A road map for lowering of corporate tax rate
As part of the plan to reduce corporate tax from 30 per cent to 25 per cent: Accelerated depreciation will be limited to 40 per cent from April 1, 2017; deductions for research to 100 per cent from April 1, 2020; Section 10AA for new SEZ units will be available to units that start activity by March 31, 2020.
Read our full coverage on Union Budget 2016
Reduced corporate tax for new manufacturers
New manufacturing companies incorporated on or after March 1, 2016, are to be given an option to be taxed at 25 per cent plus surcharge and cess, provided they do not claim profit-linked or investment-linked deductions and do not avail of investment allowance and accelerated depreciation.
Incentives for setting up of start-ups
To encourage start-ups, 100 per cent deduction of profits for three out of five years will be allowed for units set up over April 2016-March 2019. But, MAT will apply. Capital gains will not be taxed if invested in notified 'fund of funds' and by individuals in start-ups in which they have a majority.
Tax-neutral treatment for firms turning into LLPs
Tax-neutral treatment will be provided to a firm converting into Limited Liability Partnerships, if, among the other existing conditions, the total value of the assets in the books of account of the company in any of the three preceding years does not exceed Rs 5 crore.
100% deduction of profit for housing projects
To fuel activity in the housing sector, 100 per cent deduction of profits will be offered to companies undertaking housing projects for flats of up to 30 sq metres in four metro cities and 60 sq metres in other cities, that are approved between June 2016 and March 2019, and completed within three years of approval.
Luxury tax of 1% on 'high-end' cars, cash transactions
Tax will be collected at source at the rate of one per cent on purchase of luxury cars exceeding a value of Rs 10 lakh and purchase of goods and services in cash exceeding Rs 2 lakh - to mobilise additional resources, and provide the government with data to identify high spenders.
Duty structure reform to boost value addition
To facilitate the 'Make in India programme', changes are to be made in customs and excise duty rates on certain inputs, raw materials, intermediaries and components, to reduce costs and improve competitiveness of domestic industry in sectors like IT, hardware and capital goods.
Infrastructure cess of 1-4% levied on cars and SUVs
To tackle the pollution and traffic situation in Indian cities, the Budget has proposed an infrastructure cess of one per cent on small petrol, LPG and CNG cars, 2.5 per cent on diesel cars above a certain engine capacity, and four per cent on other higher engine-capacity vehicles and SUVs.
Krishi Kalyan Cess to help fund farmers' welfare
A cess of 0.5 per cent, to be called the Krishi Kalyan Cess, will be levied on all taxable services, the proceeds of which will be used exclusively for financing initiatives improvement of agriculture and the welfare of farmers. The cess will come into force with effect from June 1, 2016.
Excise duty imposed on select jewellery items
An excise duty of '1% without input tax credit or 12.5% with input tax credit' is to be imposed on articles of jewellery (excluding silver jewellery, other than studded with diamonds and some other precious stones), with a higher exemption and eligibility limits of Rs 6 crore and Rs 12 crore.
Securitisation trusts get income tax pass-through
To boost investments in asset reconstruction companies (ARCs), the Budget provides complete income tax pass-through to securitisation trusts, including trusts of ARCs. The income will be taxed in the hands of the investors instead of the trust. However, the trust will be liable to deduct tax at source.
Withholding tax of 6% levied on B2B transactions
To tap the income earned by foreign e-commerce companies from India, a person paying more than Rs 100,000 a year to a non-resident for online advertisements will withhold tax at the rate of six per cent of the gross amount paid, as equalisation levy. The levy applies to B2B transactions.
