Thursday, March 10, 2016

Our Budget expectations once again come to fruition

Every year 'Taxmann' predicts and suggests various substantive and procedural changes to taxation laws based on judicial litigations, prevalent uncertainties and change in the business environment. We met several expectations for Union Budget 2014-15 and 2015-16 which were published in [2014] 47 taxmann.com 120 (Article) and [2015] 61 taxmann.com 143 (Article).
This year also we have released our #Budgetexpectations in [2016] 67 taxmann.com 45 (Article). It is to our credit that many of our expectations came to fruition in the Union Budget 2016 as well.
The following is a comparative study of the changes suggested by us viz-a-viz changes proposed in the Finance Bill, 2016:

Expectations from Budget 2016-17
  1.  (a) Dividend income and share in profit of a firm should not be treated as exempt income for Section 14A disallowance as these incomes always suffer economic taxation.(b) Section 14A disallowance should not exceed amount of total expenditure claimed under any provision of the Act.
  2. As per section 206AA, where the deductee does not furnish the PAN, tax shall be deducted at source at higher rates. Such provision is also applicable to non-residents.
  3.  Section 244A was inserted to ensure that the assessee was duly compensated by the payment of interest for monies legally belonging to him and wrongfully retained by the Government.
  4.  It was recommended that the age-old threshold limits of TDS should be increased. Further, it was recommended that TDS rates should also be rationalized keeping in view the restructuring of the Income-tax rates over the past decade.
Proposals in Finance Bill, 2016
  1. Finance Minister, Mr. Arun Jaitley, in his budget speech said that quantification of expenditure relatable to exempt income in terms of section 14A led to number of disputes. Accordingly, he proposed to rationalize the formula in Rule 8D governing such quantification of expenditure on exempt income.
  2.  It is proposed to amend section 206AA to provide that withholding tax at higher rate shall not apply in case of non-resident subject to conditions as may be prescribed.
  3. It has been proposed that where refund arises out of self-assessment tax, such amount shall also be eligible for interest from the date of furnishing of the return or payment of tax, whichever is later, up to the date on which the refund is granted.
  4.  Threshold limits of TDS on various payments have been proposed to be increased and TDS rates have also been proposed to be revised.

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