VIMAL TANDON & CO.CHARTERED ACCOUNTANTS

BUDGET 2016-2017HIGHLIGHTS

DIRECT TAXES

Individual Basic exemption limit for men, women and HUF resident in India unchanged.

There is no change in the rate of income tax, education and SHE cess. The rates for AY 2017-18 will remain the same as in AY 2016-17.

Surcharge: Surcharge increased from 10% to 15%. The amount of Income-Tax computed as above, shall be increased by surcharge @ 15% of such Income-Tax in the case, the person has taxable income exceeding `1 Crore.

Cess: 3% cess on tax in all cases

Rebate u/s 87ARebate u/s 87A increased from ` 2,000/- to ` 5,000/- in case of assessee having income less than `5 lakhs.

Income tax slabs for individual (Male/Female)/HUF taxpayers:

Income slab(AY 2016-17)

Income slab(AY 2017-18)

Rates of Income Tax

Upto ` 2,50,000 Upto ` 2,50,000 Nil

` 2,50,001 to ` 5,00,000 ` 2,50,001 to ` 5,00,000 10%

` 5,00,001 to ` 10,00,000 ` 5,00,001 to ` 10,00,000 20%

Above ` 10,00,000 Above ` 10,00,000 30%

Income tax slabs for senior citizens:

Age Group60-80yrs

Age Group80yrs and above

Rates of Income Tax

Upto ` 3,00,000 Upto ` 5,00,000 Nil

` 3,00,001 to ` 5,00,000 10%

` 5,00,001 to ` 10,00,000 ` 5,00,001 to ` 10,00,000 20%

Above ` 10,00,000 Above ` 10,00,000 30%

Capital Gains Definition of capital asset amended [Section 2(14)] [W.e.f. A.Y. 2016-17]

The Gold Monetization Scheme, 2015 has been introduced by the Government of India. With a view to extend the same tax benefits to the scheme as were available to the Gold Deposit Scheme, 1999 it is proposed to amend Clause (14) of section 2, so as to exclude Deposit Certificates issued under Gold Monetisation Scheme, 2015 notified by the Central Government, from the definition of capital asset and thereby to exempt it from capital gains tax.

Domestic Companies The income tax rate for firms remains unchanged at 30%.

In case of Domestic Company whose total turnover or Gross Receipts do not exceed `5 Crore – 29%.

Surcharge: The amount of Income-Tax computed as above, shall be increased by surcharge @ 7% of such Income-Tax in the case, the company has taxable income exceeding `1 Crore but not exceeding ` 10 Crore.

Surcharge @ 12% of such Income-Tax in the case, the company has taxable income exceeding `10 Crore.

Education Cess : 2% Secondary and Higher Education Cess: 1%.

Domestic Companies Newly Setup Domestic companies engaged solely in the business of manufacture

or production of article or thing :-

Income in respect of such company for any previous year relevant to assessment year beginning on or after the 1st Day of April, 2017 shall be computer at 25% at the option of the company if:-

the company has been setup and registered on or after the 1st day of March, 2016; the company is engaged in the business of manufacture or production of article or thing

and is not engaged in any other business; the company while computing its total income has not claimed any benefit under section

10AA, benefit of accelerated depreciation, benefit of additional depreciation, investment allowance, expenditure on scientific research and any deduction in respect of certain income under Part-C of chapter VIA other than the provisions of Section 80JJAA and;

the option is furnished in the prescribed manner before the due date of furnishing of the Return of Income.

Foreign Companies The income tax rates remain unchanged at 40%

Surcharge: The amount of Income-Tax computed as above, shall be increased by surcharge @ 2% of such Income-Tax in the case, the company has taxable income exceeding `1 Crore but not exceeding ` 10 Crore.

Surcharge @ 5% of such Income-Tax in the case, the company has taxable income exceeding `10 Crore.

Education Cess : 2% Secondary and Higher Education Cess: 1%

In order to provide clarity in respect of implementation of POEM based rule of residence and also to address concerns of the stakeholders, it is proposed to defer the applicability of POEM based residence test by one year and the determination of residence based on POEM shall be applicable from 01/04/17.

Firms(including Limited Liability Partnership)

The income tax rate for firms remains unchanged at 30%.

Surcharge: The amount of Income-Tax computed as above, shall be increased by surcharge @ 12% of such Income-Tax in the case, the firm has taxable income exceeding `1 Crore.

Education Cess : 2% Secondary and Higher Education Cess: 1%.

House Property Increase in time period for acquisition or construction of self-occupied

house property for claiming deduction of interest [Section 24] [W.e.f. A.Y. 2017-18]A deduction of an amount of two lakh rupees shall be allowed where a house property has been acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within five years instead of the earlier three years from the end of the financial year in which capital was borrowed.

Rent received in arrears or the amount of unrealised rent realised subsequently by an assessee shall be charged to income-tax in the financial year in which such rent is received or realised, whether the assessee is the owner of the property or not in that financial year. It is also proposed that thirty per cent of the arrears of rent or the unrealised rent realised subsequently by the assessee shall be allowed as deduction.

Audit and Presumptive Taxation Section 44AB

The threshold limit of total gross receipts, specified under section 44AB for getting accounts audited increased from twenty five lakh rupees to fifty lakh rupees in the case of persons carrying on profession.

Section 44ADThe threshold limit of one crore rupees specified in the definition of "eligible business" has been increased to two crore rupees.

The expenditure in the nature of salary, remuneration, interest etc. paid to the partner as per clause (b) of section 40 shall not be deductible while computing the income under section 44AD.

Where an eligible assessee declares profit for any previous year @ 8% on the turnover and he declares profit for any of the succeeding five consecutive years not in accordance with the provisions of the section, he shall not be eligible to claim the benefit of the provisions of this section for five years subsequent to the year relevant to the previous year in which the profit has not been declared in accordance with the provisions of the section.

Audit and Presumptive Taxation Section 44ADA

New section 44ADA inserted in the Act to provide for estimating the income of an assessee who is engaged in any profession such as legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette and whose total gross receipts does not exceed fifty lakh rupees in a previous year, at a sum equal to fifty per cent. of the total gross receipts, or, as the case may be, a sum higher than the aforesaid sum earned by the assessee. The scheme will apply to such resident assessee who is an individual, Hindu undivided family or partnership firm but not Limited Liability partnership firm.Under the scheme, the assessee will be deemed to have been allowed the deductions under section 30 to 38. Accordingly, the written down value of any asset used for the purpose of the profession of the assessee will be deemed to have been calculated as if the assessee had claimed and had actually been allowed the deduction in respect of depreciation for the relevant assessment years.It is also proposed that the assessee will not be required to maintain books of account under sub-section (1) of section 44AA and get the accounts audited under section 44AB in respect of such income unless the assessee claims that the profits and gains from the aforesaid profession are lower than the profits and gains deemed to be his income under sub-section (1) of section 44ADA and his income exceeds the maximum amount which is not chargeable to income-tax.

Start-ups

Deduction of one hundred percent of the profits and gains derived by an eligible start-up from a business involving innovation development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

The benefit of hundred percent deduction of the profits derived from such business shall be available to an eligible start-up which is setup before 01.04.2019.

To promote the start-up ecosystem in the country, it is envisaged to establish a Fund of Funds which intends to raise ` 2500 crores annually for four years to finance the start-ups.

A new Section 54EE inserted to provide exemption from capital gains tax if the long term capital gains proceeds are invested by an assessee in units of such specified fund, as may be notified by the Central Government in this behalf, subject to the condition that the amount remains invested for three years failing which the exemption shall be withdrawn. The investment in the units of the specified fund shall be allowed up to Rs. 50 lakh

Start-ups

To provide relief to an individual or HUF willing to setup a startup company by selling a residential property to invest in the shares of such company, it is proposed to amend section 54GB so as to provide that long term capital gains arising on account of transfer of a residential property shall not be charged to tax if such capital gains are invested in subscription of shares of a company which qualifies to be an eligible start-up subject to the condition that the individual or HUF holds more than fifty per cent shares of the company and such company utilises the amount invested in shares to purchase new asset before due date of filing of return by the investor.

“New Asset" includes new plant and machinery and computers or computer software in case of technology driven start-ups so certified by the Inter-Ministerial Board of Certification notified by the Central Government in the official Gazette

Capital Gains

Exemption in respect of interest on deposit certificates under Gold Monetization Scheme, 2015 [Section 10(15)] [W.e.f. A.Y. 2016-17]The interest on Deposit Certificates issued under the Gold Monetization Scheme, 2015, shall be exempt from income-tax.

Unlisted SharesClause (c) of sub-section (1) of section 112 of the Income- tax Act amended so as to provide that long-term capital gains arising from the transfer of a capital asset being shares of a company not being a company in which the public are substantially interested, shall be chargeable to tax at the rate of 10 per cent.

Deductions and Exemptions

Exemption in respect of interest on deposit certificates under Gold Monetization Scheme, 2015 [Section 10(15)] [W.e.f. A.Y. 2016-17]The interest on Deposit Certificates issued under the Gold Monetization Scheme, 2015, shall be exempt from income-tax.

Raising the exemption in respect of employer contribution to superannuation fund [Section 17(2)(vii)] [W.e.f. A.Y. 2017-18]Under section 17, perquisite includes the amount of any contribution exceeding one lakh rupees to an approved superannuation fund by the employer in the hands of the assessee. This limit is proposed to be extended to Rs. 1,50,000.

Deductions and Exemptions Section 80EE

To incentivise first-home buyers availing home loans, an additional deduction is provided 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 fifty lakhs rupees in respect of which a loan of an amount not exceeding thirty five lakh rupees has been sanctioned during the period from the 1st day of April, 2016 to the 31st day of March, 2017. It is also proposed to extend the benefit of deduction till the repayment of loan continues.The deduction under the proposed section is over and above the limit of Rs 2,00,000 provided for a self-occupied property under section 24 of the Act.

Section 80GGDeduction for house rent paid increased from ` 2,000/- to ` 5,000/- in case of an individual if he is not granted house rent allowance by his employer.

Tax Deduction at Source/ Tax Collection at Source

Section Heads ExistingThresholdLimit (Rs.)

Proposed ThresholdLimit (Rs.)

192A Payment of accumulatedbalance due to an employee

30,000 50,000

194BB Winnings from Horse Race 5,000 10,000

194C Payments to Contractors Aggregate annuallimit of 75,000

Aggregateannual limit of1,00,000

194LA Payment of Compensation on acquisition of certainImmovable Property

2,00,000 2,50,000

194D Insurance commission 20,000 15,000

194G Commission on sale of lotterytickets

1,000 15,000

194H Commission or brokerage 5,000 15,000

Tax Deduction at Source/ Tax Collection at Source

Section Heads Existing Rate ofTDS (%)

Proposed Rate ofTDS (%)

194DA Payment in respect of Life Insurance Policy

2% 1%

194EE Payments in respect of NSS Deposits

20% 10%

194D Insurance commission Rate in force(10%)

5%

194G Commission on sale of lottery tickets

10% 5%

194H Commission or brokerage 10% 5%

Enabling of Filing of Form 15G/15H for rental payments [Section 197A] [1-6-2016]The existing provisions provide threshold of Rs. 1,80,000 per financial year for deduction of tax. In spite of providing higher threshold for deduction tax under this section, there may be cases where the tax payable on recipient's total income, including rental payments, will be nil. Section 197A has been amended for making the recipients of payments referred to in section 194-I also eligible for filing self declaration in Form no 15G/15H for non-deduction of tax at source.

Tax Collection at Source (TCS) on sale of vehicles; goods or services [Section 206C] [W.e.f. 1-6-2016]Section 206C has been amended to provide that the seller shall collect the tax at the rate of one per cent from the purchaser on sale of motor vehicle of the value exceeding ten lakh rupees and 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 two lakh rupees.Sub-section (1D) relating to TCS in relation to sale of any goods (other than bullion and jewellery) or services shall not apply to certain class of buyers who fulfill such conditions as may be prescribed.

Tax Deduction at Source/ Tax Collection at Source

For Companies : No Change

For others

Advance Tax

Due DateAY 2016-17

Rate Due DateAY 2017-18

Rate

15th June Nil 15th June 15%

15th September 30% 15th September 45%

15th December 60% 15th December 75%

15th March 100% 15th March 100%

An opportunity is proposed to be provided to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totalling in all to forty-five per cent of such undisclosed income declared.The scheme is proposed to be brought into effect from 1st June 2016 and will remain open up to 30th September, 2016. The scheme is proposed to be made applicable in respect of undisclosed income of any financial year upto 2015-16.Tax is proposed to be charged at the rate of thirty per cent on the declared income as increased by surcharge at the rate of twenty five per cent of tax payable (to be called the Krishi Kalyan cess). A penalty at the rate of twenty five per cent of tax payable is also proposed to be levied on undisclosed income declared under the scheme.It is proposed that following cases shall not be eligible for the scheme:

• where notices have been issued under section 142(1) or 143(2) or 148 or 153A or 153C, or• where a search or survey has been conducted and the time for issuance of notice under the

relevant provisions of the Act has not expired, or• where information is received under an agreement with foreign countries regarding such

income,• cases covered under the Black Money Act, 2015, or• persons notified under Special Court Act, 1992, or• cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic Substances

Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988.

The Income Declaration Scheme, 2016 [W.e.f. 1-6-2016]

The payment of tax, surcharge and penalty may be made on or before 30 th November, 2016.

It is provided that declarations made under the scheme shall be exempt from wealth-tax in respect of assets specified in declaration.

No scrutiny and enquiry under the Income-tax Act and Wealth-tax Act be undertaken in respect of such declarations and immunity from prosecution under such Acts be provided.

Immunity from the Benami Transactions (Prohibition) Act, 1988 is also proposed for such declarations subject to certain conditions.

It is provided that where a declaration under the scheme has been made by misrepresentation or suppression of facts, such declaration shall be treated as void.

Nothing contained in the Scheme shall be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under this Scheme.

In cases where any declaration has been made but no tax and penalty referred to the scheme has been paid within the time specified, the undisclosed income shall be chargeable to tax under the Income-tax Act in the previous year in which such declaration is made.

The Income Declaration Scheme, 2016 [W.e.f. 1-6-2016]

In cases where any income has accrued, arisen or received or any asset has been acquired out of such income prior to commencement of this Scheme, and no declaration in respect of such income is made under the Scheme such income shall be deemed to have accrued, arisen or received, or the value of the asset acquired out of such income shall be deemed to have been acquired or made, in the year in which a notice under section 142, section 143(2) or section 148 or section 153A or section 153C of the Income-tax Act is issued by the Assessing Officer and the provisions of the Income-tax Act shall apply accordingly.

If any difficulty arises in giving effect to the provisions of this Scheme, the Central Government may, by order, not inconsistent with the provisions of this Scheme, remove the difficulty by an order not after the expiry of a period of two years from the date on which the provisions of this Scheme come into force and such order be laid before each House of Parliament.

The Income Declaration Scheme, 2016 [W.e.f. 1-6-2016]

Section 50C amended to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration.

It is further proposed to provide that this provision shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, on or before the date of the agreement for the transfer of such immovable property.

Section 139 (4) amended to provide that any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time before the end of the relevant assessment year or before the completion of the assessment whichever is earlier.

Any income by way of dividend in excess of Rs. 10 lakh shall be chargeable to tax in the case of an individual, Hindu undivided family (HUF) or a firm who is resident in India, at the rate of ten percent. The taxation of dividend income in excess of ten lakh rupees shall be on gross basis.

General

Change in rate of Securities Transaction tax in case where option is not exercised [W.e.f. 1-6-2016]Securities transaction tax on sale of an option in securities where option is not exercised increased from 0.017 per cent to 0.05 per cent.

General

INDIRECT TAXES SERVICE TAX

Krishi Kalyan Cess at a rate of 0.50% of the value of taxable services on all taxable levied w.e.f 01st June, 2016 thereby taking the total tax rate to 15%.

Credit of this Cess shall be allowed after due amendment yet to be made in the Cenvat Credit Rules, 2004 to be used for payment of the proposed Cess on the service provided by a service provider.

The provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Krishi Kalyan Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services.

Broadening of Tax Base(Effective from Enactment of Bill)

Service tax is proposed to be levied on service of transportation of passengers by air conditioned stage carriage, @ 40% after abatement of 60% (as applicable to transportation of passengers by contract carriage) without input tax credit, with effect from 01.06.2016 [Read with Notification No. 08/2016-ST dated 29.02.2016 vide which changes have been made in the Abatement Notification]

Revision of Abatement (Effective from 01st April, 2016)

Service

Earlier abatement Proposed abatement

Transport of goods, other than in containers and passengers by rail

Transport of goods by vessel

70%No credit of Inputs, Capital goods and Input services is

allowed

70%Credit of Inputs,

Capital goods and Input services is

allowed

Construction of residential complex, building, civil structure, or a part thereof,

70% for high end flats and 75% for low end flats

70%

Services by a tour operator in relation to packaged tour and other than packaged tour

Packaged Tour – 75%Other – 60%

70%

Shifting of used household goods by a Goods Transport Agency

70% 60%

Services of a foreman to a chit fund 0% 30%

Section 66D(l):Presently, specified education services viz. services by way of pre-school education, higher secondary school education or equivalent, education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force, education as a part of an approved vocational education course, are covered under Section 66D(l) of the Finance Act. These services are proposed to be deleted.

However, corresponding exemption is inserted in the Mega Exemption Notification by amending the definition of “educational institutions” to include an institution providing such services as was specified in Section 66D(l) of the Finance Act [Read with Notification No. 9/2016-ST dated 01.03.2016 vide which changes have been made in the Mega Exemption List of Services in the Mega Exemption Notification].

Services deleted

Section 66D(o)(i):Proposed to be deleted w.e.f. 01.06.2016Presently, Section 66D(o)(i) of the Finance Act covers “service of transportation of passengers, with or without accompanied belongings, by a stage carriage”, which is proposed to be deleted w.e.f 01.06.2016. Corresponding to this deletion, new entry No. 23(bb)] has been inserted in the Mega Exemption Notification to exempt services by a stage carrier other than air-conditioned stage carriage. [Read with Notification No. 9/2016-ST dated 01.03.2016 vide which changes have been made in the Mega Exemption List of Services in the Mega Exemption Notification]

Further, Service tax is proposed to be levied on service of transportation of passengers by air conditioned stage carriage, @ 40% after abatement of 60% (as applicable to transportation of passengers by contract carriage) without input tax credit, with effect from 01.06.2016 [Read with Notification No. 08/2016-ST dated 29.02.2016 vide which changes have been made in the Abatement Notification]

Services deleted w.e.f. 01st June, 2016

Section 66D(p)(ii):Proposed to be deleted w.e.f. 01.06.2016Presently, Section 66D(p)(ii) of the Finance Act covers “services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance”, which is proposed to be deleted w.e.f 01.06.2016.Corresponding to this deletion, new entry [No. 53] has been inserted in the Mega Exemption Notification to such services by an aircraft.[Read with Notification No. 9/2016-ST dated 01.03.2016 vide which changes have been made in the Mega Exemption List of Services].However, the services provided by vessels would be taxable and the domestic shipping lines registered in India will pay service tax under forward charge while the services availed from foreign shipping line by a business entity located in India will get taxed under reverse charge at the hands of the business entity. The service tax so paid will be available as credit with the Indian manufacturer or service provider availing such services (subject to fulfillment of the other existing conditions). It is clarified that service tax levied on such services shall not be part of value for custom duty purposes.In addition, Cenvat credit of eligible inputs, capital goods and input services is being allowed for providing the service by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India as export of services. Consequential amendments are being made in Cenvat Credit Rules, 2004.

Services deleted w.e.f. 01st June, 2016

There is change in the rate of interest on delayed payment of Service tax, in the following manner:

                            

In case of assessees, whose value of taxable services in the preceding year/years covered by the notice is less than Rs. 60 Lakhs, the rate of interest on delayed payment of Service tax will be 12%.

Further, for the amount collected in excess of the tax assessed or determined – Section 73B of the Finance Act, 15% rate of interest would be applicable as against 18%.

Interest on Late Payment

S. No Situation Rate of Interest

1. Collection of any amount as Service tax but failing to pay the amount so collected to the credit of the Central Government on or before the date on which such payment becomes due.

24% p.a.

2. Other than in situations covered under serial number 1 above. 15% p.a.

Definition of ‘capital goods’:Wagons of sub heading 8606 92 of the CETA and equipment and appliance used in an office located within a factory are being included in the definition of Capital goods so as to allow Cenvat credit on the same;Cenvat credit on inputs and capital goods used for pumping of water, for captive use in the factory, is being allowed even where such capital goods are installed outside the factory.

Definition of ‘exempted service’:Service by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India is being excluded from the definition of “exempted service”. This would allow shipping lines to take credit on inputs and input services used in providing the said services.

Definition of ‘inputs’:All capital goods having value up to Rs. 10,000 per piece are being included in the definition of inputs. This would allow an assessee to take whole credit on such capital goods in the same year in which they are received.

Changes to CENVAT Credit Rules

Entry No. 6(b) & (c): Exemption WithdrawnServices provided by a senior advocate to an advocate or partnership firm of advocates and to a person other than a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession; andA person represented on an arbitral tribunal to an arbitral tribunalHence, Service tax in the above instances would be levied under forward charge. However, legal services provided by a firm of advocates or an advocate other than senior advocate is being continued i.e. under Reverse Charge. [Read with Notification No. 18/2016 – ST dated 01.03.2016, amending the Reverse Charge Notification]

Entry No. 13: Scope expanded to also cover the following:Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of:(ba)   a civil structure or any other original works pertaining to the ‘In-situ rehabilitation of existing slum dwellers using land as a resource through private participation’ under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers;(bb)   a civil structure or any other original works pertaining to the ‘Beneficiary led individual house construction / enhancement under the Housing for All(Urban) Mission/Pradhan Mantri Awas Yojana’.

Changes to Mega Exemption w.e.f. 01.04.2016

Entry 14(a): Exemption to construction, erection, commissioning or installation of original works pertaining to monorail or metro is being withdrawn.However, the said services, where contracts were entered into before 01.03.2016, on which appropriate stamp duty, was paid, shall remain exempt.

Entry 16: The threshold exemption limit of consideration charged for services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theatre, has been extended from Rs. 1 lakh to Rs. 1.5 Lakhs per performance (except brand ambassador).

Entry No. 23(c) deleted: Exemption to services for transport of passengers, with or without accompanied belongings, by ropeway, cable car or aerial tramway is being withdrawn.

Changes to Mega Exemption w.e.f. 01.04.2016

New Entries inserted to exempt the following: Entry 9B w.e.f. 01.03.2016: Services provided by the Indian Institutes of Management

(IIM), as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme, –a. two year full time residential Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT), conducted by Indian Institute of Management;b. fellow programme in Management;c. five year integrated programme in Management;

Entry 9C: Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI) Scheme;

Entry 9D: Services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council For Vocational Training;

Changes to Mega Exemption w.e.f. 01.03.2016

Entry 12A and 14A w.e.f. 01.03.2016: Restoration of certain exemptions withdrawn last year for projects, contracts in respect of which, contract were entered into before withdrawal of the exemption. [Refer changes discussed supra under newly proposed Section 102 and Section 103 of the Finance Act, for details];

Entry 14 (ca): Services by way of construction, erection, commissioning, installation of original works pertaining to low cost houses up to a carpet area of 60 sq. m per house in a housing project approved by the competent authority under the “Affordable housing in partnership” component of PMAY or any housing scheme of a State Government;

Entry No. 23(bb): Service of transportation of passengers, with or without accompanied belongings, by a stage carriage, was in the Negative list of services vide Section 66D(o)(i) of the Finance Act. With the proposed deletion of said entry under the Negative List, a new entry is being inserted under the Mega Exemption Notification so as to exempt services by a stage carriage other than air conditioned stage carriage;

Entry No. 26(q): Services of general insurance business provided under ‘Niramaya’ Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability Act, 1999 (44 of 1999);

Changes to Mega Exemption w.e.f. 01.03.2016

Entry No. 26C: Services of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority of India (PFRDA) under the Pension Fund Regulatory And Development Authority Act, 2013 (23 of 2013);

Entry No. 49: Services provided by Employees’ Provident Fund Organisation (EPFO) to persons governed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952);

Entry No. 50: Services provided by Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999);

Entry No. 51: Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market;

Entry No. 52: Services provided by National Centre for Cold Chain Development under Ministry of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain knowledge dissemination;

Entry No. 53 w.e.f 01.06.2016: Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India.

Changes to Mega Exemption w.e.f. 01.03.2016

New definition provided for certain terms in paragraph 2 relating to definition of – (ba) w.e.f. 01.06.2016 “approved vocational education course” means, –

(i) a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961); or(ii) a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship

(zdd) “senior advocate” has the meaning assigned to it in Section 16 of the Advocates Act, 1961 (25 of 1961).

Definition of “educational institutions” provided under clause (oa) will be substituted with the following w.e.f. the date when the Finance Bill, 2016 receives the assent of the President:“(oa) “educational institution” means an institution providing services by way of:(i)    pre-school education and education up to higher secondary school or equivalent;(ii)   education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;(iii) education as a part of an approved vocational education course;”

Changes in Definitions

Under Rule 7 of the Service Tax Rules, 1994:Service tax assessees above a certain threshold limit shall also submit an annual return for the financial year, in such form and manner as may be specified by the CBEC, by the 30th day of November of the succeeding financial year;The Central Government may, subject to such conditions or limitations, specify by notification, an assessee or class of assesses who may not be required to submit the annual return

Under Rule 7B of the Service Tax Rules, 1994:Sub-Rule 2 has been inserted to provide that an assessee, who has filed the annual return by the due date, may submit a revised return within a period of 1 month from the date of submission of the said annual return.

Under Rule 7C of the Service Tax Rules, 1994:Sub-Rule 2 has been inserted to provide that where the annual return is filed by the assessee after the due date, the assessee shall pay to the credit of the Central Government, an amount calculated at the rate of Rs. 100 per day for the period of delay in filing of such return, subject to a maximum of Rs. 20,000/-.

Annual Return

In Paragraph I, in clause (A), sub-clause (ib) is omitted to provide that services provided by mutual fund agents/distributor to a mutual fund or asset management company are being put under forward charge;

In Paragraph I, in clause (A), sub-clause (ic) is substituted by “provided or agreed to be provided by a selling or marketing agent of lottery tickets in relation to a lottery in any manner to a lottery distributor or selling agent of the State Government under the provisions of the Lottery (Regulations) Act,1998 (17 of 1998)”, to bring in line with changes made in section 65B(44) of the Finance Act;

In Paragraph I, in clause (A), sub-clause (iv), item (B) has been substituted to provide that legal services provided by a senior advocate shall be on forward charge.

Under sub clause (iv) in Item C, the term ‘support’ has been omitted for services provided or agreed to be provided by Government or Local authority from a date to be notified by the Central Government

Reverse Charge Mechanism

Operational Amendments: Changes in Section 73 of the Finance Act:

Section 73 is proposed to be amended to extend the limitation period for recovery of Service tax not levied or paid or short levied or short paid or erroneously refunded, for cases not involving fraud, collusion, suppression etc., by one year, i.e., from 18 months to 30 months. 5 year limitation period in case of fraud etc., has not been changed.

Changes in Section 78A of the Finance Act:Explanation is proposed to be inserted to provide that penalty proceedings under Section 78A (Penalty for offences by director, etc., of company) shall be deemed to be closed in cases where the main demand and penalty proceedings have been closed under Section 76/ Section 78 of the Finance Act.

Changes in Section 89 of the Finance Act:Section 89 of the Finance Act (Offence and Penalties), is proposed to be amended to enhance the monetary limit for filing complaints for punishable offences to Rs. 2 crores from Rs. 50 lakhs.

Operational Amendments:

Changes in Section 90 of the Finance Act:Sub-section (2) to Section 90 of the Finance Act is proposed to restrict the power to arrest only to situations where the tax payer has collected the Service tax but not deposited it with the exchequer, and amount of such tax collected but not paid exceeds Rs. 2 crore (as provided under amended Section 89).

Changes in Section 91 of the Finance Act:Section 91 of the Finance Act is proposed to be amended to delete reference of Section 89(1)(i) of the Finance Act under Sub-Section (1) and to delete Sub-Section (3) thereof, again to restrict the power to arrest only to situations where the tax payer has collected the Service tax but not deposited it with the exchequer, and amount of such tax collected but not paid exceeds Rs. 2 crore (as provided under amended Section 89).

Changes in Section 93A of the Finance Act:Section 93A of the Finance Act, is proposed to be amended so as to enable allowing of rebate by way of notification as well as rules. Application for rebate may be allowed to be filed within a period of 1 month from the date on commencement of the Finance Bill, 2016.

Operational Amendments: Incentives received by Air Travel Agents from CCRS: It is clarified that incentives

received by the Air Travel Agents (“ATA”) from the Companies providing Computer Reservation System (“CCRS”) are for using the software and platform provided by the CCRS like Galileo, Amadeus, etc. The CCRS are providing certain incentives either for achieving the targeted booking of air tickets or for loyalty for booking of air tickets using their software system. Thus, Service tax is leviable on the service provided to CCRS by the ATA for promoting the service provided by CCRS to Airlines.

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BUDGET HIGHLIGHTS PRESENTATION BY :-

M/s Vimal Tandon & Co.Chartered AccountantsA-107/1, Pal Mohan Plaza, 11/56,D.B. Gupta Road, Karol Bagh,New Delhi - 110005 Telefax – 23551056Tel. 45032501Mob. 9810221653, 9868171653website - vimaltandon.com

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