We are pleased to present the fourth issue of Tax Trends – SKP’s quarterly newsletter that aims to provide insights into key direct tax developments in India. This issue covers developments from January to March 2016. The Union Budget for 2016-17 was presented before the Parliament of India on 29 February 2016. The Budget announced significant tax proposals in line with the government’s continued efforts to improve the ease of doing business in India and to support the Make in India campaign. In Spotlight, we discuss the main proposals for improving the ease of doing business in the country. You may also refer to the SKP Budget 2016-17 Publication for our comprehensive coverage of the Budget proposals. The notable tax benefits proposed in the Budget include a 100% tax deduction on start-ups for a period of three years, tax benefits for providing employment, a reduction in the corporate tax rate to 25% for manufacturing companies registered from 1 March 2016 onwards, and the introduction of a Patent Box regime by providing a concessional tax rate of 10% on royalties. Also, domestic companies with an annual turnover up to INR 50 million in FY 2014-15 would be eligible for a lower corporate tax rate of 29%. In line with its intent of phasing out tax exemptions to reduce tax rates, the government has proposed phasing out tax deductions for the development, maintenance and operation of infrastructure facilities and Special Economic Zones, and the withdrawal of weighted tax deductions available for expenditure incurred for scientific research. With respect to the ease of doing business, the government has proposed to defer the applicability of Place of Effective Management (POEM) regulations by a year and these regulations would now apply from 1 April 2016. It has also been clarified that the Minimum Alternate Tax (MAT) provisions would not apply to foreign companies in most cases. The requirement of withholding tax at a penal rate of 20% on payments to non-residents who do not have a Permanent Account Number (PAN) in India is also proposed to be relaxed. The provisions regarding imposition of penalty are also sought to be liberalised. The government has also introduced an Income Declaration Scheme providing immunity from prosecution for taxpayers having undisclosed income. Also, a new Dispute Resolution Scheme has been proposed for speedy resolution of matters pending at the first appeal level. To curb the parallel economy, the requirement of Tax Collection at Source (TCS) has been introduced on transactions of sale of goods or services in cash, subject to certain conditions. The Budget also provides for revenue mobilisation measures such as an Equalisation Levy @ 6% on advertising payments to non-residents, levy of tax @ 10% on dividend income earned by individual and HUF taxpayers where the amount of dividend exceeds INR 1 million, increase in the rate of surcharge for individual taxpayers having income above INR 10 million from the existing 12% to 15%, and the advancement of payment of advance tax by non-corporate taxpayers. The government had proposed levying a tax on 40% of the interest accrued on an employee’s contribution to provident fund. However, in view of protests from the general public, this proposal was withdrawn. We hope you find this newsletter useful and we look forward to your feedback. You can write to us at [email protected]. Warm Regards, The SKP Direct Tax Team In this issue Spotlight 2 Legal Updates 4 Tax Talk 6 Compliance Calendar 7 Corporate Tax Myth 7 Contact Us 8 TAX TRENDS Volume 1 Issue 4 | Jan–Mar 2016
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SKP Tax Trends January-March 2016 - SKP Business Consulting LLP | Business · PDF file · 2016-12-23The Budget announced significant tax proposals in line with the government’s
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We are pleased to present the fourth issue of Tax Trends – SKP’s quarterly newsletter that aims to
provide insights into key direct tax developments in India. This issue covers developments from
January to March 2016.
The Union Budget for 2016-17 was presented before the Parliament of India on 29 February 2016.
The Budget announced significant tax proposals in line with the government’s continued efforts to
improve the ease of doing business in India and to support the Make in India campaign.
In Spotlight, we discuss the main proposals for improving the ease of doing business in the
country. You may also refer to the SKP Budget 2016-17 Publication for our comprehensive
coverage of the Budget proposals.
The notable tax benefits proposed in the Budget include a 100% tax deduction on start-ups for a
period of three years, tax benefits for providing employment, a reduction in the corporate tax
rate to 25% for manufacturing companies registered from 1 March 2016 onwards, and the
introduction of a Patent Box regime by providing a concessional tax rate of 10% on royalties. Also,
domestic companies with an annual turnover up to INR 50 million in FY 2014-15 would be eligible
for a lower corporate tax rate of 29%.
In line with its intent of phasing out tax exemptions to reduce tax rates, the government has
proposed phasing out tax deductions for the development, maintenance and operation of
infrastructure facilities and Special Economic Zones, and the withdrawal of weighted tax
deductions available for expenditure incurred for scientific research.
With respect to the ease of doing business, the government has proposed to defer the
applicability of Place of Effective Management (POEM) regulations by a year and these regulations
would now apply from 1 April 2016. It has also been clarified that the Minimum Alternate Tax
(MAT) provisions would not apply to foreign companies in most cases. The requirement of
withholding tax at a penal rate of 20% on payments to non-residents who do not have a
Permanent Account Number (PAN) in India is also proposed to be relaxed. The provisions
regarding imposition of penalty are also sought to be liberalised.
The government has also introduced an Income Declaration Scheme providing immunity from
prosecution for taxpayers having undisclosed income. Also, a new Dispute Resolution Scheme has
been proposed for speedy resolution of matters pending at the first appeal level.
To curb the parallel economy, the requirement of Tax Collection at Source (TCS) has been
introduced on transactions of sale of goods or services in cash, subject to certain conditions.
The Budget also provides for revenue mobilisation measures such as an Equalisation Levy @ 6%
on advertising payments to non-residents, levy of tax @ 10% on dividend income earned by
individual and HUF taxpayers where the amount of dividend exceeds INR 1 million, increase in
the rate of surcharge for individual taxpayers having income above INR 10 million from the
existing 12% to 15%, and the advancement of payment of advance tax by non-corporate
taxpayers.
The government had proposed levying a tax on 40% of the interest accrued on an employee’s
contribution to provident fund. However, in view of protests from the general public, this
proposal was withdrawn.
We hope you find this newsletter useful and we look forward to your feedback. You can write to