cajobportal Analysis of Union Budget 2016

Table of Contents
Disclaimer.
Executive Summary.
Direct Taxation – Individuals.
Direct Taxation – Corporates.
Other taxation proposals.
Indirect Taxes.
Small businesses & Entrepreneurship.
Youth & Jobs Creation.
Rural India.
Financial Services.
Fiscal Discipline.
About Us.

Disclaimer

The objective of this report is merely to highlight the key takeaways from the Union Budget 2016. It should not be construed to be, in any manner, as expressing any opinion on the performance of the Central Government
In case of any discrepancies, please mail clientservices@cajobportal.com for corrections.


Executive Summary

As we gear ourselves to dissect the anatomy of Mr Jaitley’s budget speech, we must take into cognisance the negative headwinds in the background, be it the global economy (global trade shrank 4.4% last year), Indian politics (stalemate on the GST and Insolvency Act) as well as the drought like weather conditions

The world is predicting that it is India’s chance to fly; that our nation is one of few bright spots on the stuttering global economic landscape

In the classical political rhetoric, he attributed a lot of sourness in the current economy, be it Banking NPAs or tax adventurism to his predecessors.

Income tax slabs remained unchanged, corporate tax rates were slightly lowered for specific classes, and cigarettes, SUVs, branded jewellery just turned costlier.

Mr Jaitley’s Budget was structured along 9 pillars — Agriculture and farmers' welfare, rural sector, social sector including healthcare, education, skills and job creation, infrastructure, financial sector reforms, ease of doing business, fiscal discipline, tax reforms to reduce compliance burden.

As analysts in Team cajobportal.com witnessed the 105 minute budget speech in motion, we noticed a conscious effort to make structural changes in the contours of the national economy, be it fast tracking of infrastructure projects, be it irrigation, highway or deep sea exploration, empowering the rural panchayats with Rs. 287,000 crores, aiming to double farmer income by 2020, promoting new manufacturing companies & entrepreneurial ventures. The government has expressed its commitment to a lower tax regime with non-litigious framework

Hope you find our compilation useful

Warm Regards
Sonia Singal
Co-founder: cajobportal.com™
HMP House, 4, Fairlie Place, Kolkata-1




Direct Taxation – Individuals

i. People with income less than Rs. 5 lakh to get deduction of Rs 5,000, up from Rs 2,000 last year.
ii. HRA deduction u/s 80 GG (for those who do not have a house of their own and also do not get HRA from employers) up from Rs. 24,000 to Rs. 60,000 p.a.
iii. 40% of withdrawal at the time of retirement under National Pension Scheme to be tax exempt. This was quite awaited and will provide a thrust to the NPS scheme. Similarly 40% of withdrawal from Superannuation and PF will also be tax-free
iv. For first home buyers, additional exemption of interest on housing loan of Rs. 50,000. Qualifying Criteria is that the loan value should be max Rs. 35 lakh on cost of house not exceeding Rs. 50 lakh.
v. Tax-free superannuation limit increased to Rs 1.5 lacs
vi. Dividend income of Individuals and HUF exceeding Rs 10 lac p.a. will now be taxable @ 10%


Direct Taxation – Corporates

i. New cos will not be allowed to seek any exemption, say new SEZ units will get income tax exemption only up to 31st march 2020. This essentially signals phasing of exemptions to corporates and reducing overall Effective Tax Rate (currently at 24.67%)
ii. New manufacturing companies ( set up after 1/4/16) to be taxed at 25% plus surcharge
iii. From FY 18, companies with turnover not exceeding Rs. 5 crore to be taxed at 29% plus surcharge. (
iv. Tax holiday for start-ups set up after 1/4/16 for three of the first five years of setting up the company
v. LTCG period for unlisted companied reduced to 2 years
vi. Presumptive taxation scheme limit enhanced to Rs 2 crores. Thus small and medium businesses can opt for 8% presumed income and will not have to maintain accounts or get them audited
vii. Presumptive taxation scheme for professionals with receipt up to Rs 50 lacs p.a. They can opt for 50% presumed income and will not have to maintain accounts or get them audited
viii. 100% deduction to undertakings for construction of affordable housing. Positive for companies like DLF, DB Realty, NBCC

Other taxation proposals

i. Limited period compliance window for undisclosed income from 1st June’16 to 30th Sep’16. Tax payable is 30%+7.5% Surcharge+7.5% Penalty
ii. One-time Scheme w.r.t Dispute Resolution provided the case withdrawn. The waiver of interest and penalty should incentivise companies like Vodafone to finally breathe easy
iii. New dispute resolution rules for expediting disposal of the ~ 300,000 pending cases
iv. E-assessment of scrutiny cases, making life easier for the tax payer
v. TDS Rules to be simplified
vi. The government re-affirmed its plans to implement General Anti Avoidance Rule( GAAR) from April 1, 2017, a major negative for FIIs and the stock market
vii. 1-4% infra cess on cars, SUVs, higher engine capacity vehicles.
viii. 1% Tax Collected at Source on any in-cash purchase of goods and services over Rs. 2 lakh. So using black money became all the more tougher
ix. High-level Committee Chaired By Revenue Secretary To Allay Fears Of Retro Tax
x. 13 different cesses levied by various ministries with collections less than Rs.50 crore a year to be done away with.
xi. 6% withholding tax on B2B transactions by e-commerce companies to holding companies abroad

Indirect Taxes

i. Service Tax- Krishi Kalyan Cess of 0.5% on taxable value of service. However the same is cenvatable
ii. Cenvat Credit Rules to be simplified
iii. Custom baggage rules simplified and limits increased
iv. No Service Tax for houses built under 60 square metres.
v. Clean energy cess for coal doubled to Rs 400/ tonne: negative for coal consumers as well as Coal India
vi. Excise on tobacco increased by 10% to 15%
vii. 5% tax on diesel vehicle. Negative for companies like M&M, Ashok Leyland, Eicher Motors
viii. Cess on crude reduced from Rs 4500/MT to 20% ad valorem. Positive for companies like ONGC
ix. Customs duty on aluminium raised to 7.5% from 5%. Positive for companies like Hindalco, Nalco
x. Excise duty on aviation fuel increased to 14% from 8%. Negative for companies like SpiceJet, Jet, InterGlobe
xi. 11 new benches of Indirect Tax tribunal- CESTAT-expediting disposal of tax cases

Small businesses & Entrepreneurship

i. To maintain competitive parity with shopping malls, Small and medium sized shops also would be allowed to be open for 7 days a week under the proposed amendment of Shops and Establishment Act
ii. Stand Up India Scheme for SC/ST entrepreneurs. Budgetary allocation plus preference in government procurement. . SC/ST Hub to be set up in MSME Ministry.
iii. Entrepreneurship education and training (online courses, mentoring) will be provided in 2200 colleges, 300 schools, 500 govt. it is and 50 vocational training centres through open online courses.
iv. Companies Act to be amended to ensure ease of doing business