Arun Jaitley’s Union Budget 2016-17

New Delhi: Finance Minister Arun Jaitley on Monday(Feb 29) unveiled a Rs 19.78 lakh crore budget for 2016-17, with a focus on the rural economy and infrastructure along with a minor rebate for small taxpayers and more money for health, literacy and roads.

With upcoming Assembly elections in five states, Jaitley’s main focus was on schemes for agriculture and farmers’ welfare for which he provided a whopping Rs 35,984 crore. Another massive amount, of Rs 87,765 crore, was allocated for the rural sector while Rs 2,000 crore was earmarked to give 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 the allocation for the social sector – including for 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 spent on roads, especially ones in rural areas.

When told his third 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.

In a relief to small tax payers, the budget proposes to raise the ceiling of tax rebate under Section 87(A) to Rs 5,000 from Rs 2,000 for incomes not exceeding Rs 5 lakhs a year. There are two crore tax payers in this category who would get a relief of Rs 3,000 each in their tax liability.

Those who don’t have a house of their own and don’t get house rent allowance from employers will get a deduction of Rs 60,000 a year as against the existing Rs 24,000.
First-time home buyers will get a deduction of an additional interest of Rs 50,000 per annum for a loan of up to Rs 35 lakh, during 2016-17, provided the house value does not exceed Rs 50 lakh in value.

The budget proposes extending the presumptive taxation scheme to professionals with a gross receipt of up to Rs 50 lakh with the presumption of profit being half of the gross receipt.

Jaitley said the government will meet its fiscal targets but added that from next year, he proposed doing away with the classification of plan and non-plan expenditure.
“I have weighed the policy options and decided that prudence lies in adhering to fiscal targets. Consequently, the fiscal deficit in revised estimated 2015-16 and budget estimates 2016-17 have been retained at 3.9 percent and 3.5 percent of GDP, respectively,” he said.

Jaitley also enhanced the total expenditure for this fiscal to Rs 19.78 lakh crore from Rs 17.85 lakh crore ( in the
revised estimates for this fiscal) – a hike of 10.7 percent – while the plan expenditure component was increased 15.3
percent.

“A broad understanding over the years has been (that) plan expenditures are good and non-plan expenditures are bad. This results in skewed allocations in the budget,” he said. He added that the distinction between plan and nonplan expenditure will be removed from 2017-18 onwards to enable focussing on revenue and capital classification of expenditure.

In a nod to global investors looking for an easing of foreign equity norms, the budget stipulated that 100 percent such equity will now be permitted in multi-brand retailing where the produce sold has been processed and sourced locally. In a bid to boost entrepreneurship, a lower corporate tax rate has been proposed for small firms with a turnover of below Rs.5 crores. Such firms will be taxed at 29 per cent plus surcharge and cess, and 100 percent deduction of profits for three of five years for start-ups that will be set up between April 2016 and March 2019.

Similarly, to boost “Make in India”, changes have been proposed in customs and excise levies on some items so as to reduce costs and improve competitiveness in sectors like it hardware, capital goods, defence, textiles, minerals fuels, chemicals and petrochemicals, and aircraft and ship repair.

After pursuing black money abroad, Jaitley on Monday offered a limited period compliance window for domestic holders of unaccounted income and assets. They can now declare their undisclosed income and assets and clear past transgressions by paying tax at 30 per cent plus 7.5 percent penalty and 7.5 per cent of interest, for a total of 45 per cent.

For foreign black money holders, the total tax and penalty has been made 60 per cent for those who come clean. Domestically, 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 that declarants will have immunity from prosecution. The 7.5 per cent surcharge will be called Krishi Kalyan Surcharge and will be used for agriculture and the rural economy.

“We plan to open the window under this Income Disclosure Scheme from 1st June to 30th September, 2016 with an option to pay the amount due within two months of declaration,” Jaitley said.

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