TDS, HRA, ITR to SGB: Top personal finance and income tax changes in Budget 2016 (Recap)

Relief to small taxpayers

House Rent Allowance (HRA) limit under Section 80GG increased from ₹24,000 to ₹60,000 per year for people who do not have any house of their own and also do not get any HRA from employers.

Service tax on Single premium Annuity (Insurance) Policies was decreased from 3.5% to 1.4% of the premium paid in certain cases.

For the first time home buyers’, Budget 2016 proposes to give a deduction for additional interest of ₹50,000 per annum for loans up to ₹35 lakh sanctioned during the next financial year, provided the value of the house does not exceed ₹50 lakh.

Tax on dividend, STT

Before Budget 2016, Dividend Distribution Tax (DDT) applied uniformly applied to all investors irrespective of their income slabs. Jaitley 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 ₹10 lakh per annum.

The rate of Securities Transaction Tax (STT) in case of ‘Options’ was increased from .017% to .05%.

TDS and TCS changes

Budget 2016 rationalised TDS provisions as following:

Budget 2016 proposed to collect tax at source at the rate of 1% on purchase of luxury cars exceeding value of ₹10 lakh and purchase of goods and services in cash exceeding ₹2 lakh.

The surcharge was increased from 12% to 15% for persons, other than companies, firms, and cooperative societies, having income above ₹1 crore.

Relief for non-residents

It proposed that higher rates will not apply to non-residents without PAN on furnishing alternative documents.

"It is proposed to amend section 206AA of the Income-tax Act so as to provide that TDS shall not be deducted at a higher rate in case of non-residents not having PAN, subject to prescribed condition.

Sovereign Gold Bond and mutual funds

Redemption by an individual of Sovereign Gold Bond issued by Reserve Bank of India shall not be charged to capital gains tax. It is also proposed to provide that long terms capital gains arising to any person on transfer of Sovereign Gold Bond shall be eligible for indexation benefits. (Indexation benefits are no longer available)

Any transfer of units in merger or consolidation of plans of a mutual fund scheme shall be exempt from capital gains tax.

Interest earned on Deposit Certificates issued under Gold Monetisation Scheme, 2015 and capital gains arising from them shall be exempt from tax.

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Uniform tax treatment: NPS, PF and superannuation funds

Budget 2026 provided a uniform tax treatment to the recognised provident fund, national pension system and superannuation fund. Following rules were proposed:

• Exemption limit increased from ₹1 lakh to ₹1.5 lakh for annual contribution by an employer to a superannuation fund.

• A monetary limit of ₹1.5 lakh provided for annual contribution by an employer to a recognised provident fund.

• Any amount received by the nominee, on the death of the employee at the time of closure of account under National Pension System was proposed to be exempt.

• Exemption from tax was proposed for one-time portability from a recognised provident fund or superannuation fund to National Pension System.

• Tax exemption on 40% of the pension wealth received by an employee from the National Pension System Trust.

• Exemption under the recognised provident fund and superannuation fund limited to 40% of the accumulated amount arising out of contributions made in such funds on or after 01.04.2016. However, this restriction was not applicable to an employee participating in a recognised provident fund and whose monthly salary is not over ₹15,000.

Tax relief for homeowners

Budget 2026 allowed deduction of interest payable on capital borrowed for the acquisition or construction of a self-occupied house property if such acquisition or construction is completed within five years.

A standard deduction of 30% was allowed against the amount received on account of unrealised rent while computing the house property income.

The date of agreement fixing the amount of consideration for the transfer of immovable property and not the date of registration was proposed to be taken for the purposes of computing capital gains in case of transfer of immovable property, if any payment in consequence of such agreement has been made by the purchaser of the property through any mode other than cash.

Income Tax Return filing

Section 44AB amended to enhance the threshold limit for audit of accounts from ₹25 lakh to ₹50 lakh for persons having income from profession.

Section 44AD amended to increase the threshold limit of presumptive taxation from ₹1 crore to ₹2 crore. It was also proposed to provide that if the taxpayer opts for the presumptive taxation scheme, he has to remain in that scheme for 5 years. Further, if he does not offer the income as per the said scheme in any of the five years, he shall not be eligible to claim the benefit under the scheme for next 5 years.

Section 139 amended to provide that a person shall be required to furnish his return of income if his total income during the previous year without claiming exemption under section 10(38) exceeds the maximum amount which is not chargeable to tax.

A person, who has not furnished a return for any previous year by the due date, may furnish the same before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. He may also revise such return before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

A return furnished in response to a notice issued under section 142 (1) of the Income-tax Act cannot be revised.

A return which is otherwise valid would not be treated defective merely because self-assessment tax and interest payable in accordance with the provisions of section 140A, has not been paid on or before the date of furnishing of the return.

Advance tax payment: Section 211 amended to provide that the number of instalments and due dates for payment of advance tax in the case of individuals, HUFs, firms, etc. shall be the same as is applicable to companies.

Taxpayer eligible for presumptive taxation scheme under section 44AD of the Income-tax Act shall pay the whole amount of advance tax in one instalment on or before the 15th March of the financial year.