Hitesh Sawhney, Partner- Direct Tax, PwC India
A well balanced budget with impetus to the Agriculture sector, Infrastructure sector and Financial Sector. Significant direct tax reforms – reducing Corporate tax rates for specified persons combined with sunset for various tax incentives, Taxation of Patents, Voluntary Dispute Resolution measures, accountability of tax officers, Progressive Taxation of dividends, deferment of PoEM, rationalization of TDS, penalty provisions etc. are tax-payer friendly and indicates the intent of a simplified, non-adversarial tax regime.
Gautam Mehra, Leader – Tax, PwC India.
‘Nine’ transformation pillars in the Budget, of which tax reforms is one, and ‘nine’ focus areas for tax reforms summarises the broad approach. Budget 2016 is positively focused on reducing litigation and further enabling dispute resolution. In this context, a limited period compliance window for domestic taxpayers has been introduced, which involves payment of an all-inclusive tax at 45%, and a dispute resolution scheme for disputes arising on account of retrospective amendments.
Budget 2016 has also proposed a reduction of 1% for relatively small enterprises with turnover not exceeding 5 crores and a reduction of 5% for new manufacturing companies not claiming any incentives. However, incentives such as accelerated depreciation and weighted deductions have been reduced for all eligible taxpayers. There is an additional burden on rich taxpayers by way of additional tax on dividend income of 10% in case dividend exceeds 10 lakhs and increase in surcharge on total income from 12% to 15%.
Other positives include introduction of a special tax regime for income from ‘patents’, a deferral of POEM by one year, reduction in the holding period for long term gains on unlisted shares from 3 to 2 years and no increase in service tax rates, although Krishi Kalyan cess of 0.5% has been levied. The intent to introduce GAAR next year was reinforced, which is aligned to the other commitments to introduce BEPS related developments such as CbC reporting.
Vivek Mishra Partner – Indirect tax, PwC India
Budget 2016 appears to be a workman-like budget rather than one which has dramatic changes in the indirect tax regime. An important hike in taxes has been made in service tax. Krishi Kalyan Cess has been imposed at the rate of 0.5 percent on all taxable services with effect from 1 June 2016.
While the Finance Minister did not make a mention of GST in his speech, given that the NDA government and its allies are likely to have a majority in the Rajya Sabha this year, it seems likely that the Constitution Amendment Bill for GST will be passed this year.