Hi all,

SAP has released version-5 of NOTE: 2290356 on 15.04.2016 regarding Union budget changes – 2016

Symptom

This Note delivers the changes related to the Union Budget for 2016, as announced through Note 2287721

Other Terms

Union Budget, Budget Changes 2016, HINCALC0, PC00_M40_CALC, PC00_M40_CALC_SIMU, Surcharge, Section 80EE,  Section 80GG, PF, EPF, Income Tax

Reason and Prerequisites

Union Budget Changes 2016

Prerequisites:

Minimum Support Pack requirement:

Reason for Versioning:

Solution

This Note covers changes that are effective from April 1, 2016 as per the Budget 2016 proposal.

Important:

The Finance bill has not received the President’s assent at the time that this note is being released. Therefore customers are requested to confirm the same with their legal counsels before applying these changes in their system.

The following changes have been made after the budget:

1. EPS for New Joinees

The government will pay 8.33% 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 INR 15,000. A new field is added to IT0587 to mark the eligible employees who have relevant joining dates.

2. Tax Credit

The ceiling of tax rebate under Section 87A of the Income Tax Act has been proposed to be raised to INR 5,000 from INR 2,000 for individuals with income less than INR. 5 lakh.

3. Changes under Section 80EE (Deduction on Interest on Housing Loan)

An employee is entitled to claim both the interest and the principal components of home loan repayments for tax benefits. Currently interest payable on a ‘self-occupied’ house is subject to a maximum deduction of INR 2 lakh under the head ‘Income from House Property.’ For first-time home buyers, an additional deduction of INR 50,000 on interest for a loan upto INR 35 lakh is proposed, provided the house value does not exceed INR 50 lakh. This needs to be maintained in IT0585.

4. Changes under Section 80GG (HRA)

The contribution limit for Section 80GG has been increased from INR.24000 per annum to INR.60000 per annum. This needs to be maintained in IT0585.

5. Surcharge on income above INR 1 crore is increased

The surcharge on income tax levied on individuals earning an income of INR 1 crore or more has been increased from 12% to 15%.

6. Income from Dividends

Dividend in excess of INR 10 lakh per annum will be taxed at the rate of 10%. For example, if the dividend is INR 12 lakh, INR 2 lakh will be taxed at 10%.

7. Superannuation Fund

The exemption limit is proposed to be increased from INR 1 lakh to INR 1.5 lakh for the annual contribution by an employer to a superannuation fund. The perk calculation of superannuation is a consulting solution, and the constant ZSALT needs to be modified to INR 1.5 lakh.

8. Employer Contribution of Provident Fund

The employer’s contribution to Provident fund in excess of 12% of the employee’s salary or INR 1,50,000 per annum will be subject to tax.

NOTE: For the above mentioned Point No. 8, the change proposed is still under consideration by Govt. Hence, once the same is passed in parliament a note will be released separately.

The following three options are available for implementing the solution:

Option 1 :

Apply the relevant HRSPs to obtain the necessary Corrections.

Option 2 :

You do not want to do a HRSP upgrade and you are already at the minimum support package as mentioned in the table above.

Perform the following steps to implement the changes:

Step 1 : Maintain the customizing entries as mentioned in the attached document (Manual Instructions for Union Budget changes.pdf).

Step 2 : Maintain the customizing entries as mentioned in the attached document (Manual Instructions for CF and BF wagetypes.pdf) .

Step 3 : Upload the new format for Tax Simplifier Solution (TSS) as mentioned in Step 1 and upload the attached format ( SFPF_HR_IN_SSITP_2010.zip ) .

Step 4 : Apply the attached Correction Instructions through ‘SNOTE’ transaction.

Option 3 :

You are not at the minimum support package and would like to do a HRSP upgrade only for India payroll.

Step 1 : Apply the relevant HRSP that is a CLC for India payroll ( HRSP of April 2016 ) as per the SAP Note 2296861 .

Step 2 :  Maintain the customizing entries as mentioned in the attached document (Manual Instructions for CF and BF wagetypes.pdf).

Step 3 : Upload the new format for Tax Simplifier Solution (TSS) as mentioned in Step 1 and upload the attached format ( SFPF_HR_IN_SSITP_2010.zip ) .

Step 4 : Apply the attached Correction Instructions through ‘SNOTE’ transaction.

Thanks,

Gaurav Sharma