Financial

Key Features of Budget 2016 – 2017

INTRODUCTION

> Growth of Economy accelerated to 7.6% in 2015-16.

> India hailed as a ‘bright spot’ amidst a slowing global economy by IMF.

> Robust  growth  achieved  despite  very  unfavourable  global  conditions and two consecutive years shortfall in monsoon by 13%

> Foreign  exchange  reserves  touched  highest  ever  level  of  about  350 billion US dollars.

> Despite  increased  devolution  to  States  by  55%  as  a  result  of  the  14th Finance  Commission  award, plan  expenditure  increased  at  RE  stage  in 2015-16–in contrast to earlier years.

CHALLENGES IN 2016-17

> Risks of further global slowdown and turbulence.

> Additional    fiscal    burden    due    to    7th    Central    Pay    Commission recommendations and OROP.

ROADMAP & PRIORITIES

> ‘Transform India’  to  have  a  significant  impact  on  economy  and  lives  of people.

> Government to focus on– ensuring macro-economic stability and prudent fiscal management; boosting on domestic demand; continuing with   the   pace   of   economic   reforms   and   policy initiatives to change the lives of our people for the better.

> Focus  on  enhancing  expenditure  in  priority  areas  of-farm  and  rural sector,  social  sector, infrastructure  sector employment  generation and recapitalisation of the banks.

> Focus on Vulnerable sections through: Pradhan Mantri Fasal Bima Yojana; New  health  insurance  scheme  to  protect  against    hospitalisation expenditure; facility of cooking gas connection for BPL families

> Continue  with  the  ongoing  reform  programme  and  ensure    passage  of the Goods and Service Tax bill and Insolvency and Bankruptcy law

> Undertake important reforms by: giving a statutory backing to AADHAR platform to ensure benefits reach the deserving; freeing the transport sector from constraints and restrictions incentivising gas discovery and exploration by providing calibrated marketing freedom; enactment  of  a  comprehensive  law  to  deal  with  resolution  of financial firms; provide legal framework for dispute resolution and re-negotiations in PPP projects and public utility contracts; undertake important banking sector reforms and public listing  of general insurance companies undertake significant changes in FDI policy.

AGRICULTURE AND FARMERS’ WELFARE

>Allocation for Agriculture and Farmers’ welfare is 35,984 crore

>‘Pradhan  Mantri  Krishi  Sinchai  Yojana’  to  be  implemented  in  mission mode.   28.5 lakh hectares will be brought under irrigation.

>Implementation   of   89   irrigation   projects   under   AIBP,   which   are languishing for a long time, will be fast tracked

>A  dedicated  Long Term  Irrigation  Fund  will be created  in  NABARD  with an initial corpus of about 20,000 crore

>Programme  for  sustainable  management  of  ground  water  resources with  an  estimated  cost  of 6,000  crore  will  be  implemented  through multilateral funding

>5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA

>Soil Health Card scheme will cover all 14 crore farm holdings by March 2017.

>2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years

>Promote  organic  farming  through  Parmparagat  Krishi  Vikas  Yojana and ‘Organic Value Chain Development in North East Region’.

>Unified  Agricultural  Marketing  ePlatform  to  provide  a    common  e-market platform for wholesale markets

>Allocation  under Pradhan  Mantri  Gram  Sadak  Yojana increased  to 19,000  crore.  Will  connect  remaining  65,000  eligible  habitations  by 2019.

>To  reduce  the  burden  of  loan  repayment  on  farmers,  a  provision  of 15,000   crore   has   been   made   in   the   BE  2016-17   towards   interest subvention

>Allocation under Prime Minister Fasal Bima Yojana 5,500 crore.

>850  crore  for  four  dairying  projects-‘Pashudhan  Sanjivani’, ‘Nakul Swasthya Patra’, E-Pashudhan Haat and National Genomic Centre for indigenous breeds.

RURAL SECTOR

>Allocation for rural sector -87,765 crore.

>2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission

>Every block under drought and rural distress will be taken up as an intensive Block under the Deen Dayal Antyoday a Mission

>A sum of 38,500 crore allocated for MGNREGS.

>300   Rurban   Clusters   will   be   developed   under   the   Shyama   Prasad Mukherjee Rurban Mission

>100% village electrification by 1st May, 2018.

>District Level Committees under Chairmanship of senior most Lok Sabha MP  from  the  district  for  monitoring  and  implementation  of  designated Central Sector and Centrally Sponsored Schemes.

>Priority  allocation  from  Centrally  Sponsored  Schemes  to  be  made  to reward villages that have become free from open defecation.

>A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional household within the next 3 years.

>National Land Record Modernisation Programme has been revamped.

>New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of 655 crore.

SOCIAL SECTOR INCLUDING HEALTH CARE

>Allocation   for   social   sector   including   education   and   health   care – 1,51,581 crore.

>2,000  crore  allocated  for  initial  cost  of  providing  LPG  connections  to BPL families.

>New  health  protection  scheme  will  provide  health  cover  up  to One lakh per family.  For senior citizens an additional top up package up to 30,000 will be provided.

>3,000   Stores   under   Prime   Minister’s jan   Aushadhi Yojana   will   be opened during 2016-17.

>‘National  Dialysis  Services  Programme’  to  be  started  under  National Health Mission through PPP mode

>“Stand  Up  India  Scheme”  to  facilitate  at  least  two  projects  per  bank branch.  This will benefit at least 2.5 lakh entrepreneurs.

>National  Scheduled  Caste and  Scheduled  Tribe  Hub  to  be  set  up  in partnership with industry associations

>Allocation  of 100  crore  each  for  celebrating  the  Birth  Centenary  of Pandit  Deen  Dayal  Upadhyay  and  the  350th Birth  Anniversary  of  Guru Gobind Singh.
EDUCATION, SKILLS AND JOB CREATION

>62 new Navodaya Vidyalayas will be opened

>Sarva Shiksha Abhiyan to increasing focus on quality of education

>Regulatory  architecture  to  be  provided  to  ten  public  and  ten  private institutions to emerge as world-class Teaching and Research Institutions

>Higher Education Financing Agency to be set-up with initial capital base of 1000 Crores

>Digital  Depository  for  School  Leaving  Certificates,  College  Degrees, Academic Awards and Mark sheets to be set-up.

SKILL DEVELOPMENT

>Allocation for skill development–1804. crore.

>1500 Multi Skill Training Institutes to be set-up.

>National  Board  for  Skill  Development  Certification  to  be  setup    in partnership with the industry and academia

>Entrepreneurship Education and Training through Massive Open Online Courses.

JOB CREATION

>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 1000 crore for this scheme.

>Deduction under Section 80JJAA of the Income Tax Act will be available to all assesses who are subject to statutory audit under the Act

>100  Model  Career  Centres  to  operational  by  the  end  of  2016-17  under National Career Service.

>Model Shops and Establishments Bill to be circulated to States.

INFRASTRUCTURE AND INVESTMENT

>Total investment in the road sector, including PMGSY allocation, would be 97,000 crore during 2016-17.

>India’s highest ever kilometres of new highways were awarded in 2015. To approve nearly 10,000 kms of National Highways in 2016-17.

>Allocation  of 55,000  crore  in  the  Budget  for  Roads.  Additional 15,000 crore to be raised by NHAI through bonds.

>Total outlay for infrastructure 2,21,246 crore.

>Amendments  to  be  made  in  Motor  Vehicles  Act  to  open  up the  road transport sector in the passenger segment

>Action  plan  for  revival  of  unserved  and  underserved  airports  to  be drawn up in partnership with State Governments.

>To  provide  calibrated  marketing  freedom  in  order  to  incentivise  gas production  from  deep-water,  ultra  deep-water  and  high  pressure-high temperature areas

>Comprehensive  plan,  spanning  next  15  to  20  years,  to  augment  the investment in nuclear power generation to be drawn up.

>Steps to re-vitalise PPPs: Public Utility (Resolution of Disputes) Bill will be introduced during 2016-17; Guidelines for renegotiation of PPP Concession Agreements will be issued; New   credit   rating   system   for   infrastructure   projects   to   be introduced

>Reforms  in  FDI  policy  in  the  areas  of  Insurance  and  Pension,  Asset Reconstruction Companies, Stock Exchanges.

>100%  FDI  to  be  allowed  through  FIPB  route  in  marketing  of  food products produced and manufactured in India.

>A  new  policy  for  management  of  Government  investment  in  Public Sector    Enterprises, including disinvestment and strategic    sale, approved.

FINANCIAL SECTOR REFORMS

>A   comprehensive   Code   on   Resolution   of   Financial   Firms   to   be introduced.

>Statutory basis for a Monetary Policy framework and a Monetary Policy Committee through the Finance Bill 2016.

>A Financial Data Management Centre to be set up.

>RBI to facilitate retail participation in Government securities.

>New  derivative  products  will  be  developed  by  SEBI  in  the  Commodity Derivatives market.

>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.

>Comprehensive   Central   Legislation   to   be   bought   to   deal   with   the menace of illicit deposit taking schemes.

>Increasing members and benches of the Securities Appellate Tribunal.

>Allocation  of 25,000  crore  towards  recapitalisation  of  Public  Sector Banks.

>Target  of  amount  sanctioned  under Pradhan  Mantri  Mudra  Yojana increased to 1,80,000 crore.

>General Insurance Companies owned by the Government to be listed in the stock exchanges.

budget at glance

rupee goes to rupee comes from
GOVERNANCE AND EASE OF DOING BUSINESS

>A   Task   Force   has   been   constituted   for   rationalisation   of   human resources in various Ministries.

>Comprehensive review and rationalisation of Autonomous Bodies.

>Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhar framework to be introduced.

>Introduce DBT on pilot basis for fertilizer.

>Automation  facilities  will  be  provided  in  3  lakh  fair  price  shops  by March 2017.

>Amendments  in  Companies  Act  to  improve  enabling  environment  for start-ups.

>Price  Stabilisation  Fund  with  a  corpus  of 900  crore  to  help  maintain stable prices of Pulses.

>“Ek  Bharat  Shreshtha  Bharat” programme  will  be  launched  to  link States  and  Districts  in  an  annual  programme  that  connects  people through  exchanges  in  areas  of  language,  trade,  culture,  travel  and tourism.

FISCAL DISCIPLINE

>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

>Total expenditure projected at 19.78 lakh crore

>Plan  expenditure  pegged  at 5.50  lakh  crore  under  Plan,  increase  of 15.3%

>Non-Plan expenditure kept at 14.28 lakh crores

>Special emhasis to sectors such as agriculture, irrigation, social sector including health, women and child development, welfare of Scheduled Castes and Scheduled Tribes, minorities, infrastructure.

>Mobilisation  of  additional  finances  to  the  extent  of 31,300  crore  by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising Bonds.

>Plan / Non-Plan classification to be done away with from 2017-18.

>Every  new  scheme  sanctioned  will  have  a  sunset  date  and  outcome review.

>Rationalised  and  restructured  more  than  1500  Central  Plan  Schemes into about 300 Central Sector and 30 Centrally Sponsored Schemes.

>Committee to review the implementation of the FRBM Act.
RELIEF TO SMALL TAX PAYERS

>Raise  the  ceiling  of  tax  rebate  under  section  87A  from 2000  to 5000 to lessen tax burden on individuals with income upto 5 laks.

>Increase  the  limit  of  deduction  of  rent  paid  under  section  80GG  from 24000  per  annum  to 60000,  to  provide  relief  to  those  who  live  in rented houses.

BOOST EMPLOYMENT AND GROWTH

>Increase  the  turnover  limit  under  Presumptive  taxation  scheme  under section 44AD of the Income Tax Act to 2 crores to bring big relief to a large number of assessees in the MSME category.

>Extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to 50 lakh.

>Phasing out deduction under Income Tax: Accelerated   depreciation   wherever   provided   in   IT   Act   will   be limited to maximum 40% from 1.4.2017; Benefit of  deductions  for  Research  would  be  limited  to  150%  from 1.4.2017 and 100% from 1.4.2020; Benefit  of section 10AA  to  new  SEZ  units  will be  available  to  those units which commence activity before 31.3.2020; The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020

>Corporate Tax rate proposals: New  manufacturing  companies  incorporated  on  or  after  1.3.2016 to  be  given  an  option  to  be    taxed  at  25%  +  surcharge  and  cess provided  they  do  not  claim  profit  linked  or  investment  linked deductions   and   do   not   avail   of   investment   allowance   and accelerated depreciation; Lower   the   corporate   tax   rate   for   the   next   financial   year for relatively   small   enterprises   i.e   companies   with   turnover   not exceeding 5  crore  (in the  financial  year  ending    March  2015),  to 29% plus surcharge and cess.

>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.

>10%  rate  of  tax  on  income  from  worldwide  exploitation  of  patents developed and registered in India by a resident.

>Complete  pass  through  of  income-tax  to  securitization  trusts  including trusts of ARCs.  Securitisation trusts required to deduct tax at source.

>Period  for  getting  benefit  of  long  term  capital  gain  regime  in  case  of unlisted companies is proposed to be reduced from three to two years.

>Non-banking  financial  companies  shall  be  eligible  for  deduction  to  the extent of 5% of its income in respect of provision for bad and doubtful debts.

>Determination of residency of foreign company on the basis of Place of Effective Management (POEM) is proposed to be deferred by one year.

>Commitment  to  implement  General  Anti  Avoidance  Rules  (GAAR)  from 1.4.2017.

>Exemption   of   service   tax   on   services   provided   under   Deen   Dayal Upadhyay   Grameen   Kaushalya   Yojana   and   services   provided   by Assessing   Bodies   empanelled   by   Ministry   of   Skill   Development   & Entrepreneurship.

>Exemption  of  Service  tax  on  general  insurance services  provided  under ‘Niramaya’ Health Insurance Scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability.

>Basic custom and excise duty on refrigerated containers reduced to 5% and 6%.

MAKE IN INDIA

>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.

MOVING TOWARDS A PENSIONED SOCIETY

>Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt  in  the  case  of  National  Pension  Scheme  (NPS). Annuity  fund which goes to legal heir will not be taxable.

>In   case   of   superannuation   funds   and   recognized   provident   funds, including EPF, the same norm of 40% of corpus to be tax free will apply in  respect  of  corpus  created  out  of  contributions  made on  or  from 1.4.2016.

>Limit   for   contribution   of   employer   in   recognized   Provident   and Superannuation  Fund  of 1.5  lakh  per  annum  for  taking tax benefit.Exemption  from  service  tax  for  Annuity  services  provided  by  NPS  and Services provided by EPFO to employees.

>Reduce service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid in certain cases.

PROMOTING AFFORDABLE HOUSING

>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. MAT to apply.

>Deduction for additional interest of 50,000 per annum for loans up to 35  lakh  sanctioned  in  2016-17 for  first  time  home  buyers, where house cost does not exceed 50 lakh.

>Distribution made out of income of SPV to the REITs and INVITs having specified  shareholding  will  not  be  subjected  to  Dividend  Distribution Tax, in respect of dividend distributed after the specified date.

>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.

RESOURCE   MOBILIZATION   FOR   AGRICULTURE,   RURAL   ECONOMY   AND CLEAN ENVIRONMENT

>Additional  tax  at  the  rate  of  10%  of  gross  amount  of  dividend  will  be payable  by   the  recipients  receiving dividend  in  excess of 10  lakh per annum.

>Surcharge  to  be  raised  from  12%  to  15%  on  persons,  other  than companies,  firms  and  cooperative  societies  having  income  above 1 crore.

>Tax to  be  deducted at  source  at  the  rate  of  1  %  on  purchase  of  luxury cars exceeding value of ten lakh and purchase of goods and services in cash exceeding 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 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 and SUVs.

>No credit of this cess will be available nor credit of any other tax or duty be utilized for paying this cess.

>Excise  duty  of  ‘1%  without  input  tax  credit  or  12.5%  with  input  tax credit’  on  articles  of  jewellery  [excluding  silver  jewellery,  other  than studded with diamonds and some other precious stones], with a higher exemption   and   eligibility   limits   of 6   crores   and 12   crores respectively.

>Excise  on  readymade  garments  with  retail  price  of 1000  or  more raised to 2% without input tax credit or 12.5% with input tax credit.

>‘Clean  Energy  Cess’  levied  on  coal,  lignite  and  peat  renamed  to  ‘Clean Environment Cess’ and rate increased from 200 per tonne to 400 per tonne.

>Excise  duties  on  various  tobacco  products  other  than  beedi  raised  by about 10 to 15%.

>Assignment  of  right  to  use  the  spectrum  and  its  transfers has  been deducted  as a  service  leviable  to  service  tax  and  not  sale  of  intangible goods.

PROVIDING CERTAINITY IN TAXATION

>Committed  to  providing  a  stable  and predictable  taxation  regime  and reduce black money.

>Domestic  taxpayers  can  declare  undisclosed  income  or such income represented  in  the  form  of  any  asset  by  paying  tax  at  30%,  and surcharge  at  7.5%  and  penalty  at  7.5%,  which  is  a  total  of  45%  of  the undisclosed income. Declarants will have immunity from prosecution.

>Surcharge  levied  at  7.5%  of  undisclosed  income  will  be  called  Krishi Kalyan surcharge to be used for agriculture and rural economy.

>New   Dispute   Resolution   Scheme   to   be   introduced.   No   penalty   in respect of cases with disputed tax up to 10 lakh. Cases with disputed tax exceeding 10 lakh to be subjected to 25% of the minimum of the imposable penalty.  Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty and tax interest on quantum addition.

>High  Level  Committee  chaired  by  Revenue  Secretary  to  oversee  fresh cases where assessing officer applies the retrospective amendment.

>One-time   scheme   of   Dispute   Resolution   for   ongoing   cases   under retrospective amendment.

>Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.

>Disallowance  will  be  limited  to  1%  of  the  average  monthly  value  of investments  yielding  exempt  income,  but not  exceeding  the  actual expenditure claimed under rule 8D of Section 14A of Income Tax Act.

>Time  limit  of  one  year  for  disposing  petitions  of  the tax  payers seeking waiver of interest and penalty.

>Mandatory  for  the  assessing  officer  to  grant  stay  of  demand  once  the assesse pays 15% of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals).

>Monetary  limit  for  deciding  an  appeal  by  a  single  member  Bench  of ITAT enhanced from 15 lakhs to 50 lakhs.

>11  new  benches  of  Customs,  Excise  and  Service  Tax  Appellate  Tribunal(CESTAT).

SIMPLIFICATION AND RATIONALIZATION OF TAXES

>13  cesses,  levied  by  various  Ministries  in  which  revenue  collection  is less than 50 crore in a year to be abolished.

>For  non-residents  providing  alternative documents  to  PAN  card,  higher TDS not to apply.

>Revision of return extended to Central Excise assesses.

>Additional options  to  banking  companies  and  financial  institutions, including  NBFCs,  for  reversal  of  input  tax  credits  with  respect  to  non-taxable services.

>Customs  Act  to  provide  for  deferred  payment  of  customs  duties  for importers and exporters with proven track record.

>Customs Single Window Project to be implemented at major ports and airports starting from beginning of next financial year.

>Increase  in  free  baggage  allowance  for  international  passengers.  Filing of baggage only for those carrying dutiable goods.

TECHNOLOGY FOR ACCOUNTABILITY

>Expansion  in  the  scope  of  e-assessments  to  all  assessees in  7  mega cities in the coming years.

>Interest at the rate of 9% p.a against normal rate of 6% p.a for delay in giving effect to Appellate order beyond ninety days.

>‘e-Sahyog’  to  be  expanded  to  reduce  compliance  cost,  especially  for small taxpayers.

(188) Views

Facebooktwitterredditpinterest

Leave a Reply

Your email address will not be published. Required fields are marked *

*