Mrc budget 2016 2017

at a glance…
Mukesh Raj & Company,
C-63, 1st Floor, Preet Vihar, Delhi-110092
Contact : 011-22050790 ; www.mukeshraj.com

Key Proposals
Direct
Taxes
Indirect
Taxes
For Ease
of Doing
Business
Startups
Key
Economic
Indicators
Budget at a glance….

• Affirming that the economy is on the right track,
Finance Minister Mr.Arun Jaitley presented the
Union Budget for 2016-2017, on 29th February
2016.
• This Union Budget is a bitter sweet pillar for the
common man. While incentivizing the “AAM
AADMI” to buy homes, Finance Minister Arun
Jaitley has made cars expensive.
• Direct taxes as the name suggests , are taxes that
are directly paid to the government by the
taxpayer. It is a tax applied on individuals and
organizations directly by the government. Some
examples of Direct taxes are :
• Income Tax
• Corporation Tax
• Wealth tax, which is no longer in effect now.
Key proposals in Direct Taxes
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• Income Tax is paid by an individual based on
his/her taxable income in a given financial year.
• Under the Income Tax Act, the term “Individual”,
also includes Hindu Undivided Family(HUF’s),
Cooperative Societies, Trusts and any artificial
judicial person.
• Taxable Income refers to total income minus
applicable deductions and exemptions.
• Tax is payable if the taxable income is above the
minimum taxable limit and is paid as per the
different rates announced for each tax slab for the
financial year.
• Finance Minister Mr. Arun Jaitley, did not propose
any change in the income tax slab rates. However
various changes have been proposed in the income
tax provisions which impact the taxable income of
an individual.
Income Tax

• If the total income of an individual exceeds
Rs.1 Crore, then the rate of surcharge will be 15%
(against earlier 12%)
• In case of a resident individual, HUF or a firm, if
dividend received by them from a domestic
company exceeds Rs.10,00,000, then an additional
tax at the rate of 10% of gross amount of dividend
shall be paid. This will come into effect from 1st
April 2017.
• In order to provide relief to small taxpayers , the
Relief under Section 87A is proposed to be
increased from Rs.2000/- to Rs.5000/-
However this relief is available to a resident
individual if his total income does not exceed
Rs.5,00,000. For the Assessment Year 2017-2018,
the relief shall be allowed up to income-tax liability
or Rs.5,000/- whichever is less.
• The Finance Bill proposes an amendment to
provide that income tax is payable at 10% on long
term capital gains (LTCG), arising from the transfer
of unlisted securities or shares of a closely held
company.
Income Tax

• Currently the non-corporate taxpayers, pay the advance tax in three installments, viz. @30%, 60% & 100%
of tax on or before 15th September , 15th December & 15th March of each fiscal year respectively. The new
Finance Bill 2016 proposes to treat the non-corporate at par with the corporate taxpayers. This can be
seen as follows :
Advance Tax
Due Date For All Taxpayers ( Corporate and Non-Corporate Taxpayers )
15th June 15% of Tax
15th September 45% of Tax
15th December 75% of Tax
15th March 100% of Tax

• Earlier the tax-payers opting for presumptive
taxation scheme under Section 44AD were not
able to pay advance tax. Further these taxpayers
were not liable for interest under Sections 234B
& 234C. It is now proposed that such taxpayers
shall also pay the advance tax on or before 15th
March of each previous year. Consequently
interest for default and deferment of advance
tax under Section 234B & Section 234C
respectively , shall also be levied.
Advance Tax

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S.NO MALES / FEMALES TAX RATES
1 Taxable Income upto Rs. 2,50,000 Nil
2 Rs. 2,50,000 to Rs.5,00,000 10%
3 Rs. 5,00,000 to 10,00,000 20%
4 Above Rs. 10,00,000 30%
S.NO SENIOR CITIZENS TAX RATES
2 Rs. 3,00,000 to Rs. 5,00,000 10%
3 Rs. 5,00,000 to Rs.10,00,000 20%
4 Above Rs. 10,00,000 30%
1. Income Tax- Slab Rates

Contact : 011- 22050790
S.NO SUPER SENIOR CITIZEN TAX RATES
2 Rs. 5,00,000 to Rs. 10,00,000 20%
3 Above Rs. 10,00,000 30%
Income Tax- Slab Rates
2. Co-operative Society
S.NO Income Slabs TAX RATES
1 Where taxable income doesn’t exceed Rs. 10,000 10%
2 Where the taxable income exceeds Rs. 10,000
but doesn’t exceed Rs. 20,000
1,000 + 20% of income in
excess of Rs. 10,000
3 Where the taxable income exceeds Rs. 20,000 3,000 + 30% of amount by
which the taxable income
exceeds Rs. 20,000

3.Firm / Local Authority
Income Tax: 30% of Taxable Income
Plus:
 Surcharge: 12% of income tax if taxable income exceeds Rs. 1Crore
 Education Cess: 3% of total of income tax and surcharge
4. Domestic Company
• Income Tax: 30% of Taxable Income
• Tax Rate is 29% if Turnover or Gross Receipts of the company doesn’t exceed Rs.5
Crores.
Plus:
Surcharge:
7% of the Income Tax if taxable income exceeds Rs. 1 crore
12% of the Income Tax if taxable Income exceeds Rs. 10 crore
Education Cess: 3% of total of income tax and surcharge

5. Foreign Company
Income Tax: 40% of Taxable Income
Plus:
• Surcharge:
2% of the Income Tax if taxable income exceeds Rs. 1crore
5% of the Income Tax if taxable income exceeds Rs. 5crore
•Education Cess: 3% of the total of Income Tax and surcharge

• It is proposed that filing of return by an
individual/HUF/AOP/BOI/artificial juridical person
shall be mandatory even if their entire income is
exempt from tax under Section 10(38). However,
in such case the total income without giving effect
to the provisions of Section 10(38) should exceed
the maximum exemption limit to require the
assessee to file the return of income.
• Currently, the belated return can be filed even
after expiry of relevant AY, But it is now proposed
that belated return cannot be filed after expiry of
relevant Assessment Year. Thus, belated return
can be filed before the end of relevant AY or
before completion of assessment, whichever is
earlier.
• It is also proposed that return which is otherwise
valid shall not be treated as defective return just
because self-assessment tax and interest have not
been paid on or before date of furnishing of the
return.
• It has been proposed that belated return can also
be revised if there is any omission or wrong
statement in the return of income.
• It has been proposed that processing of return is
necessary before making scrutiny assessment.
Return Of Income

Deductions : Section 80EE ( Income Tax Benefit on Home Loan Interest)
• In furtherance of the goal of the Government of
providing “Housing for all” , it is proposed to
incentivise First Home Buyers availing home
loans, by providing additional deduction in
respect of interest on loan taken for residential
house property from any financial institution up
to Rs. 50,000/-
• This incentive is proposed to be extended to a
house property :
• Whose value is less than Rs. 50,00,000 in
respect of which a loan of an amount not
exceeding Rs.35,00,000 has been sanctioned
during the period from 1st April 2016 to 31st 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 limit of Rs.2,00,000/- provided for a
self occupied property under Section 24 of the Act.
• These amendments will take effect from 1st
April,2017
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• An assessee is allowed to claim deduction of up to
Rs. 2,00,000 in respect of interest on loan taken
for acquisition or construction of self occupied
house property, if the following conditions are
fulfilled :
• House property has been acquired or constructed
within a period of 3 years from the end of the
financial year in which loan was taken.
• In view of the fact that housing projects often take
longer time for completion, it is proposed that the
deduction shall be available if property is acquired
or constructed within 5 years from the end of the
financial year in which capital was borrowed.

• An individual can claim deduction under Section
80GG if he is paying house rent but not receiving
any HRA from the employer. The least of following
is allowed as deduction:
• Rent paid in excess of 10% of total income;
• Rs. 2,000 per month; or
• 25% of total income.
The existing limit of Rs. 2,000 per month is
proposed to be increased to Rs. 5,000 per month.
Deductions : Section 80 GG (In Respect of Rent Paid)

• Deduction under Section 80JJAA is proposed to be
allowed to all assesses who are required to get
their accounts audited.
• 30% of emoluments paid to employees would be
allowed as a deduction provided emolument per
employee per month is less than or equal to Rs.
25,000.
• However, no deduction is available where
Government is paying for EPF of such employees
• It is further proposed to reduce the minimum
number of days of employment in a financial year
from 300 days to 240 days and also the condition
of 10% increase in number of employees every
year is proposed to be withdrawn.
Deductions : Section 80 JJAA

Incentives for promoting “Housing for All”
• In order to promote “Housing For All”, it is
proposed to provide for 100% deduction of profits
of an assessee developing or building affordable
housing projects if the housing project is approved
by competent authorities before 31/03/2019,
subject to following conditions:
• Project is completed within 3 years from date of
approval.
• where residential unit is allotted to an individual,
no such unit shall be allotted to him or any
member of his family, etc
• The project is on a plot of land measuring not less
than 1000 sq. metres where the project is within
25 km from the municipal limits of four metros
namely Delhi, Mumbai, Chennai & Kolkata and
Budget at a glance….Budget at a glance….
in any other area, it is measuring not less than 2000 sq.
metres where the size of the residential unit in the said
areas is not more than thirty sq. metres and sixty sq.
metres, respectively,

Taxation of Unrealised Rent and Arrears of Rent
• It is proposed to simplify the earlier Sections and
merge them under a single new section 25A so as to
bring uniformity in tax treatment of arrears of rent
and unrealised rent.
• It is proposed to provide that the amount of rent
received in arrears or the amount of unrealised rent
realised subsequently by an assessee shall be charged
to income-tax in the financial year in which such rent
is received or realised, whether the assessee is the
owner of the property or not in that financial year.
• It is also proposed that thirty per cent of the arrears
of rent or the unrealised rent realised subsequently by
the assessee shall be allowed as deduction. From
01/04/2017.

Presumptive Taxation Scheme
• Currently, the presumptive tax regime does not
apply to an assessee engaged in specified
profession [as referred to in Section 44AA(1) such
as legal, medical, engineering or architectural
profession or the profession of accountancy or
technical consultancy or interior decoration or any
other profession as is notified]. A new Section
44ADA is proposed to be inserted for computing
professional income on presumptive basis at 50%
of gross receipts. Professionals can take benefit of
such presumptive Scheme if their receipts do not
exceed Rs.50,00,000.
• Under existing provisions of Section 44AD eligible
assessee can take benefit of presumptive taxation
Scheme if his turnover or gross receipts in
previous year does not exceed an amount of
Rs.1 Crore Such threshold limit has been proposed to
be increased from Rs.1 Crores to Rs.2 Crores.
• If partnership firm is computing its business
income on presumptive basis, it is proposed that
salary and interest paid to its partners shall not be
allowed as deduction from such presumptive
income.
• As a measure against misuse of presumptive
taxation scheme, it is proposed that where an
assessee declares profit on presumptive basis
under Section 44AD for any previous year but does
not declare profit on presumptive basis for
subsequent five years, he shall not be eligible to

Presumptive Taxation Scheme
claim the benefit of presumptive taxation again
for next five years subsequent to the year in which
the profit has not been declared in accordance
with Section 44AD
• It is also proposed that the assessee will not be
required to maintain books of account under sub-
section (1) of section 44AA and get the accounts
audited under section 44AB 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 sub-section (1) of section 44ADA
and his income exceeds the maximum amount
which is not chargeable to income-tax. However
this will be applicable from 01/04/2017

Accounts and Audit
• The threshold limit for audit under Section 44AB
has been proposed to be increased to Rs. 50 lakhs
from existing Rs. 25 lakhs in case of specified
professions.
• It is proposed that a taxpayer covered under new
proposed Section 44ADA [presumptive taxation
scheme for specified professionals], shall get its
accounts audited if he claims that the profits and
gains from the profession are lower than the
presumptive income and his income exceeds the
maximum amount which is not chargeable to
income-tax.

Changes Related to TDS/TCS
• Section 206AA is proposed to be amended so that
the withholding tax at higher rate shall not apply
in case of a non-resident subject to prescribed
conditions. Currently such exemption is given only
in respect of payment of interest on long term
bonds as referred to in Section 194LC.
• As per Section 206C the seller shall collect tax at
source at a rate of 1% from purchaser
• on sale of motor vehicles of value exceeding
Rs.10 lakhs,
• on sale of any goods or service in cash (other than
bullions and jewelleries or providing any services
other than payments on which tax is deducted at
source) exceeding Rs.2lakhs.
• In order to rationalise the rates and base for TDS
provisions, the threshold limit and the rates of
deduction of tax at source have been revised
substantially.
• It is proposed to amend Section 206AA of the
Income Tax Act so as to provide that TDS shall not be
deducted at a higher rate in case of non-residents
not having PAN, subject to prescribed conditions.
• TCS is proposed to be levied at 1% in case of sale of
goods or services, if value thereof exceeds
Rs.2,00,000/-
• TCS is proposed to be levied at 1% in case of sale of
motor vehicle, if value thereof exceeds
Rs.10,00,000/-

Increase in threshold limit of deduction of tax at source on various
payments :
Present
Section
Heads Existing Threshold Limit
(Amount in Rs.)
Proposed Threshold Limit
(Amount in Rs.)
192A Payment of accumulated balance due to an
employee
30,000/- 50,000/-
194 BB Winnings from Horse Race 5,000/- 10,000/-
194C Payments to Contractors Aggregate annual limit of
75,000/-
Aggregate annual limit of
1,00,000/-
194 LA Payment of Compensation on acquisition of
certain Immovable Property
2,00,000/- 2,50,000/-

payments :
Present
Section
Heads Existing Threshold Limit
(Amount in Rs.)
Proposed Threshold Limit
(Amount in Rs.)
194D Insurance Commission 20,000/- 15,000/-
194G Commission on Sale of Lottery Tickets 1,000/- 15,000/-
194H Commission or Brokerage 5,000/- 15,000/-

payments :
Present
Section
Heads Existing Rates of TDS (%) Proposed Rate of TDS (%)
194DA Payment in respect of Life Insurance
Policy
2% 1%
194EE Payments in respect of NSS Deposits 20% 10%
194D Insurance Commission Rate in force (10%) 5%
194G Commission on Sale of Lottery Tickets 10% 5%
194H Commission or Brokerage 10% 5%

Other Amendments
• The Government will contribute 8.33% for all
new employees enrolling in EPFO for first three
years of their employment.
• To provide relief to newly setup Domestic
Companies engaged in business of
manufacturing or production, it is proposed to
amend the act by insertion of new Section
115BA from A.Y. 2017-18 shall be computed @
25% if-
a) Company has been setup and registered on or
after 1st March 2016.
b) The company while computing its total income
has not claimed any benefit u/s 10AA, benefit of
accelerated depreciation, additional depreciation,
investment allowance, expenditure on scientific
research and any deduction in respective of
certain income under part C of chapter VIA other
than the provisions of 80JJAA.
c) The option is furnished in the prescribed manner
before the due date of furnishing of income.
d) Companies engaged in the business of
manufacturing or production of any article or
thing and is not engaged in other business.
• With a view to ensure the prompt payment of
dues to Railways for the use of Railway Assets it
is proposed to amend Section 43B so as to
expand its scope to include payments made to
Indian Railways for use of Railway assets within its
ambit. From 01/04/2017
Budget at a glance….Budget at a glance….

• Indirect Taxes are applied on the manufacture or sale
of goods and services.
• These are initially paid to the government by an
intermediary, who then adds the amount of the tax
paid to the value of the goods / services and passes
on the total amount to the end user. Some examples
of Indirect taxes are :
• Service Tax
• Sales Tax
• Excise Duty
Key proposals in Indirect Taxes

• Service Tax is applicable on all services provided in
India, except a specified negative list of services that
are exempt. It is paid by the service provider to the
government who in turn collects it from the end user
by the service provider at the time of provision of such
service.
• The benefit of quarterly payment of Service tax Is being
extended to One Person Company & HUF w.e.f 1st April
2016.
• Interest Rate will be 24% if service tax is collected but
not deposited to ex-chequer.
• Various changes have taken place in the Service Tax. This
can be seen in the table presented on the next slide.
Service Tax
•The abatement rate in respect of services by way of
construction of residential complex, building, civil
structure or a part thereof is being rationalized at 70%
by merging two existing rates.(70% for high end flats &
75% for low end flats.)
•Quarterly payment of service tax being extended to
“One Person Company”(OPC) and HUF also, w.e.f. 1st
April 2016.
• Facility of payment of service tax being extended on
receipt basis to “One Person Company” (OPC)
Also, w.e.f. 1st April 2016.

S.No Services Existing Proposed
1. Krishi Kalyan Cess is applicable on all taxable services w.e.f 1st June 2016 to
finance and promote agriculture.
- 0.5%
2. Exemption on Services Provided by
• A senior advocate to an advocate or partnership firm of advocates
providing legal services, &
• A person represented on an arbitral tribunal to an arbitral tribunal
- 14%
3. Exemption on the services of transport of passengers, with or without
accompanied belongings, by ropeway, cable car, or aerial tramway is being
withdrawn with effect from 1st April 2016.
- 14%
4. The Negative List entry that covers “service of transportation of passengers
with or without accompanied belongings, by a stage carrier ”, being omitted
and tax proposed to be levied on service of transportation of passengers by
air conditioned stage carriage, at the abatement of 60% without input tax
credit with effect from 1st June 2016.
- 5.6%

• Excise Duty is applicable on the manufacture of
goods sold in India.
• Once goods are manufactured, it is originally paid
by the manufacturer directly to the Central
Government.
• When the goods change hands from the
manufacturer to the buyer, this tax is bundled by
the manufacturer along with the cost of goods and
passed on to the buyer.
• Excise 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.
• Excise on readymade garments with retail price of
Rs.1000 or more has been raised to 2% without
input tax credit or 12.5% with input tax credit.
• Excise Duty on various tobacco products other
than beedi has been raised from 10% to 15%.
Excise Duty

• 13 Cesses levied by other Ministries/Departments and administered by the Department of Revenue, where
the revenue collection from each of them is less than Rs. 50crore in a year being abolished.
Interest Rates on delayed payment of duty/tax across all indirect
taxes being rationalized at 15% , except in case of service tax
collected but not deposited to the exchequer, in which case the rate
of interest will be 24% from the date on which the service tax
payment became due.
For assesses with taxable value during preceding year/years covered
by the notice is less than Rs.60 lakhs, the rate of interest on delayed
payment of service tax will be 12%.
This will come into effect from date of enforcement of Finance
Bill,2016.
Customs
18%
Excise
18%
Customs
Excise
Service Tax
15%
Service Tax
18%
24%
30%
24%
In case of tax
collected but
not deposited
For Ease of Doing Business

• With a view to providing an impetus to start-ups
and facilitate their growth in the initial phase of
their business, it is proposed to provide a
deduction of one hundred percent of the profits &
gains derived by an eligible start-up from a
business involving innovation development,
deployment or commercialization of new
products, processes or services driven by
technology or intellectual property.
• The benefit of 100% deduction of the profits
derived from such business shall be available to an
eligible start up which is setup before 1April 2019.
Key proposals for Start Up

• Section 54GB proposes that long-term capital
gains arising from transfer of residential property
of individual or HUF shall not be charged to tax if
such capital gain is invested in shares of an eligible
start-up. Such exemption shall be available if:
• Individual or HUF holds more than 50% shares of
such start-up; and
• Such investment is utilized by the start-up to
purchase new assets before due date of filing of
return of investor.
• A new Section 54EE is inserted to provide for
exemption up to Rs. 50 lakhs for long-term capital
gains invested in units of funds set-up by
Government to promote start-ups.
Capital Gain Exemptions for Investment in Start Ups
• Exemption shall be reversed
• if amount invested is withdrawn within 3 years from
date of making investment in specified funds.
• Further, if assessee takes any loan and/or advance
against such investment then he is deemed to have
transferred such specified asset on the date on
which such loan or advance is taken.

• Economic Indicators allow analysis of economic
performance and and predictions of future
performance.
• Out of various economic indicators we will take a brief
overview of the main indicators in the coming slides :
India’s Key Economic Indicators

• The Gross Domestic Product (GDP) in India
expanded 1.90% in the third quarter of 2015 over the
previous quarter. GDP Growth Rate in India averaged
1.66% from 1996 until 2015.
• In the budget the Finance Minister Mr. Arun Jaitley,
has pegged India’s nominal GDP growth at 11% in
Financial Year 2017, despite global volatility.
• The Central Statistics office (CSO) said that full year
GDP forecast has been revised upward to 7.6% . It
further said that India’s GDP grew at 7.6% in the first
quarter , 7.7% in the second quarter and 7.3% in the
third quarter.
• India hailed as a “bright spot” amidst a slowing global
economy by IMF. The Foreign Exchange Reserves
touched highest ever level of about 350 billion US
Dollars.
GDP Growth Rate

• It has been decided to done away with Plan and Non-
Planned expenditure from fiscal 2017-2018.
• To improve the quality of Government expenditure,
every new scheme being sanctioned by Government
will have a sunset date and outcome review. A
redeeming feature of this year’s budget Is that the
Government has improved upon the Revenue Deficit
Target from 2.8% to 2.5% of GDP in RE 2015-2016.
• The fiscal deficit in RE 2015-2016 and BE 2016-2017
have been retained at 3.9% and 3.5% of GDP
respectively.
• The total expenditure in the Budget for 2016-2017
has been projected at Rs.19.78lakh crore, consisting
of Rs.5.50 lakh crore under Plan and Rs. 14.28 lakh
crore under Non Plan.
• The increase in Plan Expenditure is in the order of
15.3% over current year BE. Plan allocations have
given special emphasis to sectors like agriculture,
irrigation, social sector including health, women and
child development, welfare of Scheduled Castes and
Scheduled tribes, minorities, infrastructure etc.
Fiscal Discipline

Mrc budget 2016 2017

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