India: Key Highlights Of The Union Budget For The Year 2016-17

Last Updated: 20 April 2016
Article by Manoj K. Singh

Most Read Contributor in India, September 2016



1.1 Tax Slab For The Financial Year 2016- 17

There is no change in the Tax slab for the financial year 2016-17 for individuals (including senior and super senior citizens), Hindu Undivided Family (HUF), co-operative societies, firms and Local Authorities.

1.2 Increase in Surcharge on income over Rs. 1 Crore

Surcharge on income above Rs. 1 Crore increased from existing 12% to 15% on persons, other than companies, firms and cooperative societies.

1.3 Additional Rebate under Section 87A

1.3.1 Additional rebate for Rs. 3,000 has been proposed under section 87A1 of the Income Tax Act, 1961 (hereinafter referred to as the "Act") for the individuals having income upto Rs. 5 lakhs.

1.3.2 This is in addition to existing rebate of Rs. 2,000. Thus, any assessee having income less than Rs. 5 Lakh may now claim a total rebate of Rs. 5,000 under section 87A.

1.4 Increase in the limit of deduction of rent paid under section 80GG

The limit of deduction of rent paid for assessee who lives in rented houses has been increased from existing Rs. 24,000 to Rs. 60,000 per annum under section 80GG2 of the Act.

1.5 Deduction of additional interest on housing loan

1.5.1 An additional deduction of Rs. 50,000 per annum has been proposed on account of interest paid on housing loans sanctioned in the year 2016-17 for the first time buyers.

1.5.2 This is applicable for the loans amounting upto Rs. 35 Lakhs and the value of such house for which loan taken should not be more than Rs. 50 Lakhs.

1.6 Increase of Turnover Limit Under Presumptive Taxation Scheme (PTS)

1.6.1 The limit of turnover under the Presumptive Taxation Scheme (PTS) under section 44AD3 of the Act has been increased from existing Rs. 1 Crore to Rs. 2 Crore.

1.6.2 For the first time, the PTS has been extended to include Professionals having gross receipts upto Rs. 50 Lakhs. However, the deemed amount of profit for such professionals under PTS would be 50% of the gross receipts.

1.7 Changes in the rate of Tax Deduction at Source (TDS)

1.7.1 TDS at rate of 1% has been proposed on purchase of luxury cars costing more that Rs. 10 Lakhs.

1.7.2 TDS at the rate of 1% on purchase of goods and services by cash exceeding Rs. 2 Lakhs has been proposed. 1.7.3 Higher rate of TDS would not apply to non residents not having Permanent Account Number (PAN) in India.

However, some alternate documents to PAN card are required to be provided by such non residents to avoid higher TDS.

1.8 Additional Tax on Dividend

Additional tax at the rate of 10% has been proposed on the persons receiving dividend exceeding Rs. 10 Lakhs per annum.

1.9 Increase in Securities Transactions Tax (STT) rate

Rate of STT on options transactions proposed to be increased from existing 0.017% to 0.5%.

1.10 Exemption of Tax under Sovereign Gold Bond Scheme, 2015

Exemption from capital gain is proposed on any redemption of Sovereign Gold Bond under the Sovereign Gold Bond Scheme, 2015. Further, indexation benefits to long term capital gains arising on transfer of Sovereign Gold Bond is also proposed to be provided.

1.11 Exemption of Tax for Rupee Denominated Bond

Exemption is proposed to be provided to non-resident investors on capital gains arising in case of appreciation of rupee between the date of issue and the date of redemption of Rupee Denominated Bonds against the foreign currency in which the investment is made.

1.12 Change in Schedule of Advance Tax Payment

1.12.1 It is proposed to change the schedule of advance tax payment for the taxpayers other than companies to bring the same in line with that of companies. Accordingly, the new schedule of advance tax payment for individuals, firms, AOP's, BOI's, trusts etc. shall be as under:

1.13 Disclosure of unaccounted money

1.13.1 Income Disclosure Scheme has been introduced for disclosure of unaccounted money by any assessee with an option to pay tax at the rate of 30% plus surcharge at the rate of 7.5% and penalty totaling to 45%.

1.13.2 Under the said scheme amount of tax shall be payable within 2 months from the date of declarations.

1.13.3 The assessee shall have immunity from any prosecution under the said scheme.


2.1 Benefits to New Manufacturing Companies

An option to be taxed at 25% plus surcharge and cess to be given to new manufacturing companies incorporated on or after 01.03.2016 provided such companies do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation.

2.2 Lower Corporate Tax Rate for Small Companies

It has been proposed to lower the corporate tax rate to 29% plus surcharge and cess for relatively small companies having turnover not exceeding Rs. 5 Crores in the financial year ending March 2015. This lower rate would be applicable from the next financial year.

2.3 Deduction to Startups

100% deduction of profits for 3 out of 5 years to be provided to startups who have started their setups during the period April 2016 to March 2019. However, the provisions of Minimum Alternate Tax (MAT) would be applicable to such startups.

2.4 Deductions and Exemptions to undertakings in housing projects

2.4.1 To promote affordable housing it is proposed to provide 100% deductions for profits to undertakings in housing project for flats upto 30 square meters in four metro cities and upto 60 square meters in other cities subject to condition that such housing projects must be approved during the period June 2016 to March 2019 and completed in three years. 2.4.2 The provisions of Minimum Alternate Tax (MAT) would be applicable to such startups. 2.4.3 It is also proposed to provide exemption from service tax on construction of affordable houses upto 60 square meters under any scheme of Central / State Government including PPP Scheme.

2.5 No Dividend Distribution Tax for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (InvIT)

Any amount of dividend distributed by Special Purpose Vehicles (SPVs) to the REITs and InvITs would not be subject to Dividend Distribution Tax (DDT) subject to condition that:

  1. Such SPVs must be 100% owned by REIT and InvIT; and
  2. Such amount of dividend should be paid out of current income and not from accumulated income.

2.6 Deferment of Place of Effective Management ('POEM')

The criteria to determine residential status of a foreign company in India as per Place of Effective Management ('POEM') rule has been proposed to be deferred by one year and accordingly, it is proposed to be implemented in 2017-18.

2.7 To Phase out some deductions and exemptions under the Income Tax:

It is proposed to phase out some deduction and/or exemptions under the Income Tax as under:

  1. Accelerated depreciation as per Section 32 of the Act, restricted to maximum 40% from 01.04.2017.
  2. Weighted deduction on research and development activities as per Section 35 restricted to 150% from 01.04.2017 and 100% from 01.04.2020.
  3. Weighted deduction for specified businesses as per Section 35AD of the Act restricted to 100% only from 2017-18.
  4. Weighted deduction for skill development under section 35CCD of the Act will continue upto 01.04.2020.
  5. Benefits of deductions as per section 10AA of the Act will be available to newly set up special economic zone units commencing activity before 31.03.2020.

To continue reading this update, please click here


1 Section 87A - Rebate of income-tax in case of certain individuals

2 Deductions in respect of rents paid

3 Special provision for computing profits and gains of business on presumptive basis

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.