AMENDMENTS BY THE FINANCE ACT, 2016 :
(A) Rates of Tax
(A) Rates of Tax
Section 2 of the Finance Act, 2016 read with Part I of the First Schedule to the Finance Act, 2016, seeks to specify the rates at which income-tax is to be levied on income chargeable to tax for the assessment year 2016-17. Part II lays down the rate at which tax is to be deducted at source during the financial year 2016-17 from income subject to such deduction under the Income-tax Act, 1961; Part III lays down the rates for charging incometax in certain cases, rates for deducting income-tax from income chargeable under the head “salaries” and the rates for computing advance tax for the financial year 2016-17 i.e., A.Y.2017-18. Part III of the First Schedule to the Finance Act, 2016 will become Part I of the First Schedule to the Finance Act, 2017 and so on.
Rates for deduction of tax at source for the F.Y.2016-17 from certain income
Part II of the First Schedule to the Finance Act, 2016 specifies the rates at which income-tax is to be deducted at source under sections 193, 194, 194A, 194B, 194BB, 194D, 194LBA and 195 during the financial year 2016-17. These rates of tax deduction at source are the same as were applicable for the F.Y.2015-16. However, the rate of tax deduction at source has been decreased from 10% to 5% in respect of income by way of insurance commission payable to a resident non-corporate assessee. Further, the scope of Part II of the First Schedule has been expanded to include the “rates in force” for the purpose of tax deduction at source under section 194LBB from income distributed to a non-resident unit holder of an investment fund and under section 194LBC from income distributed to a non-resident investor of a securitization trust.
Surcharge would be levied on income-tax deducted at source in case of non-corporate non-residents and foreign companies. If the recipient is a non-resident individual or HUF or AOP or BOI, whether incorporated or not, or artificial juridical person, surcharge@15% would be levied on such income-tax if the income or aggregate of income paid or likely to be paid and subject to deduction exceeds ` 1 crore. If the recipient is co-operative society or a firm, being a non-resident, surcharge@12% would be levied on such income tax if the income or aggregate of income paid or likely to be paid and subject to deduction exceeds ` 1 crore.
If the recipient is a foreign company, surcharge@ –
(i) 2% would be levied on such income-tax, where the income or aggregate of such incomes paid or likely to be paid and subject to deduction exceeds ` 1 crore but does not exceed ` 10 crore; and
(ii) 5% would be levied on such income-tax, where the income or aggregate of such incomes paid or likely to be paid and subject to deduction exceeds ` 10 crore.
Surcharge would not be levied on deductions in all other cases. Also, education cess and secondary and higher education cess would not be added to tax deducted or collected at source in the case of a domestic company or a resident non-corporate assessee. However, education cess @2% and secondary and higher education cess @1% on income-tax plus surcharge, wherever applicable, would be added to tax deducted at source in cases of non-corporate non-residents and foreign companies.
Rates for deduction of tax at source from “salaries”, computation of “advance tax” and charging of income-tax in certain cases during the financial year 2016-17
Part III of the First Schedule to the Finance Act, 2016 specifies the rate at which income tax is to be deducted at source from “salaries” and also the rate at which “advance tax” is to be computed and income-tax is to be calculated or charged in certain cases for the financial year 2016-17 i.e., A.Y. 2017-18.
It may be noted that education cess @2% and secondary and higher education cess @1% would continue to apply on tax deducted at source in respect of salary payments.
The general basic exemption limit for individuals/HUFs/AOPs/BOIs and artificial juridical persons remains unchanged (i.e., ` 2,50,000). The basic exemption limit of ` 3,00,000 for senior citizens, being resident individuals of the age of 60 years or more but less than 80 years at any time during the previous year also remains the same. Resident individuals of the age of 80 years or more at any time during the previous year would continue to be eligible for the higher basic exemption limit of (i.e., ` 5,00,000). The tax slabs are shown hereunder –
(i) (a) Individual/ HUF/ AOP / BOI and every artificial juridical person
|
Level of total income |
Rate of income-tax |
| Where the total income does not exceed
2,50,000 |
Nil |
| Where the total income exceeds 2,50,000 but does not exceed 5,00,000 | 10% of the amount by which the
total income exceeds ` 2,50,000 |
| Where the total income exceeds 5,00,000 but does not exceed 10,00,000 | `Rs 25,000 plus 20% of the amount by which the total income exceeds ` 5,00,000
|
| Where the total income exceeds 10,00,000 | Rs1,25,000 plus 30% of the amount by which the total income exceeds ` 10,00,000 |
(b) For resident individuals of the age of 60 years or more but less than 80 years at any time during the previous year
|
Level of total income |
Rate of income-tax |
| Where the total income does not exceed ` 3,00,000
|
Nil |
| Where the total income exceeds ` 3,00,000 but does not exceed ` 5,00,000
|
10% of the amount by which the total income exceeds ` 3,00,000 |
| Where the total income exceeds ` 5,00,000 but does not exceed ` 10,00,000
|
` 20,000 plus 20% of the amount by which the total income exceeds ` 5,00,000 |
| Where the total income exceeds ` 10,00,000
|
` 1,20,000 plus 30% of the amount by which the total income exceeds ` 10,00,000 |
(c) For resident individuals of the age of 80 years or more at any time during the previous year
|
Level of total income |
Rate of income-tax |
| Where the total income does not
exceed ` 5,00,000 |
Nil |
| Where the total income exceeds ` 5,00,000 but does not exceed ` 10,00,000 | 20% of the amount by which the total income exceeds ` 5,00,000 |
| Where the total income exceeds ` 10,00,000 | ` 1,00,000 plus 30% of the amount by which the total income exceeds ` 10,00,000 |
(ii) Co-operative society
There is no change in the rate structure as compared to A.Y.2016-17.
|
Level of total income |
Rate of income-tax |
|
| (1) | Where the total income does
not exceed ` 10,000
|
10% of the total income |
| (2) | Where the total income exceeds ` 10,000 but does not exceed ` 20,000 | ` 1,000 plus 20% of the amount by which the total income exceeds ` 10,000 |
| (3) | Where the total income exceeds ` 20,000 | ` 3,000 plus 30% of the amount by which the total income exceeds ` 20,000 |
(iii) Firm/Limited Liability Partnership (LLP)
The rate of tax for a firm for A.Y.2017-18 is the same as that for A.Y.2016-17 i.e., 30% on the whole of the total income of the firm. This rate would apply to an LLP also.
(iv) Local authority
The rate of tax for a local authority for A.Y.2017-18 is the same as that for A.Y.2016-17 i.e., 30% on the whole of the total income of the local authority.
(v) Company
The rates of tax for A.Y.2017-18 are as follows:
| In the case of a domestic company |
29% of the total Income
30% of the total income |
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| (1) | (i) Where the total turnover or gross receipt in the
previous year 2014-15 does not exceed ` 5 crore
(ii) In case of other domestic companies |
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New section 115BA has been inserted to provide that the income-tax payable in respect of the total income of a domestic company for any previous year relevant to A.Y.2017-18 and thereafter, shall be computed @25%, at the option of the company, if, –
(i) the company has been setup and registered on or after 1st March, 2016;
(ii) the company is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it; and
(iii) the company while computing its total income has not claimed any benefit under any of the provisions of the Act listed hereunder –
(iv) the company has also not claimed benefit of any deduction in respect of certain income under Part-C of Chapter-VI-A, other than the provisions of section 80JJAA, while computing its total income; (v) the company has also not claimed set-off of any loss carried forward from any earlier assessment year, if such loss is attributable to the deductions specified in (iii) and (iv) above [such loss shall be deemed to have been already given full effect to and no further deduction for such loss shall be allowed for any subsequent year]; (vi) normal depreciation under section 32 [i.e., depreciation other than additional depreciation under section 32(1)(iia)] is determined in the prescribed manner; (vii) the option is exercised in the prescribed manner on or before the due date specified under section 139(1) for furnishing the first of the returns of income which the person is required to furnish under the provisions of the Income-tax Act, 1961. However, once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.
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