NEW DELHI: Marginal tax relief of up to Rs 6,600 for small tax payers, a 3 per cent hike in surcharge on super-rich, new levies on cars and SUVs and a compliance window to domestic black money holders were unveiled in the Budget for 2016-17 that envisages a huge spending of Rs 1.77 lakh crore in rural areas to address the agrarian distress.
Presenting his third Budget on Monday, Finance Minister Arun Jaitley made no changes in the personal or corporate income-tax slabs but made costlier several items including electricity, jewellery, readymade garments, mineral water and aerated drinks, tobacco and cigarettes by raising duties. The Budget brought in a new 0.5 per cent Krishi Kalyan cess on all taxable services to fund agriculture while proposing a retirement tax on 60 per cent of the pension and provident fund corpus including EPF created after April 1, 2016.
Against expectations of incentives for industry hit by global slowdown and shrinking exports, the Budget did not offer anything major. While deciding to stick to fiscal deficit roadmap, he unveiled a new policy for sale of PSUs to raise additional resources as well as tried to address lingering tax issues with one-time settlement offers. While the revenue loss on direct taxes will be Rs 1,060 crore, his indirect tax proposal will mobilise an additional Rs 20,670 crore. Net revenue gain will be Rs 19,610 crore.
Asked about comments that the Budget was left-of-centre, Jaitley said, “It is neither left nor right but deals with the reality of Indian economy. It addresses sectors which need highest priority and rural areas need most attention.” “There is a serious challenge, if not distress, in the rural sector and we have given priority to the social sector and infrastructure. This Budget is a combination of several things,” he said.
Ahead of Assembly elections in five states, Jaitley focused on plans for agriculture and farmers’ welfare by providing Rs 35,984 crore on this alone. A massive Rs 87,765 crore has been allocated for rural sector while Rs 2,000 crore will be provided for giving concessional LPG connections to BPL families.
As much as Rs 2.87 lakh crore will be given as grants in aid to panchayats and municipalities while allocation for social sector including education and healthcare has been pegged at Rs 1.51 lakh crore. A total outlay of Rs 2.21 lakh crore has been made for infrastructure, of which Rs 97,000 crore will be in the road sector including on rural roads. In a bid to shore up the economy hit by global slowdown, the Budget proposes a 15.3 per cent higher expenditure at Rs 19.78 lakh crore in 2016-17, consisting of Rs 5.50 lakh crore under Plan and Rs 14.28 lakh crore under non-Plan.
The Budget provides an outlay of Rs 1,62,759 crore for defence in 2016-17, up by 13 per cent from Rs 1,43,236 crore in the revised estimates for the current year. Capital expenditure on defence has been put at Rs 86,340 crore against Rs 81,400 crore in the current year’s revised estimates. Interest payment will account of Rs 4,92,670 crore against Rs 4,42,620 crore. Subsidies will marginally lower at Rs 2,50,433 crore as opposed to Rs 2,57,801 crore in the revised estimates.
In relief to small tax payers, the Budget proposes to raise the ceiling of tax rebate under Section 87(A) from Rs 2,000 to Rs 5,000 for incomes not exceeding Rs 5 lakh per annum. There are two crore tax payers in this category who would get a relief of Rs 3,000 in their tax liability.
Those who do not have house of their own and do not get house rent allowance from employers will get a deduction of Rs 60,000 per year as against existing Rs 24,000. First time home buyers will get a deduction of an additional interest of Rs 50,000 per annum for loan up to Rs 35 lakh, during 2016-17, provided the house value does not exceed Rs 50 lakh. The Budget proposes to extend the presumptive taxation scheme to professionals with gross receipt up to Rs 50 lakh with the presumption of profit being half of the gross receipt.
After pursuing black money abroad, Jaitley on Monday offered a limited period compliance window for domestic holders of unaccounted income and assets to declare their undisclosed income and assets and clear past transgressions by paying tax at 30 per cent plus 7.5 per cent penalty and 7.5 per cent of interest, a total of 45 per cent. For the foreign black money holders, the total tax and penalty was 60 per cent for those who came clean. In the domestic scheme, the minister declared that there will be no scrutiny or inquiry regarding income tax declared under the scheme under I-T and Wealth Tax Act and they will have immunity from prosecution. Immunity from benami transaction act of 1998 is also proposed subject to certain conditions. The 7.5 per cent surcharge will be called Krishi Kalyan surcharge to be used for agriculture and rural economy. “We plan to open the window under this Income Disclosure Scheme from June 1 to September 30, 2016, with an option to pay amount due within two months of declaration,” he said.
A Krishi Kalyan cess of 0.5 per cent would cover all services, proceeds of which will be used for financing incentives for improvement of agriculture and welfare of farmers. The cess will come into effect from June 1.
Referring to concerns over pollution and traffic situation in cities, Jaitley proposed to levy an infrastructure cess of 1 per cent on small petrol, LPG, CNG cars, 2.5 per cent on diesel cars of certain capacity and 4 per cent on higher engine capacity vehicles and SUVs.
Recalling his last year’s promise of reducing corporate tax from 30 to 25 per cent over a period accompanied by rationalisation and removal of exemptions and incentives, Jaitley on Monday limited accelerated depreciation provided under I-T Act to a maximum of 40 per cent from April 1, 2017. The benefit of deduction for research would be limited to 150 per cent from April 1, 2017, and 100 per cent from April 2020.
To boost domestic manufacturing and job creation, he allowed new units incorporated on or after March 1, 2016, an option of being taxed at 25 per cent plus surcharge and cess, provided they do not claim profit linked- or investment linked-deductions. He also proposed lower corporate income tax rate for next financial year of relatively small enterprises with a turnover not exceeding Rs 5 crore in fiscal 2016 to 29 per cent plus surcharge and cess. At present, they pay 30 per cent plus surcharge and cess.
In a bid to promote employment through startups under the Make in India programme, the Budget proposes to assist their propagation through 100 per cent deduction of profit for three out of five years for companies set up between April 2016 and March 2019. Minimum Alternate Tax will apply in such cases. Capital gains will not be invested in regulated/ notified fund or funds and by individuals in notified startups in which they hold majority shares.
As part of an attempt to incentivise domestic value addition in the Make in India campaign, he proposed suitable changes in customs and excise duty rates on certain inputs, raw material, intermediaries and components to reduce cost and improve competitiveness of domestic industry in various sectors including IT, IT hardware, capital goods, defence production, MRO of aircrafts and ships, and textiles. The period of getting benefit of long-term capital gain regime in case of unlisted companies is proposed to be reduced from 3 to 2 years. The controversial General Anti Avoidance Rules or GAAR will be implemented from April 1, 2017, he said.
The 12 per cent surcharge on personal income above Rs 1 crore has been raised to 15 per cent. The Budget also proposes to collect tax at source at the rate of one per cent on purchase of luxury cars exceeding value of Rs 10 lakh and purchase of goods and services in cash exceeding Rs 2 lakh. It also seeks to impose an excise duty of 1 per cent without input tax credit or 12 per cent with input tax credit, on articles of jewellery excluding silver other than studded with diamond or some other precious stone with a higher exemption and eligibility limit of Rs 6 crore and Rs 12 crore, respectively.
As an additional resource mobilisation for agriculture and rural economy, the Finance Minister proposed a 10 per cent additional dividend distribution tax on individuals, HUFs and firms receiving dividend in excess of Rs 10 lakh per annum. He also proposed a number of measures as part of financial sector reforms that includes enactment of a comprehensive Code on Resolution of Financial Firms to provide with a mechanism to deal with bankruptcy situations in banks, insurance companies and financial sector entities. This Code together with the Insolvency and Bankruptcy Code 2015, when enacted, will provide a comprehensive resolution mechanism for the economy. He also announced that a comprehensive central legislation will be brought to deal with the menace of illicit deposit taking schemes.
Jaitley proposed Rs 25,000 crore for bank recapitalisation and said the government will also consider the option of reducing its stake to below 50 per cent. For skill development, a pet theme of Prime Minister Narendra Modi, Jaitley allocated Rs 1,804 crore. 1,500 multi training skilled institutes will be set up. As part of reforms, FDI policy will be liberalised in areas of insurance and pension, asset reconstruction companies and stock exchanges. 100 per cent FDI will be allowed through FIPB route in food products produced and manufactured in India.
Fiscal deficit in the revised estimates of 2015-16 and the Budget for coming year has been retained at 3.9 per cent and 3.5 per cent to ensure fiscal discipline. Total expenditure has been projected at Rs 19.78 lakh crore, with planned expenditure pegged at Rs 5.50 lakh crore and non-plan at Rs 14.28 lakh crore. As a boost to employment and growth, the turnover limit under presumptive taxation scheme under the Income Tax Act has been increased to Rs 2 crore to bring relief to a large number of assesses in medium and small enterprise category. The presumptive taxation scheme with profit deemed to be 50 per cent has been extended to all professionals with gross proceeds of up to Rs 50 lakh.
Budget 2016-17 Benefit to Goa
Export duty on iron ore fines and lumps with Fe content below 58% abolished. Earlier, it was 10% and 30%, respectively
dearer
Air and railway tickets
Readymade clothes
Small and Luxury cars
Diamond
Mineral water
Mobile bill
Cable
Movies
Cigarettes
Gold
Eating out
Insurance schemes
Cheaper
Dialysis equipment
Routers
Broadband Modems Set top boxes
Ambulances
Digital video recorder
E-readers made in India
Sector-wise allocation
Rs 3,000 crore for nuclear power generation
Rs 35,984 crore for farm sector
Rs 87,765 crore for rural development
Rs 2,21,246 crore for infrastructure
Rs 5,500 crore for PM Fasal Bima Yojana
Rs 1,000 crore for higher education financing
Rs 25,000 crore for recapitalization of public sector banks
HIGHLIGHTS
To double farmers’ income by 2022
New initiative to provide cooking gas to BPL families
`9,000 cr for Swachh Bharat Programme
Villages will be rewarded to discourage open defecation
`500 cr for Stand-up India to promote entrepreneurship amongst SC, ST
All small shops will be allowed to remain open all seven days of week. Model Shops and Estabilishment Bill soon
To exempt affordable houses up to 60 sq mt from service tax
First-time home buyer – Rs 50,000 deduction for upto Rs 30 lakh loan, provided house cost not more than `50 lakh
Measures to speed up road construction: Rs 55,000 cr allocated for roads and highways by 2017
Entrepreneurs will be allowed to operate buses/fleet services
Govt to set up 3,000 new generic medicine stores across the country to tackle shortage of drugs in rural areas
60% of EPF deposits to be taxed on withdrawal after April 1
To open new Greenfield ports
Small airports and air strips to be developed for improving regional connectivity
To allow firms to launch infra bonds worth `31,300 cr
FDI policy to address farmers’ needs
Fiscal deficit target 3.5%, revised revenue deficit target at 2.5%
New bankruptcy code will be introduced as a measure to fight bankruptcy in PSU banks
NITI Aayog to identify PSUs for asset sale
Aadhar made compulsory for availing social sector benefits
Direct benefit transfer in fertilizer subsidy on pilot basis
Tax rebate to those under Rs 5 lakh per annum
Tax rebate on rent (HRA allowance) increased to Rs 60,000 per annum for Rs 24,000 per annum
100% tax deduction for startups for first three years
No change in income tax slabs
Setting up of 1500 multi-skilled training institutes, Rs 1,700 cr set aside for skill training institutes
To promote 100 model career centres by end of 2016
Reactions to budget
It is a nit-picking Budget. There is no big idea except one that was mentioned on Sunday by the PM himself that govt plans to double farmers’ income in next 5 yrs. It is an impossible dream and there is no inclination, no way of telling the country how it will be achieved” – Manmohan Singh,
Cong leader & noted economist
They have been talking about development of agriculture, farmers but nothing concrete seen in Budget 2016” – Nitish Kumar,
Bihar CM & JD(U) leader
Outside Budget, they promised a lot to corporate sector. Not evident now. Nothing spectacular in Budget” – – D Raja, CPI leader
It is hopeless also for middle class. 60 per cent of PF corpus created by employees after April 1, 2016, will be taxed when he/she withdraws money. Younger the employee, worse off he/she would be. This has never happened in the history of India. Retirement benefit bruised in a country where virtually no social safety net exists”
– Derek O’Brien, Trinamool Congress
Overall, Budget proposals are in line with development priorities of the nation. Finance Minister has made a strong attempt to pump prime the rural economy and infrastructure sector. This would yield dividends and we foresee a multiplier effect in the form of demand generation and employment creation over time”
– Harshavardhan Neotia,
President, FICCI
Really an excellent Budget. The adherence to fiscal discipline, with emphasis on growth and development, increasing infrastructure spending… are key elements of this year’s Budget”
– Ashtosh Raina, Head-FX, HDFC Bank
These steps will help our millions of farmers recover from the rough patch they have been going through but govt will have to raise allocation for crop insurance scheme, as the gap between farmers’ cost on farming and their loss, if any, is huge. Although I welcome higher allocation for irrigation, we need to see its implementation”
– Yoginder K Alagh, Farm Expert
While I see quite a few positives in this Budget, I see one announcement that can prove to be a dampener. Making PAN mandatory for purchases above Rs one lakh is going to have a serious impact on consumption. Not more than 13% of Indians have PAN card and only about 4% of them pay Income Tax.
– Kishore Biyani, CEO, Future Group
Overall, this is a responsible ‘Rural First’ Budget that attempts to revive demand, while continuing on the path of fiscal consolidation. For the FMCG sector, initiatives to support revival of rural and urban consumption should help bring growth back on track”
– Rajat Wahi,
Consumer Markets Head, KPMG India