CA Umesh Sharma

Arjuna (Fictional Character): Krishna, Government has announced Budget on 29th February 2016 for the Year 2016-17. On this Various persons expressed their views. As every coin has two sides, likewise Budget 2016 also came up with some good and some bad changes. Tell us which are the Fair, Lovely and Bad provisions which came out of Jaitley’s potily?

Krishna (Fictional Character): Listen Arjuna, whether it be a Direct Tax or an Indirect Tax, it influences each and every person. It is mandatory for the Government to collect Taxes. The current economic scenario and various other conditions are taken into consideration while making budget amendments. In Lok Sabha and thereafter everywhere, “Fair and Lovely” buzz word is very much in discussion. In this context, we will differentiate the provisions of the Budget into Fair(Ordinary), Lovely(Good) and Bad(Poor) for Common Man. Also note that there can be changes before they become provision of laws.

Fair & Lovely Budget

Arjuna: Krishna, Which are the provisions in this Budget which seems to be Lovely?

Krishna: Arjuna, the provisions which are beneficial for the common man or on which, they will have to pay less tax can be termed as “Lovely.” They are as follows:

  1. If the income of individual taxpayer’s is below Rs. 5,00,000/-, they are entitled to rebate of Rs. 5000, which was earlier Rs. 2000. From this small taxpayer’s will be benefitted.
  2. If individual is buying a new house or getting it constructed and has taken Loan for the same, then deduction of interest up to Rs. 2,00,000/- is allowed, if the acquisition or construction is completed within 5 years, which was earlier to be completed within 3 years.
  3. If in the Financial Year 2016-17, if the Taxpayer is acquiring his first house, the value of which should be less than Rs. 50,00,000 and the loan taken for it is up to Rs. 35,00,000/-, then the Taxpayer will get an additional deduction of Rs. 50,000/- over and above the limit of interest of Rs. 2,00,000/-, every year till the repayment of loan continues.
  4. If the total gross receipts of company tax payer’s is below Rs. 5 crore in the year 2014-15, then the rate of income tax will be 29%, which was earlier 30%.
  5. The Benefit of 100% tax exemption shall be available to an eligible Start-up which is setup before 1st April 2019, for 3 consecutive years out of 5 years.
  6. Long Term Capital Gain on transfer of Asset , if invested in Startup, will get exemption.
  7. If taxpayer is living in rented house, and if he is not receiving HRA, then he is allowed a deduction of Rs. 5,000/- per month, which was earlier Rs. 2000/- per month. Businessmen may get benefited form it.
  8. Income tax officers will now scrutinize the books in soft form and online submission will also be accepted. Therefore paper submission will be reduced.
  9. Income tax officers had the rights to impose penalty from 100% to 300%, and now they may impose the penalty of 50% or 100% only on the ground mentioned i.e, under and misreported income.
  10. The limit of contribution by the employee for Superannuation Fund has been increased from Rs. 1,00,000/- to Rs. 1,50,000/-.
  11. If Investment is made in Gold Monetization scheme 2015, then it will be excluded from the definition of capital asset and thereby will be exempted from capital gains tax. If we club this with Income Declaration Scheme, through Gold discloser, then what will be its effect.
  12. Tax audit applicable taxpayers can get additional deduction of 30% on employment of new workmen.
  13. Specified low housing projects were given 100% tax exemption if completed within 3 years.

Arjuna: Krishna, Which are the provisions in this Budget which seems to be Fair?

Krishna: Arjuna, those provisions which maintains balance can be termed as “Fair”. They are as follows:

  1. Aggregate annual limit of Tax deduction at source for payment to contractors was Rs. 75,000/-, now it is increased to Rs. 1,00,000/-. Further rate of TDS on commission and brokerage has been reduced from 10% to 5% and the limit for deduction has been made to Rs. 15,000/-
  2. To resolve the old tax disputes Government has now introduced Tax Dispute Resolution Scheme, in which there are different types. And if Taxpayer opts for this Scheme, he will be less penalized.
  3. Income Declaration Scheme- An opportunity is given for converting black money into white by paying 45% tax. The word “Fair & Lovely” word is in the light due to this scheme. Fair Market Value of Assets disclosed will play a major role in this scheme.
  4. Now taxpayer can file return without making payment of income tax. It won’t be consider as Defective return.
  5. Now taxpayers can revise late filed return before due date.

Arjuna: Krishna, Which are the provisions in this Budget which seems to be Bad?

Krishna: Arjuna, the provisions for which taxpayers have to pay more taxes or which are problematic, can be termed as “Ugly.” They are as follows:

  1. For Professionals The Limit of Gross Receipts for the applicability of Tax Audit has been increased from Rs. 25 Lacs to Rs. 50 Lacs. Provision of Presumptive taxation has been introduced for Professionals. The rate of presumptive taxation has been fixed at 50% i.e. professions will have to show 50% of the gross receipts as income. Its too harsh.
  2. If Individual, HUF or Firm has received Dividend Income then 10% Income tax will have to be paid on dividend received in excess of Rs.10,00,000 on Gross basis.
  3. Surcharge will be charged at the rate 15% which was earlier charged at 12%, if the total Income exceeds Rs.1 Crore. In the period of 2 years, this surcharge has been increased to 15% from 10%.
  4. If Motor Car is Sold for more than Rs. 10,00,000/-, then the seller will have to pay 1% TCS on such amount.
  5. To restrict the Cash Transactions, Government has introduced the provisions of Tax Collected at source (TCS). Goods and services, if given in cash to a person for of more than Rs. 2,00,000/-, then TCS at the rate 1% is to be paid. Cash Sales will be affected because of such provision.
  6. The limit of presumptive taxation of businessman @8% has been increased from Rs. 1 Cr. To Rs. 2 Cr. In Presumptive Taxation scheme Partnership Firms were allowed deduction of Salary paid to partner and Interest on partner’s capital. However now it will not be allowed.
  7. If assessee opts for Presumptive taxation, then he will be required to pay advance tax on or before 15th March. For others now 4 installments are made of advance tax.
  8. For disclosing income under presumptive taxation, government has set a limit of Five years.
  9. From now if money is withdrawn from Provident Fund or Pension Fund, 60% of such withdrawal will be considered as Taxable Income. Dispute is going on whether to pay taxes on interest amount or withdrawal amount.

Arjuna: Krishna, What should taxpayers learn from this?

Krishna: Arjuna, Everyone should think whether Jaitley’s Potli stood up with their expectations. In such a large country, somewhere or the other, the expenses of the Government and tax collection have an impact, but what we do for the country? But do officers implement this in proper manner? There are many such serious problems. In the rush to earn money, there are so many who intentionally avoid tax laws of the country or find a way to avoid payment of taxes by finding loopholes. Still if citizens maintain balance and follow the laws, then our country can achieve expectations from the budget. “Jetly ke Potli me se kisiko mila Aam to Kisiko Mili Gutli” everyone has to ponder over it.

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