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Budget 2016-17 will help Boost Economic Growth and Employment Generation
Tax proposals announced by Finance Minister Arun Jaitley in Budget 2016-17 are aimed at boosting economic growth and generating employment.
Other
objective
he
had
said
behind
the
tax
proposals
was
to
give
incentive
to
#MakeInIndia.
The
main
provision
to
boost
economic
growth
and
employment
includes
100%
deduction
of
profits
for
3
out
of
5
years
for
start-ups
from
April
2016
to
March
2019.
To promote innovation a special patent regime with 10% rate of tax on income from worldwide exploitation of patents developed and registered in India was proposed by the FM.
For non-banking financial companies there is a provision for deduction to the extent of 5% of its income in respect of bad and doubtful debts.
The corporate income tax rate for the next financial year of relatively small enterprises i.e companies with turnover not exceeding Rs. 5 crores (in the financial year ending March 2015) is proposed to be lowered to 29 % plus surcharge and cess.
The new manufacturing companies which are incorporated on or after 1.3.2016 are proposed to be given an option to be taxed at 25% 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.
Service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development and Entrepreneurship are also proposed to be exempted.
The determination of residency of foreign company on the basis of Place of Effective Management (POEM) is deferred by one year.
To get more investment in Asset Reconstruction Companies (ARCs), which play a very important role in resolution of bad debts, a complete pass through income-tax to securitisation trusts including trusts of ARCs has been proposed. The income will be taxed in the hands of the investors instead of the trust.
Finance Minister Arun Jaitley also enunciated a plan for phasing-out various exemptions as the corporate tax is proposed to be reduced from 30% to 25 % over a period. Such graduated plan includes:
1.
The
accelerated
depreciation
provided
under
IT
Act
will
be
limited
to
maximum
40
%
from
1.4.2017.
2.
The
benefit
of
deductions
for
Research
would
be
limited
to
150%
from
1.4.2017
and
100%
from
1.4.2020.
3.
The
benefit
of
section
10AA
to
new
SEZ
units
will
be
available
to
those
units
which
commence
activity
before
31.3.2020.
4.
The
weighted
deduction
under
section
35CCD
for
skill
development
will
continue
up
to
1.4.2020.
Other objectives enunciated for his tax proposals are:
1.
Additional
resource
mobilisation
for
agriculture,
2.
Rural
economy
and
clean
environment,
3.
Use
of
technology
for
creating
accountability,
4.
Simplification
and
rationalization
of
taxation,
and
5.
Reduction
in
litigation
for
providing
certainty
in
taxation.
