Budget 2016: Here are the changes Jaitley has made to the tax regime

Finance Minister Arun Jaitley in his Union Budget speech, while keeping income tax slabs unchanged, announced several income tax changes to benefit small tax payers, new manufacturing units, start-ups, pensioners, and more. 

In his speech, Jaitley said that he had a nine-point agenda to rationalise the taxation structure in the country. 

1) Relief to small tax paying citizens: 

-- In relief to small tax payers, the Budget proposes to raise the ceiling of tax rebate under Section 87(A) from Rs 2,000 to Rs 3,000 for incomes not exceeding Rs 5 lakh per annum. Two crore tax payers will benefit from this, Jaitley said. 

-- Those who do not have houses of their own and do not get house rent allowance from employers will get a deduction of Rs 60,000 per year as against existing Rs 24,000.

-- First-time home buyers will get a deduction of an additional interest of Rs 50,000 per annum for loan upto Rs 35 lakh, during 2016-17, provided the house value does not exceed Rs 50 lakh.

-- The Budget proposes to extend the presumptive taxation scheme to professionals with a gross receipt up to Rs 50 lakh with the presumption of profit being half of the gross receipt.

-  Deduction for rent paid will be raised to Rs 60,000 from Rs 20,000 to benefit those living in rented houses.

-  The government has also proposed to increase the turnover limit under presumptive taxation scheme under 44 AD of the Income Tax Act to Rs 2 crore from existing limit of Rs 1 crore, which will benefit more than 30 lakh small business people.

-- He also proposed to extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to Rs 50 lakh.

- Service tax exemption for construction of affordable housing up to 60 sq. mt. under state and central housing schemes.

- Presumptive income tax scheme to be extended to all professionals with income of Rs 50 lakh with a presumption of 50% profit.

-  Measures to rationalise TDS provisions for income tax have been proposed to improve cash flow position of small tax payers who get their funds blocked due to current TDS provisions.

2) Measures to boost growth and employment:

Corporate tax incentives

- Incentives for new manufacturing companies and small enterprise companies.

- New manufacturing companies incorporated on or after March 2016, as proposed to be given an option of 25%. 

- I propose to lower corporate IT rate for next financial year of relatively small enterprises companies with turnovers not exceeding Rs 5 crore in financial year ending March 2015 to 29% per surcharge.

- Start-ups to get 100% exemption from tax on profits for three years. MAT will be applicable for this. 

- Additional options for reversal of input tax credits with respect to non-taxable services provided by banking companies and financial institutions, including NBFCs, by way of extending deposits, loans and advances. 

3) Incentivise Make in India: Propose to make suitable changes in customs and excise duty rates to reduce cost and increase competitiveness in IT, hardware, defence production, textile.

4) Move towards pension society: 

- Tax treatment should be uniform for defined benefits and defined schemes. Withdrawal of 40% of corpus during retirement will be made tax-free.

-  Government to contribute 8.33% to Employee Pension Scheme (EPS) for new workers, gives Rs 1,000 crore.

-  For first time home buyers: Additional deduction of Rs 50,000  on interest for loans up to Rs 35 lakh for property not exceeding Rs 50 lakh. 

-  Dividend -- Dividend of individuals over Rs 10 lakh will be taxable.

-  Rate of security transaction tax in auction to be increased from 0.17% to 0.15%.

5) Additional resource for clean economy:

-  Exemptions on environmentally friendly cars to be continued.

-  Infrastructure cess on LPG cars, cars of higher engine capacity, SUVs.

-  1% infrastructure cess on small LPG cars.

-  Clean energy cess for coal at Rs 400 per tonne.

6) Reducing litigation: 

- Limited period compliance window for taxpayers to declare undisclosed income. Declarations to have immunity from prosecution 

- Limited tax compliance window from Jun 1 - Sep 30 for declaring undisclosed income at 45% including surcharge and penalties

- Our government is completely committed to removing black money from the economy.

7) Simplification in taxation:

- To cut multi taxes, propose to abolish 13 cesses levied by various Ministries in which revenue collection is less than Rs 50 crores per year.

- I accept suggestion from Rahul Gandhi on providing relief (exemption of duty on braille paper) to differently-abled people.

8) Create accountability: 

- Propose new dispute resolution scheme