Bill retains excise duty on gold jewellery, expands tax benefit for start- ups
The Lok Sabha on Thursday passed the Union Budget for 2016-17, incorporating official amendments to the Finance Bill. It now goes to the Rajya Sabha for debate but that House has no power to reject it.
One such is reducing the period of holding of shares of unlisted companies from the current 36 months to 24 months to qualify for long- term capital gains tax. The provision was absent despite Finance Minister Arun Jaitley announcing it in his Budget speech.
Other amendments included extending the tax benefits for start- ups to limited liability partnerships, dropping a proposal to tax employer contributions to recognised provident funds in excess of Rs. 1.5 lakh a year and clearing an ambiguity on additional dividend tax. Penalty for concealing income has been changed from the existing 0300 per cent to 50- 200 per cent.
Opposition parties raised the issue of not bringing non- taxation measures such as setting up of a monetary policy committee to fix the policy rate and amendments in the Foreign Contribution Regulation Act. Speaker Sumitra Mahajan gave the ruling that there were precedents of non- taxation proposals being included in the Finance Bill but the established practice was to keep such proposals out.
With this, the way has been paved to set up a panel to fix the policy rate, against the current practice of the Reserve Bank governor doing so.
However, the latter will have a casting vote.
Experts believe the proposal to reduce the period of listing of shares for unlisted companies from three to two years to come under long- term capital gains ( LTCG) will reduce the tax burden for shareholders in such companies. “ This will encourage M& A ( mergers & acquisition) activity,” said Sunil Shah, partner, Deloitte Haskins & Sells. LTCG attracts 20 per cent tax in unlisted companies; the short- term tax is 30 per cent.
The Bill had proposed additional dividend tax at 10 per cent over the dividend distribution tax ( DDT). It was not clear whether this applied on the total received by a taxpayer or to dividends received from each company. The amendment has clarified that such tax will be levied if the aggregate amount of dividends received by a tax payer from a domestic company or companies, exceeds Rs. 10 lakh in ayear. The Bill had proposed various tax sops to start- ups, including exemption for three years. The amendments extend these to limited liability partnerships (LLPs). “ Start- ups need not incorporate as a company and formation as an LLP will help in minimising administrative costs,” Shah said. An LLP is apartnership in which partners have limited liabilities. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partners misconduct or negligence.
The Bill has reduced the upper limit of penalty for concealment of income to 50- 200 per cent from the current 0300 per cent.
Business Standard New Delhi,6th May 2016
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