Union Budget 2016-17
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The Union Budget for 2016-17 has been announced by Mr Arun Jaitley, Union Minister for Finance, Government of India, in Parliament on February 29, 2016
Highlights of Union Budget 2016-17
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Overview of the Economy and fiscal deficit
- Economic growth has accelerated to 7.6 per cent in 2015-16.
- India hailed as a ‘bright spot’ amidst a slowing global economy by IMF
- CPI inflation has come down to 5.4 per cent.
- Current Account deficit projected to be 1.4 per cent of Gross Domestic Product (GDP) at the end of this fiscal year.
- Foreign exchange reserves touched highest ever level of about US$ 350 billion.
- Government has retained the fiscal deficit target for 2015-16 and 2016-17 at 3.9 per cent and 3.5 per cent of GDP respectively.
- Revenue Deficit target from 2.8 per cent to 2.5 per cent in RE 2015-16.
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Budget Estimates 2016-17
- Total receipts (excluding Borrowings and other liabilities) estimated at Rs 14.44 lakh crore (US$ 211 billion), a growth of 15.5 per cent.
- Gross revenue receipts estimated at Rs 13.77 lakh crore (US$ 201 billion) which comprise of Rs 10.54 lakh crore (US$ 154 billion) of tax revenues and Rs 3.22 lakh crore (US$ 47 billion) of non-tax revenues.
- Total expenditure estimated at Rs 19.78 lakh crore (US$ 289 billion), an increase of 10.8 per cent over previous year.
- Non-plan expenditure estimated to increase by 9.1 per cent to reach Rs 14.28 lakh crore (US$ 208.6 billion).
- Plan expenditure pegged at Rs 5.50 lakh crore (US$ 80.3 billion), 15.3 per cent increase over previous year.
- Plan / Non-Plan classification to be done away with from 2017-18. Every new scheme sanctioned to have a sunset date and an outcome review.
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Financial Performance 2015-16
Receipts
- Total receipts (excluding Borrowings and other liabilities) stood at Rs 12.50 lakh crore (US$ 182.6 billion) in Revised Estimates (RE), which is more than the Budgeted Estimates (BE) of Rs 12.21 lakh crore (US$ 178.3 billion) by Rs 28,473 crore (US$ 4.16 billion).
- Gross revenue receipts were Rs 12.06 lakh crore (US$ 176 billion) in RE, which were higher than BE by Rs 64,509 crore (US$ 9.42 billion) owing to 16.6 per cent increase of Non-tax revenues in RE.
- Tax revenues stood at Rs 9.47 lakh crore (US$ 138.3 billion) in RE, which were more than the BE of Rs 9.19 lakh crore (US$ 134.2 billion) by Rs 27,666 crore (US$ 4.04 billion).
- There was an substantial increase of 23.6 per cent in collection of Union Excise Duties which stood at Rs 2.84 lakh crore (US$ 41.5 billion) in RE, an increase of Rs 54,334 crore (US$ 8 billion) over the BE of Rs 2.29 lakh crore (US$ 33.5 billion).
Expenditure
- Total expenditure was Rs 17.85 lakh crore (US$ 260.7 billion) in RE, which exceeded the BE of Rs 17.77 lakh crore (US$ 259.6 billion) by Rs 7,914 crore (US$ 1.16 billion).
- Non-plan expenditure in RE was in line with BE. However, Plan expenditure exceeded the BE by Rs 11,920 crore (US$ 1.74 billion), to be revised to Rs 4.77 lakh crore (US$ 69.7 billion), an increase of 2.6 per cent.
- Expense on Defence sector was lower by 9 per cent or Rs 22,091 crore (US$ 3.22 billion) in RE, while that on Subsidies and Pensions was higher by 5.7 per cent and 8.1 per cent respectively.
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Agriculture and farmers welfare- Allocation: Rs 35,984 crore (US$ 5.25 billion)
- ‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission mode. 2.85 million hectares will be brought under irrigation.
- A dedicated Long Term Irrigation Fund will be created in National Bank for Agriculture and Rural Development (NABARD) with an initial corpus of about Rs 20,000 crore (US$ 2.9 billion).
- Programme for sustainable management of ground water resources with an estimated cost of Rs 6,000 crore (US$ 877 million) will be implemented through multilateral funding.
- Allocation under Pradhan Mantri Gram Sadak Yojana (PMGSY) increased to Rs 19,000 crore (US$ 2.7 billion).
- A provision of Rs 15,000 crore (US$ 2.2 billion) has been made towards interest subvention to reduce the burden of loan repayment on farmers.
- Allocation under Prime Minister Fasal Bima Yojana is Rs 5,500 crore (US$ 802 million).
- The budget allocated Rs 850 crore (US$ 124.2 million) for four dairy projects.
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Rural sector- Allocation: Rs 87,756 crore (US$ 12.8 billion)
- Rs 287,000 crore (US$ 41.9) will be given as Grant-in-Aid to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission.
- A sum of Rs 38,500 crore (US$ 5.6 billion) allocated for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
- 300 Rurban Clusters will be developed under the Shyama Prasad Mukherjee Rurban Mission.
- A 100 per cent village electrification target set by May 01, 2018.
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Social sector including healthcare- Allocation: Rs 151,581 crore (US$ 22.04 billion)
- Rs 2,000 crore (US$ 293 million) allocated for initial cost of providing LPG connections to below poverty line (BPL) families.
- New health protection scheme will provide health cover up to Rs 1 lakh (US$ 1,454) per family. For senior citizens an additional top-up package up to Rs 30,000 (US$ 436) will be provided.
- 3,000 stores under Prime Minister’s Jan Aushadhi Yojana to be opened during 2016-17.
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Education, skills and job creation
- 62 new Navodaya Vidyalayas will be opened.
- Sarva Shiksha Abhiyan to increasing focus on quality of education
- Higher Education Financing Agency to be set-up with initial capital base of Rs 1,000 crore (US$ 145).
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Skill development- Allocation: Rs 1,804 crore (US$ 263 million)
- 500 Multi Skill Training Institutes to be setup.
- 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.
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Job Creation
- Government of India will pay contribution of 8.33 per cent for of all new employees enrolling in Employees' Provident Fund Organisation (EPFO) for the first three years of their employment. Budget provision of Rs 1,000 crore (US$ 146 million) for this scheme.
- Deduction under Section 80JJAAof 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.
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Infrastructure and investment- Allocation: Rs 221,246 crore (US$ 32.3 billion)
- Total investment in the road sector would be Rs 97,000 crore (US$ 14.1 billion) during 2016-17.
- To approve nearly 10,000 kms of National Highways in 2016-17.
- Reforms in foreign direct investment (FDI) policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.
- 100 per cent FDI to be allowed through Foreign Investment Promotion Board (FIPB) route in marketing of food products produced and manufactured in India.
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Financial sector reforms
- A comprehensive code on resolution of financial firms to be introduced.
- Amendments in the SARFAESI Act 2002 to enable the sponsor of an asset reconstruction company (ARC) to hold up to 100 per cent stake in the ARC and permit non institutional investors to invest in securitisation receipts.
- Allocation of Rs 25,000 crore (US$ 3.6 billion) towards recapitalisation of public sector banks.
- Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to Rs 180,000 crore (US$ 26.3 billion).
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Governance and ease of doing business
- A task force has been constituted for rationalisation of human resources in various Ministries.
- Amendments in Companies Act to improve enabling environment for start-ups.
- Price Stabilisation Fund with a corpus of Rs 900 crore (US$ 131.5 million) 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.
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Relief to small tax payers
- Ceiling of tax rebate under section 87A to be raised from Rs 2,000 (US$ 29.2) to Rs 5,000 (US$ 73) to lessen tax burden on individuals with income up to Rs 5 lakhs (US$ 7,270).
- Limit of deduction of rent paid under section 80GG to be increased from Rs 24,000 (US$ 350.8) per annum to Rs 60,000 (US$ 876.6), to provide relief to those who live in rented houses.
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Boost employment and growth
- Increase the turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act to Rs 2 crore (US$ 0.3 million) to boost the MSME sector.
- Extend the presumptive taxation scheme with profit deemed to be 50 per cent to professionals with gross receipts up to 50 lakh (US$ .015 million).
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Phasing out deduction under Income Tax
- Accelerated depreciation limited to maximum 40 per cent from April 01, 2017.
- Benefit of deductions for Research would be limited to 150 per cent from April 01, 2017 and 100 per cent from April 01, 2020.
- Benefit of section 10AA to new Special Economic Zone (SEZ) units will be available to those units which commence activity before March 31, 2020.
- Weighted deduction under section 35CCD for skill development will continue up to April 01, 2020.
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Corporate Tax rate proposals
- Manufacturing companies incorporated on or after March 01, 2016 to be given an option to be taxed at 25 per cent plus surcharge and cess if 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 companies with turnover not exceeding Rs 5 crore (US$ 0.73 million), in the financial year ending March 2015, to 29 per cent plus surcharge and cess.
- One hundred per cent deduction of profits for 3 out of 5 years for start-ups setup during April, 2016 to March, 2019.
- 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.
- Commitment to implement General Anti Avoidance Rules (GAAR) from April 01, 2017.
- Exemption of service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana.
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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.
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Moving towards a pensioned society
- Withdrawal up to 40 per cent of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme (NPS) and in case of superannuation funds and recognised provident funds, including EPF it will apply to corpus created out of contributions made on or from 1st April, 2016.
- Annuity fund which goes to legal heir will not be taxable.
- Contribution of employer in recognised Provident and Superannuation Fund to be limited to Rs 1.5 lakh (US$ 2,192) per annum for taking tax benefit.
- Service tax on Single premium Annuity (Insurance) Policies to be reduced from 3.5 per cent to 1.4 per cent of the premium paid in certain cases.
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Promoting affordable housing
- 100 per cent deduction for profits to an undertaking in housing project for flats upto 30 square metres in four metro cities and 60 square metres in other cities, approved during June 2016 to March 2019 and completed in three years. Minimum Alternate Tax (MAT) to apply.
- Deduction for additional interest of Rs 50,000 (US$ 730) per annum for loans up to Rs 35 lakh (US$ 51,158) sanctioned in FY 2016-17 for first time home buyers, where house cost does not exceed Rs 50 lakh (US$ 73,082).
- Extend excise duty exemption, presently available to concrete mix manufactured at site for use in construction work to ready mix concrete.
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Resource mobilisation for agriculture, rural economy and clean environment
- Additional tax at the rate of 10 per cent of gross amount of dividend will be payable by the recipients receiving dividend in excess of Rs 10 lakh (US$ 14,616) per annum.
- Surcharge to be raised from 12 per cent to 15 per cent on persons, other than companies, firms and cooperative societies having income above Rs 1 crore (US$ 0.015).
- Tax to be deducted at source at the rate of 1 per cent on purchase of luxury cars exceeding value of Rs 10 lakh (US$ 14,616) and purchase of goods and services in cash exceeding Rs 2 lakh (US$ 2,923)
- Securities Transaction Tax (STT) in case of ‘Options’ is proposed to be increased from 0.017 per cent to 0.05 per cent.
- Excise duties on various tobacco products other than beedi raised by about 10-15 per cent.
- Assignment of right to use the spectrum and its transfer has been deducted as a service leviable to service tax and not sale of intangible goods.
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Providing certainty 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 per cent, and surcharge at 7.5 per cent and penalty at 7.5 per cent, which is a total of 45 per cent of the undisclosed income and they will have immunity from prosecution.
- New Dispute Resolution Scheme to be introduced. No penalty in respect of cases with disputed tax up to Rs 10 lakh (US$ 14,616). Cases with disputed tax exceeding Rs 10 lakh (US$ 14,616) to be subjected to 25 per cent of the minimum of the imposable penalty.
- Penalty rates to be 50 per cent of tax in case of underreporting of income and 200 per cent of tax where there is misreporting of facts.
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Simplification and rationalisation of taxes
- 13 cesses, levied by various ministries in which revenue collection is less than Rs 50 crore in a year to be abolished
- 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.
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Technology for accountability
- Expansion in the scope of e-assessments to all assesses in seven megacities in the coming years.
- Interest at the rate of 9 per cent per annum against normal rate of 6 per cent per annum for delay in giving effect to Appellate order beyond 90 days.
- ‘e-Sahyog’ to be expanded to reduce compliance cost, especially for small taxpayers.
Roadmap and Priorities
- 'Transform India' to have a significant impact on economy and lives of people.
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Focus on Vulnerable sections through:
- Pradhan Mantri Fasal Bima Yojana (PMFBY)
- New health insurance scheme to protect against hospitalisation expenditure
- Facility of cooking gas connection for Below Poverty Line (BPL) families
- Continue with the ongoing reform programme and ensure passage of the Goods and Service Tax bill and Insolvency and Bankruptcy law
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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
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