EBook on Budget-2016 Analysis for Layman & Tax Practitioners

Indian Union Budget – 2016 An Analysis For Layman as well Tax Practitioners Analysis by CA. Tejas K. Andharia B. COM, F.C.A., D.I.S.A.(ICAI), D.I.R.M.(ICAI) Bhavnagar, Gujarat Email: tejasinvites@gmail.com Page 2 of 29 1. Income Tax rates are not changed (except in case of certain types of companies) but surcharge in case of individual, H.U.F., A.O.P., B.O.I. and artificial juridical persons is increased from 12% of income tax to 15% of income tax. [Not to worry situation for most of the tax payers as surcharge is applicable to so called super rich persons only. i.e., when taxable income exceeds Rs. 1 crore.] [Applicable from A. Y. 2017-18] 2. Rebate under section 87A is increased to Rs. 5,000/- from Rs. 2000/-. [This rebate is available to individual resident in India whose taxable income does not exceed five lakh rupees.] [Applicable from A. Y. 2017-18] 3. Under the existing provisions, tax is not deducted at source (TDS) on rent payment where the rent does not exceeds Rs. 1,80,000/- per financial year. To further relax this provision, section 197A is proposed to be amended in this budget. As a result, recipient of rent can now furnish to the payer of rent a self- declaration in prescribed Form. no. 15G/15H declaring that the tax on his estimated total income (which includes this rent income also) of the relevant previous year would be nil. (Thus, one can save itself from TDS even when rent income during the year exceeds Rs. 1,80,000/-). 4. Tax Collection at Source (TCS): In order to reduce the quantum of cash transaction in sale of any goods and services and for curbing the flow of unaccounted money in the trading system and to bring high value transactions within the tax net, it is proposed to amend section 206C, whereby it is proposed that the seller shall collect the tax at the rate of 1% from the purchaser on sale of motor vehicle of the value exceeding Rs. 10 lakh. Further it is also proposed that sale in cash of any goods (other than bullion and jewellery) , or providing of any services (other than payments on which tax is deducted at source under Chapter XVII-B) exceeding Rs. 2 lakh except in certain class of buyers who fulfill such conditions as may be prescribed. [Applicable from 01/06/2016] 5. Housing Loan Interest: As per existing provisions, housing loan interest in case of self- occupied property is available upto Rs 2,00,000 under section 24(b) of the Act where such acquisition or construction of such house property is completed within 3 years from the end of the financial year in which capital was borrowed. This limit of 3 years is extended to 5 years from A.Y. 2017-18. Further, under section 80EE, deduction of up to 1 lakh rupees in respect of interest paid on loan by an individual for acquisition of a residential house property was available for A.Y. 2014-15 and A.Y. 2015-16. In this budget, by substituting existing section 80EE with new provisions, it is proposed to further incentivise first-home buyers (the assessee does not own any residential house property on the date of sanction of loan) availing home loans, by providing additional deduction in respect of interest on loan taken for residential house property from any financial institution up to Rs. 50,000. This incentive is proposed to be extended to a house property of a value less than Rs. 50 lakhs in respect of which a loan of an amount not exceeding Rs. 35 lakh has been sanctioned during the period from the 01/04/2016 to the 31/03/2017. It is also proposed to extend the benefit of deduction till the repayment of loan continues . .] [Applicable from A. Y. 2017-18] 6. Deduction towards House Rent: At present, deduction under section 80GG is available to an individual (who is not in receipt of House Rent Allowance anytime during the year) upto Rs. 2000 per month. In this budget, this upper limit of Rs. 2000 per month is increased to new upper limit of Rs. 5,000 per month. [Applicable from A. Y. 2017-18] Page 3 of 29 7. Housing Projects: Weighted deduction under section 35AD (1A) was available of 150 per cent of capital expenditure (other than expenditure on land, goodwill and financial assets) for developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed. In this budget, subsection (1A) is omitted w.e.f. A.Y. 2018-19, so from A.Y. 2018-19, such deduction will be limited to 100% instead of 150%. Further, new section 80-IBA is proposed to be inserted by this budget w.e.f. A.Y. 2017-18 which proposes a deduction of an amount equal to 100%. of the profits and gains derived from the business of developing and building housing projects of specified nature as explained below. i. The project is approved by the competent authority after the 01/06/2016, but on or before the 31/03/2019, in accordance with such guidelines as may be prescribed; ii. The project is completed within a period of three years from the date of approval by the competent authority (Following are further conditions) . I.) Where more than one approval are taken, three years shall be counted from the date on which the project was first app roved by the competent authority; and II.) the project shall be deemed to have been completed when a certificate of completion of project as a whole is obtained in writing from the competent authority; III.) the built-up area of the shops and other commercial establishments included in the housing project does not exceed 3% of the aggregate built-up area; IV.) the project is on a plot of land measuring not less than 1000 square metres where such project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the area of 25 kilometres from the municipal limits of these cities, or 2000 square metres within the jurisdiction of any other municipality or cantonment board; V.) the residential units comprised in the housing project does not exceed 30 square metres where such project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the area of twenty-five kilometres from the municipal limits of these cities, or 60 square metres, where such project is located within the jurisdiction of any other municipality or cantonment board; VI.) where a residential unit in the housing project is allotted to an individual, no other residential unit in the housing project shall be allotted to the individual or the spouse or the minor children of such individual; VII.) the project utilizes: