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Detailed provisions relating to Direct taxes

Posted on 29 February 2016,    
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FINANCE BILL, 2016

PROVISIONS RELATING TO DIRECT TAXES

Introduction

The provisions of Finance Bill, 2016 relating to direct taxes seeks to amend the Income-tax Act, 1961 ('the Act'), the Finance (No.2) Act, 2004, Finance Act, 2013 and Finance Act 2015, in order to provide for –

A. Rates of Income-tax

B. Additional Resource Mobilisation

C. Widening of Tax Base and Anti-Abuse Measures

D. Measures to Phase Out Deductions

E. Measures to Promote Socio-economic Growth

F. Relief and Welfare Measures

G. Ease of doing Business & Dispute Resolution

H. Rationalisation Measures

2. The Finance Bill, 2016 seeks to prescribe the rates of income-tax on income liable to tax for the assessment year 2016-17; the rates at which tax will be deductible at source during the financial year 2016-17 from interest (including interest on securities), winnings from lotteries or crossword puzzles, winning from horse races, card games and other categories of income liable to deduction or collection of tax at source under the Act ; rates for computation of "Advance Tax ", deduction of income-tax from, or payment of tax on 'Salaries' and charging of income-tax on current incomes in certain cases for the financial year 2016-17.

DIRECT TAXES

A. RATES OF INCOME-TAX

I. Rates of income-tax in respect of income liable to tax for the assessment year 2016-2017.

In respect of income of all categories of assessees liable to tax for the assessment year 2016-2017, the rates of income-tax have been specified in Part I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2015, for the purposes of computation of "advance tax", deduction of tax at source from "Salaries" and charging of tax payable in certain cases.

(1) Surcharge on income-tax

Surcharge shall be levied in respect of income liable to tax for the assessment year 2016-2017, in the following cases:-

(a) in the case of every individual or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of Act, cooperative societies, firms or local authorities, the amount of income-tax shall be increased by a surcharge for the purposes of the Union at the rate of twelve percent. of such income-tax in case of a person having a total income exceeding one crore rupees.

However, marginal relief shall be allowed in all these cases to ensure that the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

Also, in the case of persons mentioned in (a) above having total income chargeable to tax under section 115JC of the Act and where such income exceeds one crore rupees, surcharge at the rate mentioned above shall be levied and marginal relief shall also be provided.

(b) in the case of a domestic company-

(i) having total income exceeding one crore rupees but not exceeding ten crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the Union calculated at the rate of seven per cent. of such income tax;

(ii) having total income exceeding ten crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the Union calculated at the rate of twelve per cent. of such income-tax.

(c) in the case of a company, other than a domestic company,-

(i) having total income exceeding one crore rupees but not exceeding ten crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the Union calculated at the rate of two per cent. of such income tax;

(ii) having total income exceeding ten crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the Union calculated at the rate of five per cent. of such income tax.

However, marginal relief shall be allowed in all these cases to ensure that the total amount payable as income-tax and surcharge on total income exceeding one crore rupees but not exceeding ten crore rupees, shall not exceed the total amount payable as income-tax on a total income of one crore rupees, by more than the amount of income that exceeds one crore rupees. The total amount payable as income-tax and surcharge on total income exceeding ten crore rupees, shall not exceed the total amount payable as income-tax and surcharge on a total income of ten crore rupees, by more than the amount of income that exceeds ten crore rupees.

Also, in the case of every company having total income chargeable to tax under section 115JB of the Act and where such income exceeds one crore rupees but does not exceed ten crore rupees, or exceeds ten crore rupees, as the case may be, surcharge at the rates mentioned above shall be levied and marginal relief shall also be provided.

(d) In other cases (including sections 115-O, 115QA, 115R or 115TA), the surcharge shall be levied at the rate of twelve percent.

(2) Education Cess - For the assessment year 2016-2017, additional surcharge called the "Education Cess on income-tax" and "Secondary and Higher Education Cess on income-tax" shall continue to be levied at the rate of two per cent. and one per cent., respectively, on the amount of tax computed, inclusive of surcharge, in all cases. No marginal relief shall be available in respect of such Cesses.

II. Rates for deduction of income-tax at source during the financial year 2016-2017 from certain incomes other than "Salaries". The rates for deduction of income-tax at source during the financial year 2016-2017 from certain incomes other than "Salaries" have been specified in Part II of the First Schedule to the Bill. 

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