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India’s Union Budget 2016-17 was presented by Finance Minister Arun Jaitley when we are evidencing the global economy in a serious crisis. Over the last two years, global growth has contracted to 3.1% whereas India has presented a steadfast GDP growth rate of 7.6%. Consumer Price Inflation for January 2016 is reported at 5.69% which is also accredited to be at the 17-month high. Last year, Government of India entered in to Monetary Policy Framework Agreement with RBI, to keep inflation below 6%. RBI and Government of India needs to be congratulated to be able to keep the same in control and as per the desired expectations (largely thanks to historically low oil prices). Foreign Direct Investments have risen from $60 million in February 2014 to $3.74 billion in December 2015.

The International Monetary Fund has hailed India as a ‘bright spot’ amidst a slowing global economy. The World Economic Forum has said that India’s growth is ‘extraordinarily high’. Much said about past. Now, the time has come wherein the government has presented its budget for the Financial Year 2016-17. Budget is regarded as a document which spells out the intent, commitment and priority  of the government for the next fiscal year. It is one of those horses on which the economic conditions for the next year would ride upon. It will also set path and pace for the various developmental and socio-economic concerns of India, its economy and its citizenry.

Let us take a categorical view of comparable developments of the 2 budgets.

Key Achievements

Budget 2016-17 Budget 2015-16
Growth of Economy accelerated to 7.6% in 2015-16. Financial Inclusion – 12.5 crores families financially mainstreamed in 100 days.
Foreign exchange reserves touched highest ever level of about 350 billion US dollars. Transparent Coal Block auctions to augment resources of the States.
Swachh Bharat is not only a programme to improve hygiene and cleanliness but has become a movement to regenerate India.
Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%. 
Revenue Deficit target from 2.8% to 2.5% in RE 2015-16
Journey for fiscal deficit target of 3% will be achieved in 3 years rather than 2 years. The fiscal deficit targets are 3.9%, 3.5% and 3.0% in FY 2015-16, 2016-17 & 2017-18 respectively.

Budget Estimates

Let us look at the big figures of major components of the budget (so that we can know little bit of the scale government deals with)

Budget 2016-17 Budget 2015-16
Non-Plan expenditure estimates for the Financial Year are estimated at Rs. 14,28,050 crore. Non-Plan expenditure estimates for the Financial Year are estimated at Rs. 13,12,200 crore.
Plan expenditure is estimated to be Rs. 5,50,010 crore. Plan expenditure is estimated to be Rs. 4,65,277 crore.
Total Expenditure has accordingly been estimated at Rs. 19,78,060 crore. Total Expenditure has accordingly been estimated at Rs. 17,77,477 crore.
Gross Tax receipts are estimated to be Rs. 16,30,888 crore. Gross Tax receipts are estimated to be Rs. 14,49,490 crore.
Devolution to the States is estimated to be Rs. 5,70,337. Devolution to the States is estimated to be Rs. 5,23,958.
Share of Central Government will be Rs. 10,54,101. Share of Central Government will be Rs. 9,19,842.
Non Tax Revenues for the next fiscal are estimated to be Rs. 3,22,921 crore. Non Tax Revenues for the next fiscal are estimated to be Rs. 2,21,733 crore.
Fiscal deficit will be 3.5 per cent of GDP and Revenue Deficit will be 2.3 per cent of GDP. Fiscal deficit will be 3.9 per cent of GDP and Revenue Deficit will be 2.8 per cent of GDP.

Individuals

Let us look at the something which would matter to you the most (as an individual taxpayer). We are talking about the benefits passed on to you.

Budget 2016-17 Budget 2015-16
Rebate under section 87A has been increased from Rs. 2,000 to Rs, 5,000. This rebate is available to taxpayers having income below Rs. 5,00,000 Limit of deduction of health insurance premium increased from Rs. 15000 to Rs.  25000, for senior citizens limit increased from Rs. 20000 to Rs. 30000.
Taxpayers who do not own any house property, are living in a rented premises and who do not receive any HRA (House Rent Allowance) from their employers, will get an increased deduction of Rs. 5,000 per month (Earlier Rs. 2,000 per month) under section 80GG of the Income Tax Act. Senior citizens above the age of 80 years, who are not covered by health insurance, to be allowed deduction of Rs.  30000 towards medical expenditures.
The turnover limit to avail the Presumptive Tax Scheme under section 44AD, has been increased from Rs. 1 crore to Rs. 2 crore. The taxpayers carrying a business will be allowed to avail this scheme for which they will have to declared profits at minimum 8% of the total turnover and they will be exempted from the requirement of  maintaining any books of  accounts. Deduction limit of Rs.  60000 with respect to specified decease of serious nature enhanced to Rs.  80000 in case of senior citizen.
Earlier the Presumptive Tax Scheme under section 44AD was available only to individuals carrying a business. With effect from 1st april 2016, the benefits of this scheme has also been extended to the Professionals whose annual turnover does not exceed Rs. 50,00,000, provided the declared profits from such profession are not less than 50%. The professional availing these scheme will be exempted from maintaining  any books of accounts. Additional deduction of Rs. 25000 allowed for differently abled persons.
For the first time home buyers, additional deduction of Rs. 50,000 annually will be allowed under section 80EE for interest payments towards loans taken upto Rs. 35 lakhs. The value of the house should not exceed Rs. 50 lakhs. Limit on deduction on account of contribution to a pension fund and the new pension scheme increased from Rs.  1 lakh to Rs. 1.5 lakh.
Any amount withdrawn from NPS (New Pension Scheme) at the time of retirement will be exempted upto 40% of the total Withdrawal amount. Additional deduction of Rs.  50000 for contribution to the new pension scheme u/s 80CCD.
Any gains resulting from trading of securities of unlisted firms would be long term capital gains if the period of holding of such securities is 24 months or more. Earlier the holding period requirement was 36 months. Payments to the beneficiaries including interest payment on deposit in Sukanya Samriddhi scheme to be fully exempt.
Service-tax exemption on Varishtha Bima Yojana.
Conversion of existing excise duty on petrol and diesel to the extent of Rs.  4 per litre into Road Cess to fund investment.
To mitigate the problem being faced by many genuine charitable institutions, it is proposed to modify the ceiling on receipts from activities in the nature of trade, commerce or business to 20% of the total receipts from the existing ceiling of Rs.  25 lakh.

The buzzword of the town is ease of doing business and startups. Let’s see what’s in the box.

Budget 2016-17

Budget 2015-16

Automation facilities will be provided in 3 lakh fair price shops by March 2017. Penalty provision in indirect taxes are being rationalised to encourage compliance and early dispute resolution.
Amendments in Companies Act to improve enabling environment for start-ups. Wealth-tax replaced with additional surcharge of 2 per cent on super rich with a taxable income of over Rs. 1 crore annually
Price Stabilisation Fund with a corpus of Rs.  900 crore to help maintain stable prices of Pulses. Domestic transfer pricing threshold limit increased from Rs. 5 crore to Rs.  20 crore.
New manufacturing companies incorporated on or after 1.3.2016 to be given an option to be taxed at 25% + surcharge and cess provided on fulfillment of certain conditions Online central excise and service tax registration to be done in two working days.
10% rate of tax on income from worldwide exploitation of patents developed and registered in India by a resident. Time limit for taking CENVAT credit on inputs and input services increased from 6 months to 1 year.
100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019. MAT will apply in such cases. Donation made to National Fund for Control of Drug Abuse (NFCDA) to be eligible for 100% deduction u/s 80G of Income-tax Act.
Individuals and Hindu Undivided Family (HUF) setting up start-ups by deploying capital gains from sale of residential property will also get tax relief Seized cash can be adjusted towards assessees tax liability
The budget also proposed to establish a Fund of Funds to raise Rs 2,500 crore annually for four years to finance the start-ups.

Housing

Let us see the plans our government has for various classes of citizens.

Budget 2016-17

100% deduction for profits to an undertaking in housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019 and completed in three years.
Exemption from service tax on construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including PPP Schemes.
Extend excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work to Ready Mix Concrete.
100% deduction for profits to an undertaking in housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019 and completed in three years.

Infrastructure

Expenditure on infrastructure needs of the country are always centric to any budget. It is one of those factors which decides the course of various other industries.

Budget 2016-17

Budget 2015-16

Total investment in the road sector, including PMGSY allocation, would be Rs.  97,000 crore during 2016-17. National Investment and Infrastructure Fund (NIIF), to be established with an annual flow of Rs. 20,000 crores to it.
To provide calibrated marketing freedom in order to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature areas Tax free infrastructure bonds for the projects in the rail, road and irrigation sectors.
Action plan for revival of unserved and underserved airports to be drawn up in partnership with State Governments. 5 new Ultra Mega Power Projects, each of 4000 MW, in the Plug-and-Play mode.
Allocation of Rs.  55,000 crore in the Budget for Roads. Additional Rs. 15,000 crore to be raised by NHAI through bonds. Ports in public sector will be encouraged, to corporatize, and become companies under the Companies Act to attract investment and leverage the huge land resources.
Comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation to be drawn up (SETU) Self-Employment and Talent Utilization) to be established as Techno-financial, incubation and facilitation programme to support all aspects of start-up business. Rs. 1000 crore to be set aside as initial amount in NITI.

Financial Markets / Sectors

The financial markets’ importance has been increasing immensely as and when we advance on technological and global front. The closer we move to the concept of global village, the higher is the integration of financial factors world over.

Budget 2016-17

Budget 2015-16

A comprehensive Code on Resolution of Financial Firms to be introduced. Public Debt Management Agency (PDMA) bringing both external and domestic borrowings under one roof to be set up this year.
A Financial Data Management Centre to be set up Forward Markets commission to be merged with SEBI.
RBI to facilitate retail participation in Government securities Proposal to create a Task Force to establish sector-neutral financial redressal agency that will address grievance against all financial service providers.
Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to hold up to 100% stake in the ARC and permit non institutional investors to invest in Securitization Receipts India Financial Code to be introduced soon in Parliament for consideration.
Allocation of Rs.  25,000 crore towards recapitalisation of Public Sector Banks. Vision of putting in place a direct tax regime, which is internationally competitive on rates, without exemptions.
General Insurance Companies owned by the Government to be listed in the stock exchanges
Budget has also proposed great incentives for International Financial Service Centres (IFSCs) like GIFT City in Gujarat.

Agriculture, Rural and Social Sector

They have been the prime matter of concern for our Prime Minister Narendra Modi. Major  focus of this budget has been delved on these matters. The whole idea on this front is to improve the incomes of the farmers and double them by 2022 as well as create new horizons and new avenues for empowering the growth via creation and maximisation of rural demand. This is also one of the first efforts towards reducing the urban rural divide.

Budget 2016-17

Budget 2015-16

‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission mode. 28.5 lakh hectares will be brought under irrigation. Major steps take to address the two major factors critical to agricultural production, that of soil and water.
Implementation of 89 irrigation projects under AIBP, which are languishing for a long time, will be fast tracked Rs. 5,300 crore to support micro-irrigation, watershed development and the ‘Pradhan Mantri Krishi Sinchai Yojana’.
Target of Rs. 9 lakh crore of agricultural credit during the year 2016-17 Target of Rs. 8.5 lakh crore of agricultural credit during the year 2015-16
A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about Rs.  20,000 crore Rs. 25,000 crore in 2015-16 to the corpus of Rural Infrastructure Development Fund (RIDF) set up in NABARD
Programme for sustainable management of ground water resources with an estimated cost of Rs.  6,000 crore will be implemented through 3 multilateral funding Rs. 15,000 crore for Short Term RRB Refinance Fund
Unified Agricultural Marketing ePlatform to provide a common e- market platform for wholesale markets Rs. 45,000 crore for Short Term Co-operative Rural Credit Refinance Fund
Allocation under Prime Minister Fasal Bima Yojana Rs.  5,500 crore Rs. 15,000 crore for Long Term Rural Credit Fund
A sum of Rs.  38,500 crore allocated for MGNREGS. A sum of Rs.  34,700 crore allocated for MGNREGS.
100% village electrification by 1st May, 2018 Target of renewable energy capacity revised to 175000 MW till 2022, comprising 100000 MW Solar, 60000 MW Wind, 10000 MW Biomass and 5000 MW Small Hydro.
New health protection scheme will provide health cover up to Rs.  One lakh per family. For senior citizens an additional top-up package up to Rs.  30,000 will be provided. MUDRA Bank, with a corpus of Rs. 20,000 crores, and credit guarantee corpus of Rs. 3,000 crores to be created.
3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be opened during 2016-17. Postal network with 1,54,000 points of presence spread across villages to be used for increasing access of the people to the formal financial system
“Stand Up India Scheme” to facilitate at least two projects per bank branch. This will benefit at least 2.5 lakh entrepreneurs. Pradhan Mantri Suraksha Bima Yojna to cover accidental death risk of Rs. 2 Lakh for a premium of just Rs. 12 per year.
Rs.  2,000 crore allocated for initial cost of providing LPG connections to
BPL families.
Pradhan Mantri Jeevan Jyoti Bima Yojana to cover both natural and accidental death risk of Rs. 2 lakh at premium of Rs. 330 per year for the age group of 18-50.
GoI will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment. Budget provision of Rs.  1000 crore for this scheme
Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to Rs.  1,80,000 crore

Make In India

Let us have a bird’s eye view on the take of Make in India in the Budget. There are other various efforts being contributed off-budget towards this scheme.

Budget 2016-17

Budget 2015-16

Changes in customs and excise duty rates on certain inputs to reduce costs and improve competitiveness of domestic industry in sectors like Information technology hardware, capital goods, defence production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper, paperboard & newsprint, Maintenance repair and overhauling [MRO] of aircrafts and ship repair.

Additional investment allowance (@ 15%) and additional depreciation (@35%) to new manufacturing units set up during the period 01-04-2015 to 31-03-2020 in notified backward areas of Andhra Pradesh and Telangana.

Rate of Income-tax on royalty and fees for technical services reduced from 25% to 10%, to facilitate technology inflow.

Resource Mobilization

Government has taken various measures on pruning and realigning certain cesses to mobilize resources for education, rural economy and clean environment.

Budget 2016-17

Tax to be deducted at source at the rate of 1 % on purchase of luxury cars exceeding value of Rs. ten lakh and purchase of goods and services in cash exceeding Rs.  two lakh.
Securities Transaction tax in case of ‘Options’ is proposed to be increased from .017% to .05%.
Equalization levy of 6% of gross amount for payment made to non- residents exceeding Rs.  1 lakh a year in case of B2B transactions.
Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016. Proceeds would be exclusively used for financing initiatives for improvement of agriculture and welfare of farmers. Input tax credit of this cess will be available for payment of this cess.
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 13 and SUVs. No credit of this cess will be available nor credit of any other tax or duty be utilized for paying this cess.
‘Clean Energy Cess’ levied on coal, lignite and peat renamed to ‘Clean Environment Cess’ and rate increased from Rs. 200 per tonne to Rs. 400 per tonne.
Excise duties on various tobacco products other than beedi raised by about 10 to 15%.
13 cesses, levied by various Ministries in which revenue collection is less than Rs.  50 crore in a year to be abolished.

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Category Income Tax, Other Articles by - Anand Satyapanthi 



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