hi all,

SAP has released note 2287721 for budget 2016 related proposed changes

please see the details below_

Symptom

Budget 2016-Proposed changes that could affect payroll processing and reporting

Other Terms

Budget 2016, Announcement

Reason and Prerequisites

There are certain changes proposed in the Budget 2016 which could impact the payroll processing and reporting

Solution

Sl. No Topic Area Details Proposal in Budget 2016
1 EPS for new joinees 8.33% for EPF for new joinee with income less than Rs. 15,000 The government will pay 8.33 percent of the Employee Provident Fund (EPF) for all new employees for the first three years. The government will contribute the amount on behalf of the EMPLOYERS, for the first three years of employment. The scheme will be applicable to employees with a monthly salary of up to Rs 15,000
2 Rebate of income-tax under Section 87A Tax rebate under Section 87A increased from Rs. 2,000 to Rs. 5,000 The ceiling of tax rebate under Section 87A of Income Tax Act has been proposed to be raised to Rs 5,000 from Rs 2,000 for individuals with income less than Rs. 5 lakh
3 House Rent Allowance House Rent Allowance exemption under Section 88GG increased At present under Section 80GG, employees who do not have any house of their own and also do not get any house rent allowance from the employer get a deduction of Rs 24,000 per annum from their income to compensate them for the rent they pay. The proposal is to increase the limit of deduction in respect of rent paid under section 80GG from Rs 24,000 per annum to Rs 60,000 per annum
4 Interest on Housing Loan First time home buyers to get additional 50,000 exemption on Interest paid An employee is entitled to claim both the interest and principal components of home loan repayments for tax benefits. Currently interest payable on a ‘self-occupied’ house is subject to a maximum deduction of Rs 2 lakh under the head ‘Income from House Property’. For first time home buyers, an additional deduction of Rs 50,000 on interest for loan upto Rs 35 lakh is proposed, provided the house value doesn’t exceed Rs 50 lakh
5 Surcharge on income Surcharge on income above 1 crore increased In the budget 2016, the finance minister has proposed to increase the surcharge on income tax levied on individuals earning income of Rs 1 crore or more from 12 per cent at present to 15 per cent. On income above Rs 1 crore a surcharge of 12 per cent of income tax is additionally levied on the income tax computed and then the 3 per cent cess is proposed to be further levied on the total of tax plus surcharge
6 Income from dividends Income from dividends above Rs. 10 lakhs to be taxed For investors receiving dividend in excess of Rs 10 lakh per annum, tax at the rate of 10% of gross amount of dividend in addition to applicable Dividend Distribution Tax (DDT) is proposed. Dividend income received by investors was already taxed through DDT. Now, budget 2016 proposes 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 individual recipients
7 Employer contribution of Provident Fund Employer contribution of Provident Fund to be taxed Employer’s contribution to Provident fund in excess of 12% of the salary of the employee or Rs. 150,000 p.a. will be subject to tax
8 Superannuation Fund Increase in exemption limit Exemption limit is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh for annual contribution by an employer to a superannuation fund

At present we are analysing these proposals and the corresponding impact on the system. Details of the analysis will be updated in this note in the due course.

Planned delivery date for legal change by 22.03.2016

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Thanks,

Gaurav Sharma

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