Direct Tax Proposals
Personal Taxation
·
Basic exemption limit to be increased from Rs. 2
lakhs to Rs. 2.5 lakhs for taxpayer below the age of 60 years and from Rs. 2.5
lakhs to Rs. 3 lakhs, in case of senior citizens.
·
The existing limit of deduction under section 80C
to be increased from Rs. 1 lakh to Rs. 1.5 lakhs. The annual ceiling limit for
investment in Public Provident Fund to be increased from Rs. 1 lakh to Rs. 1.5
lakh.
·
The deduction in respect of interest on housing
loan borrowed for self occupied property to be enhanced from Rs. 1.5 lakhs to
Rs. 2 lakhs.
·
No change proposed in the rate of surcharge rate
and education cess.
Business Taxation
·
Tax on distributed profits of domestic companies
under section 115-O and tax on distributed income to unit holders under section
115-R to be levied on the gross amount of dividend and not on net amount of
dividend distributed.
·
Deduction under section 32AC@15% of investment in
new plant and machinery to be allowed if such investment exceeds Rs. 25 crores
during the previous year. Such deduction is allowable for investment made in
plant and machinery upto 31.03.2017.
·
The terminal date for power sector undertakings to
set-up, start transmission or distribution or substantial renovation and
modernization of existing network to be extended for a further period upto 31st
March, 2017.
·
Deduction in respect of capital expenditure
extended to two new sectors, namely, laying and operating of slurry pipelines
for the transportation of iron ore, and setting up and operating semi conductor
wafer fabrication manufacturing units. Period of 8 years being specified for
which capital asset to be used for specified business
·
The Corporate Social Responsibility (CSR) expenditure
under section 135 of the Companies Act, 2013 not deductible under section 37.
·
Disallowance of payments made to non-residents not
to be attracted if the tax is deducted during the previous year and deposited
on or before the due date of filing of return of income.
·
Disallowance of payments made to residents without
deduction of tax to be limited to 30% of such payment. Further, disallowance to
be attracted for all payments on which tax is required to be deducted under
Chapter XVII-B.
·
Presumptive income of an assessee engaged in the
business of plying, hiring or leasing goods carriage to be computed at Rs.
7,500 per month per vehicle for all types of goods carriage vehicles, whether
heavy vehicles or not.
·
Provisions of AMT to be attracted to assessees
claiming investment linked tax deduction under section 35AD
·
Since the tax accounting standards that were placed
in public domain are not intended for maintenance of accounts but for the
purpose of computation of income, the term “accounting standards” is to be replaced
with “income computation and disclosure standards”.
Capital Gains
·
Units of debt oriented mutual funds and unlisted
securities to qualify as a short-term capital asset, if held for not more than
36 months. The period for qualifying as a short-term capital asset to be
increased from 12 months to 36 months.
·
Long-term capital gains on units of debt-oriented
mutual funds not eligible for concessional rate of tax@10% (without indexation
benefit);
·
Advance received and retained in the course of
negotiations for transfer of a capital asset which did not materialize to be
treated as income chargeable to tax under the head “Income from other sources”
Currently, such sum is being deducted from the cost of acquisition for
computing capital gains when the asset is subsequently transferred.
·
Enhanced compensation on compulsory acquisition of
a capital asset received in pursuance of an interim order of a court, tribunal
or other authority to be deemed as income chargeable under the head “capital gains”
in the previous year in which the final order of such Court, Tribunal or other
authority is made.
·
“Cost Inflation Index” in relation to a previous
year to mean such index as may be notified by the Central Government having
regard to 75% of average rise in the Consumer Price Index (Urban) for the
immediately preceding previous year to such previous year. Reference to
Consumer Price Index (CPI) for urban non-manual employees to be removed since release
of CPI for such employees has been discontinued.
·
Sections 54 and 54F to be amended to provide that
the benefit of exemption thereunder would be available only in respect of
investment in one residential house situated in India.
·
Exemption under section 54EC for investment in
long-term specified asset, out of capital gains arising from transfer of one or
more original assets, to be restricted to Rs.50 lacs, whether such investment
is made in the same financial year or in the next financial year or partly in
the same financial year and partly in the next financial year.
Charitable Trusts
·
Where a trust or institution has been granted
registration for availing benefit under section 11 and the registration is in
force for a previous year, then, such trust or institution cannot claim any
exemption under any provision of section 10 [other than section 10(1) and
section 10(23C)]. Likewise, where an entity has been approved or notified for
claiming benefit of exemption under section 10(23C), it would not be entitled
to claim any benefit of exemption under the other provisions of section 10 [except
the exemption under section 10(1)].
·
Income for the purposes of application under
section 11 and section 10(23C), shall be determined without providing deduction
or allowance for depreciation in respect of an asset, acquisition of which has
been claimed as an application of income under these sections in the same or
any other previous year. In effect, if the cost of asset has been claimed as
application of income, then depreciation on such asset cannot be claimed in the
same or any other previous year.
·
The power of the Commissioner or Principal
Commissioner to cancel the registration of the trust or institution has been
expanded. Section 12AA has been amended to provide that where a trust or
institution has been granted registration and subsequently, it is noticed that
its activities are being carried out in such a manner that –
(a) Its
income does not enure for the benefit of general public;
(b) It is for
the benefit of any particular community or caste;
(c) Any
income or property of the trust is applied for the benefit of specified persons
like author of trust, trustees, etc.; or
(d) Its funds
are invested in prohibited modes.
the
registration may be cancelled, if such trust or institution does not prove that
there was a reasonable cause for the activities to be carried out in the above
manner.
·
Anonymous donations in excess of one lakh or 5% of
total donations received by the assessee, is taxable at 30%. The income-tax
payable by the assessee shall be the aggregate of 30% of such donations and the
income tax, which would be leviable, had the total income been reduced by the aggregate
of anonymous donations which is in excess of 5% of total donations received by
the assessee or one lakh, whichever is higher.
Non-resident Taxation
·
The benefit of concessional rate of withholding
tax@5% extended to borrowings by way of issue of any long-term bond, and not
restricted only to long-term infrastructure bonds. Further, the period for
which the benefit is available to be extended by two years i.e. borrowings made
before 1st July, 2017.
·
Benefit of concessional rate of 15% on dividend
received by Indian companies from specified foreign companies to be extended
without limitation to a particular assessment year;
·
“Roll Back mechanism” to be provided in the APA
scheme upto a period not exceeding 4 previous years preceding the first
previous year for which the APA applies .
·
Income arising from transfer of security by a
Foreign Portfolio Investors to be in the nature of capital gains.
Tax Deduction at Source
Tax to be deducted @2% from the sum paid under life insurance policies which
are not exempted under section 10(10D). No tax to be deducted where the amount
in aggregate exceeds Rs. 1 lakh.
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