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.2
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 through3
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
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 Antyodaya
Mission
A sum of ` 38,500 crore allocated for MGNREGS.
300 Rurban Clusters will be developed under the Shyama Prasad4
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 Guru5
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.6
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,7
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.
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.8
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 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 emphasis 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.9
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.10
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 INDIA11
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.12
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 vehicles13
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 also14
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 for15
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.
