Page 12 - Banking Finance April 2016
P. 12
ROUNDUP
Inflation rose to 5.69% TDS relief for agents, small businesses and employees
while factory output fell
to 1.3% Finance minister Arun Jaitley has an- assets, TDS will been omitted from
nounced an overhaul of India's tax de- June 1, 2016.
India's economy seemed to have ducted at sources (TDS) system, a
sputtered as move that will help cut taxes for small The threshold applicable for TDS in
retail inflation taxpayers, employees, contractors and Employees Provident Fund (EPF) has
rose to 5.69% commission agents. been increased to Rs 50,000 from Rs
in January,
while factory "To improve the cash 30,000. Similarly the TDS
flow position of small threshold for winning in
output fell 1.3% in December. Fac- taxpayers who get their horse race has been in-
tory output, measured by the index funds blocked due to creased from Rs 5,000 to
of industrial production, fell 3.4% in current TDS provision, I Rs 10,000.
November and expanded 3.6% in propose to rationalise TDS provisions
December last year. for Income Tax," Jaitley said. TDS will also be appli-
cable on payment to contractors
The manufacturing sector, which ac- TDS on payment in respect of life in- where the aggregate annual limit is of
counts for two-thirds of the country's surance policies has been reduced Rs 1,00,000 against the current Rs
industrial output, shrank 2.4% in De- from 2% to 1%. TDS on payments in 75,000. Similarly, the TDS threshold on
cember, suggesting factories were respect of NSS (National Service payment of compensation on acquisi-
cutting production. Though the de- Scheme) deposits has been reduced tion of a certain immovable property
celeration in December could be from 20% to 10%; insurance commis- has increased from Rs 2,00,000 to Rs
partly attributed to production sion will also now have a TDS of 5% 2,50,000; on sale of lottery tickets
halted in factories shut by floods in from existing 10%. TDS on commission from Rs 1,000 to Rs 15,000 and on
Chennai, analysts said persistent or brokerage has been reduced from commission or brokerage from Rs
moderation in industrial output was 10% to 5%. In case, one has income in 5,000 to Rs 15,000. The threshold has
a cause for worry. respect of units and on payments of been reduced in case of insurance
compensation on acquisition of capital commission from Rs 20,000 to Rs
"Floods in parts of southern India 15,000.
were a one-off factor that adversely
impacted factory output in Decem- Service Tax to be slapped on cos availing govt., local
ber 2015," Aditi Nayar, senior econo-
mist, ICRA, a credit rating and re- authority services
search firm, said.
Indian companies will have to pay service tax on any service they avail from the
Analysts have been closely watching government or local authority from the next fiscal year,
factory output data as the govern- broadening the scope of the levy to include not just spec-
ment in its latest estimates forecast trum but all auctions, right of way , licence fees and de-
that India's economy will grow at velopment rights. These will all attract service tax, now
7.6% in 2015-16, the fastest in five applied at 15%, inclusive of two cesses.
years, buoyed by a strong revival in
the industrial sector. According to the Budget "all services provided by the government or local au-
thority to a business entity, except the services that are specifically exempted,
Direct transfer of NREGA or covered by any other entry in the negative list, shall be liable to service tax".
wage to account
Services provided by the government or local authorities, excluding certain speci-
The government will start paying fied ones, are currently in the negative list, implying that no service tax can be
wages to NREGA workers in 10 levied on them. Under the negative list system, all services are taxed unless
states directly into their bank ac- specifically mentioned in the list.
counts on a daily basis, bypassing
state treasuries. The Finance Act, 2015, has made an enabling provision to exclude all services
provided by the government or local authorities to a business entity from the
negative list. The provision, however, does not cover government services pro-
vided to individuals.
12 | 2016 | APRIL | BANKING FINANCE
