Government looks to resolve 100 transfer pricing issues; seeks to sign more advanced agreements

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Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies

In a significant move towards a more progressive taxation policy the revenue officials have set an aggressive target of resolving about 100 transfer pricing issues by signing advance pricing agreements (APAs) with multinationals this fiscal, people close to the development said.

The government, through the Central Bureau of Direct Taxes (CBDT), had signed a record 55 APAs with multinationals in 2015-16. In all, the Indian government has signed 64 APAs, including 62 in the last two years. Now the government is getting more ambitious and officials are confident about achieving the target.

“We are already working on about 175 cases (APAs), and the target is achievable,” said a person close to the development. “Also, the officers who are dealing with the issue have now got fair amount of experience and work would be faster going ahead.”

Samir Gandhi, partner at Deloitte Haskins & Sells LLP, said, “In last one year, we have seen that the government has been very active in resolving the transfer pricing cases through the APAs. Going forward it is very likely that we will see more number of cases being resolved.”

An APA is mainly an agreement between a tax payer—mostly multinationals— and tax authority— CBDT in India’s case—where the transfer pricing methodology is determined. The methodology to calculate taxes could then be used for an agreed period of time on the tax payer’s future international transactions.

Transfer pricing disputes are mainly related to the calculation of profit made by multinational companies and how they have been shifted to their parent. Many firms have gone to court, challenging the government’s transfer pricing calculations. In July 2012, the government introduced the APA programme, which allows companies and the revenue authorities to negotiate the rate at which tax is to be paid and avoid disputes. Of the total APAs signed last year, 53 were unilateral agreements while two were bilateral agreements.

A unilateral APA is an agreement between the tax payer and the tax authority of the country (CBDT). A bilateral agreement is signed by these two plus the tax authority of the country where the multinational is headquartered.

Industry trackers expect that some more “complicated” APAs would be signed this year. “Going ahead some of these cases (APAs) will involve relatively complex cases/transactions and also application of TP methodologies of profit split and TNMM (transactional net margin method),” said Gandhi of Deloitte. Industry experts said the shift from a time when India was considered to be one of the most aggressive in the world on transfer pricing to the current situation has happened in last two years.

“There are primarily two developments which have happened in last one year in the context of transfer pricing disputes,” said Rohan K Phatarphekar, partner and national head, global transfer pricing services, at KPMG. “One is the government’s agenda of having a non-adversarial tax regime and improving the ease of doing business, which has resulted in lesser amount of transfer pricing adjustments, and the other is the CBDT circular clearly laying out the guidelines as to when a case needs to be referred for transfer pricing assessment which has reduced the overall number of cases picked up for scrutiny,” he said.

Experts also pointed out that the government’s stance on liberal transfer pricing comes at a time when many multinationals face the prospect of increasing disputes across the world. Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies.

Companies and tax consultants said that not only is the Indian government going all guns to resolve old issues in last one year, but also there has been no major transfer pricing demand as officials did not take an aggressive stance. Currently there are about 650 pending cases in APA, according to a report by Deloitte.

Going ahead, a lot of disputes also set to be resolved due to mutual APAs signed between Indian authorities and their US counterpart. This is mainly because the US Internal Revenue Service (IRS) has started accepting bilateral APA applications with India from February 16, 2016, the Deloitte report said.

Source:
http://economictimes.indiatimes.com/articleshow/51886742.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

NRIs with offshore bank accounts cannot escape investigation by tax authorities

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Governed by rules and conventions of banking secrecy, banks in Switzerland and tax havens divulge information only after account holders give their consent.

Even NRIs with offshore bank accounts cannot keep the taxman at bay by obtaining quick relief from the court of law. In order to prove their innocence, such persons will have to instruct the overseas banks to share information on the accounts with the Indian tax office.

And, only after the details released by the bank show that the money lying in the account does not belong to the person who has been pulled up (for hiding offshore assets), can he escape the glare of tax officials.

The Bombay High Court recently dismissed the writ petition filed by an NRI — an alleged beneficiary of a trust linked to an account with HSBC Geneva — after she refused to sign the “consent waiver” form to let HSBC share the information on the account. Governed by rules and conventions of banking secrecy, banks in Switzerland and tax havens divulge information only after account holders gives their consent.

The court, in its order dated April 5, said, “In the normal course of human conduct if a person has nothing to hide and serious allegations/questions are being raised about the funds, a person would make available the documents which would put to rest all questions which seem to arise in the mind of the authorities.”

Since the court did not allow the withdrawal of petition, the order is likely to be used by the tax office which is trying to fish out bank account and transaction details from those it suspects to have accounts with HSBC Geneva.

According to the base note that the French government had shared with New Delhi, the petitioner Soignee R Kothari, along with six other individuals and two trusts, are beneficiaries of an account held by one White Cedar Investments with HSBC Geneva; the seven individuals in turn are beneficial owners of the two trusts.

As on 26 March 2006, the account had a balance of more than $44 million. The department had served Ms Kothari a notice to reopen assessment for the assessment year 2006-07.

She has later agreed (in a rejoinder before the court) to sign the consent waiver form with a modification — as ‘alleged beneficiary’ rather than ‘holder or beneficiary’ of the account in HSBC Geneva.

“With this, the Bombay High Court has precluded any alleged holder of overseas bank account from seeking alternative remedy by way of a writ. However, their right to contest any addition of income by the tax authorities would still survive. Thus, while NRIs can prove that they are outside jurisdiction of Indian tax authorities, they cannot wriggle out of investigation by virtue of being NRIs,” said senior chartered accountant Dilip Lakhani. The other six alleged beneficiaries of the trust are Arun Ramniklal Mehta, Russell Mehta, Viraj Russell Mehta, Rihen Harshad Mehta, Naina Harshad Mehta and Priti Harshad Mehta.

The court said that this bank statement if obtained from HSBC Geneva “would reveal and/or possibly give clues as to the source of amounts deposited in the Account No. 5091404580.” “If a person has nothing to hide, we believe the person would have co-operated in obtaining bank statements,” said

Source : http://economictimes.indiatimes.com/articleshow/51870910.cms

 

Key changes in new Income Tax Return (ITR) forms

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The Finance Act, 2015 abolished the wealth-tax. Thus, taxpayers are no longer required to file returns of wealth tax from assessment year 2016-17 onwards. However, the Hon’ble Finance Minister in his budget speech had announced that information which was to be furnished in wealth tax return will now form part of Income Tax Returns (ITR).

Thus, in new ITR forms, namely, ITR-1, ITR-2, ITR-2A and ITR-4S the Government has imposed obligation on Individuals and HUFs having income exceeding Rs 50 lakhs to furnish information regarding assets and liabilities.

2.0 Changes made in new ITR forms:-

2.1 Declaration of value of assets and liabilities by Individuals/HUF earning above Rs 50 lakhs:-

[ITR 1, 2, 2A, 3, 4, 4S]

The new ITR forms introduce a new Schedule requiring individuals/HUFs to declare the value of assets and liabilities if their total income exceeds Rs. 50 lakhs. Assets include immovable assets and movable assets. Under the heading immovable assets, taxpayers have to disclose cost of land and building. Under movable assets cost of Jewellery, bullion, vehicles, Yachts, boats, aircraft and cash in hand need to be disclosed. Further, such taxpayers need to disclose all liabilities in relation to such assets.

Note: Individuals and HUFs with income exceeding 25 lakhs, filing ITR-3 and ITR-4 were already required to furnish information of their assets and liabilities. Now such threshold limit of 25 lakhs has been increased to 50 lakhs in new ITR-3 and ITR-4 for disclosure of details of assets and liabilities.

2.2          TCS credit for individual taxpayers:-

[ITR 1, 2, 2A]

Sub-section (1D) was inserted in Section 206 by the Finance Act, 2012 to reduce the practice of cash payments for purchase of bullion and Jewellery and for curbing the flow of unaccounted money in the trading system.

Section 206(1D) provides that the seller of bullion and Jewellery shall collect TCS at 1% of sale consideration from buyer if such sale consideration is received in cash and it exceeds:

i) 2 lakh, in case Bullion; and

ii) 5 lakh, in case of Jewellery.

However, in the absence of any row in the ITR Forms (ITR 1, 2 and 2A), individual taxpayers were unable to claim credit of such TCS. Therefore, new ITR Forms provide an option to claim TCS by the individual taxpayers.

2.3          Firms can file ITR-4S for presumptive income:-

[ITR-4S]

Under the existing provisions of Rule 12, firms were required to file ITR 5 even for presumptive income. The amended Rule 12 would now allow firms to file ITR 4S for presumptive income. Accordingly, a separate row is provided for in ITR 4S to claim deduction of interest and salary paid by the firms to the partners.

2.4        Additional deduction for contribution to NPS under Section 80CCD :-

[ITR 1, 2, 2A, 3, 4 and 4S]

A new sub-section (1B) was introduced in Section 80CCD by the Finance Act, 2015 to provide for an additional deduction of upto Rs. 50,000 for investment in National Pension Scheme. Accordingly, a new row is now introduced in the ITR Forms to claim benefits of such additional deduction.

2.5          Details of pass through income of business trust or investment fund:-

[ITR 2, 2A, 3, 4, 5, 6, 7]

As per provisions of Section 115UA and Section 115UB,pass through status is provided in respect ofincome [other than income from business or profession] of business trust/investment fund. Thus, income distributed by the business trust/investment fund is to be taxed in the hands of the unit holders.

The new ITR Forms have a new ‘Schedule PTI’ for reporting of pass through income of business trust/investment fund. Following details should be provided by such trust in ITR forms:

■  Name of business trust/investment fund

■  PAN

■  Head of income

■  Amount of income

■  TDS on such amount, if any.

2.6 Disclosure of details regarding partnership firm by a partner:-

[ITR 3, 4]

In ITR forms there is a separate ‘Schedule IF’ wherein partners are required to disclose the name of the partnership firms in which he is a partner. Now partners have to disclose whether such firm is liable to transfer pricing audit under Section 92E. Separate column has been inserted for such purpose in ‘Schedule IF’.

2.7 Share of income from firm/AOP/BOI:-

[ITR 3, 4, 5, 6]

Share of income from partnership firm, AOP and BOI is exempt from tax in hands of recipient. However, such exempt income had to be disclosed in old ITR forms under ‘Schedule EI’. Now, disclosure of such exempt income has been done away with in new ITR forms.

2.8 Deduction of additional investment allowance:-

[ITR 4, 5, 6]

Section 32AD was inserted by the Finance Act, 2015 to provide for an additional investment allowance to an undertaking set-up in the notified backward areas in the States of Andhra Pradesh or Telangana. Suitable safeguards have been provided in the provision for restricting the transfer of the plant or machinery for a period of 5 years. On transfer of such asset within five years, the amount of deduction already allowed shall be deemed as income from business or profession (i.e., deemed income under Section 32AD) in the year of transfer.

A separate row has been inserted in new ITR forms to claim such deduction under Section 32AD. Further, a separate row is provided to offer the deemed income to tax under Section 32AD.

2.9 Effect of Income Computation and Disclosure Standards (‘ICDS’):-

[ITR 4, 5, 6]

New ‘Schedule ICDS’ has been inserted in ITR forms wherein effect of Income Computation and Disclosure Standards (‘ICDS’) on profit needs to be disclosed.

2.10       Percentage of commercial receipts by a trust:-

[ITR 7]

The Finance Act, 2015 has substituted the proviso to Section 2(15) to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, unless:

i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

ii) the aggregate receipts from such activity or activities during the previous year, do not exceed 20% of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year.

In other words, advancement of any other object of charitable purpose shall not be deemed as charitable if receipts from any commercial activity exceed 20% of total receipts. Accordingly, a new row is inserted in ITR 7 to disclose percentage of commercial receipts vis-à-vis total receipts in order to ensure that such condition (as given hereinabove) is not violated.

2.11       Application of income by a trust:-

[ITR 7]

Income of charitable or religious trust is exempt if 85% of its income is applied for charitable or religious purposes in India. If income applied for charitable or religious purposes during the previous year falls short of 85% because such income has not been received during the year or due to any other reason, an option is given to assessee to apply such income in future years in prescribed manner. Assessee has to choose such an option by filing Form 9A to the Assessing Officer before due date of filing return of income under Section 139(1).

Now a separate row is provided in new ITR 7 requiring trust to confirm if it has filed Form 9A to exercise such an option and the date of filing of such form.

2.12       Details to be given by Universities, hospitals, educational institutions:-

[ITR 7]

Exemption under sub-clause (iiiab) and (iiiac) of Section 10(23C) is available to universities or educational institutions, hospitals or other institutions which are wholly or substantially financed by the Government, subject to certain prescribed conditions. The Finance Act, 2015 has amended the provisions of Section 139 to provide that such entities covered under clauses (iiiab) and (iiiac) of Section 10(23C) shall be mandatorily required to file their returns of income.

Now such universities, hospitals, educational institutions, etc., have to disclose their name and annual receipts in new ITR 7. Further, they are also required to disclose the amount eligible for exemption in ITR 7.

2.13       Minimum Alternate Tax (MAT) disclosure:-

[ITR-6, 7]

The Finance Act, 2015 had excluded following incomes for computing MAT liability:

i) Share of a member in the income of the AOP/BOI, on which no income-tax was payable.

ii) Passive income (like capital gains, interest, royalty, FTS) accruing or arising to foreign company if income-tax payable thereon was less than 18.5%.

iii)  Amount representing:

–          Notional gain on transfer of a capital asset, being share of SPV to a business trust in exchange of units allotted by that trust referred to in clause (xvii) of Section 47; or

–          Notional gain resulting from change in carrying amount of said units; or

–          Gain on transfer of units referred to in clause (xvii) of section 47.

iv) Loss on transfer of units referred to in Section 47(xvii) (subject to conditions)

 

Consequently, the Finance Act, 2015 had provided for addition of related expenditure on aforesaid income while computing MAT liability.

Separate row have now been inserted in ITR forms to incorporate such changes.

 

2.14       Disclosure of Audit information:-

[ITR 5, 6]

In new ITR forms there is a separate row for disclosure of following details if taxpayer is liable for audit under any Act [other than the Income Tax Act]:

1)         Act and Section under which taxpayer is liable for audit

2)         Date of furnishing of Audit Report.

2.15 Deduction of sum paid for purchase of sugarcane:-

[ITR-5]

The Finance Act, 2015 had inserted Section 36(1)(xvii) to provide that co-operative society, engaged in the business of manufacturing of sugar, could claim deduction of expenditure on purchase of sugarcane to the extent of price approved or fixed by the Government. Expenditure in excess of such fixed price was to be disallowed.

 

New ITR-5 has inserted a separate row for disclosure of sum which is disallowable under Section 36(1)(xvii).

2.16 Deduction under section 80JJAA:-

[ITR 4, 5]

Old provisions of section 80JJAA, inter alia, provided for deduction to an Indian company, deriving profits from manufacture of goods in a factory. The quantum of deduction allowed was equal to 30% of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment was provided.

With a view to encourage generation of employment, the Finance Act, 2015 had amended Section 80JJAA so as to extend the benefit of such provision to all assessees having manufacturing units rather than restricting it to corporate assessees only.

New ITR-4 and ITR-5 forms now contain a separate row for such taxpayers (other than corporate taxpayers) to claim benefit of such deduction under Section 80JJA

I-T dept launches tax calculator; e-filing of few ITRs begins

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The calculator works once a filer correctly feeds his basic details and information, as notified for the current assessment year by the government.

E-filing of income tax returns for the assessment year 2016-17 was launched today for a select category of entities and individuals even as the IT department provided an online calculator for filers to do an easy check and obtain their annual tax liability.

“Two Income Tax Returns have been activated over the official e-filing portal of the department today.

The two are ITR 1 (SAHAJ) meant for individuals having income from salary and interest and ITR 4S (Sugam) meant for individuals, HUF, partnership firms having income from presumptive business,” a senior tax department officer said.

The other ITRs will be hosted on the same portal soon, the officer said.

The ‘tax calculator’ is an online computer-based programme hosted on the website of the tax department and is meant to help taxpayers or filers assess their tax liability.

The calculator works once a filer correctly feeds his basic details and information, as notified for the current assessment year by the government.

Last year, the e-filing commenced on July 1 as there was delay in finalisation of the ITR forms because of the controversy generated over a 14-page document requiring assesses to disclose bank account and foreign travel details.

Later the form was simplified and the number of pages was reduced to three.

This year, the Central Board of Direct Taxes notified the new forms on March 30 and ITRs can be filed till the stipulated deadline of July 31.

At the time of filing the form, the taxpayer has to fill in his PAN, personal information and information on taxes paid and TDS will be auto-filled in the form.

Officials said the calculator has been updated and calibrated by the department as per the new announcements made in respect of tax rates in the latest Budget.

The facility can be used by any taxpayer whether individual, corporate or any other entity, to compute their tax liability.

However, there is a word of caution from the tax department that filers should not solely rely on it as complicated cases of ITR have different requirements which may not be addressed by the ‘calculator’.

“The calculator is only to enable public to have a quick and an easy access to basic tax calculation and does not purport to give correct tax calculation in all circumstances.

“It is advised that for filing of returns the exact calculation may be made as per the provisions contained in the relevant Acts, Rules etc,” the tax department said in a disclaimer.

The official said the calculator has been hosted on the website of the department, for the ease of all who either do e-filing or manual filing of ITR.

The calculator has been enabled to compute the total tax liability of an individual or any other category of taxpayer under various heads like income from house property, capital gains, profits and gains of business or profession and agricultural income, among others.

A total of nine such ITRs have been notified which include the Sahaj (ITR-1), ITR-2, ITR-2A, ITR-3, Sugam (ITR-4S), ITR-4, ITR-5, ITR-6, ITR-7 and an acknowledgement form called the ITR-V.

People with an income of more than Rs 50 lakh per annum and who own luxury items like yacht, aircraft or valuable jewellery will now have to disclose these expensive assets with the IT department in the new ITRs.

ITR 1-SAHAJ, 2 and 2A can be used by individual or Hindu Undivided Families whose income does not include income from business.

ITR 4S – SUGAM can be used by an individual or HUF whose income includes business income assessable on presumptive basis.

It can also be filed by a firm, other than a limited liability partnership firm.

CBDT processes 6.53L online rectification requests in ITR

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CBDTThe tax department has processed over 6.53 lakh online rectification applications in 2015-16 fiscal and asked the assesses to make use of the e-filing portal for correcting mistakes in Income tax returns.

The Central Board of Direct Taxes (CBDT) in a statement said the e-filing portal of the I-T department provides the utility for online filing and tracking of rectification requests.
CPC has already processed 6,53,763 online rectification requests in 2015-16 till February 29, 2016.
Section 154 of the Income-tax Act provides the taxpayer with an option to seek rectification of mistakes in record.
CBDT said a detailed user manual for filing online rectification is available on the e-filing portal, on which the taxpayer can also monitor the status of disposal of rectification request.
It said in case of any mistake in data entry of tax payment or TDS details, taxpayer can select the “Rectification Request Type->Taxpayer is correcting data for Tax Credit mismatch only” and use the option of pre-filling the correct details.
In case of data entry mistake in any other Schedule or omission of any details, the taxpayer can select the option “Taxpayer is correcting Data in Rectification” and the reason for seeking rectification.
In any other case taxpayer can select the option “No further Data Correction Required, Reprocess the case” where the mistake in processing may have occurred due to non-reporting of TDS by deductor etc, CBDT said.
“CBDT is committed to ensuring accuracy in processing of returns and determination of refunds and seeks the active cooperation of taxpayers in ensuring correctness of data while submitting the return or rectification request,” the statement added.

Source: http://policypulse.com/news/india/story/1116.html

Budget 2016-17: Key Highlights

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INTRODUCTION

  • Growth of Economy accelerated to 7.6% in 2015-16.
  • India hailed as a ‘bright spot’ amidst a slowing global economy by IMF.
  • Robust growth achieved despite very unfavourable global conditions and two consecutive years shortfall in monsoon by 13%
  • Foreign exchange reserves touched highest ever level of about 350 billion US dollars.

 

CHALLENGES IN 2016-17

  • Risks of further global slowdown and turbulence.
  • Additional fiscal burden due to 7th Central Pay Commission recommendations and an additional burden due to One Rank One Pension OROP.

ROADMAP & PRIORITIES

  • Focus on enhancing expenditure in priority areas of – farm and rural sector, social sector, infrastructure sector employment generation and recapitalization of the banks.
  • Government to focus on:
  • ensuring macro-economic stability & prudent fiscal management.
  • boosting on domestic demand
  • continuing with the pace of economic reforms and policy initiatives to change the lives of our people for the better.
  • ‘Transform India’ to have a significant impact on economy and lives of people.
  • Focus on Vulnerable sections through:
    • Pradhan Mantri Fasal Bima Yojana
    • New health insurance scheme to protect against hospitalisation expenditure
    • facility of cooking gas connection for BPL families
  • Continue with the ongoing reform programme and ensure passage of the Goods and Service Tax bill and Insolvency and Bankruptcy law
  • Undertake important reforms by:
    • giving a statutory backing to AADHAR platform to ensure benefits reach the deserving.
    • freeing the transport sector from constraints and restrictions
    • incentivizing gas discovery and exploration by providing calibrated marketing freedom
    • enactment of a comprehensive law to deal with resolution of financial firms
    • provide legal framework for dispute resolution and
    • re-negotiations in PPP projects and public utility contracts
    • undertake important banking sector reforms and public listing of general insurance companies undertake significant changes in FDI policy.

AGRICULTURE AND FARMERS’ WELFARE

  • Allocation for Agriculture and Farmers’ welfare is 35,984 crore
  • ‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission 28.5 lakh hectares will be brought under irrigation.
  • Implementation of 89 irrigation projects under AIBP, which are languishing for a long time, will be fast tracked
  • A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about 20,000 crore
  • Programme for sustainable management of ground water resources with an estimated cost of 6,000 crore will be implemented through multilateral funding.

MULTILATERAL FUNDING

  • 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA
  • Soil Health Card scheme will cover all 14 crore farm holdings by March
  • 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years
  • Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’ and ‘Organic Value Chain Development in North East Region’.
  • Unified Agricultural Marketing ePlatform to provide a common e-market platform for wholesale markets
  • Allocation under Pradhan Mantri Gram Sadak Yojana increased to 19,000 crore. Will connect remaining 65,000 eligible habitations
  • To reduce the burden of loan repayment on farmers, a provision of 15,000 crore has been made in the BE 2016-17 towards interest subvention
  • Allocation under Prime Minister Fasal Bima Yojana 5,500 crore.
  • 850 crore for four dairying projects – ‘Pashudhan Sanjivani’, ‘Nakul Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for indigenous breeds

RURAL SECTOR

  • Allocation for rural sector – 87,765 crore.
  • 87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission
  • Every block under drought and rural distress will be taken up as an intensive Block under the Deen Dayal Antyodaya Mission
  • A sum of 38,500 crore allocated for MGNREGS.
  • 300 Rurban Clusters will be developed under the Shyama Prasad Mukerjee Ruban Mission.

Mukherjee Rurban Mission

  • 100% village electrification by 1st May, 2018.
  • District Level Committees under Chairmanship of senior most Lok Sabha MP from the district for monitoring and implementation of designated Central Sector and Centrally Sponsored Schemes.
  • Priority allocation from Centrally Sponsored Schemes to be made to reward villages that have become free from open defecation.
  • A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional household within the next 3 years.
  • National Land Record Modernisation Programme has been revamped.
  • New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of 655 crore.

SOCIAL SECTOR INCLUDING HEALTH CARE

  • Allocation for social sector including education and health care – 1,51,581 crore.
  • 2,000 crore allocated for initial cost of providing LPG connections to BPL families.
  • New health protection scheme will provide health cover up to One lakh per family. For senior citizens an additional top-up package up to 30,000 will be provided.
  • 3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be opened during 2016-17.
  • ‘National Dialysis Services Programme’ to be started under National Health Mission through PPP mode
  • “Stand Up India Scheme” to facilitate at least two projects per bank This will benefit at least 2.5 lakh entrepreneurs.
  • National Scheduled Caste and Scheduled Tribe Hub to be set up in partnership with industry associations
  • Allocation of 100 crore each for celebrating the Birth Centenary of Pandit Deen Dayal Upadhyay and the 350th Birth Anniversary of Guru Gobind Singh.

EDUCATION, SKILLS AND JOB CREATION

  • 62 new Navodaya Vidyalayas will be opened
  • Sarva Shiksha Abhiyan to increasing focus on quality of education
  • Regulatory architecture to be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions
  • Higher Education Financing Agency to be set-up with initial capital base of 1000 Crores
  • Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up.

SKILL DEVELOPMENT

  • Allocation for skill development – 1804. crore.
  • 1500 Multi Skill Training Institutes to be set-up.
  • National Board for Skill Development Certification to be setup in partnership with the industry and academia
  • Entrepreneurship Education and Training through Massive Open Online Courses

JOB CREATION

  • GoI will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment. Budget provision of 1000 crore for this scheme.
  • Deduction under Section 80JJAA of the Income Tax Act will be available to all assesses who are subject to statutory audit under the Act
  • 100 Model Career Centres to operational by the end of 2016-17 under National Career Service.
  • Model Shops and Establishments Bill to be circulated to States.

INFRASTRUCTURE AND INVESTMENT

  • Total investment in the road sector, including PMGSY allocation, would be 97,000 crore during 2016-17.
  • India’s highest ever kilometres of new highways were awarded in 2015. To approve nearly 10,000 kms of National Highways in 2016-17.
  • Allocation of 55,000 corer in the Budget for Roads. Additional
    15,000 crore to be raised by NHAI through bonds.
  • Total outlay for infrastructure – 2,21,246 crore.
  • Amendments to be made in Motor Vehicles Act to open up the road transport sector in the passenger segment
  • Action plan for revival of unserved and underserved airports to be drawn up in partnership with State Governments.
  • To provide calibrated marketing freedom in order to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature areas
  • Comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation to be drawn up.
  • Steps to re-vitalise PPPs:
    • Public Utility (Resolution of Disputes) Bill will be introduced during 2016-17
    • Guidelines for renegotiation of PPP Concession Agreements will be issued
    • New credit rating system for infrastructure projects to be introduced
  • Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.
  • 100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.
  • A new policy for management of Government investment in Public Sector Enterprises, including disinvestment and strategic sale, approved.

FINANCIAL SECTOR REFORMS

  • Statutory basis for a Monetary Policy framework and a Monetary Policy Committee through the Finance Bill 2016.
  • A Financial Data Management Centre to be set up.
  • RBI to facilitate retail participation in Government securities.
  • New derivative products will be developed by SEBI in the Commodity Derivatives market.
  • 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.
  • Comprehensive Central Legislation to be bought to deal with the menace of illicit deposit taking schemes.
  • Increasing members and benches of the Securities Appellate Tribunal.
  • Allocation of 25,000 crore towards recapitalisation of Public Sector
  • Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to 1,80,000 crore.
  • General Insurance Companies owned by the Government to be listed in the stock exchanges.

GOVERNANCE AND EASE OF DOING BUSINESS

  • A Task Force has been constituted for rationalisation of human resources in various Ministries.
  • Comprehensive review and rationalisation of Autonomous Bodies.
  • Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhar framework to be introduced.
  • Introduce DBT on pilot basis for fertilizer.
  • Automation facilities will be provided in 3 lakh fair price shops by March 2017.
  • Amendments in Companies Act to improve enabling environment for start-ups.
  • Price Stabilisation Fund with a corpus of 900 crore to help maintain stable prices of Pulses.
  • “Ek Bharat Shreshtha Bharat” programme will be launched to link States and Districts in an annual programme that connects people through exchanges in areas of language, trade, culture, travel and tourism.

FISCAL DISCIPLINE

  • Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.
  • Revenue Deficit target from 2.8% to 2.5% in RE 2015-16
  • Total expenditure projected at 19.78 lakh crore
  • Plan expenditure pegged at 5.50 lakh crore under Plan, increase of 3%
  • Non-Plan expenditure kept at 14.28 lakh crores
  • Special emphasis to sectors such as agriculture, irrigation, social sector including health, women and child development, welfare of Scheduled Castes and Scheduled Tribes, minorities, infrastructure.
  • Mobilisation of additional finances to the extent of 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising Bonds.
  • Plan / Non-Plan classification to be done away with from 2017-18.
  • Every new scheme sanctioned will have a sunset date and outcome review.
  • Rationalised and restructured more than 1500 Central Plan Schemes
    into about 300 Central Sector and 30 Centrally Sponsored Schemes.
  • Committee to review the implementation of the FRBM Act.

RELIEF TO SMALL TAX PAYERS

  • Raise the ceiling of tax rebate under section 87A from 2000 to 5000 to lessen tax burden on individuals with income upto 5 laks.
  • Increase the limit of deduction of rent paid under section 80GG from 24000 per annum to 60000, to provide relief to those who live in rented houses.

BOOST EMPLOYMENT AND GROWTH

  • Increase the turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act to 2 crores to bring big relief to a large number of assessees in the MSME category.
  • Extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to 50 lakh.
  • Phasing out deduction under Income Tax:
    • Accelerated depreciation wherever provided in IT Act will be limited to maximum 40% from 1.4.2017
    • Benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020
    • Benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020.
    • The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020
  • Corporate Tax rate proposals:
    • New manufacturing companies incorporated on or after 1.3.2016 to be given an option to be taxed at 25% + surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation.
    • Lower the corporate tax rate for the next financial year for relatively small enterprises i.e companies with turnover not exceeding 5 crore (in the financial year ending March 2015), to 29% plus surcharge and cess.
  • 100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019. MAT will apply in such cases.
  • 10% rate of tax on income from worldwide exploitation of patents developed and registered in India by a resident.
  • Complete pass through of income-tax to securitization trusts including trusts of ARCs. Securitisation trusts required to deduct tax at source.
  • Period for getting benefit of long term capital gain regime in case of unlisted companies is proposed to be reduced from three to two years.
  • Non-banking financial companies shall be eligible for deduction to the extent of 5% of its income in respect of provision for bad and doubtful
  • Determination of residency of foreign company on the basis of Place of Effective Management (POEM) is proposed to be deferred by one year.
  • Commitment to implement General Anti Avoidance Rules (GAAR) from 4.2017.
  • Exemption of service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development & Entrepreneurship.
  • Exemption of Service tax on general insurance services provided under ‘Niramaya’ Health Insurance Scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability.
  • Basic custom and excise duty on refrigerated containers reduced to 5% and 6%.

MAKE IN INDIA

  • Changes in customs and excise duty rates on certain inputs to reduce costs and improve competitiveness of domestic industry in sectors like Information technology 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.

MOVING TOWARDS A PENSIONED SOCIETY

  • Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme (NPS). Annuity fund which goes to legal heir will not be taxable.
  • In 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 from 4.2016.
  • Limit for contribution of employer in recognized Provident and Superannuation Fund of 1.5 lakh per annum for taking tax benefit. Exemption from service tax for Annuity services provided by NPS and Services provided by EPFO to employees.
  • Reduce service tax on Single premium Annuity (Insurance) Policies from 5% to 1.4% of the premium paid in certain cases.

PROMOTING AFFORDABLE HOUSING

  • 100% deduction for profits to an undertaking in housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019 and completed in three years. MAT to apply.
  • Deduction for additional interest of 50,000 per annum for loans up to 35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does not exceed 50 lakh.
  • Distribution made out of income of SPV to the RE ITs and INVITs having specified shareholding will not be subjected to Dividend Distribution Tax, in respect of dividend distributed after the specified date.
  • Exemption from service tax on construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including PPP Schemes.
  • Extend excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work to Ready Mix Concrete.

RESOURCE MOBILIZATION FOR AGRICULTURE, RURAL ECONOMY AND CLEAN ENVIRONMENT

  • Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend in excess of 10 lakh per annum.
  • Surcharge to be raised from 12% to 15% on persons, other than companies, firms and cooperative societies having income above 1 crore.
  • Tax to be deducted at source at the rate of 1 % on purchase of luxury cars exceeding value of ten lakh and purchase of goods and services in cash exceeding two lakh.
  • Securities Transaction tax in case of ‘Options’ is proposed to be increased from .017% to .05%.
  • Equalization levy of 6% of gross amount for payment made to non­residents exceeding 1 lakh a year in case of B2B transactions.
  • Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016. Proceeds would be exclusively used for financing initiatives for improvement of agriculture and welfare of farmers. Input tax credit of this cess will be available for payment of this cess.
  • Infrastructure cess, of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles 12 and SUVs. No credit of this cess will be available nor credit of any other tax or duty be utilized for paying this cess.
  • 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 6 crores and 12 crores
  • Excise on readymade garments with retail price of 1000 or more raised to 2% without input tax credit or 12.5% with input tax credit.
  • ‘Clean Energy Cess’ levied on coal, lignite and peat renamed to ‘Clean Environment Cess’ and rate increased from 200 per tonne to 400 per tonne.
  • Excise duties on various tobacco products other than beedi raised by about 10 to 15%.
  • Assignment of right to use the spectrum and its transfers has been deducted as a service leviable to service tax and not sale of intangible goods.

PROVIDING CERTAINTY IN TAXATION

  • Committed to providing a stable and predictable taxation regime and reduce black money.
  • Domestic taxpayers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and 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.
  • Surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.
  • New Dispute Resolution Scheme to be introduced. No penalty in respect of cases with disputed tax up to 10 lakh. Cases with disputed tax exceeding 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.
  • High Level Committee chaired by Revenue Secretary to oversee fresh cases where assessing officer applies the retrospective amendment.
  • One-time scheme of Dispute Resolution for ongoing cases under retrospective amendment.
  • Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.
  • Disallowance will be limited to 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure claimed under rule 8D of Section 14A of Income Tax Act.
  • Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty.
  • Mandatory for the assessing officer to grant stay of demand once the assesse pays 15% of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals).
  • Monetary limit for deciding an appeal by a single member Bench of ITAT enhanced from 15 lakhs to 50 lakhs.
  • 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

SIMPLIFICATION AND RATIONALIZATION OF TAXES

  • 13 cesses, levied by various Ministries in which revenue collection is less than 50 crore in a year to be abolished.
  • For non-residents providing alternative documents to PAN card, higher TDS not to apply.
  • Revision of return extended to Central Excise assesses.
  • Additional options to banking companies and financial institutions, including NBFCs, for reversal of input tax credits with respect to non­taxable services.
  • Customs Act to provide for deferred payment of customs duties for 14 importers and exporters with proven track record.
  • Customs Single Window Project to be implemented at major ports and airports starting from beginning of next financial year.
  • Increase in free baggage allowance for international passengers. Filing of baggage only for those carrying dutiable goods.

TECHNOLOGY FOR ACCOUNTABILITY

  • Expansion in the scope of e-assessments to all assessees in 7 mega cities in the coming years.
  • Interest at the rate of 9% p.a against normal rate of 6% p.a for delay in giving effect to Appellate order beyond ninety days.
  • ‘e-Sahyog’ to be expanded to reduce compliance cost, especially for small taxpayers.