Additional Resource Mobilization for agriculture, rural economy and clean environment

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Krishi Kalyan Cess @ 0.5% on all taxable services for financing initiatives relating to improvement of agriculture and welfare of farmers

While presenting the General Budget 2016-17 in Lok Sabha today, the Union Finance Minister Shri Arun Jaitley said that uniform application of Dividend Distribution Tax (DDT) to all investors distorts the fairness and progressive nature of taxes. He therefore proposed that in addition to DDT paid by the companies, tax at the rate of 10% of gross amount of dividend will be payable by the recipients, that is, individuals, HUFs and firms receiving dividend in excess of Rs. 10 lakh per annum.

The surcharge was increased from 12% to 15% on persons having income above Rs. 1 crore. The rate of Securities Transaction tax in case of ‘options’ was increased from 0.017% to 0.05%.

In order to tap tax on income accruing to foreign e-commerce companies from India, it was proposed that a person making payment to a non-resident, who does not have a permanent establishment, exceeding in aggregate Rs. 1 lakh in a year, as consideration for online advertisement, will withhold tax at 6% of gross amount paid, as Equalization levy. This levy will apply only on B2B transactions.

It was also proposed to collect tax at source at the rate of 1% on purchase of luxury cars exceeding value of Rs. 10 lakh and purchase of goods and services in cash exceeding Rs. 2 lakh.

Sh. Arun Jaitley proposed Krishi Kalyan Cess @ 0.5% on all taxable services. Its proceeds would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. It will come into effect from 1st June, 2016.

To tackle the pollution and traffic situation in the country, the Union Finance Minister proposed infrastructure cess of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs. The ‘Clean Energy Cess’ levied on coal, lignite and peat was proposed to be renamed as ‘Clean Environment Cess’. Its rate was increased from Rs. 200 per tonne to Rs. 400 per tonne.

To discourage consumption of tobacco and tobacco products, Sh. Arun Jaitley proposed to increase the excise duties on various tobacco products other than beedi by about 10 to 15%.

Also, an important proposal made was to amend the Finance Act 1994 so as to declare assignment by the Government of the right to use the radio-frequency spectrum and its subsequent transfers a service. This will help clarify that assignment of right to use the spectrum is a service leviable to service tax and not sale of intangible goods.