SN
Description
Impact
1
Stay application to be provided on payment of 15% of tax demand
Positive
2
Section 206AA of the Act not to be applicable to non-residents who do not possess a PAN on satisfaction of conditions yet to be prescribed. Reference could be made to the Draft Report of Justice R.V Easwar (Retd) Committee to simplify the provisions of IT Act, where it was recommended that Tax Identification Number (TIN) from the country of residence of the recipient could be furnished to avoid higher withholding under Section 206AA if the Act
Positive
3
Rule 8D of the Income-tax Rules, 1962 (“Rules”) to limit disallowance to 1 percent of average monthly value of investments yielding exempt income, but not exceeding actual expenditure claimed. Rules to be published
Negative
4
Introduction of Country by country reporting for companies having turnover more than 750 Mn Euro
Negative
5
Introduction of maintenance of Master file by India HO
Negative
6
New levy of 6 percent on the consideration for specified services (online advertisement, provision for digital advertising space or any other facility or service as may be prescribed for the purpose of online advertisement) received by non-resident not having permanent establishment in India. Not applicable in case the non-resident has a permanent establishment in India/ in case where the consideration does not exceed INR 100,000 in any financial year or in a case where the payments are not for the purpose of any business or profession. Such income would be exempt under the proposed Section 10(50) of the IT Act. The proposed levy is outside the purview of the Income tax Act.
Negative
7
Profit of Housing project being 100% exempted for each unit less than 60 SM
Positive
8
Manufacturing Company incorporate after 1.3.2016 can pay tax @ 25% subject does not claim any special exemption
Please be noted that no special condition required for formation of new company and can be a good tax planning
Positive
9
Tax rate @ 29% for companies having turnover less than 5 Crore.
Positive
10
Tax incentives under Section 80JJAA of the Act proposed to be extended to all assesses subject to tax audit under Section 44AB of the Act. Deduction available in respect of cost incurred on any employee whose total emoluments is less than or equal to INR 25,000 per month. In the first year of a new business, 30 percent of all emoluments paid or payable to employees to be allowed as deduction. The minimum number of days of employment in a financial year stands reduced from 300 days to 240 days. The deduction is available only in respect of additional employee cost (ie only if there is an addition in the workforce and not mere replacement hiring)
Positive
11
With effect from 1 April 2016, units in IFSC eligible to following tax benefits:
► Deduction under section 80LA to continue without a sunset clause.
► Companies not liable to DDT.
► MAT rate reduced to 9%.
Positive
12
Royalty income derived from patents developed and registered in India taxable at 10 percent (plus applicable surcharge and cess) on the gross amount of royalty. No expenditure or allowance in respect of such royalty income to be allowed. The concessional rate would not apply to sale of patented products
Positive
13
Tax holiday for 3 consecutive years out of 5 years beginning from the year in which an eligible start-up is incorporated
Specified capital gains will not be taxable in the hands of individuals under Section 54GB if sale proceeds from sale of residential house property are invested in newly incorporated companies in which they hold majority of shares. Existing provision of section 54GB requires the company to invest the proceeds in the purchase of new assets being plant and machinery. The Budget proposes to extend the definition of new assets to include computer and software.
Benefits only to be available to startups housed in corporate form of business organisation
New provision included for exemption of long term capital gains on account of investments made in a ‘fund of funds’ set-up to finance start-ups – up to INR 5,000,000 in a financial year. Investments proposed to have a lock in of 3 years from the date of investment.
Positive
14
POEM postponed for 1 year
Positive
15
Additional depreciation of 20 % extended to power sector
Positive
16
MAT provisions not to be applicable to foreign companies with retrospective effect from April 1, 2001 if (i) the assessee is a resident of a country or a specified territory with which India has entered into a tax treaty and such assesse does not have a permanent establishment in India, or (ii) the assessee is a resident of a country with which India does not have a tax treaty and the assessee is not required to seek registration under any law for the time being in force relating to companies
Negative
17
Phase out removal of tax incentives and deductions
Negative
18
Reduction on deprecation rate of computers @ 40%
Negative
19
Reduction on section 35 deduction to 150% now and 100% in 2020
Sl No
Section
Proposed changes
1
10AA
SEZ unit tax holiday to be available only to units which commence activity on or before March 31, 2020
2
80IA/ 80IAB /80IB
No deduction shall be available if the specified activities commences on or after April 1, 2017
3
32
Depreciation to be limited to a maximum of 40 percent irrespective of the block of assets
4
35(1)(ii)/ 35(1)(iia)
Weighted deduction for payments made to various eligible institutions capped at 100 percent from April 1, 2020
5
35(2AB)
Weighted deduction for in-house research reduced from 200 percent to 150 percent from April 1, 2016 and 100 percent from April 1, 2020
Negative.
20
Tax on share buybacks under Section 115QA of the Income tax Act also to include buybacks undertaken under the Companies Act, 2013. Further Rules to be prescribed for the manner of determination of cost of shares bought back by a company in various circumstances including shares being issued under tax neutral reorganisations
Negative.
Income Tax Amendment – Others.
SN
Description
Impact
1
Change in TDS Provision
‒ 194C – INR 75,000 increased to INR 1,00,000
‒ 194H – INR 5,000 increased to INR 15,000; TDS rate under Section 194H of the Act reduced to 5 percent (from the existing rate of 10 percent).
Positive
2
Reduction in penalty rates and relaxation in their condition
Positive
3
Voluntary disclosure of undisclosed income @ 45% of tax
Positive
4
Mandatory summary assessment u/s 143(1)
Positive
5
Introduction of bank guarantee for attachment of properties
Positive
6
Time limit for assessment reduced to 21 months
Positive
7
IRS cannot file appeal against DRP order
Positive
8
Introduction of direct tax dispute resolution scheme
Postive
9
Taxation of Non compete Fees
Negative
10
Increase in turnover limit of tax audit
Positive
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