My first cut reaction is that this is

a good Budget giving focus on 9

Pillars

My first cut reaction is that this is a good Budget giving focus on 9 Pillars which include focus
on Infra, rural areas, relief to small tax payers, creating ease of doing business, affordable
housing and so on and so forth. Fiscal deficit has been proposed to keep at 3.5% which is a big
positive without compromising development agenda. On Taxation front, there are simplification
and rationalisation measures, introducing presumptive taxation for small and medium tax
payers. Keeping in line with objective of unearthing black money, the FM has proposed to
introduce Domestic black mint by laying 30% tax, 7.5% surcharge and 7.5% penalty thus
totalling 45% to be operational from June 1, 2016 to Sept 30, 2016 in a manner that tax will be
paid within 2 months of declaration. Numbers of measures have been introduced for reducing
tax litigation.
Most recommendations of Tax reforms administration report and Easwar Committee have been
accepted - this is a good simplification and rationalisation measures. On capital market front,
additional tax on dividend has been introduced at 10% in addition to DDT if dividend income
exceeds Rs.10 lacs. Short term capital gains tax period for non-listed companies has been
reduced from 3 years to 2 years - the FM was silent on listed companies.

Corporate tax rate has been reduced from 30% to 29% in restricted cases thus the path to
reducing tax rate and also corresponding incentives will need to be examined in detail. 3
year tax holiday has been introduced for startups with keeping Minimum alternate tax
leviable. Introducing 10% tax on patent companies is a big boost for IPR related companies
and it looks like it is in line with country like UK. On international taxation, Base Erosion and
Profit Shifting measures including Country by Country regime.
Also the FM made a declaration to resolve retro taxation by paying tax and no interest and
penalty. Deferring POEM by a year is a good measure. GAAR will be introduced by
01/04/2017 as proposed last year. This looks like a big measure to create certainly,
predictability and non-adversarial tax regime and create ease of doing business in India.
Overall, on tax front there are good rationalization measures on both direct and indirect
taxation. Also there are good 9 Pillars of FM'a speech which should take India to an
increased growth story soon.

Source: Uday Ved

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