Executive Summary – The Finance Minister, Arun Jaitley announced the Budget for the financial year 2016-17. The budget focussed on social development, growth in rural areas and easier tax regime. There are no changes to the personal income tax slabs. There are some benefits and exemptions that can be used while computing personal income tax.
The Finance Minister Arun Jaitley presented the Union Budget today.
- The government will contribute 8.33% in EPF for new employees for first three years.
- If your income is less than Rs. 5,00,000 per annum, you will get a tax rebate of Rs. 5000. It was Rs. 2000 earlier.
- An additional amount of Rs. 50,000 will be allowed for exemption for tax calculation for housing loans up to Rs. 35 lakh. This is applicable if the person is a first time home buyer and the value of the property is not above Rs. 50 lakh.
- There will be no Service Tax for houses newly built with area less than or equal to 60 sq. m.
- Under the National Pension Scheme (NPS), at the time of retirement, when the maturity amount is being withdrawn, 40% of the withdrawal amount will be exempt from tax when a person is withdrawing amount from the NPS Scheme at retirement. But there is also a proposal to tax 60% of EPF and PPF withdrawals for contributions post April 1 2016. The tax rate will be as per the income tax slab a person is categorized in.
- A deduction of Rs. 60,000 will be allowed for tax computation on rent paid for housing. This was Rs. 20, 000 earlier.
- HRA deduction has been increased to Rs. 60,000 p.a. From Rs. 24,000. The ceiling under 87A will be increased by Rs. 3,000.
- A 15% surcharge will be applicable on income equal to or greater than Rs. 1 crore.
- The presumptive tax has to be paid by professionals earning up to Rs 50 lakh per year.
- The tax compliance window for declaring undisclosed income has been limited till 30 September. The person will have to pay @ 45%.
- Dividend earned above Rs. 10 lakh per annum to be taxed at additional 10 per cent.
- Corporate income tax rate has been decreased to 29% plus surcharge for companies with turnover less than or equal to Rs. 5 crore. Manufacturing companies incorporated after April 1, 2016 will have to pay a tax of 25% + surcharge provided they do not claim exemptions.
- General Insurance companies will be listed in the stock exchange
- There are incentives to be provided for deepwater gas exploration
- There is a 2.5% tax on diesel vehicles purchase which is not so good for companies manufacturing diesel vehicles.
- NBFCs can get a deduction of 5% of income for provision against bad debts.
- The government has not announced any additional amount for funding banks' bad debts and provision for bad debts. This will be seen as a negative factor as there were expectations of recapitalization.
- 1% cess on petrol and CNG cars that cost more than Rs. 10,00,000.
- Tobacco Tax up to 15%
- Excise duty on retail garments is increased to 6%
- The clean energy cess on coal production has increased to Rs. 400/tonne.
- 4% high capacity tax for SUVs.
- The following amounts have been earmarked -
- Rs. 3,000 crores - Nuclear power generation
- Rs 55,000 crores - Roads and highways
- Rs. 9,000 crore – Swachch Bharat Programme
- Rs. 500 crore – Promote entrepreneurship among SC/ST and women
- A nationwide rollout of ATMs and micro ATMs over a period of 3 years is announced.
- Multi-skill training centres will be launched across the country to increase the employability of people.
- Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has been allocated Rs. 38,500 crores
- The Pradhan Mantri Fasal Bima Yojana that was announced earlier will have a fund of Rs 5,500 crore. Farmers will pay a nominal uniform premium of 1.5%-2% and the rest will be paid by the government.
- There will be 89 projects set up for irrigation, road development, dairy production, rural employment scheme and increased Internet access in rural areas.
- 0.5 per cent Krishi Kalyan Cess will be levied on all services.
- Infrastructure and agriculture cess to be levied.
- 10% additional tax on dividend earned greater than Rs. 10 lakh per year.
- Service tax is exempt for general insurance schemes under Niramayi Swasthya Bima Yojana
The Finance Minister Arun Jaitley presented the Union Budget today. It focused on fiscal discipline and bringing demand in and empowering rural India and overall development of the country.
The budget has kept focus on fiscal prudence, rural growth and on bringing out an easier tax regime over a period of time. Bank recapitalization and healthcare have not been provided the expected impetus. The things that have got more costlier are cars, tobacco products, readymade garments, air travel and goods and services worth Rs. 2,00,000 or more. The things that have cheaper solar lamps, pension plans, hybrid electric vehicles, houses with area less than 60 sq. m and sterilised dialyser. There are some positives for the individual tax payers in the form of more deductions and tax-free withdrawal of NPS corpus up to 40% of the amount. But there are some cess charges and increase of surcharge on income of the super rich. If the proposal to tax EPF and PPF withdrawals becomes true, it will be a big blow to the salaried class. There are some steps taken to make tax evaders to toe the line.