs.25,00,000 to
Rs.50,00,000 in case of profession.
6.1.12 Increase in threshold limit for presumptive taxation scheme for persons having
income from business.
It is proposed to increase the threshold limit of Rs. 1,00,00,000 to Rs.
2,00,00,000 in case of eligible assessee engaged in eligible business. The
eligible assessee shall be required to pay advance tax and it is proposed that
advance tax may be paid by 15 March of the FY.
Further, the expenditure in the nature of salary, remuneration, interest, etc. paid
to the partner as per Section 40(b) of the IT Act shall not be deductible while
computing the income under Section 44AD.
It is also proposed that where an eligible assessee declares profit for any
previous year in accordance with Section 44AD and he declares profit for any of
the 5 consecutive assessment years relevant to the previous year succeeding
such previous year not in accordance with the provisions of Section 44AD(1), he
shall not be eligible to claim the benefit of the provisions of this section for 5
assessment years subsequent to the assessment year relevant to the previous
year in which the profit has not been declared.
6.1.13 Taxation of non-compete fees and exclusivity rights in case of profession
Section 28(va) of the IT Act is proposed to be amended to bring the recurring
nature of non-compete fees received / receivable in relation to not carrying out
any profession, within the scope of section 28 of the IT Act i.e. the charging
section of profits and gains of business or profession.
Further, it is also proposed to amend the proviso to section 28(va) of the IT Act
to clarify that receipts for transfer of right to carry on any profession, which are
chargeable to tax under the head ‘Capital gains’, would not be taxable as profits
and gains of business or profession. It is also proposed to amend section 55 of
the IT Act so as to provide that the 'cost of acquisition' and 'cost of
improvement' for working out ‘Capital gains’ on capital receipts arising out of
transfer of right to carry on any profession shall also be taken as 'NIL’.
6.1.14 Equalisation Levy
A new Chapter VIII titled "Equalisation Levy" is inserted in the Finance Bill 2016.
The chapter provides for an equalisation levy @ 6% of the amount of
consideration exceeding Rs. 1,00,000 for specified services received or
receivable by a non-resident not having PE in India from a resident in India who
carries out business or profession or from a non-resident having PE in India.
Specified service means online advertisement, any provision for digital
advertising space or any other facility or service for the purpose of online
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advertisement and includes any other service as may be notified by the Central
Government in this behalf.
In order to avoid double taxation, it is proposed to provide exemption under
section 10(50) of the IT Act for any income arising from providing specified
services on which equalisation levy is chargeable. It is further proposed to
amend section 40(a) of the IT Act to provide that deduction for expenses
incurred by the assessee under this Chapter shall be allowed only if the
equalization levy is deducted and deposited to the credit of Central government.
This Chapter will take effect from the date appointed in the notification to be
issued by the Central Government.
6.1.15 Rationalization of conversion of a company into Limited Liability Partnership
(LLP)
In addition to the existing condition under section 47(xiiib) of the IT Act, for
availing tax neutral conversion from Company to LLP, it is proposed to amend
the said section so as to provide that, for availing tax-neutral conversion, in
addition to the existing conditions, the value of the total assets in the books of
accounts of the company in any of the 3 previous years preceding the previous
year in which the conversion takes place, should not exceed Rs. 5,00,00,000
6.1.16 Deferment of POEM and enabling provisions for its implementation
The POEM was defined to mean a place where key management and
commercial decisions that are necessary for the conduct of the business of an
entity as a whole are in substance made.
In order to provide clarity in respect of implementation of POEM based rule of
residence and also to address concerns of the stakeholders, it is proposed to:
ndefer the applicability of POEM based residence test by 1 year and the
determination of residence based on POEM shall be applicable from FY
2016-17.
nprovide a transition mechanism for a company which is incorporated
outside India and has not earlier been assessed to tax in India.
nprovide that these transition provisions would also cover any subsequent
previous year upto the date of determination of POEM in an assessment
proceedings. However, once the transition is complete, then normal
provision of the IT Act would apply.
provide that in the notification, certain conditions including procedural
conditions subject to which these adaptations shall apply can be
provided for and in case of failure to comply with the conditions, the
benefit of such notification would not be available to the foreign
company.
nprovide that every notification issued in exercise of this power by the
Central Government shall be laid before each house of the Parliament.
6.1.17 Benefit of initial additional depreciation under section 32(1)(iia) of the IT Act
extended to assessee engaged in the business of transmission of power
It is proposed to amend Section 32(1)(iia) to provide that an assessee engaged
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in the business of transmission of power shall also be allowed additional
depreciation @ 20% of actual cost of new machinery or plant acquired and
installed in a previous year.
6.1.18 New taxation regime for securitisation trust and its investors
In order to rationalise the tax regime for securitisation trust and its investors, it
is proposed to substitute the existing special regime for securitisation trusts by
a new regime. The new regime provides for tax pass through treatment of the
income of the securitisation trust by which such income would be directly
taxable in the hands of its investors. It further states that the securitisation
trust shall be required to deduct the tax at source at the rate of 25% in case of
payment to resident investors which are individual or HUF and @ 30% in case of
others. In case of payments to non-resident investors, the TDS shall be at the
rates in force.
It is proposed to provide that the current regime of distribution tax shall cease
to apply in case of distribution made by securitisation trusts with effect from 1
June 2016.
These amendments will take effect from 1 June 2016.
6.1.19 Phasing out of deduction and exemptions
The Government proposed to implement its decision to reduce corporate tax
rate from 30% to 25% over the next 4 years along with corresponding phasing
out of exemption and deductions. In this regard, the Government with its
intention to phasing out the incentives under the IT Act has stipulated sunset
dates for the various sections and amendments. For details, please refer
Chapter 5 - Tax Incentives.
6.1.20 TCS on sale of vehicles and goods or services
The existing provision of section 206C of the IT Act, provides that the seller
shall collect tax at source at specified rate from the buyer at the time of sale of
specified items such as alcoholic liquor for human consumption, tendu leaves,
scrap, mineral being coal or lignite or iron ore, bullion, etc. in cash exceeding
Rs. 2,00,000
It is proposed to amend section 206C of the IT Act to provide that the seller shall
collect the tax @ 1% from the purchaser on sale of motor vehicle of the value
exceeding Rs. 10,00,000 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 Rs. 2,00,000.
This amendment will take effect from 1 June 2016.
6.1.21 Deduction in respect of provision for bad and doubtful debt in the case of NBFC
It is proposed to provide deduction from total income (computed before making
any deduction under this clause and Chapter-VIA) on account of provision for
bad and doubtful debts to the extent of 5% of the total income in the case of
NBFCs.
6.2.1 Additional deduction in respect of interest on housing loan
6.2 Personal
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Section 80EE of the IT Act is substituted to incentivize first-home buyers
availing home loans, by providing additional deduction up to Rs. 50,000 in
respect of interest payable on loan taken for residential house property from
any financial institution. This incentive is proposed to be extended to a house
property of a value less than Rs. 50,00,000 and in respect of which a loan of an
amount not exceeding Rs. 35,00,000 has been sanctioned during the period
from 1 April 2016 to 31 March 2017. It is also proposed to extend the benefit of
deduction till the repayment of loan continues.
The deduction under the proposed section is over and above the existing
deduction of interest against income from house property under Section 24 of
the IT Act.
6.2.2 Rationalization of taxation of Income by way of dividend
It is proposed to insert a new Section 115BBDA of the IT Act, so as to provide
that any income by way of dividend from domestic companies in excess of
Rs.10,00,000 received by an Individual, HUF or a Firm who is resident in India,
shall be chargeable to tax @10% on gross basis.
6.2.3 Rationalisation of tax treatment of Recognised Provident Funds, Pension Funds
and National Pension Scheme
nIt is proposed to amend Section 10 of the IT Act, so as to provide that in
respect of the contributions made on or after 1 April 2016 by an employee
participating in a recognized provident fund and superannuation fund, up
to 40% of the accumulated balance attributable to such contributions on
withdrawal shall be exempt from tax.
nIt is proposed to amend that any payment in commutation of an annuity
purchased out of contributions made on or after 1 April 2016 which
exceeds 40% of the annuity, shall be chargeable to tax.
nAny payment from National Pension System Trust to an employee on
account of closure or his opting out of the pension scheme referred to in
Section 80CCD of the IT Act, to the extent it does not exceed 40% of the
total amount payable to him at the time of closure or his opting out of the
scheme, shall be exempt from tax. However, the whole amount received
by the nominee, on death of the assessee shall be exempt from tax.
nUnder Part A of Fourth Schedule to the IT Act, contributions made by
employer to the credit of an employee participating in a recognised
provident fund, which are in excess of 12% of the salary of the employee,
are liable to tax in the hands of the employee. However, there is no
monetary limit for the contribution made by the employer though there
is a monetary ceiling for employee's contribution. Therefore, in order to
bring parity in the monetary limit for contribution by the employer and
the employee, it is proposed to amend the said section and said schedule
so as to provide the limit of employer's contribution to Rs.1,50,000,
without attracting tax.
nWith a view to bring all the pension plans under one umberalla, it is also
proposed to amend-
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– the said schedule so as to provide exemption to one-time
portability from a recognised provident fund to NPS;
–• Section 10(13) of the IT Act so as to provide that any payment
from an approved superannuation fund by way of transfer to the
account of the employee under NPS referred to in Section 80CCD
and notified by the Central Government shall be exempt from tax.
6.2.4 Increase in limit of rebate allowable under Section 87A
It is proposed to increase the maximum amount of rebate from Rs.2,000 to
Rs.5,000.
6.2.5 Rationalization of limit of deduction allowable in respect of rents paid under
Section 80GG
In order to provide relief to the individual tax payers, it is proposed to increase
the maximum limit of deduction Rs. 2,000 to Rs. 5,000 per month.
6.2.6 Increase in time period for acquisition or construction of self-occupied house
property for claiming deduction of interest
It is proposed that the deduction under Section 24(b) of the IT Act, on account
of interest paid on capital borrowed for acquisition or construction of a self-
occupied house property shall be available if the acquisition or construction is
completed within 5 years from the end of the FY in which capital was borrowed.
6.2.7 Taxation of gold bond under Sovereign Gold Bond Scheme, 2015
In order to encourage the investment in aforesaid scheme, it is proposed to
amend section 47 of the IT Act 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.
Further, it is also proposed to amend section 48 of the IT Act, so as to provide
indexation benefits to long term capital gains arising on transfer of Sovereign
Gold Bond to all assessee.
6.2.8 Tax Treatment of Gold Monetization Scheme, 2015
With view to extend the tax benefits to the Gold Monetization Scheme, 2015 as
were available to the Gold Deposit Scheme, 1999 it is proposed to extend the
same tax benefits to the Gold Monetization Scheme, 2015 introduced by the
Government of India. It is proposed to amend Section 2(14) of the IT Act to
exclude Deposit Certificates issued under Gold Monetisation Scheme, 2015
from the definition of capital asset and thereby to exempt it from capital gains
tax.
It is also proposed to amend Section 10(15) of the IT Act to provide that the
interest on Deposit Certificates issued under the aforesaid Scheme, shall be
exempt from income-tax.
This amendment will be effective retrospectively from 1 April 2016.
6.2.9 Tax on capital gain on transfer of residential property not to be charged in
certain cases
The existing provision of section 54GB of the IT Act provided exemption from
capital gain from the transfer of long term capital assets being a residential
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property (a house or plot of land) owned by eligible assessee (i.e. Individual or
HUF), provided, the capital gain are invested in subscription of shares of a
company which is qualified to be a SME and subject to other conditions specified
therein.
Further, on receipt of the proceeds the company should invest the same in
purchase of new assets being new plant and machinery but does not include,
inter alia, computer or computer software.
With view to avoid the incidence of the aforesaid conditions on start-ups, it is
proposed to amend section 54GB of the IT Act to provide that investment in
eligible start-up company could be made upto 31 March 2019 and also as to
provide that the expression ‘New Assets” includes computers or computer
software in case of technology driven start-ups so certified by the Inter-
Ministerial Board of Certification notified by the Central Government.
6.2.10 Rationalization of Section 56(2)(vii)
It is proposed to amend the IT Act to provide that any shares received by an
individual or HUF as a consequence of demerger or amalgamation of a company
shall not attract section 56(2)(vii) of the IT Act.
6.3.1 Exemption from requirement of furnishing PAN under section 206AA to certain
non-residents
It is proposed to amend section 206AA so as to provide that the provisions of
this section shall also not apply to a non-resident, not being a company, or to a
foreign company, in respect of any other payment, other than interest on bonds,
subject to such conditions as may be prescribed.
This amendment will take effect from 1June 2016
6.3.2 Applicability of MAT on foreign companies for the period prior to 1 April 2015
It is proposed to amend the IT Act so as to provide that with effect from 1 April
2001, the provisions of section 115JB shall not be applicable to a foreign
company if:
nthe assessee is a resident of a country or a specified territory with which
India has an agreement referred to in section 90(1) or the Central
Government has adopted any agreement under section 90A(1) and the
assessee does not have a permanent establishment in India in
accordance with the provisions of such Agreement; or
nthe assessee is a resident of a country with which India does not have an
agreement of the nature referred to in clause (i) above and the assessee
is not required to seek registration under any law for the time being in
force relating to companies.
This amendment is proposed to be made effective retrospectively from AY
2001-02.
6.3.3 Taxation of Rupee Denominated Bond
The RBI has recently permitted Indian corporates to issue rupee denominated
bonds outside India as a measure to enable the Indian corporates to raise funds
6.3 Non Residents
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from outside India.
Accordingly, with a view to provide relief to non-resident investor who bears the
risk of currency fluctuation, it is proposed to amend section 48 of the IT 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.
6.3.4 Exemption in respect of certain activity related to diamond trading in Specified
Notified Zone
In order to facilitate the Foreign Mining Companies (FMC) to undertake activity
of display of uncut diamond it is proposed to amend section 9 of the IT Act to
provide that 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 un-assorted
diamonds in a specified zone notified by the Central Government.
This amendment will take effect retrospectively from AY 2016-17 and
subsequent years.
6.3.5 Clarification on taxability upon transfer of shares of a private limited company
by non-residents
With a view to clarify the position on whether the shares of a private limited
company forms part of unlisted securities or not, it is proposed to amend the
provisions of section 112(1)(c) of the IT Act to provide that long-term capital
gains arising from the transfer of a capital asset being shares of a company not
being a company in which the public are substantially interested, shall be
chargeable to tax at the rate of 10%.
6.3.6 Modification in conditions of special taxation regime for off shore funds
Section 9A of the IT Act provides for a special regime in respect of offshore
funds. The benefit under section 9A is available subject to the prescribed
conditions provided in sub-sections (3), (4) and (5) of this section. In order to
rationalize the regime, it is proposed to modify these conditions to provide that
the eligible investment fund for purposes of section 9A shall also mean a fund
established or incorporated or registered outside India in a country or a
specified territory notified by the Central Government in this behalf. It is also
proposed to provide that the condition of fund not controlling and managing any
business in India or from India shall be restricted only in the context of activities
in India.
6.3.7 Rationalization of tax deduction at source provisions relating to payments by
Category-I and Category-II AIF’s to its investors
In order to rationalise the TDS regime in respect of payments made by the
investment funds to its investors, it is proposed to amend section 194LBB of the
IT Act to provide that the person responsible for making the payment to the
investor shall deduct income-tax under section 194LBB of the IT Act @10%
where the payee is a resident and at the rates in force where the payee is a non-
resident (not being a company) or a foreign company.
Further, it is proposed to amend section 197 of the IT Act to include section
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194LBB of the IT Act in the list of sections for which a certificate for deduction
of tax at lower rate or no deduction of tax can be obtained.
6.4.1 Furnishing of report in respect of international group - BEPS action plan -
Country-By-Country Report and Master file
The OECD Report on Action 13 of BEPS Action plan provides for revised
standards for transfer pricing documentation and a template for Country-by-
Country (CbC) reporting of income, earnings, taxes paid and certain measure of
economic activity. A three-tiered structure has been mandated consisting of:
na master file containing standardised information relevant for all MNE
group members;
na local file referring specifically to material transactions of the local
taxpayer; and
na CbC report containing certain information relating to the global
allocation of the MNE's income and taxes paid together with certain
indicators of the location of economic activity within the MNE group.
The CbC report mentions that, these 3 documents (country-by-country report,
master file and local file) will require taxpayers to articulate consistent transfer
pricing positions and will provide tax administrations with useful information to
assess transfer pricing risks. It will facilitate tax administrations to make
determinations about where their resources can most effectively be deployed,
and, in the event audits are called for, provide information to commence and
target audit enquiries.
The CbC report requires MNEs to report annually and for each tax jurisdiction in
which they do business; the amount of revenue, profit before income tax and
income tax paid and accrued. It also requires MNEs to report their total
employment, capital, accumulated earnings and tangible assets in each tax
jurisdiction. Finally, it requires MNEs to identify each entity within the group
doing business in a particular tax jurisdiction and to provide an indication of the
business activities of each entity.
The CbC report has to be submitted by parent entity of an international group to
the prescribed authority in its country of residence. This report is to be based on
consolidated financial statement of the group.
The master file is intended to provide a high-level overview of the MNE group’s
business, including the nature of its global business operations, its overall
transfer pricing policies; and its global allocation of income and economic
activity in order to assist tax administrations in evaluating the presence of
significant transfer pricing risk.
It is proposed to insert section 286 in the IT Act to provide a specific reporting
regime in respect of CbC reporting and also the master file. The elements
relating to CbC reporting requirement and matters proposed to be included are:
nthe reporting provision shall apply in respect of an international group
6.4 Transfer Pricing
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having consolidated revenue, based on consolidated financial
statements, exceeds the threshold. The current international consensus
is for a threshold of €750 million equivalent in local currency. This
threshold in Indian currency would be equivalent to Rs.5,395 crores (at
current rates).
nthe parent entity of an international group, if it is resident in India shall be
required to furnish the report in respect of the group to the prescribed
authority on or before the due date of furnishing of return of income for
the Assessment Year relevant to the Financial Year (previous year) for
which the report is being furnished;
nthe parent entity shall be an entity which is required to prepare
consolidated financial statement under the applicable laws or would have
been required to prepare such a statement, had equity share of any
entity of the group been listed on a recognized stock exchange in India;
nevery constituent entity in India, of an international group having parent
entity that is not resident in India, shall provide information regarding the
country or territory of residence of the parent of the international group
to which it belongs. This information shall be furnished to the prescribed
authority on or before the prescribed date;
nthe report shall be furnished in prescribed manner and in the prescribed
form and would contain aggregate information in respect of revenue,
profit & loss before Income-tax, amount of Income-tax paid and accrued,
details of capital, accumulated earnings, number of employees, tangible
assets other than cash or cash equivalent in respect of each country or
territory along with details of each constituent's residential status,
nature and detail of main business activity and any other information as
may be prescribed. This shall be based on the template provided in the
OECD BEPS report on Action Plan 13;
nan entity in India belonging to an international group shall be required to
furnish CbC report to the prescribed authority if the parent entity of the
group is resident:
– in a country with which India does not have an arrangement for
exchange of the CbC report; or
– such country is not exchanging information with India even
though there is an agreement; and
– this fact has been intimated to the entity by the prescribed
authority.
nIf there are more than one entities of the same group in India, then the
group can nominate (under intimation in writing to the prescribed
authority) the entity that shall furnish the report on behalf of the group.
This entity would then furnish the report;
nIf an international group, having parent entity which is not resident in
India, had designated an alternate entity for filing its report with the tax
jurisdiction in which the alternate entity is resident, then the entities of
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such group operating in India would not be obliged to furnish report if the
report can be obtained under the agreement of exchange of such reports
by Indian tax authorities;
nThe prescribed authority may call for such document and information
from the entity furnishing the report for the purpose of verifying the
accuracy as it may specify in notice. The entity shall be required to make
submission within 30 days of receipt of notice or further period if
extended by the prescribed authority, but extension shall not be beyond
30 days.
6.4.2 Rationalisation of time limit for completion of assessment, reassessment and
re-computation
It is proposed to substitute section 153 of the IT Act wherein the time limit for
completion of the assessment, reassessment and re-computation has been
advanced by 3 months and accordingly, the time limit for completion of the TP
assessments has also been advanced.
The amendment will take effect from 1 June 2016.
6.4.3 Amendment to section 92D to the IT Act
Section 92D of the IT Act relating to maintenance and keeping of information
and document by persons entering into an international transaction or specified
domestic transaction, provides that every person who has entered into an
international transaction or specified domestic transaction shall keep and
maintain such information and document in respect thereof as may be
prescribed. The said section further provides that the Assessing Officer or the
Commissioner (Appeals) may in the course of any proceeding require such
person to furnish the information and document within the period of 30 days of
it being called for or within the extended period.
It is proposed to amend Section 92D of the IT Act so as to provide that the
person being a constituent entity of an ‘international group’ referred to in
section 286 of the IT Act, shall also keep and maintain such information and
document in respect of the international group as may be prescribed. It is
further proposed to amend the said section so as to provide that without
prejudice to the power of the Assessing Officer or the Commissioner (Appeals)
to call for the information and document, the person being a constituent entity
of an international group, shall furnish the prescribed information and document
to the prescribed authority referred to in section 286 of the IT Act in the
prescribed manner on or before the date to be prescribed.
6.4.3.1Penalty for failure to furnish report or for furnishing inaccurate report under
section 286
It is proposed to insert section 271GB of the IT Act and amendment to section
271AA of the IT Act for non-furnishing of the report or furnishing inaccurate
report, under which a graded penalty structure would apply as follows:
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6.5 General
6.5.1 Rationalization of Provisions relating to filing of appeal with ITAT against the
order of DRP
Sections under
IT Act
Penalty
Section 271GB
Non-furnishing
of Report
(a) Default not more than one
month
Rs.5,000 per day
Particulars of Default
(b) Default more than one month Rs.15,000 per day for
period exceeding 1 month
(c) Default even after service of
order levying penalty under
either (a) or (b) above
Rs.50,000 per day
continuing default beyond
the date of service of
penalty order
Section 271GB
Timely non-
submission of
information and
documents
before
prescribed
authority
(a) timely non-submission of
information before prescribed
authority when called for
Rs.5,000 per day
(b) Default even after service of
order levying penalty under
(a) above
Rs.50,000 per day
continuing default beyond
the date of service of
penalty order
Section 271AA
Inaccurate
Information in
Report
(a) the entity knows of the
inaccuracy at the time of
furnishing the report but does
not inform the prescribed
authority; or
Rs.5,00,000
(b) the entity discovers the
inaccuracy after the report is
furnished and fails to inform
the prescribed authority and
furnish correct report within a
period of 15 days of such
discovery;
or
(c) the entity furnishes
inaccurate information or
document in response to
notice of the prescribed
authority.
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Section 253(2A) of the IT Act provides that the Principal Commissioner or
Commissioner may, if he objects to any direction issued by the DRP under
Section 144C(5) of the IT Act in pursuance of which the AO has passed an order
completing the assessment or reassessment, direct the AO to appeal to the
ITAT against such order.
Further, Section 253(3A) of the IT Act provides that every appeal under sub-
section (2A) shall be filed within 60 days of the date on which the order sought
to be appealed against is passed by the AO in pursuance of the directions of the
DRP under sub-section (5) of section 144C of the IT Act. In line with the decision
of the Government to minimize litigation, it is proposed to omit the said sub-
sections (2A) and (3A) of section 253 of the IT Act to do away with the filing of
appeal by the AO against the order of the DRP. The consequent amendments
are proposed to be made to sub-section (3A) and (4) of the said provision.
6.5.2 Rationalization of Penalty Provisions
It is proposed to replace section 271 of the IT Act with section 270A which
provides for levy of penalty in cases of under-reporting and misreporting of
income.
Sub-section (1) of the proposed new section 270A of the IT Act seeks to
provide that the AO, CIT (Appeals) or the Principal Commissioner or
Commissioner may levy penalty if a person has under-reported his income as
specified in the provisions.
The amount of under-reported income is proposed to be calculated in different
scenarios are provided in detail in the regulations. It is proposed that the rate of
penalty shall be 50% of the tax payable on under-reported income. However in a
case where under-reporting of income results from misreporting of income by
the assessee, the person shall be liable for penalty @200% of the tax payable
on such misreported income as specified in the provisions.
It is also proposed that in case of company, firm or local authority, the tax
payable on under-reported income shall be calculated as if the under-reported
income is the total income. In any other case, the tax payable shall be 30% of the
under-reported income.
It is also proposed that no addition or disallowance of an amount shall form the
basis for imposition of penalty, if such addition or disallowance has formed the
basis of imposition of penalty in the case of the person for the same or any
other AY.
Consequential amendments have been proposed in sections 119, 253, 271A,
271AA, 271AAB, 273A and 279 of the IT Act to provide reference to newly
inserted section 270A of the IT Act.
6.5.3 Rationalisation of time limit for assessment, reassessment and re-
computation
It is desirable that proceedings under the IT Act are finalised more expeditiously
as digitisation of processes within the department has enhanced its efficiency
in handling workload. It is proposed to advance the time limit for completion of
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assessment, reassessment etc. by 3 months as compared to the existing time
limit.
6.5.4 Penalty under section 271AAB of the IT Act
In order to rationalize the rate of penalty and to reduce discretion, it is proposed
to amend clause (c) of sub-section (1) of section 271AAB of the IT Act to provide
for levy of penalty on undisclosed income at a flat rate of 60% of such income.
6.5.5 Clarification regarding set off losses against deemed undisclosed income
Section 115BBE of the IT Act, inter-alia provides that the income relating to
section 68 or section 69 or section 69A or section 69B or section 69C or
section 69D of the IT Act is taxable @ 30% and further provides that no
deduction in respect of any expenditure or allowances in relation to income
referred to in the said sections shall be allowable.
In order to avoid unnecessary litigation, it is proposed to amend the provisions
of section 115BBE(2) of the IT Act to expressly provide that no set off of any
loss shall be allowable in respect of income under sections 68 or section 69 or
section 69A or section 69B or section 69C or section 69D of the IT Act.
6.5.6 Rationalization of TDS provisions
In order to rationalise the rates and base for TDS provisions, the existing
threshold limit for deduction of tax at source and the rates of deduction of tax
at source are proposed to be revised. For details please refer Chapter 11 ‘TDS
Rates’.
6.5.7 Tax on accreted income of charitable institution and trust in certain specified
cases
The existing provision of the IT Act does not provide any clarity on how the
assets of charitable institutions and trust, shall be dealt with, in case when it
voluntarily wind up its activities and dissolves or may also merge with any
other charitable or non-charitable institution or it may convert into a non-
charitable organization.
It is proposed to amend the provision of the IT Act and introduce new chapter
XII-EB in the IT Act, to provide for levy of additional income tax at MMR, in case
of conversion into or merger with any non-charitable form or on transfer of
assets of a charitable organization on its dissolution to a non-charitable
institution.
6.5.8 Providing legal framework for automation of various processes and paperless
assessment
It is proposed to amend the relevant provisions of the IT Act so as to provide
adequate legal framework for paperless assessment in order to enhance
efficiency and reduce the burden of compliance. A series of changes are
proposed to achieve this objective.
6.5.9 Rationalization of advance tax payment schedule under section 211 of the IT
Act and interest under section 234C of the IT Act
It is proposed to rationalise schedule for advance tax payment and prescribe the
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same advance tax schedule for all the assessees i.e. 4 installments except in
case of an eligible assessee in respect of eligible business as referred to in
section 44AD of the IT Act.
It is further proposed that an eligible assessee in respect of eligible business
referred to in section 44AD of the IT Act opting for computation of profits or
gains of business on presumptive basis, shall be required to pay advance tax of
the whole amount in 1 installment on or before 15 March of FY.
The consequential amendments are also proposed to be made to section 234C
of the IT Act.
It is also proposed that interest under section 234C of the IT Act shall not be
chargeable in case of an assessee having income under the head "Profits and
gains of business or profession" for the first time, subject to fulfillment of
conditions specified therein.
6.5.10 Increase in rate of STT in case of sale of an option in securities
STT is proposed to be increased from 0.017% to 0.05% of the option premium on
sale of an option in securities where option is not exercised.
6.5.11 Tax exemption on long term capital gain on investment of the gains in units of
specified funds
It is proposed to insert new section 54EE to provide exemption from tax on long
term capital gain if the long term capital gains proceeds are invested by the
assessee in units of the specified fund within 6 months from the date of such
transfer of long term capital assets.
It is further proposed that, the aggregate investment in the units of specified
funds shall be allowed up to Rs. 50,00,000 during any financial year in which
original asset or assets are transferred or in the subsequent financial year. The
exemption shall be subject to condition that the amount remains invested for 3
years failing to which the exemption shall be withdrawn.
6.5.12 Filing of return of Income
It is proposed to amend the 6th proviso to section 139(1) of the IT Act to include
that if a person during the previous year earns income which is exempt under
section 10(38) of the IT Act and income of such person without giving effect to
the said clause of section 10 exceeds the maximum amount which is not
chargeable to tax, shall also be liable to file return of income for the previous
year within the due date.
It is also proposed to substitute section 139(4) of the IT Act to provide that any
person who has not furnished a return within the time allowed to him under
section 139(1) of the IT Act, may furnish the return for any previous year at any
time before the end of the relevant assessment year or before the completion
of the assessment, whichever is earlier.
It is also proposed to substitute section 139(5) of the IT Act so as to provide that
if any person, having furnished a ROI under section 139(1) of the IT Act or under
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section 139(4) of the IT Act, or in a return furnished in response to notice issued
under section 142(1) of the IT Act, discovers any omission or any wrong
statement therein, he may furnish a revised return at any time before the expiry
of 1 year from the end of the relevant assessment year or before the completion
of the assessment, whichever is earlier.
It is also proposed to provide that a ROI 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.
6.5.13 Rationalization of Section 50C in case sale consideration is fixed under
agreement executed prior to the date of registration of immovable property
It is proposed to amend the provisions of section 50C of the IT Act so as to
provide that where the date of the agreement fixing the amount of
consideration for the transfer of immovable property and the date of
registration are not the same, the stamp duty value on the date of the
agreement may be taken for the purposes of computing the full value of
consideration.
It is further proposed to provide that this provision shall apply only in a case
where the amount of consideration referred to therein, or a part thereof, has
been paid by way of an account payee cheque or account payee bank draft or
use of electronic clearing system through a bank account, on or before the date
of the agreement for the transfer of such immovable property.
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Chapter 7 Indirect Taxes - Significant Changes
The change in rates effected in the Customs and
Central Excise regulations shall be effective from 1
March 2016 and legislative changes shall be
effective from the enactment of Finance Bill, 2016
unless otherwise specified. The changes in Service
Tax regulations shall be effective from the date of
enactment of the Bill, unless otherwise specified.
The provisions applicable to Service Tax, Customs
and Excise are given as under:
n11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT)
to be created for removable of backlog of cases.
nThe limitation period for issuance of show cause notice for cases not involving
fraud, collusion, suppression, etc. is proposed to be increased from 18 months to
30 months in case of service tax and from 1 year to 2 year in case of excise and
customs.
nRate of interest for delay in payment of excise and customs duty to be reduced
from 18% to 15% p.a. w.e.f. 1 April 2016. Rate of interest for delay in payment of
service tax to be rationalized @ 24% p.a. in case amount is collected but not paid
and @ 15% p.a. in all other cases as against the present rate of 18% to 30% p.a.,
as the case may be.
nIndirect Tax Dispute Resolution Scheme, 2016 has been proposed to be
introduced w.e.f. 1 June 2016 for service tax, excise and customs assessee who
has filed an appeal before Commissioner (Appeals) and is pending for
adjudication as on 1 March 2016. The salient features are as follows:
- The declaration to be filed on or before 31 December 2016.
- To pay duty/tax, interest and penalty @ 25% imposed under the
impugned order within 15 days of receipt of acknowledgment and
intimate within 7 days of such payment.
- Scheme not applicable in certain cases like search and seizure
proceedings being initiated; prosecution proceedings being initiated
before 1 June 2016; matter pertaining to narcotic drugs or other
prohibited goods; matter pertaining to any offence punishable under
Indian Penal Code, Prevention of Corruption Act, 1988 etc.; or detention
order passed under COFESA.
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7.1 Service Tax
7.1.1 General
services.
7.1.2 Amendment in scope of negative list of services, exempted services and
declared services
nServices by way of construction, erection etc. of a civil structure or any
other original works pertaining to the “In-situ Rehabilitation of existing
slum dwellers using land as a resource through private participation”
component of Housing for All (HFA) (Urban) Mission / PMAY only for
existing slum dwellers to be exempted.
nServices by way of construction, erection etc., of a civil structure or any
other original works pertaining to the “Beneficiary-led individual house
construction / enhancement” component of Housing for All (HFA)
(Urban) Mission/ PMAY to be exempted.
nServices provided by Indian Institute of Management to their students by
way of specified educational programs to be exempted.
These amendments will take effect from 1 March 2016
nLegal services provided by a senior advocate to an advocate or
partnership firm of advocates on shall be liable to service tax. Further
services provided by person represented on an arbitral tribunal to an
arbitral tribunal made liable to service tax.
nServices by way of transportation of passengers by ropeway, cable car
or aerial tramway shall now be liable to service tax.
nServices by way of construction, erection, etc., of original works
pertaining to low cost houses up to a carpet area of 60 sq. mtr. per house
(i.e. 645 sq ft.) in a housing project approved by the competent authority
under the “Affordable housing in partnership” component of housing for
All (Urban) Mission/ Pradhan Mantri Awas Yojana (PMAY) or any housing
scheme of a State Government shall be exempted.
nExemption limit of services by a performing artist in folk or classical art
forms of music, dance or theatre has been increased from Rs. 1,00,000 to
Rs. 1,50,000 per performance.
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nExemption has been provided for the following services-
- Services of assessing bodies empanelled centrally by Directorate
General of Training, Ministry of Skill Development and
Entrepreneurship.
- Services provided by way of skill/vocational training by Deen
Dayal Upadhyay Grameen Kaushalya Yojana training partners.
- Services of general insurance business provided under Niramaya
Health Insurance scheme.
- Services provided by Insurance Regulatory and Development
Authority (IRDA) of India to insurers.
- Services provided by National Centre for Cold Chain Development
under Department of Agriculture, Cooperation and Farmers
Welfare, Government of India, by way of cold chain knowledge
dissemination.
- Services provided by Biotechnology Industry Research Assistance
Council (BIRAC) approved biotechnology incubators to the
incubatees.
- Services provided by Employees Provident Fund Organisation
(EPFO) to employees.
- Services provided by Securities and Exchange Board of India
(SEBI) by way of protecting the interests of investors in securities
and to promote the development of, and to regulate, the securities
market.
- The services of life insurance business provided by way of annuity
under the National Pension System (NPS) regulated by Pension
Fund Regulatory and Development Authority (PFRDA) of India.
These amendments will take effect from 1 April 2016
nServices by way of transportation of passengers by stage carriage which
was earlier not taxable has been proposed to be liable to service tax.
However, non-air conditioned stage carriage has been excluded from the
purview of service tax by inserting the same in the Mega Exemption
w.e.f. 1 June 2016.
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nServices by way of construction, erection, commissioning, or installation
of original works pertaining to monorail and metro shall now be liable to
service tax. However, where contracts were entered into before 1 March
2016, on which appropriate stamp duty, was paid, shall remain exempt.
nRestoration of certain exemptions withdrawn last year for projects,
contracts in respect of which were entered into before withdrawal of the
exemption.
(a) Exemption from service tax on services provided to the
Government, a local authority or a governmental authority by way
of construction, erection, commissioning, installation, completion,
fitting out, repair, maintenance, renovation, or alteration of:
- Civil structure;
- Structure used as educational, clinical and art establishment
- Residential complex used by government employees.
was withdrawn w.e.f. 1 April 2015. The same is being restored for the
services provided under a contract which had been entered into prior to 1
March 2015 and on which appropriate stamp duty, where applicable, had
been paid prior to that date. The exemption is being restored till 31 March
2020.
Refund to be granted for all such service tax which has been collected but
which would not have been so collected had the above law been in force
at all times.
(b) Exemption from service tax on services by way of construction,
erection, commissioning or installation of original works pertaining
to an airport, port was withdrawn with effect from 1 April 2015.
The same is being restored for the services provided under a
contract which had been entered into prior to 1 March 2015 and on
which appropriate stamp duty, where applicable, had been paid
prior to that date subject to production of certificate from the
Ministry of Civil Aviation or Ministry of Shipping, as the case may
be, that the contract had been entered into prior to 1 March 2015.
The exemption is being restored till 31 March 2020.
nAssignment by the Government of the right to use the radio-frequency
spectrum and subsequent transfers thereof is proposed to be declared
as a service under section 66E of the Finance Act, 1994.
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7.1.3 Amendment in abatement rates
nAt present, there is abatement of 60% on the gross value of renting of
motor-cab services, provided no CENVAT Credit has been taken. It has
been clarified that cost of fuel should be included in the consideration
charged for providing renting of motor-cab services for availing the
abatement.
The above amendment will take effect from 1 April 2016
7.1.4 Amendment in Point of Taxation Rules, 2011
nDoubts regarding the point of taxation in case of a new service becoming
taxable existed in the present scenario. Now, it has been clarified that the
new levy on services shall be treated as to be services becoming taxable
for the first time and thus Rule 5 of Point of Taxation to be applied.
nAs per Rule 5, no tax shall be payable in following 2 scenario:
Paticulars
Abatement rate (%)
Existing Proposed Existing
1 Transport of passengers by rail 70 70
2 Transport of goods other than in
containers by rail 70 70
3 Transport of goods in containers by rail 70 60
4 Transport of goods by vessel 70 70
5 Services by way of construction of
residential complex, building,
civil structure, or a part thereof- 70 70
a) High end flats
b) Low end flats
6 Services provided by a tour operator
in relation to packaged tour 75 70
7 Services provided by a tour operator
in relation to services other than
packaged tour. 60 70
8 Services provided by goods
transport agency for shifting
of household goods 70 60
9 Services provided by goods
transport agency other than
mentioned in Sl .no 8 70 70
10 Services provided by foreman of a
chit fund in relation to chit NIL 30
CENVAT Credit
Proposed
Available
only of input
services.
Not
available
Sr.
No.
Available
only of input
services.
Not
available
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- Invoice has been issued and payment received against such
invoice before such service became taxable;
- Payment has been received before the service becomes taxable
and invoice has been issued within 14 days of the date when the
st
service is taxed for the 1 time.
nIt is further clarified that new levy or tax shall be payable on all the cases
other than specified above.
The above amendment will take effect from 1 March 2016.
7.1.5 Amendment in Reverse Charge Mechanism
nServices provided by mutual fund agent or distributor, to a mutual fund
or asset management company shall now be liable as forward charge
instead of the existing reverse charge, so as to enable the small sub-
agents down the distributor chain to avail small scale exemption having
threshold exemption of Rs. 10,00,000 per year.
The above amendment will take effect from 1 April 2016
7.1.6 Other Significant Amendments
nOne Person Company whose aggregate value of services during
previous financial year is Rs. 50,00,000 or less or a Hindu Undivided
Family shall be required to pay service tax as per the due date as
applicable to individual or partnership firms.
nThe optional Service Tax rate in case of single premium annuity policies is
being rationalized @ 1.4% of the total premium charged in case where the
amount allocated for investment is not intimated to policy holder.
nService tax assessees above a certain threshold will also be required to
file an annual return.
The above amendment will take effect from 1 April 2016.
nNotification No. 41/2012-ST, dated the 29 June 2012 was amended by
notification No.1/2016-ST dated 3 February 2016 so as to, inter alia,
allow refund of Service Tax on services used beyond the factory or any
other place or premises of production or manufacture of the said goods
for the export of the said goods. The amendment is being made to give
retrospective effect from the date of application of the notification i.e. 1
July 2012.
nServices by way of construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, repair, alteration of canal,
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dam or irrigation works to a governmental authority during the period 1
July 2012 to 29 January 2014 shall be exempted. Thus, refund of service
tax paid on the said services for the above period shall be allowed.
nThe power of arrest in service tax is proposed to be restricted to
situations where the tax payer has collected the tax but not deposited it
to exchequer to the tune of Rs. 2,00,00,000 or more against existing limit
of Rs. 50,00,000
nThe monetary limit for launching prosecution is proposed to be increased
from Rs. 1,00,00,000 to Rs. 2,00,00,000.
7.2.1 General
nPeak rate of Basic Customs Duty (BCD) remains unchanged @10.30%
(Tax @ 10%, Education Cess @ 2% and Secondary and Higher Education
Cess @ 1%).
7.2.2 Gems and Jewellery
nBCD on import of Imitation Jewellery is increased from 10% to 15%.
nConcessional CVD on Gold Dore bar and Silver Dore bar is increased from
8% to 8.75% and from 7% to 7.75% respectively.
7.2.3 Pharmaceutical and Healthcare
nBCD on import of medical use fission Molybdenum – 99 used in the
manufacture of radio pharmaceuticals, is reduced from 7.5% to NIL.
nDisposable sterilized dialyzer and micro barrier of artificial kidney is
exempted from BCD, CVD and SAD.
nBCD on Super Absorbent Polymer used in the manufacture of sanitary
towels, tampons, napkins, diapers, etc. is reduced from 7.5% to 5%,
subject to actual user condition. BCD on pulp of wood used in the
manufacture of sanitary towels, tampons, napkins, diapers, etc. is
reduced from 5% to 2.5%, subject to actual user condition.
7.2.4 Textiles
nBCD on import of specified fabrics used in the manufacture of textile
garments for exports, exempted to the extent of 1% of FOB value of
exports in the preceding FY, subject to specified conditions. Exemption
entitlement shall be one twelfth of 1% for the month of March 2016.
nBCD on import of specified fibres, filaments/ yarns is reduced from 5% to
2.5%.
7.2 Customs Duty
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7.2.5 Storage and warehousing
nNew class of warehouse to be added for enabling storage of specific
goods under physical control of the Department.
nConcessional BCD at 5% is extended to Cold chain including pre-cooling
unit, packhouses, sorting and grading lines and ripening chambers.
Consequently, the Project Import Regulations have been amended to
provide for the transitions.
nBCD on refrigerated containers is reduced from 10% to 5%.
7.2.6 Automobiles
nBCD on golf cars is increased from 10% to 60%.
nExemption from levy of BCD on import of battery pack, battery charger,
AC or DC motor, AC or DC motor controllers used in the manufacture of
electrically operated vehicles and hybrid vehicles is extended without
any time limit.
7.2.7 Others
nDuty free allowance for bonafide gifts is increased from Rs. 10,000 to Rs.
20,000.
nCVD Exemption on certain specified construction related machinery
withdrawn.
nPower generation project driven by municipal and urban waste, must be
backed by valid agreement between producer of power with urban local
body for processing of municipal solid waste. The agreement is needed to
have validity of more than 10 years from the date of commissioning of
project for availing customs duty concessions as an alternative to the
existing condition of “production of valid power purchase agreement
between the importer/producer of power and the purchaser, for the sale
and purchase of electricity generated using non-conventional materials”.
nSelf – declaration sufficient for availing duty exemptions to import goods
at concessional rate to be used in manufacture of excisable goods. The
manufacturer filing such declaration to avail the benefit of concessional
rate of duty shall be required to furnish a quarterly return as prescribed
under the regulations.
nBaggage rules simplified and rationalized to cover multiple slabs of duty
free allowance for various categories of passengers.
nCustoms baggage declaration to be filed only by passengers carrying
dutiable or prohibited goods. The Customs Duty Free allowances are –
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7.3 Central Excise
7.3.1 General
nThe general effective rate of BED remained unchanged @12.5%.
7.3.2 Precious metals and Jewellery
nExemption from BED has been withdrawn on certain articles of jewelllery
(as indicated below) which will result in levy of excise duty as under -
Eligible passenger Origin country Duty free allowance
Passengers of Indian origin and
foreigners residing in India,
excluding infant
Other than
Nepal, Bhutan,
Myanmar
50,000
Tourists of foreign origin, excluding
infants
15,000
Passengers of Indian origin and
foreigners residing in India,
excluding infant
Nepal, Bhutan,
Myanmar
15,000
Tourists of foreign origin, excluding
infants
By land - Nil
Indian passenger who has been
residing abroad for over 1 year
Anywhere Gold jewellery
Gentleman – 20 gms with
a value cap of Rs.50,000
Lady – 40 gms with a
value cap of Rs.1,00,000
All passengers Anywhere Alcohol liquor or wine:
2 litres
All passengers Anywhere Cigarettes: 200 numbers
or Cigars upto 50 or
Tobacco 250 grams
Passenger of 18 years and above Anywhere One Laptop
Tariff
entry
Description of
excisable goods
Rate chargeable
(without
CENVAT Credit)
7113 (I) Articles of jewellery;
Rate chargeable
(without
CENVAT Credit)
1% 12.5%
7113 (II) Articles of silver jewellery,
other than those studded with
diamond, ruby, emerald or
sapphire.
NIL NIL
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nSmall Scale Industries (SSI) threshold exemption for articles of jewellery
(excluding articles of silver jewellery, other than those studded with
diamonds, ruby, emerald or sapphire) is being increased to Rs.
600,00,000 in a year, with an eligibility limit of Rs. 1200,00,000 in the
preceding financial year. For the month of March, 2016, the SSI exemption
for such articles of jewellery is being restricted to Rs. 50,00,000.
nOptional centralized registration has been extended to such
manufacturers. Requirement of physical verification of premises to be
registered in such cases is being done away with.
nFollowing excise duty changes have been effected -
7.3.3 Automobile Sector
nInfrastructure cess is being levied on motor vehicle (depending upon
type of motor vehicle under the chapter heading 8703 ranging from 1% to
4%. However, the motor vehicles after clearances is registered for use as
taxi, cars for physically handicapped persons and registered as
ambulance shall be exempted from infrastructure cess.
nCENVAT credit cannot be utilized against the payment of Infrastructure
cess and further no credit of such cess shall be available under the
CENVAT Credit Rules
nThe validity period of concessional excise duty of 6% granted to specified
parts of electric vehicle and hybrid vehicle is being extended without
time limit.
nThe excise duty on engine foe xEV (hybrid electric vehicle) reduced from
12.5% to 6%.
Particulars Present
Excise duty
Gold bars manufactured from gold ore or
concentrate, gole dore bar and silver dore bar
Earlier
Excise duty
9.0 %9.5 %
Gold bars and gold coins of purity not below 99.5 %
produced during the process of copper smelting
9.0 %9.5 %
Silver manufactured from silver ore or concentrate,
silver dore and gold dore bar.
8.0 %8.5 %
Silver in any form, except silver coins of purity
below 99.9 % produced during the process of
copper smelting
8.0 %8.5 %
Silver produced during the process of zinc or lead
smelting
8.0 %8.5 %
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7.3.4 Food Processing Sector
nBasic excise duty on refrigerated containers reduced from 12.5% to 6%.
7.3.5 Textiles
nThe tariff rate for following goods have been amended:
7.3.6 Consumer Goods
nExcise duty on rubber sheets and resin rubber sheets for soles and heals
reduced from 12.5% to 6%.
nThe tariff rate for all categories of footwear is being reduced from 75% to
70% of retail sale price.
nExcise duty on water, including mineral waters and aerated waters,
containing added sugar or other sweetening matter or flavored being
increased from 18% to 21%
7.3.7 Amendments in CENVAT Credit Rules, 2004
nAll capital goods having value up to Rs. 10,000 per piece are being
included in the definition of inputs.
nWagons falling under sub heading 8606 92 of the Central excise tariff and
equipment and appliance used in an office located within a factory are
being included in the definition of capital goods and hence, CENVAT credit
shall be eligible.
nManufacturer of final products is being allowed to take CENVAT Credit of
Chapter 82 of the Central Excise Tariff (tools, implements etc.) in addition
to credit on jigs, fixtures, moulds and dies when intended to be used in
the premises of job-worker or another manufacturer who manufactures
the goods as per specification of manufacturer of final products. The
manufacturer can send the said goods directly to other manufacturer or
job-worker without bringing the same to his premises.
nThe CENVAT Credit Rules has been amended, so as to improve credit flow,
reduce the compliance burden and associated litigations, particularly
Particulars Earlier position Present position
Readymade garments and made
up of articles of textiles
30% of retail sale
price
60% of retail sale
price
Branded readymade garments
and made up articles of textiles of
Nil(without CENVAT
credit)
or
6% / 12.5% (with
CENVAT credit)
2%(without CENVAT
credit)
or
12.5% (with CENVAT
credit)
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those relating to apportionment of credit between exempted and non-
exempted final products / services.
nAmendments are been made in respect of provisions relating to input
service distributor, including extension to transfer the input services
credit to outsourced manufacturers, under certain circumstances. The
amendments in said rules will also enable manufacturers with multiple
manufacturing units to maintain a common warehouse for inputs and
distribute inputs with credits to the individual manufacturing units.
nRule 9A is being amended to provide for filing an annual return by a
manufacturer of final product or provider of output service for each
financial year by 30 November of the succeeding year.
nPresently, Rule 14(2) prescribe a procedure on First in First out basis for
determining whether a particular credit has been utilized. The said sub-
rule has been omitted. Now, whether a particular credit has been utilised
or not shall be ascertained by examining whether during the period under
consideration, the minimum balance of credit in the account of the
assesse was equal to or more than the disputed amount of credit.
nBanking and other financial institution to have an option of reversing
CENVAT credit in respect of exempted services on actual basis in addition
to an option of reversal of 50% of CENVAT credit.
nExcise duty on capital goods used exclusively for manufacture of
exempted goods or provision of exempted service for 2years from the
date of commencement of commercial production or providing of
services or 2 years from installation of capital goods post
commencement shall not be eligible as CENVAT credit. Hitherto, no time
limit was prescribed for exclusive usage of capital goods.
These amendments will take effect from 1 April 2016.
India to place outside India not to be treated as exempted services for the
purpose of CENVAT Credit Rules. Thus, shipping lines will be entitled to
avail CENVAT credit on inputs and input services used in providing said
services.
7.3.8 Amendments to Central Excise Rules, 2002
nCentral excise assesses can revise the filed periodical return by the end
of the calendar month in which return is filed. These amendments will
take effect from 1 April 2016.
nReduction in number of returns by an assesse above a certain threshold
from 27 to 13.
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nIn respect of finalization of provisional assessment, the interest shall be
charged from the original date of payment of duty.
7.3.9 Certain Other Amendments
nThe excise duty exemption under the area based exemptions for
production of gold and silver from gold dore, silver dore or any other raw
material is prospectively withdrawn. Thus, a new industrial unit or an
existing industrial unit which undertakes substantial expansion of
capacity shall not be eligible for availing excise duty exemption.
nRule 5 of CENVAT Credit Rules read with Notification No.27/2012 CE
dated 18 June 2012 has been amended for filing of refund claim. In respect
of service provider, the expiry of 1 year shall be from the date of issuance
of invoice where payment has been received in advance prior to date of
issuiance of invoice or receipt of payment in foreign exchange where
service has been completed prior to receipt of such payment, whichever
is earlier. In case of manufacturer of goods, section 11B of the Central
Excise Act is applicable for filing refund claim.
nSection 3 of The Central Sales Tax Act, 1956 deals with formulation of
principles for determining when a sale or purchase of goods takes place
in the course of inter-state trade or commerce.
nAn explanation has been added to state that where the gas sold or
purchased and transported through a common carrier pipeline or any
other common transport or distribution system becomes co-mingled
and fungible with other gas in the pipeline or system and such gas is
introduced into the pipeline or system in one state and is taken out from
the pipeline in another state, such sale or purchase of gas shall be
deemed to be a movement of goods from one state to another and
Central Sales Tax will be applicable on such transaction.
7.4 Central Sales Tax Act, 1956
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Chapter 8 Other Significant Proposals
8.1 Significant Proposals – Business Incentives
8.1.1 As a measure to support the export sector, the duty
drawback scheme has been widened and deepened to
include more products and countries.
8.1.2 “Stand Up India Scheme” to facilitate at least two
projects per bank branch, one for each category of
entrepreneur i.e. SC/ ST and woman. This will benefit at
least 2.5 lakh entrepreneurs.
8.1.3 A new model Shops and Establishments Bill to be
circulated to the state governments
8.1.4 To provide calibrated marketing freedom in order to incentivise gas production
from deep-water, ultra deep-water and high pressure-high temperature areas.
8.1.5 Comprehensive plan, spanning next 15 to 20 years, to augment the investment
in nuclear power generation to be drawn up.
8.1.6 It is proposed to amend Companies Act to improve environment for start-ups
8.1.7 Government to contribute 8.33% for all new employees (where basic salary
does not exceed Rs. 15,000 p.m.) enrolling in EPFO for the first 3 years of their
employment. Budget provision of Rs. 1,000 crores for this scheme.
8.2 Liberalization of FDI Provisions proposed
Sr.
No.
Sector-wise Budget Announcements
1. Insurance and Pension
Sector
Foreign investment up to 49% will be allowed in
the insurance and pension sectors under the
automatic route, subject to the extant guidelines
on Indian management and control to be verified
by the Regulators.
2. FDI in Asset
Reconstruction
Companies (ARCs)
100% FDI in ARCs will be permitted through
automatic route. Foreign Portfolio Investors (FPIs)
will be allowed up to 100% of each tranche in
securities receipts issued by ARCs subject to
sectoral caps.
3. NBFC Sector FDI will be allowed beyond the 18 specified NBFC
activities under the automatic route in other
activities which are regulated by financial sector
regulators
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8.3 Other Measures – Ease of Doing Business for Foreign Investors
8.4 FEMA
8.3.1 With a view to promote Make in India and following the practices in advanced
countries, foreign investors will be accorded Residency Status subject to
certain conditions. Currently, these investors are granted business visa only up
to 5 years at a time.
8.3.2 In order to ensure effective implementation of Bilateral Investment Treaties
signed by India with other countries, it is proposed to introduce a Centre State
Investment Agreement. This will ensure fulfilment of obligations of the State
Governments under these Treaties. States which opt to sign these Agreements
will be seen as more attractive destinations by foreign investors.
8.4.1 Section 14A is proposed to be inserted in FEMA to incorporate provisions
contained under the Second Schedule appended to the IT Act so as to empower
an officer not below the rank of Assistant Director to recover arrears of penalty
Sr.
No.
Sector-wise Budget Announcements
4. FDI in marketing of
food products
produced and
manufactured
As a measure to benefit farmers and give impetus
to food processing industry and create vast
employment opportunities, 100% FDI is proposed
to be allowed in marketing of food products
produced and manufactured in India through FIPB
route.
5. Other Significant Measures
(a) Investment limit for
foreign entities in
Indian stock
exchanges
Investment limit for foreign entities in Indian stock
exchanges will be enhanced from 5 to 15% on par
with domestic institutions. This will enhance global
competitiveness of Indian stock exchanges and
accelerate adoption of best-in-class technology
and global market practices.
(b) Eligible FDI to include
hybrid instruments
The basket of eligible FDI instruments will be
expanded to include hybrid instruments subject to
certain conditions
(c) Investment by FPIs in
Central Public Sector
Enterprises
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.
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under the FEMA by exercising the powers conferred under the IT Act.
8.4.2 Infrastructure Development – Railways
nIt has been proposed to launch “Foreign Rail Technology Cooperation
Scheme” in order to achieve higher quality services.
nIt is proposed to open e-ticketing facility to foreign debit / credit cards
held by foreign tourists and NRIs by June 2016.
nLIC will set up a dedicated fund to provide credit enhancement to
infrastructure projects. The fund will help in raising the credit rating of
bonds floated by infrastructure companies and facilitate investment from
long term investors.
nRBI will issue guidelines to encourage large borrowers to access a certain
portion of their financing needs through market mechanism instead of
the banks.
nInvestment basket of FPIs will be expanded to include unlisted debt
securities and pass through securities issued by securitisation SPVs.
nFor developing and enabling eco system for the private placement
market in corporate bonds, an electronic auction platform will be
introduced by SEBI for primary debt offer.
nA complete information repository for corporate bonds, covering both
primary and secondary market segments will be developed jointly by RBI
and SEBI.
nA framework for an electronic platform for repo market in corporate
bonds will be developed by RBI.
8.6.1 RBI Act is being amended to provide statutory basis for a Monetary Policy
Framework and a Monetary Policy Committee through the Finance Bill 2016. A
committee-based approach will add lot of value and transparency to monetary
policy decisions.
8.6.2 To continue with the ongoing reform programme and ensure passage of the
Constitutional amendments to enable implementation of the Goods and
Service Tax, the passage of Insolvency and Bankruptcy law and other
important reform measures.
8.6.3 It is proposed to set-up a Committee to review the implementation of the FRBM
8.5 Deepening of Corporate Bond Market
8.6 Significant Proposals – Proposed New Legislations / Amendments /
Announcements
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Act.
8.6.4 Passenger road transport segment to be revamped with reforms (including
Amendments to be made in Motor Vehicles Act).
8.6.5 Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to
hold up to 100% stake in the ARC and permit non-institutional investors to
invest in Securitization Receipts.
8.6.6 A comprehensive Code on Resolution of Financial Firms to be introduced.
8.6.7 Comprehensive central legislation to deal with illicit deposit taking schemes to
be introduced.
8.6.8 Department of Investment and Public Asset Management to oversee
disinvestment in public sector.
8.6.9 Steps to revitalise PPPs:
nPublic Utility (Resolution of Disputes) Bill will be introduced during 2016-
17
nGuidelines for renegotiation of PPP Concession Agreements will be
issued
nNew credit rating system for infrastructure projects to be introduced
nA new policy for management of Government investment in Public
Sector Enterprises, including disinvestment and strategic sale approved.
8.7.1 Undertake important reforms by:
ngiving a statutory backing to AADHAR platform to ensure benefits reach
the deserving
nincentivising gas discovery and exploration by providing calibrated
marketing freedom
nprovide legal framework for dispute resolution and re-negotiations in
PPP projects and public utility contracts
nundertake important banking sector reforms and public listing of general
insurance companies
8.7 Other Proposals
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Chapter 9 Impact On Select Industries
9.1 Gems And Jewellery Industry
9.1.1 Key Highlights
nThe Gems and Jewellery
sector plays a significant
role in the Indian economy,
contributing around 6% to
7% of the country’s GDP. It
is substantially export oriented and labour intensive sector.
nBased on its potential for growth and value addition, the Government of
India has declared the Gems and Jewellery sector as a focus area for
export promotion. The Government has recently undertaken various
measures to promote investments and to upgrade technology & skills to
promote ‘Brand India’ in the international market.
nOverall exports from the gem and jewellery industry in India during the
first six months of FY 2015-16 stood at $19.22 billion, a decline of 5.59%
over the $20.3 billion exported during the same period last year.
nThe exports of cut and polished diamonds during this period fell by
13.81% to $10.42 billion this year from $12.09 billion last year, while the
import of rough diamonds fell from $9.4 billion last year to $6.95 billion
this year, a decline of 26%.
9.1.2 Positive Proposals / Impact
nNew manufacturing companies, incorporated on or after 1 March, 2016
will be given an option to be taxed at 25% plus surcharge and cess
provided they do not claim profit linked or investment linked deductions
and do not avail of investment allowance and accelerated depreciation.
nSmall enterprises i.e. companies with turnover not exceeding Rs.
5,00,00,000 (in the FY ending 31 March 2015) will be taxed at lower rate
of 29% plus applicable surcharge and cess.
nNo 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 notified Special Zone.
nRedemption of Sovereign Gold Bonds under the Sovereign Gold Bond
Scheme, 2015 by an individual will not be treated as transfer and
therefore shall be exempt from tax on capital gains.
nAggregate annual limit of Rs. 75,000 proposed to be increased upto Rs.
100,000 for deduction of tax at source under section 194C.
nThreshold limit for deduction of tax at source under section 194H
proposed to be increased from Rs. 5,000 to Rs. 10,000. Rate of tax
deduction proposed to be reduced from 10% to 5%
nThe turnover limit under presumptive taxation under section 44AD of
the IT Act will be increased from Rs. 1,00,00,000 to Rs. 2,00,00,000
which will bring relief to a larger number of assessees in the MSME
sector.
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nConcessional 10% rate of tax on income from worldwide exploitation of
patents developed and registered in India by a resident.
nPeriod for getting benefit of concessional treatment on long term capital
gains in case of unlisted companies is proposed to be reduced from 3 to 2
years.
nDetermination of residency of foreign company on the basis of POEM is
proposed to be deferred by 1 year.
nGovernment will contribute 8.33% towards the Employee Pension
Scheme all new employees enrolling in EPFO for the first three years of
their employment. The scheme will incentivize new employment
generation in the sector and will be applicable to those with salary up to
Rs. 15,000/- per month.
nDomestic taxpayers can declare undisclosed income or such income
represented in the form of any asset by paying tax at 30%, surcharge at
7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed
income. Declarants will have immunity from prosecution. Scheme shall be
open from 1 June 2016 to Sept 30 2016
nNew Dispute Resolution Scheme to be introduced. No penalty in respect
of cases with disputed tax up to Rs. 10 lacs. Cases with disputed tax
exceeding Rs. 10 lakh to be subjected to 25% of the minimum of the
imposable penalty. Any pending appeal against a penalty order can also
be settled by paying 25% of the minimum of the imposable penalty and
tax interest on quantum addition. G&J companies facing various indirect
tax litigations may avail benefit of this scheme.
nReduced penalty rates to be 50% of tax in case of underreporting of
income and 200% of tax where there is misreporting of facts.
nIt is proposed to increase rate of interest on refund from 6% to 9% in case
it is related to delay in giving Appellate order by more than 90 days.
nThe Notification No. 41/2012-ST, dated 29 June 2012, was amended by
notification No.1/2016-ST dated 3 February 2016 so as to, inter alia, allow
refund of service tax on services used beyond the factory or any other
place or premises of production or manufacture of the said goods for the
export of the said goods. This amendment is now proposed to be made
effective from the date of application of the parent notification (i.e.
retrospectively from 1 July 2012).
9.1.3 Negative Proposals / Impact
nAdditional tax at the rate of 10% of gross amount of dividend will be
payable by the Individual, Hindu undivided family (HUF) or a firm who is
resident in India, receiving dividend in excess of Rs. 10,00,000 per annum.
nSurcharge to be raised from 12% to 15% on persons, other than
companies, firms and co-operative societies having income above Rs.
1,00,00,000.
nTax to be collected at the rate of 1% on sale of motor vehicle of the value
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exceeding Rs. 10,00,000 and sale of goods and services in cash
exceeding Rs. 2,00,000.
nIn case of superannuation funds and recognized provident funds,
including EPF, going forward, only 40% of corpus created out of
contributions made on or from 1 April 2016 will be tax free.
nPhasing out deduction under Income tax :
– Accelerated depreciation wherever provided in IT Act will be limited
to maximum 40% from 1 April 2017.
– Benefit of deductions for research would be limited to 150% from 1
April 2017 and 100% from 1 April 2020.
– Benefit of section 10AA to new SEZ units will be available to those
units which commence activity before 31 March 2020.
– The weighted average deduction under section 35CCD for skill
development will continue up to 1 April 2020.
services.
nRate of interest rationalized @ 24% in case amount collected but not paid
and @ 15% in all other cases as against the present rate of 18% to 30%, as
the case may be.
nExcise duty of 1% without input tax credit or 12.5% with input tax credit
on articles of jewellery (excluding silver jewellery, other than studded
with diamonds and some other precious stones) with a higher exemption
and eligibility limits of Rs. 6,00,00,000 and Rs. 12,00,00,000 respectively.
as per Rule 5 of Point of Taxation Rules, 2011 and that the transactions
other than those falling under 2 scenarios specified in Rule 5 shall be
liable to new levy.
nRefined gold bars manufactured from gold dore bar, silver dore bar, gold
ore or concentrate, silver ore or concentrate, copper ore or concentrate.
Prospectively, the excise duty exemption under the existing area based
exemptions on refined gold is being withdrawn – rate of duty increase
from 9% to 9.5%
nFor refined silver manufactured from silver ore or concentrate, silver dore
bar, or gold dore bar, the excise duty exemption under the existing area
based exemptions is being withdrawn – rate of duty to increase from 8%
to 8.5%
nCustoms duty on Imitation jewellery increased from 10% 15%
nCVD increased on Gold dore bars from 8% to 8.75%
nCVD increased on Silver dore from 7% to 7.75%
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9.2 Entertainment and Media Industry
9.2.1 Key highlights
nThe Media and Entertainment (M&E) industry broadly comprises
Television, Films, Print, Electronic Media, Radio, Music, Animation, Digital
Advertising, Gaming etc., Each of these segments has their own impact
on the masses.
nThe Government of India has supported M&E industry’s growth by taking
various initiatives such as digitising the cable distribution sector to
attract greater institutional funding, increasing FDI limit from 74% to
100% in cable and DTH satellite platforms and granting industry status to
the film industry for easy access to institutional finance.
nThe Indian M&E industry is on an impressive growth path. The revenue
from advertising is expected to grow at a CAGR of 13% and will exceed
Rs.81,600 crore (US$ 12.29 billion) in 2019 from Rs.41,400 crore (US$
6.24 billion) in 2014. Internet access has surpassed the print segment as
the second-largest segment contributing to the overall pie of M&E
industry revenues.
9.2.2 Positive proposal/Impacts
nNew manufacturing companies incorporated on or after 1 March 2016 to
be given an option to be taxed at 25% plus surcharge and cess provided
they do not claim profit linked or investment linked deductions and do not
avail of investment allowance and accelerated depreciation.
nIncrease in the turnover limit under presumptive taxation scheme under
section 44AD of the IT Act to Rs.2,00,00,000 to bring big relief to a large
number of assessees in Cinema production, content for TV, Event
management and other related activities.
n100% deduction of profits for 3 out of 5 years for startups setup during
April 2016 to March 2019. MAT will apply in such cases.
nSmall enterprises i.e. companies with turnover not exceeding
Rs.5,00,00,000 (in the FY ending 31 March 2015) will be taxed at lower
rate of 29% plus applicable surcharge and cess.
nPeriod for getting benefit of long term capital gain regime in case of
unlisted companies is proposed to be reduced from 3 to 2 years.
proposed to be deferred by 1 year so as to bring in better clarity on
applicability of the said provisions.
nConcessional rate of tax @ 10% on income from worldwide exploitation of
nAggregate annual limit of Rs.75,000 proposed to be increased up to
Rs.100,000 for TDS under section 194C of the IT Act.
nThreshold limit for TDS under section 194H of the IT Act proposed to be
increased from Rs.5,000 to Rs.10,000. Rate of tax deduction proposed to
be reduced from 10% to 5%.
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open from 1 June 2016 to 30 September 2016.
nReduced Penalty rates to be 50% of tax in case of under-reporting of
start-ups.
nModel Shops and Establishments Bill to be circulated to States to uniform
law to benefit large media and entertainment organization across the
Country.
nChanges in customs and excise duty rates on certain inputs to reduce
costs and improve competitiveness of domestic industry in sectors like
paper, paperboard & newsprint.
nIncrease in free baggage allowance for international passengers. Filing of
baggage only for those carrying dutiable goods.
9.2.3 Negative Proposals / Impact
companies, firms and co-operative societies having income above
Rs.1,00,00,000.
nEqualization levy of 6% of gross amount for payment made to non-
residents exceeding Rs.1,00,000 a year in case of B2B transactions
payable by the Individual, HUF or a firm who is resident in India, receiving
dividend in excess of Rs.10,00,000 p.a.
nEffective service tax rate to increase to 15% (including Swachh Bharat
Cess) in view of the proposal to levy additional cess @ 0.5% (Krishi
Kalyan Cess) w.e.f. 1 June 2016 on all or any of the taxable services .
nRate of interest rationalized @ 24% in case of amount collected but not
paid and @ 15% in all other cases as against the present rate of 18% to
30%, as the case may be.
as per Rule 5 of Point of Taxation Rules, 2011 and that transactions other
than those falling under 2 scenarios specified in Rule 5 shall be liable to
new levy.
nIndia has well regarded and world class IT& ITES industry holding on to its
leadership position globally with 55% of market share with a revenue
over US $146 billion of exports and having CAGR @ 15% and is expected
9.3 Information Technology / ITES SECTOR
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to touch US $300 billion by 2020.
nIndia, the fourth largest base for new businesses in the world and home
to over 3,100 tech start-ups, is set to increase its base to 11,500 tech
start-ups by 2020.
nThe sector's contribution to the country's GDP has risen to 9.5% in 2015-
16 and proved as a largest private sector employer.
9.3.2 Positive Proposals / Impact
nEligible start-ups can avail 100% deduction of profits and gains for any 3
consecutive years out of 5 years from the year in which the eligible
start-up is incorporated.
nSmall enterprises i.e. companies with turnover not exceeding
Rs.5,00,00,000 (in the FY ending 31 March 2015) will be taxed at lower
rate of 29% plus applicable surcharge and cess.
nConcessional 10% rate of tax on income from worldwide exploitation of
proposed to be deferred by 1 year so as to bring in better clarity on
applicability of the said provisions.
nBenefit of section 10AA of the IT Act to new SEZ units will be available to
those units which commence activity before 31 March 2020.
nThe weighted deduction under section 35CCD for skill development will
continue up to 1 April 2020.
nPeriod for getting benefit of long term capital gain regime in case of
unlisted companies is proposed to be reduced from 3 to 2 years.
nAggregate annual limit of Rs.75,000 proposed to be increased up to
Rs.100,000 for TDS under section 194C of the IT Act.
nThreshold limit for TDS under section 194H of the IT Act proposed to be
increased from Rs.5,000 to Rs.10,000. Rate of tax deduction proposed to
be reduced from 10% to 5%.
open from 1 June 2016 to 30 September 2016.
nReduced Penalty rates to be 50% of tax in case of under-reporting of
start-ups.
9.3.3 Negative proposals/Impact
companies, firms and co-operative societies having income above
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Rs.1,00,00,000.
nEqualization levy of 6% of amount of consideration exceeding
Rs.1,00,000 for specified services received or receivable by a non-
resident not having PE in India from a resident in India who carries
business or profession, or a non-resident having PE in India.
nBenefit of deductions for Scientific Research paid to approved scientific
research association would be limited to 150% from 1 April 2017 and 100%
from 1 April 2020.
nNo deduction shall be available in respect of profits derives from
development of SEZ (section 80-IAB of the IT Act) from AY 2018-19.
payable by the Individual, HUF or a firm who is resident in India, receiving
dividend in excess of Rs.10,00,000 per annum.
services.
nRate of interest rationalized @ 24% in case amount collected but not paid
and @ 15% in all other cases as against the present rate of 18% to 30%, as
the case may be.
as per Rule 5 of Point of Taxation Rules, 2011 and that transactions other
than those falling under 2 scenarios specified in Rule 5 shall be liable to
new levy.
nInfrastructure sector is responsible for propelling India’s overall
development and enjoys intense focus from Government. The
Government of India along with the governments of the respective
States have taken several initiatives to encourage the development in the
sector. The Smart City Project, where there is a plan to build 100 smart
cities, is a prime opportunity for the real estate companies.
nThe Government of India has earmarked Rs 50,000 crore (US$ 7.5 billion)
to develop 100 smart cities across the country. The World Bank has
approved a US$ 650 million debt funding for a part of the eastern arm of
the Dedicated Freight Corridor (DFC) project in India.
9.4.2 Positive proposals / impacts
nIn housing sector, an undertaking carrying on housing projects, approved
between June 2016 to March 2019, of constructing flats of 30 sq metres
in 4 metro cities and 60 sq metres in other cities is eligible to claim 100%
deduction of profits subject to compliance of certain conditions. MAT /
AMT will apply in such cases.
nEligible start-ups can avail 100% deduction of profits and gains for any 3
9.4 Real Estate and infrastructure Industry
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consecutive years out of 5 years from the year in which the eligible
start-up is incorporated.
nDeduction for additional interest of Rs. 50,000 per annum in case of first
time home buyers where the loans up to Rs. 35 lac sanctioned in FY
2016-17 and house cost does not exceed Rs. 50 lacs. This deduction is
over and above the limit of Rs.2,00,000 provided under section 24 of the
Income tax Act.
nDeduction of Interest on borrowed capital for acquisition or construction
of self occupied house property shall be available if the acquisition or
construction is completed within 5 years as against 3 years earlier.
nSection 25A, 25AA and 25B merged to section 25A to bring uniformity in
treatment of unrealized rent and receipt of arrear rent. Both, receipt of
arrear of rent and unrealized rent received subsequently, shall be taxed in
the year in which the same is received or realized and 30% deduction
shall be allowed whether taxpayer own the property or not in that
financial year.
nSection 50C has been amended to rationalize the situation where the
date of agreement fixing the amount of consideration for transfer of
immovable property and date of registration are not same then the
stamp duty value on the date of the agreement may be taken for the
purpose of computing full value of consideration. This shall apply only in
the case where amount of consideration referred therein or a part
thereof paid otherwise than cash.
nTo facilitate investment in REITs, dividend distributed out of income of
SPV to the REITs and InvITs having specified shareholding, will not be
subjected to DDT.
nCorporate tax rate for relatively smaller domestic companies with
turnover not exceeding Rs. 5 crores (in the financial year ending 31 March
2015) to be 29% plus applicable surcharge plus cess.
nDirect Tax Dispute Resolution Scheme 2016 proposed to be introduced
for tax arrears and specified tax where the assessee has the option to
settle the case by paying tax and concessional interest and penalty.
nThe limit of turnover for applicability of Presumptive taxation scheme
under section 44AD for specified businesses, increased from Rs. 1 crore
to Rs. 2 crores.
nWeighted deduction under section 35CDD for skill development will
continue up to 1 April 2020.
nAs per Budget announcements, period for getting benefit of long term
capital gains in case of shares of unlisted companies proposed to be
reduced from 3 years to 2 years.
nAn enterprise starts development, operation and maintenance of any
infrastructure facility on or after 1 April 2017 shall be eligible for
investment linked deduction under section 35AD.
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nPayment to Railway for use of Railway assets is brought within the ambit
of section 43B. In other words, payment to Railway shall be allowed on
the payment basis.
nFollowing changes proposed in TDS provisions which has impact on real
estate and infrastructure industry:
Section
Proposed
Limit (Rs.)
194C Payment to contracts
Existing
limit (Rs.)
Heads
Aggregate
annual limit
of 75,000
Aggregate
annual limit
of 1,00,000
194LA Payment of compensation on
acquisition of certain immovable
property
2,00,000 2,50,000
194H Commission or brokerage 5,000 15,000
Section
Proposed Rate
of TDS (%)
Existing Rate
of TDS(%)
Heads
194H Commission or brokerage 10% 5%
194L Payment of compensation on
acquisition of capital asset
To be
omitted wef
1 June 2016
nSteps to re-vitalize PPPs proposed through:
– Public Utility (Resolution of Disputes) Bill to be introduced during
2016-17.
– Guidelines for renegotiation of PPP Concession Agreements to be
issued
– New credit rating system for infrastructure projects to be
introduced
nServices by way of construction, erection, etc. of original works under
Housing for All (HFA) (Urban) Mission / PMAY, is exempted from service
tax.
nServices by way of construction, erection, etc., of original works
pertaining to low cost houses up to a carpet area of 60 sq. mtr. per house
(i.e. 645 sq ft.) in a housing project approved by the competent authority
under the “Affordable housing in partnership” component of housing for
All (Urban) Mission/ Pradhan Mantri Awas Yojana (PMAY) or any housing
scheme of a State Government shall be exempted.
nExemption to construction, maintenance in relation to various projects,
contracts etc. which was removed w.e.f. 1 April 2015 been restored and
given retrospective exemption.
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India to place outside India not to be treated as exempted services for the
purpose of CENVAT Credit Rules. Thus, shipping lines will be entitled to
avail CENVAT credit on inputs and input services used in providing said
services.
nAmendment in abatement rates
Sr
No
CENVAT CreditAbatement rate (%)
Particulars
Transport of passengers
by rail
Not
available
Available
only of
input
services
1
Existing Proposed Existing Proposed
70 70
Transport of goods other
than in containers by rail
2 70 70
Transport of goods in
containers by rail
3 70 70
Transport of goods by
vessel
4 70 70
Services by way of
construction of residential
complex, building, civil
structure, or a part
thereof-
a) High end flats
b) Low end flats
Available
only of
input
services
Available
only of
input
services
5
70 70
nNo service tax on construction of affordable houses up to 60 sq metres
under any scheme of the Central or State Government including PPP
schemes.
nPresently excise duty exemption is available to Concrete Mix
manufactured at site for use in construction work at site is now also
extended to Ready Mix Concrete.
nTo promote use of refrigerated containers, basic custom and excise duty
on them reduced to 5% and 6% from 10% and 12.5% respectively.
nServices provided by way of construction or maintenance etc. of canal,
dam or other irrigation work provided to Government authorities during
the period from 1 July 2012 to 29 January 2014 are being exempted from
service tax with consequential refund.
9.4.3 Negative proposals / Impact
nNo deduction shall be available under section 80IAB where development
of SEZ begins on or after 1 April 2017.
nNo deduction shall be available to enterprises under section 80IA of
Income tax Act, which starts development, operation and maintenance
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of any infrastructure facility on or after 1 April 2017.
nAccelerated depreciation provided under Income tax Act will be limited to
maximum 40% from 1 April 2017 for all assets (whether old or new).
nWeighted deduction under section 35(1)(ii), 35(2AA) and 35 (2AB) of the
Income tax Act reduced to 150% from FY 2017-18 to FY 2019-20 and
from FY 2020-21 onwards the deduction shall be restricted to 100%.
nDeduction under section 35(1) (iia) and (iii) shall be reduced from 125% to
100% with effect from 1 April 2017.
nDeduction under section 35AD of the income tax Act is reduced to 100%
from 150% in case of cold chain facility, warehousing facility, affordable
housing projects, building and operating hospitals with effect from 1 April
2017.
nIn addition to existing conditions for availing tax neutral conversion from
Company to LLP, value of total assets as per books in any preceding 3
years not to exceed Rs. 5 crores.
nDividend received by Individual, HUF and Firms in excess of Rs.10 lacs per
annum are now required to pay additional tax 10% on gross amount of
dividend received.
services.
nInfrastructure cess of 1% proposed to be levied on small petrol, LPG, CNG
cars, 2.5% proposed on diesel cars of certain capacity and 4% proposed
on other higher engine capacity vehicles and SUVs.
nServices by way of construction, erection, commissioning or installation
of original works pertaining to monorail and metro shall now be liable to
service tax. However, where contracts were entered into before 1 March
2016, on which appropriate stamp duty, was paid, shall remain exempt.
nExemptions to the services of transport of passenger, by ropeway, cable
car or aerial tramways is being withdrawn with effect from 1 April 2016.
nServices by way of transportation of passengers by stage carriage which
was earlier not taxable has been proposed to be liable to service tax.
However, non-air conditioned stage carriage has been excluded from the
purview of service tax by inserting the same in the Mega Exemption
w.e.f. 1 June 2016.
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Chapter 10 DTAA Rates
Sr.
No.
Country Dividend
[Note 1]
Interest Royalty FTS Remarks
Tax rate Tax rate Tax rateTax rate
One of the major aspects considered by
businesses, while operating on an
international scale, is the complexity of
taxation systems existing in various
jurisdictions. India being a major player in
the world market has entered into
comprehensive DTAAs with almost 92
countries in order to mitigate the taxation
complexities and to facilitate international business transactions. In this chapter, we
have compiled the tax rates in respect of Dividend, Interest, Royalty and Fees for
Technical Services, based on the DTAAs entered into by India with various countries.
Rate as per the IT Act Nil [Note 1] 20% 10% 10% Rate as per IT Act (to be further
[Note 6 [Note 3 [Note 3 increased by applicable surcharge
and 7] and 7] and 7] and education cess) or DTAA rate,
whichever is more beneficial shall
apply.
1. Albania 10% 10% [Note 4] 10% 10%
2. Armenia 10% 10% [Note 4] 10% 10%
3. Australia 15% 15% Note 5 Covered
under
Article for
Royalty
4. Austria 10% 10% [Note 4] 10% 10%
5. Bangladesh 10% / 15% 10% [Note 4] 10% No 10% tax on dividends if at least
separate 10% of the capital is owned by
provision company; in any other case 15%.
6. Belarus 10% / 15% 10% [Note 4] 15% 15% 10% tax on dividends if at least
25% of the shares are owned by
company; in any other case 15%.
7. Belgium 15% 15% / 10% 10% 10% 1. Interest taxable at 10% if
recipient is bank; in any other
case 15%.
2. MFN clause with respect to
Royalty and FTS.
8. Botswana 7.50% / 10% 10% [Note 4] 10% 10% 7.50% tax on dividends if at least
25% of the capital is owned by
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Sr.
No.
Country Dividend
[Note 1]
9. Brazil 15% 15% [Note 4] 15% (25% Covered 15% tax on dividends if paid to a
for under company; in any other case as per
trademark) Article for domestic tax laws.
Royalty
10. Bulgaria 15% 15% [Note 4] 15% / 20% 20% 15% tax on royalties if relating to
copyrights of literary, artistic or
scientific works, other than
cinematograph films or films or
tapes used for radio or television
broadcasting; in any other case
20%.
11. Bhutan 10% 10% [Note 4] 10% 10%
12. Canada 15% / 25% 15% [Note 4] Note 5 Note 5 15% tax on dividends if at least 10%
of the voting power is owned by
13. China 10% 10% [Note 4] 10% 10%
14. Croatia 5%/15% 10 % [Note 4] 10% 10% 5% tax on dividends if at least 10%
of the capital is owned by company
(other than partnership); in any
other case 15%.
15. Cyprus 10% / 15% 10% [Note 4] 15% 15% / 10% 1. 10% tax on dividends if at least
2. Technical Fees are taxable @10%
under Article 13 and Fees for
included Services is chargeable
@15% under Article 12.
16. Czech Republic 10% 10% [Note 4] 10% 10%
17. Colombia 5% 10% [Note 4] 10% 10%
18. Denmark 15% / 25% 15% / 10% 20% 20% 1. 15% tax on dividends if at least
[Note 4] 25% of the shares are owned by
company; in any other case
25%.
2. Interest taxable at 10% if
case 15%.
19. Estonia 10% 10%[Note 4] 10% 10%
20. Ethiopia 7.50% 10% [Note 4] 10% 10%
21. Finland 10% 10% [Note 4] 10% 10% MFN clause with respect to
Dividend, Interest, Royalty and FTS.
Chapter 10 DTAA RATES

22. France 10% 10% [Note 4] 10% 10% MFN clause with respect to
23. Fiji 5% 10% [Note 4] 10% 10%
24. Georgia 10% 10% [Note 4] 10% 10%
25. Germany 10% 10% [Note 4] 10% 10%
26. Greece Taxable as per domestic laws in No
source country separate
provision
27. Hungary 10% 10% [Note 4] 10% 10% MFN clause with respect to
28. Indonesia 10% / 15% 10% [Note 4] 15% No 1. 10% tax on dividends if at least
separate 25% of the shares are owned by
2. The tax rates on dividend
income, royalties and FTS (In the
earlier DTAA, no separate
provision for FTS) have been
reduced to 10%, but the same is
yet to be notified.
29. Iceland 10% 10% [Note 4] 10% 10%
30. Ireland 10% 10% [Note 4] 10% 10%
31. Israel 10% 10% [Note 4] 10% 10% MFN clause with respect to
32. Italy 15% / 25% 15% [Note 4] 20% 20% 15% tax on dividends if at least 10%
of the shares are owned by
33. Japan 10% 10% [Note 4] 10% 10%
34. Jordan 10% 10% [Note 4] 20% 20%
35. Kazakhstan 10% 10% [Note 4] 10% 10% MFN clause with respect to
36. Kenya 15% 15% [Note 4] 20% No 17.50% tax in case of Management
separate and Professional fees.
provision
37. Korea 15% / 20% 15% / 10% 15% 15% 1. 15% tax on dividends if at least
company;inanyothercase 20%.
case 15%.
Sr.
No.
Country Dividend
[Note 1]

38. Kuwait 10% 10% [Note 4] 10% 10%
39. Kyrgyz Republic 10% 10% [Note 4] 15% 15%
40. Latvia 10% 10% [Note 4] 10% 10%
41. Libya Taxable as per domestic laws in No
source country separate
provision
42. Lithuania 5%/15% 10% 10% 10% 5% tax on dividends if at least 10%
of the shares are beneficially
owned by company (other than a
partnership); in any other case
15%.
43. Luxembourg 10% 10% [Note 4] 10% 10%
44. Macedonia 10% 10% [Note 4] 10% 10%
45. Malaysia 5% 10% [Note 4] 10% 10%
46. Malta 10% 10% [Note 4] 10% 10%
47. Mauritius 5% / 15% Taxable as 15% No 5% tax on dividends if at least 10%
per domestic separate of the capital is owned by
laws [Note 4] provision company; in any other case 15%.
48. Mongolia 15% 15% [Note 4] 15% 15%
49. Montenegro 5% / 15% 10% [Note 4] 10% 10% 5% tax on dividends if at least 25%
(other than a partnership); in any
other case 15%.
50. Morocco 10% 10% [Note 4] 10% 10%
51. Mozambique 7.50% 10% [Note 4] 10% No
separate
provision
52. Myanmar 5% 10% [Note 4] 10% No
separate
provision
53. Namibia 10% 10% [Note 4] 10% 10%
54. Nepal 5%/10% 10% [Note 4] 15% No 1. 5% tax on dividends if at least
Royalty, shall be applicable if
Nepal enters into treaty with
any other country for a lower
rate on royalties.
Sr.
No.
Country Dividend
[Note 1]

55. Netherlands 10% 10% [Note 4] 10% 10% MFN clause with respect to
56. New Zealand 15% 10% [Note 4] 10% 10%
57. Norway 10 % 10 % [Note 4] 10% 10%
58. Oman 10% / 10% [Note 4] 15% 15% 10% tax on dividends if at least
12.50% 10% of the shares are owned by
company; in any other case
12.50%.
59. Philippines 15% / 20% 15% / 10% 15% No 1. 15% tax on dividends if at least
provision company; in any other case
20%.
2. Interest taxable @ 10% if
recipient is Financial Institution
(including an insurance
company) and where the
interest is payable by a company
resident of Philippines to a
resident of India in respect of
public issues of bonds,
debentures or similar
obligations. In any other case
15%.
3. Royalty taxable @ 15% if it is
payable in pursuance of any
collaboration agreement
approved by the Government of
India. No rates prescribed in any
other case.
60. Poland 10% 10% [Note 4] 15% 15%
61. Portuguese 10% / 15% 10% [Note 4] 10% 10% 10% tax on dividends if at least
Republic 25% of the capital stock is owned
by company for an uninterrupted
period of 2 years prior to the
payment of dividend; in any other
case 15%.
62. Qatar 5% / 10%. 10% [Note 4] 10% 10% 5% tax on dividends if at least 10%
of the shares are owned by
63. Romania 10% 10% [Note 4] 10% 10%
64. Russian 10% 10% [Note 4] 10% 10%
Federation
Sr.
No.
Country Dividend
[Note 1]

Sr.
No.
Country Dividend
[Note 1]
65. Saudi Arabia 5% 10% [Note 4] 10% No
separate
provision
66. Serbia 5% / 15% 10% [Note 4] 10% 10% 5% tax on dividends if at least 25%
(other than a partnership); in any
other case 15%.
67. Singapore 10% / 15% 10% / 15% 10% 10% 1. 10% tax on dividends if at least
recipient is bank or similar
financial institution including an
insurance company; in any other
case 15%.
68. Slovenia 5% / 15% 10% [Note 4] 10% 10% 5% tax on dividends if at least 10%
of the capital is owned by
69. South Africa 10% 10% [Note 4] 10% 10%
70. Spain 15% 15% [Note 4] 10% / 20% 10% 1. 10% tax on royalties if paid for
the use or right to use any
industrial, commercial or
scientific equipment; in any
other case 20%.
Royalty and FTS.
71. Sri Lanka 7.5% 10% [Note 4] 10% 10%
72. Sudan 10% 10% [Note 4] 10% 10%
73. Sweden 10% 10% [Note 4] 10% 10% MFN clause with respect to
74. Swiss 10% 10% [Note 4] 10% 10% MFN clause with respect to
Confederation Dividend, Interest, Royalty and FTS.
75. Syria 5% / 10% 10% [Note 4] 10% No 5% tax on dividends if at least 10%
separate of the shares are owned by
provision company (other than a
partnership); in any other case
10%.
76. Tajikistan 5% / 10%. 10% [Note 4] 10% No 5% tax on dividends if at least 25%
separate of the capital is owned by company
provision (other than a partnership); in any
other case 10%.

77. Tanzania 5%/10% 10% [Note 4] 10% No 5% tax on dividends if at least 25%
separate of the shares are beneficially
provision owned by company; in any other
case 10%.
78. Thailand 15% / 20% 25% / 10% 15% No 1. 15% tax on dividends if at least
[Note 4] separate 10% of the voting shares are
provision owned by payee company and
the payer is an industrial
company, 20% if payer company
is an industrial company or the
payee company owns at least
25% of the voting shares; and in
any other case as per the
domestic laws of the payer
company.
recipient is any financial
institution including an
case 25%.
3. A revised DTAA has been signed
with Thailand, which is effective
from 1 April 2016. As per the
Revised DTAA, the rate of
withholding tax is 10% in respect
of Dividend, Interest and
Royalty. There is no specific
provision with respect to FTS.
79. Trinidad and 10% 10% [Note 4] 10% 10%
Tobago
80. Turkey 15% 10%/15% 15% 15% Interest is taxable at 10% if
recipient is bank, insurance
company or similar financial
institution; in any other case 15%.
81. Turkmenistan 10% 10% [Note 4] 10% 10%
82. Uganda 10% 10% [Note 4] 10% 10%
83. Ukraine 10% / 15% 10% [Note 4] 10% 10% 10% tax on dividends if at least
company (other than a
partnership); in any other
case 15%.
[Note 4]
Sr.
No.
Country Dividend
[Note 1]

84. United Arab 10% 5% / 12.5% 10% No
in any other case 12.50%.
85. United Arab As per
domestic
86. United Kingdom 15% / 10% 15% / 10% Note 5 Note 5 1. Interest taxable at 10% if
case 15%.
2. Dividend taxable at 15% where
dividend is paid out of income
derived directly or indirectly
from immovable property. In
other case-10%.
87. United Mexican 10% 10% 10% 10%
88. United States 15% / 25% 10% / 15%
[Note 4] 10% of the voting stock is
owned by company; in any other
case 25%.
recipient is bonafide bank or
financial institution including an
case 15%.
89. Uruguay 5% 10%[Note 4] 10% 10%
90. Uzbekistan 10% 10% 10% 10%
91. Vietnam 10% 10% [Note 4] 10% 10%
92. Zambia 5% / 15% 10% [Note 4] 10% 10% 1. 5% tax on dividends if at least
company during a period of 6
months immediately preceding
the date of payment of dividend;
in any other case 15%.
Interest taxable at 5% if recipient is
Emirates [Note 4] separate bank or similar financial institution;
provision
As per Taxable in No
Republic (Egypt) domestic source separate
law law country provision
as per
domestic
tax rate
[Note 4]
States [Note 4]
Note 5 Note 5 1. 15% tax on dividends if at least
of America
[Note 4]
Sr.
No.
Country Dividend
[Note 1]

Notes:
1. As per section 115-O of the IT Act, subject to certain exceptions, any amount
declared, distributed or paid by a domestic company by way of dividend shall be
chargeable to DDT effectively @ 20.3576%. In such cases, dividend distributed
(which is subject to DDT) is not subject to any withholding tax and is tax exempt
in the hands of the recipient shareholders. The rates mentioned in the above
table are applicable to dividend other than the dividend declared, distributed or
paid by Indian companies on which DDT is applicable. [Such as deemed dividend
under Section 2(22)(e) of the IT Act.]
2. Unless otherwise provided in the DTAA, both the countries have right to tax.
3. With effect from FY 2015-16, the rate of tax under the IT Act on Royalty and/or
FTS receivable by a non-resident has been reduced to 10% (plus applicable
Surcharge and Education Cess) by the Finance Act, 2015. As per section 90(2) of
the IT Act, tax rate as per the provisions of DTAA or the IT Act, whichever is
beneficial to the assessee, shall apply. For availing the benefit of DTAA,
furnishing of TRC and self declaration in Form 10F by the payee shall be
mandatory.
4. Interest derived and beneficially owned by the Government, a political sub-
division or a local authority or certain institutions like the RBI or Central Bank of
other State or any other institution as may be agreed upon is exempt from
taxation in the country of source.
5. Tax rate is 10% in case of Royalties for equipment rental and fees for services
ancillary or subsidiary thereto. For other cases, the tax rate is 15%. However, for
first 5 years of the agreement, the rate is 20% in case of payer other than
Government or specified institution and 15% for the subsequent years.
6. Lower withholding tax of 5% is applicable in case of interest on borrowing in
foreign currency, interest on long term bond including long term infrastructure
bond, interest from infrastructure debt fund, interest on rupee denominated
bond and government securities.
7. In case, the payee is not able to furnish his PAN to the payer, tax shall be
deducted at the higher of the following rates (i) rate specified in the relevant
provisions of the IT Act (ii) at the rate or rates in force (iii) at the rate of 20%. It is
proposed to amend section 206AA of the IT Act so as to provide that tax shall
not be deducted at a higher rate in case of non-residents not having PAN,
subject to prescribed conditions which are yet to be prescribed.

Chapter 11 TDS Rates
In this chapter, we have compiled the relevant provisions of TDS
relating to residents and non-residents, incorporating herein the
nature of payment, threshold limits for tax deduction and the
applicable rates of TDS for different classes of recipients.
Sr.
No.
Nature of Payment Existing
Threshold for
Deduction
Rate at
which Tax is
to be
Deducted
[Note1]
2
Section Proposed
Threshold for
Deduction w.e.f.
1 June 2016
Proposed
Rate at
which tax
is to be
Deducted
[Note 1]
Accumulated balance
due to an employee
participating in RPF
[Note-2 and 6]
Rs. 30,000 in
aggregate
192A 10% 10%Rs. 50,000 in
aggregate
1 Salary As per slab rates prescribed for senior citizens
(includes very senior citizen) and other individuals
192
3 Interest on Securities
including listed
debentures
[Note-3 and 6]
Rs. 5,000 for interest
on debentures by
public company to
individuals and HUF
193 10% 10%Rs. 5,000 for interest
on debentures by
public company to
individuals and HUF
4 Interest other than
interest on securities
[Note-4, 6 and 7]
Rs. 5,000 /
Rs. 10,000 p.a.
194A 10% 10%Rs. 5,000 /
Rs. 10,000 p.a.
5 Winning from lottery or
crossword puzzle or card
game or other game
Rs. 10,000194B 30% 30%Rs. 10,000
6 Winnings from horse
race
Rs. 5,000194BB 30% 30%Rs. 10,000
7 Payments to contractors
[Note-7 and 8]
Rs. 30,000 for single
transaction or
Rs. 75,000 annual limit
194C 2% (1% for
individual
and HUF)
2% (1% for
individual
and HUF)
Rs. 30,000 for single
transaction or
Rs. 1,00,000 annual
limit
8 Insurance commission Rs. 20,000194D 10% 5%Rs. 15,000
9 Payment in respect of
life insurance policy
[Note-5 and 6]
Less than Rs. 1,00,000194DA 2% 1%Less than
Rs. 1,00,000
10 Payment to non-
resident sportsmen /
entertainer / sports
association
No threshold194E 20% 20%No threshold
11 Payment in respect of
deposits under National
Savings Scheme,1987
[Note 6]
Less than Rs. 2,500194EE 20% 10%Less than Rs. 2,500
Commission, etc. on sale
of Lottery Tickets
Rs. 1,000194G 10% 5%Rs. 15,00012
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Sr.
No.
Nature of Payment Existing
Threshold for
Deduction
Rate at
which Tax is
to be
Deducted
[Note1]
Section Proposed
Threshold for
Deduction w.e.f.
1 June 2016
Proposed
Rate at
which tax
is to be
Deducted
[Note1]
Notes:
1. In case the payee is not able to furnish his / her PAN to the payer, tax shall be deducted at higher
of the following rates (i) rate specified in the relevant provision of the IT Act, (ii) at the rates
in force or (iii) at the rate of 20%. It is proposed to amend section 206AA of the IT Act so as to
provide that tax shall not be deducted at a higher rate in case of non-residents not having PAN,
13 Commission or
brokerage [Note-7]
Rs. 5,000 p.a.194H 10% 5%Rs. 15,000 p.a.
14a Rent of Land / Building /
Furniture or fitting
[Note-6 and 7]
Rs. 1,80,000 p.a.194I 10% 10%Rs. 1,80,000 p.a.
14b Rent of Plant, Machinery
or Equipment [Note-6
and 7]
Rs. 1,80,000 p.a.194I 2% 2%Rs. 1,80,000 p.a.
15 Payment/credit of
consideration to a
resident transferor of
any immovable property
(other than agricultural
land)
Less than
Rs. 50,00,000
194IA 1% 1%Less than
Rs. 50,00,000
16 Fees for professional and
technical services /
royalty / remuneration
to Director other than
salary [Note-7 and 9]
Rs. 30,000 p.a.194J 10% 10%Rs. 30,000 p.a.
18 Income by way of
Interest from
Infrastructure Debt Fund
No threshold194LB 5% 5%No threshold
19 Income by way of
Interest from Indian
Company [Note-10]
No threshold194LC 5% 5%No threshold
20 Income by way of
Interest on certain
Bonds and Government
Securities held by FII and
QFI [Note-11]
No threshold194LD 5% 5%No threshold
21 Payment to non-
resident of sum
chargeable to tax in India
As per the rate in force or rate specified in the relevant DTAAs,
whichever is beneficial [Note-12]
195
17 Payment of
compensation for
acquisition of certain
immovable property
Rs. 2,00,000 p.a.194LA 10% 10%Rs. 2,50,000 p.a.
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subject to conditions which are yet to be prescribed.
2. In case PAN is not furnished by the person entitled to receive the accumulated balance in RPF, the
tax is to be deducted at the maximum marginal rate of 35.535%
3. Interest on securities issued by Company and listed on any recognized stock exchange would not
be subject to deduction of tax if such securities are held in dematerialized form.
4. Under Section 194A, the threshold limit is Rs.10,000 where the payer is a banking company or a
co-operative society engaged in banking business, or in case of deposits with post office under a
scheme notified by Central Government and Rs. 5,000 in any other case.
5. Tax is to be deducted on sums payable other than the amount not includible in the total income
under section 10(10D).
6. Tax is not to be deducted, if the payee furnishes to the payer a declaration in Form No.15G or 15H,
as the case may be.
7. An individual or HUF is not liable to deduct tax. However, an individual or HUF, who is liable to tax
audit under section 44AB during the financial year immediately preceding the financial year in
which sum is credited or paid, shall be liable to deduct tax under sections 194A, 194C, 194H, 194I
and 194J, as the case may be.
8. No tax is required to be deducted at source on credit or payment of transport charges, if the
transporter owns ten or less than ten goods carriages at any time during the previous year and
furnishes a declaration to that effect along with his valid PAN.
9. Tax is required to be deducted on remuneration paid to a director which is not in the nature of
salary.
10. In respect of amount borrowed in foreign currency from a source outside India:
nunder a loan agreement executed after 1 July 2012 but before 1 July 2017; or
nby way of issue of any long term bond issued after 1 October 2014 but before 1 July 2017;
or
nby way of issue of long term infrastructure bond after 1 July 2012 but before 1 July 2017.
11. Interest payable on or after 1 June 2013 but before 1 July 2017 in respect of investment made by FII
or QFI in:
nRupee denominated bond of an Indian Company
nGovernment Security
12. For the purpose of claiming DTAA benefit, the non-resident payee should furnish a valid TRC from
foreign tax authority and a self-declaration in Form 10F.
13. It has been clarified by CBDT that a payer shall not be required to deduct TDS on service tax
component wherever in terms of the agreement between the payer and payee, the service tax
component comprised in the amount payable to a resident payee is indicated separately.
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Chapter 12 Direct Taxes And Service Tax
Compliance Calendar
I. Due dates for filing of Return of Income (‘ROI’), obtaining Tax Audit Report and Transfer Pricing
(Note 1)
Person covered under tax audit (other than those to 30 September
whom transfer pricing is applicable)
Person covered under transfer pricing 30 November
Other persons 30 September 31 July 31 July
II. Advance Tax Payments for Income Tax (Note 2 and 3)
st
1 Installment - on or before 15 June 15%
nd
2 Installment - on or before 15 September 45%
rd
3 Installment - on or before 15 December 75%
th
4 Installment - on or before 15 March 100%
III. Tax Deducted at Source (‘TDS’) (Note 4)
Tax must be deducted at the time of payment,
in case of salary
In case of payments other than salary, at the time of
making payment or credit, whichever is earlier
Tax deducted must be deposited in the bank by 7th day
of following month except tax deducted for payment or
credit made in March must be deposited by 30th April
IV. Tax Collected at Source (‘TCS’)
Tax must be collected at the time of receipt or debit,
whichever is earlier
Tax collected must be deposited within one week from
the last day of the month in which the collection is
made.
V. Due dates for filing of TDS / TCS Returns
For quarter ended June 15 July
For quarter ended September 15 October
For quarter ended December 15 January
For quarter ended March 15 May
Nature of Compliances Company Partnership
Firm / LLP
Individual
and HUF
Person
Applicable
Applicable
DIRECT TAX COMPLIANCE CALENDAR
In this chapter, we have provided an overview of the various direct
tax and service tax compliances from the perspective of a
Company, Partnership Firm (including LLP), Individual and HUF.
Applicable, only
if person is
covered under
tax audit in the
preceding
previous year
Applicable, only
if person is
covered under
tax audit in the
preceding
previous year
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Chapter 12 Direct Taxes And Service Tax Compliance Calendar
VI. Due dates for issue of Form 16 (for Salaries) / Form 16A (for other than Salaries)/ Form 16B (for Sale of
Property) and Form 27D (for TCS)
Issue of Form 16 annually 31 May
Issue of Form 16A / 27D for quarter ended June 30 July
Issue of Form 16A / 27D for quarter ended September 30 October
Issue of Form 16A / 27D for quarter ended December 30 January
Issue of Form 16A / 27D for quarter ended March 30 May
Issue of Form 16B 15 days from the due date of depositing tax
VII. Due date for payment of DDT
Applicable to all companies declaring/paying or
distributing dividend
VIII. Due date of submission of Statement under section 285 of the IT Act (Note 5)
Non-resident having liaison office in India to file Within 60 days
statement in Form 49C from the end of financial year
IX. Due date for filing Annual Information Return under section 285BA of the IT Act
Specified persons to furnish Annual Information 31 August
Return in Form 61A in respect of specified financial
transactions
X. Due dates for filing of appeals before the Income-tax appellate authorities
Objections before the Dispute Resolution Panel Within 30 days
from the receipt of the draft assessment order
Appeal to the Commissioner of Income-tax (Appeals) Within 30 days
from the date of service of notice of
demand or the relevant order
sought to be appealed against
Appeal to the Income-tax Appellate Tribunal (Note 6) Within 60 days
from the date on which order sought
to be appealed against is communicated
Nature of Compliances Company Partnership
Firm / LLP
Individual
and HUF
Person
Not Applicable
NOTES:
1. In case of working partner of a partnership firm, whose accounts are required to be audited under section 44AB of the
IT Act, the date of filing of ROI is 30 September.
2. Advance tax payment for income-tax is applicable to every person where the amount of income-tax payable is
Rs.10,000 or more.
3. It is proposed that an eligible assessee in respect of eligible business referred to in section 44AD opting for
computation of profits or gains of business on presumptive basis, shall be required to pay advance tax of the whole
amount in 1 installment on or before the 15th March of the financial year.
4. A NIL declaration is basically a declaration for non-filing of TDS Statements for those deductors who are not liable to
deduct any tax during the relevant quarter or have not deducted tax during any quarter and subsequently did not file a
TDS Statement under section 200(3) of the IT Act’ 1961 for any quarter.
5. Every person, being a non-resident having liaison office in India shall, in respect of its activities in a financial year, file a
statement in Form No. 49C within 60 days from the end of the financial year i.e. 30 May to the Assessing Officer.
6. Memorandum of cross objection is to be filed within 30 days from the receipt of notice intimating that the appeal has
been preferred before the Tribunal, against any part of the order under appeal, if required.
Within 14 days
from the date
of declaration
or payment or
distribution of
dividend,
whichever is
earlier
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Chapter 12 Direct Taxes And Service Tax Compliance Calendar
Due date for payment of Service Tax (Note 1)
For One Person Company whose aggregate value of
services during previous financial year is Rs. 50,00,000 By 6th of the following month for every quarter
or less, Individual, partnership firm, LLP or HUF
For Others (Companies, Trusts, AOP, Societies, etc.) By 6th of the following month for every month
Interest on late payment of Service Tax (Note 2)
Collection of any amount as service tax but failing to pay
the amount so collected on or before the date on which 24% p.a.
such payment becomes due
In situations other than covered above 15% p.a.
Filing of Service Tax returns
April to September (Note 3) 25 October
October to March (Note 4) 25 April
Late fees for delay in filing of returns (Note 5)
For delay up to 15 days Rs. 500
For delay beyond 15 days up to 30 days Rs. 1,000
For delay beyond 30 days (Note 6) Rs. 1,000 + Rs. 100 per day
Due date for filing of appeal
Particulars
Due dates/quantum of
interest and late filing fees
SERVICE TAX COMPLIANCE CALENDAR
Appeal to be filed before Customs, Excise and Service
Tax Appellate Tribunal (CESTAT) against order of
Commissioner of Central Excise or Commissioner of
Central Excise (Appeals).
Within 3 months from date of receipt of the
order. CESTAT has powers to condone the delay
in filing of appeal if it is satisfied that there was
sufficient cause for not presenting the appeal
within the stipulated period.
Appeal to be filed before Commissioner of Central Excise
(Appeals) against order of adjudication authority
subordinate to Commissioner of Central Excise.
Within 2 months from date of receipt of the
order. The Commissioner of Central Excise
(Appeals) has the power to condone delay in
filing of appeal for a further period of 1 month
provided sufficient cause is shown for non-filing
the appeal within stipulated period of 2 months.
NOTES:
1. The due date for payment of service tax for the month or quarter ended on 31 March is 31 March itself.
2. For service provider having turnover below Rs. 60,00,000 in the preceding financial year or period
covered under notice, the specified rate shall be reduced by 3%.
3. The due date for filing of Service Tax returns for the period April to September for Input Service
Distributor is 30 October.
4. The due date for filing of service tax returns for the period October to March for Input Service Distributor
is 30 April.
5. In case service tax is NIL, the authority may waive the late filing fees on being satisfied that there is
sufficient reason for not filing the return.
6. Maximum late filing fees shall not exceed Rs. 20,000
7. The following categories of person must mandatorily obtain service tax registration and comply with
the provisions:
nEvery person liable to pay service tax;
nAn Input Service Distributor;
nEvery provider of taxable service whose aggregate value of taxable service in financial year exceeds
Rs. 9,00,000.
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ABBREVIATIONS
AE Associated Enterprise
AMT Alternate Minimum Tax
AO Assessing Officer
AOP Association of Persons
ARC Asset Reconstruction Company
AY Assessment Year
B2B Business to Business
BCD Basic Customs Duty
BED Basic Excise Duty
BEPS Base Erosion and Profit shifting
BIRAC Biotechnology Industry Research Assistance
Council
BOI Body of Individuals
BoP Balance of Payment
BSE Bombay Stock Exchange
CAGR Compounded Average Growth Rate
CbC Country by Country
CBDT Central Board of Direct Taxes
CBEC Central Board of Excise and Custom
CESTAT Customs Excise & Service Tax Appellate
Tribunal
CENVAT Central Value Added Tax
CCR Cenvat Credit Rules
CIT Commissioner of Income Tax
CNG Compressed Natural Gas
COFEPOSA Conservation of Foreign Exchange and
Prevention of Smuggling Activities Act
CRISIL Credit Rating Information Services of India
Limited
CTT Commodity Transaction Tax
CVD Additional Duty of Customs levied under
section 3(1) of the Customs Tariff Act, 1975
DDT Dividend Distribution Tax
DIPP Department of Industrial Policy and Promotion
DFC Dedicated Freight Corridor
DRP Dispute Resolution Panel
DSIR Department of Scientific & Industrial Research
DTA Domestic Tariff Area
DTAA Double Taxation Avoidance Agreement
DTH Direct To Home
DVR Digital Video Recorder
EET Exempt, Exempt and Tax
ELSS Equity Linked Savings Scheme
EPFO Employees Provident Fund Organisation
EPFS Employees Provident Fund Scheme
EOU Export Oriented Unit
EU European Union
FDI Foreign Direct Investment
FEMA Foreign Exchange Management Act, 1999
FII Foreign Institutional Investors
FIPB Foreign Investment Promotion Board
FMC Foreign Mining Companies
FOB Free On Board
FPI Foreign Portfolio Investor
FRBM Fiscal Responsibility and Budget Management
Act, 2003
FTS Fees for Technical Services
FY Financial Year
GAAR General Anti Avoidance Rules
GDP Gross Domestic Product
GJEPC Gems and Jewellery Export Promotion Council
GST Goods and Services Tax
HNI High Net-worth Individual
HUF Hindu Undivided Family
ICDS Income Computation and Disclosure Standard
IFSC Indian Financial System Code
InvIT Infrastructure Investment Trust
INR Indian Rupee
IRDA Insurance Regulatory and Development
Authority
IREDA Indian Renewable Energy Development
Agency Limited
IT Information Technology
ITeS Information Technology enabled Services
IT Act Income-tax Act, 1961
ITAT Income Tax Appellate Tribunal
IT Rules Income-Tax Rules, 1962
LED Light-Emitting Diode
LIC Life Insurance Corporation of India
LLP Limited Liability Partnership
LPG Liquified Petroleum Gas
M&E Media and Entertainment
MFN Most Favoured Nation
MMR Maximum Marginal Rate
MAT Minimum Alternate Tax
MNE Multi-National Enterprises
MSME Ministry of Small and Medium Enterprise
NABARD National Bank for Agriculture and Rural
Development
NBFC Non-Banking Financial Company
NHAI National Highway Authority of India
NPS National Pension Scheme
NRI Non-resident Indian
NSC National Savings Certificate
OECD Organization for Economic Co-operation and
Development
PAN Permanent Account Number
PCBs Printed Circuit Boards
PE Permanent Establishment
PFC Power Financer Corporation Limited
PFRDA Pension Fund Regulatory and Development
Authority
PMAY Pradhan Mantri Awas Yojana
PMLA Prevention of Money-Laundering Act, 2002
POEM Place of Effective Management
PPP Public Private Partnership
QFI Qualified Foreign Investor
R&D Research and Development
RBI Reserve Bank of India
RBI Act The Reserve Bank of India Act, 1934
RCM Reverse Charge Mechanism
REC / RECL Rural Electrification Corporation Limited
REIT Real Estate Investment Trust
ROI Return of Income
RPF Recognized Provident Fund
SAD Special Additional Duty of Customs levied
under sub-section (5) of section 3 of the
Customs Tariff Act, 1975
SARFAESI The Securitization and Reconstruction of
Financial Assets and Enforcement of Security
Interest Act, 2002
SC / ST Scheduled Caste / Scheduled Tribe
SE Securities Exchange
SEBI Securities and Exchange Board of India
SEZ Special Economic Zone
SME Small And Medium Enterprises
SPV Special Purpose Vehicle
SSI Small Scale Industries
STT Security Transaction Tax
TAN Tax Deduction and Collection Account Number
TCS Tax Collected at Source
TDS Tax Deducted at Source
TP Transfer Pricing
TRC Tax Residency Certificate
ULIP Unit Linked Insurance Policy
US$ United States Dollar
VAT Value Added Tax
VFX Visual Effects
w.e.f. with effect from
WT Act Wealth Tax Act, 1957
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Mumbai
13th Floor, Bakhtawar
229, Nariman Point
Mumbai - 400 021.
301-309, A Wing
3rd Floor, Technopolis Knowledge Park
Mahakali Caves Road, Andheri (E)
Mumbai – 400 093.
201, Shree Padmini
Teli Galli Junction
Andheri (E), Mumbai - 400 069.
New Delhi - NCR
2nd Floor, Tower-B
B-37, Sector-1
Noida - 201 301.
Chennai
Abhinav Centre
No. 4, Co-operative Colony
Off. Chamiers Road
Alwarpet, Chennai - 600 018.
1A, Chamiers Apartments
62/121, Chamiers Road
R. A. Puram, Chennai - 600 028.
Kolkata
A-6, 12th Floor
Chatterjee International
Centre
33A, Jawaharlal Nehru Road
Kolkata - 700 071.
Bengaluru
Sujaya, No. 1007, 2nd Cross
13th Main, HAL II Stage
Bengaluru - 560 038.
Surat
DTA-2, G-02 to G-05 Plot
Gujarat Hira Bourse
Ichhapore-2
Surat – 394 510.
T-720, Belgium Tower
Opp. Linear Bus Stop
Ring Road, Surat - 395 002.
B/604-605, Tirupati Plaza
Athwa Gate, Nanpura
Surat - 395 001.
Hyderabad
217, Maruthi Corporate Point
Swapnalok Complex
92, Sarojini Devi Road
Secunderabad - 500 003.
Ahmedabad
B-504, Narnarayan Complex
Navrangpura
Ahmedabad - 380 009.
Pune
102, First Floor
Shree Residency
Baner Balewadi Road
Near Laxmi Mata Mandir
Balewadi, Pune – 411 045.
Gandhidham
Divyasarika, Plot No. 41
Ward 10-A, Gurukul
Gandhidham - 370 201.
Indore
106, Manas Bhavan Extension
1st Floor, R.N.T. Marg
Indore - 452 001.
Jaipur
346, 3rd Floor
Ganpati Plaza, M.I. Road
Jaipur – 302 001.
New Delhi-NCR
Bengaluru
Indore
Pune
Gandhidham
Ahmedabad
Surat
Mumbai
Hyderabad
Chennai
Kolkata
Jaipur
RSM in India

For further information please contact:
RSM Astute Consulting Pvt. Ltd.
13th Floor, Bakhtawar, 229, Nariman Point, Mumbai - 400 021.
T: (91-22) 6108 5555 / 6121 4444
F: (91-22) 6108 5556 / 2287 5771
E: emails@rsmindia.in
W: www.rsmindia.in
Offices: Mumbai, New Delhi-NCR, Chennai, Kolkata, Bengaluru (Bangalore), Surat, Hyderabad, Ahmedabad, Pune,
Gandhidham, Indore and Jaipur.
facebook.com/RSMinlndia
twitter.com/RSM_India
linkedin.com/company/rsm-india
RSM Astute Consulting Pvt. Ltd. (including its affiliates) is a member of the RSM network and trades as RSM. RSM is the trading name used by the
members of the RSM network.
Each member of the RSM network is an independent accounting and consulting firm each of which practises in its own right. The RSM network is not
itself a separate legal entity of any description in any jurisdiction.
The RSM network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose
registered office is at 11 Old Jewry, London EC2R 8DU.
The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association,
an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug.
© RSM International Association, 2016

Publication - RSM India Budget 2016 Key Aspects

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