Decoding

All you wanted to know about​ Budget 2016

Financial sector reforms

Ease of doing business

Reducing litigation and providing certainty in taxation

e-initiatives

Others

Measures to phase out tax deductions

• Accelerated depreciation tax benefit has been limited to a maximum of 40 per cent.
• Benefit of deductions for scientific research, specified businesses, social projects, agricultural extensions project and skill development projects have been restricted.

Measures to phase out tax deductions

• Facilitation of retail participation in Government securities.
• Various measures to be undertaken to deepen corporate bond market.
• 49 per cent of Foreign Direct Investment (FDI) will be permitted in pension and insurance sectors through an automatic route, subject to guidelines.
• Similarly, 100 per cent FDI in asset reconstruction companies will be permitted through the automatic route.
• General insurance companies owned by the Government will be listed on the stock exchanges
• Allocation has been made towards recapitalisation of public sector banks.
• Capital gains arising to the extent of rupee appreciation during the tenure of the rupee denominated bonds, will be tax exempt.

Financial sector reforms

• Companies Act, 2013 will be amended to remove impediments and increase the ease of doing business and improve environment for start-ups.
• The timeline of registration of companies to be reduced to one day.

Ease of doing business

• Introduction of a limited period compliance window, for domestic taxpayers to declare undisclosed income.
• Such income will be taxed at the rate of 45 per cent, inclusive of surcharge and penalty.
• There will be no scrutiny or inquiry regarding such income declared.
• A new Dispute Resolution Scheme has been proposed.
• Penalty scheme will be modified to reduce penalty rates to 50 per cent in case of underreporting of income, and 200 per cent in case of misreporting of facts.
• Quantification of disallowance of expenditure, pertaining to exempt income, has been limited to 1 per cent of the average monthly value of investments yielding exempt income. But this should not exceed the actual expenditure claimed.

Reducing litigation and providing certainty in taxation

• Deployment of an e-market platform in 585 regulated wholesale markets, to implement a Unified Agriculture Marketing Scheme. This will provide access to markets to farmers.
• To build an integrated land information management system, the National Land Record Modernisation Programme will be revamped.
• A digital depository for school leaving certificates, college degrees, academic awards and mark sheet will be established.
• Financial Data Management Centre will be set up to facilitate integrated data analysis in financial sector.
• E-assessment to be extended to seven cities.
• To resolve mismatch in Income tax returns, E-Sahyog, a pilot project, will be introduced to provide an online mechanism.

e-Initiatives

• Removal of Dividend Distribution Tax (DDT) on distribution of income of Special Purpose Vehicle (SPV) to the Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), having specified shareholding.
• Imposition of Krishi Kalyan Cess on all taxable services at the rate of 0.5 per cent.
• Widened the indirect tax base by imposing excise duty on jewellery, increasing the excise duty on branded garments, and on various tobacco products.
• To meet the commitment to Base Erosion and Profit Sharing (BEPS) initiative of the Organisation for Economic Co-operation and Development (OECD), requirement of country by country reporting by Indian multi-nationals, which have a consolidated revenue of EUR 750 million will be incorporated. Contd...

Others

• General Anti-Avoidance Rules (GAAR) will be effective from April 1, 2017.
• The determination of residency of a foreign company on the basis of Place of Effective Management, has been deferred by one year.
• Minimum Alternate Taxation (MAT) will not be applicable to a foreign company with effect from April 1, 2001, if the foreign company does not have a permanent establishment under the relevant tax treaty or a place of business in India.
• Several recommendations of Justice Easwar Committee are proposed to be accepted for simplification and rationalisation of taxation.

Others