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Deductions, Cesses & Peace!

Published on Mon, Feb 29,2016 | 22:28, Updated at Mon, Feb 29 at 22:29Source : Moneycontrol.com 

By: Menaka Doshi, Executive Editor, CNBC TV18

Budget 2016 has a lot to say on taxes! It lays down a  roadmap for eliminating deductions, takes a baby step towards the 25% corporate tax rate, creates a patent box regime, defers POEM, confirms GAAR for next year, levies a new tax on online ad revenue earned by non-residents, makes crorepatis & big dividend income earners pay more tax, introduces a new 0.5% cess on services, makes cars, jewellery, expensive clothes, tobacco products, listed stock options and coal more expensive and devises two new schemes to unearth black money and settle tax disputes.

I’ve listed what I think are the tax highlights of Budget 2016. If you find more let me know….

DIRECT TAX

BYE BYE DEDUCTIONS!
-    Accelerated depreciation limited to maximum 40% from 1.4.2017
-    Benefit of deductions for Research limited to 150% from 1.4.2017 and 100% from 1.4.2020
-    Benefit of section 10AA to new SEZ units available to those units which commence activity before 31.3.2020
-    Weighted deduction (Sec 35CCD) for skill development will continue up to 1.4.2020

NEW DEDUCTIONS!
-    100% profit deduction for 3 of 5 years for Startups setup between Apr ‘16 – Mar ‘19. MAT will apply
-    10%  tax on income from worldwide exploitation of patents developed & registered in India by a resident
-    100% deduction for profits in housing project for small flats approved during Jun ‘16 - to Mar ‘19 & completed in three years. MAT to apply

25% CORPORATE RATE
-    Manufacturing companies incorporated starting 1.3.2016 have option to be taxed at 25% + surcharge and cess. Cannot claim any deduction/allowance
-    29% corporate tax rate plus surcharge & cess for FY17 for companies with less than Rs 5 cr turnover in FY15

POEM, GAAR, DIGITAL ECONOMY!
POEM deferred
GAAR on schedule for April 2017
6% tax on online ad revenue of more than Rs 1 lakh received by non-resident from resident

TAX THE RICH
-    10% additional tax on gross dividend for those receiving dividend more than Rs 10 lakh p.a
-    Crorepati surcharge raised from 12% to 15%

TRUSTS
-    Complete income tax pass through for securitization trusts including ARC trusts
-    Securitisation trusts required to deduct tax at source
-    No Dividend Distribution Tax on Distribution of income of SPV to the REITs & INVITs

INDIRECT TAX

NEW CESSES
-    Krishi Kalyan Cess @ 0.5% on all taxable services w.e.f. 1 June 2016
-    Input tax credit of this cess will be available for payment of this cess
-    1% Infrastructure cess on small petrol, LPG, CNG cars
-    2.5% Infrastructure cess on diesel cars of certain capacity
-    4% Infrastructure cess on higher engine capacity vehicles and SUVs

HIGHER TAXES
-    1% TDS on luxury cars exceeding  Rs 10 lakhs
-    1% TDS on cash purchase of goods and services more than Rs 2 lakhs
-    STT on Options increased from 0.017% to 0.05%
-    1% Excise duty on jewellery (excluding silver jewellery)
-    2% Excise duty on readymade garments with retail price of Rs 1000 or more
-    Clean Energy Cess on coal, lignite and peat increased from Rs 200/tonne to Rs 400/tonne
-    Excise duties on various tobacco products other than beedi raised by about 10 to 15%

MAKE IN INDIA
-    Customs & excise duty lowered for IT hardware, capital goods, defence production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper, paperboard & newsprint, maintenance repair and overhauling [MRO] of aircrafts and ship repair

LOWER TAXES
-    Abolished 13 cesses, levied by various Ministries in which revenue collection is less than Rs 50 crore in a year
-    Basic custom and excise duty on refrigerated containers reduced to 5% and 6%
-    Extend excise duty exemption to Ready Mix Concrete

LITIGATION

INCOME DISCLOSURE SCHEME
-    Domestic taxpayers can declare undisclosed income by paying 30% tax + 7.5% surcharge + 7.5% penalty. Immunity from prosecution

DISPUTE RESOLUTION
New Dispute Resolution Scheme
-    0% penalty  in disputes upto Rs 10 lakhs. 25% of minimum imposable penalty  in other cases
-    Pending appeals can be settled by paying 25% of minimum imposable penalty + tax interest
-    One-time scheme of Dispute Resolution for ongoing cases under retrospective amendment
-    Penalty rates to be 50% of tax for underreporting of income &200% of tax for misreporting facts
 
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