New Delhi, Feb 01, 2017: Softening the demonetisation blow, the Budget for 2017-18 today halved the tax to 5 per cent on incomes upto Rs 5 lakh but proposed a new surcharge of 10 per cent on incomes between Rs 50 lakh and Rs 1 crore and raised duties on cigarettes and pan masala while stepping up allocations for infrastructure, rural, agriculture and social sectors.
Breaking from the past, Finance Minister Arun Jaitley presented a historic Budget in which the railway budget has been merged and the date advanced by a month, retaining the 15 per cent surcharge on taxable income above Rs 1 crore.
While the surcharge alone would net Rs 2,700 crore a year, his give away on direct tax proposals will result in a loss of Rs 15,500 crore.
The change in the personal income tax rate for individual assessees between Rs 2.5 lakh and Rs 5 lakh income would reduce the tax liability of all persons below Rs 5 lakh to either to zero (with rebate) or 50 per cent of their existing liability.
In order to have duplication of benefit, the existing benefit of rebate available to them is being reduced to Rs 2,500 available only to assessees upto income of Rs 3.5 lakh.
While the taxation liability of people with income upto Rs 5 lakh is being reduced to half, all other categories of tax payers in the subsequent slabs will also get a uniform benefit of Rs 12,500 per person.
In the case of senior citizens above 60 years, there will be no tax upto Rs 3 lakh, while the exemption will be upto Rs 5 lakh in case of citizens above 80 years. Both the categories will attract income tax of 20 per cent on income between Rs 5 lakh and Rs 10 lakh and 30 per cent for income above Rs 10 lakh.
Against the backdrop of demonetisation intended to eliminate blackmoney and introduce clean transactions, the Budget barred any transaction in cash above Rs 3 lakh. As a measure of transparency in political funding, he lowered to one-tenth the donation that political parties can accept in cash to Rs 2000 per donor.
The Finance Minister expressed confidence that the pace of remonetisation has picked up and would soon reach comfortable levels with effects not expected to spillover into the next fiscal.
In view of the fact that the proposed GST is expected to be rolled out soon, he left indirect taxes largely untouched expect for some changes in duties on tobacco products, solar panels and circuit for mobile phones.
While excise duty on pan masala has been hiked to 9 per cent from 6 per cent currently and that on unmanufactured tobacco to 8.3 per cent from 4.2 per cent, the same on filter and non-filter cigaretes of all length was also hiked.
Mobile phones will be costlier with the Budget proposing a 2 per cent special auxillary duty on import of populated printed circuit boards (PCBs).
The Finance Minister ruled out abolition of Minimum Alternate Tax (MAT) on companies but allowed them a carry foward facility for 15 years instead of 10 years to allow them MAT credit.
In a bid to boost the rural and informal sectors hurt by the note ban, the Budget raised the target for agriculture credit during the coming year to a record Rs 10 lakh crore that will ensure flow of credit to under serviced areas.
The Budget provides for Rs 9000 crore under the Crop Insurance Scheme and proposed to set up a decidcated micro-irrigation fund under NABARD with an initial corpus of Rs 5,000 crore.
The Budget provisions under rural employement guarantee scheme MGNREGA has been increased from Rs 38,500 crore in the current year to Rs 48,000 crore in 2017-18, while Rs 19,000 crore has been given under the rural roads programme.
The total allocation for rural, agriculture and allied sectors has been pegged at Rs 187,223 crore, which is 24 per cent higher than the previous year.
In a bid to boost infrastructure spending, the Minister proposed a total of Rs 1,31,000 crore towards capital and development expenditure of railways which includes Rs 55,000 crore provided by the government.
The Railways will focus on four major areas of passenger safety, capital and development work, cleanliness and finance and accounting reforms. A passenger safety fund is being created with a corpus of Rs 1 lakh crore over five years and a plan for modernisation and upgradation of identified corridors.
Railway lines of 3,500 km will be commissioned in next fiscal as against 2,800 km in the previous year. Steps will be taken to dedicated trains for tourism and pilgrimages.
In the road sector, allocation for highways has been stepped up to Rs 64,900 crore against Rs 57,976 crore in Budget Estimates of 2016-17.
For the transportation sector as a whole, including rail, road and shipping, the Budget provides for Rs 2,41,387 crore in FY18. "This magnitude of investment will spur a huge amount of economic activity across the country and create more job opportunities," Jaitley said.
As a financial sector reform, the Budget also proposed to abolish Foreign Investment Promotion Board (FIPB). Other measures to perk up the financial sector include further integration of commodities and securities derivatives market and full online process of registration of financial market intermediaries like mutual funds, brokers, portfolio managers to improve ease of doing business.
The total expenditure in the Budget has been placed at Rs 21.47 lakh crore.
Defence expenditure, excluding pensions, has been pegged Rs 274,114 crore for FY18 including Rs 86,488 crore for capital.
With the abolition of plan, non-plan expenditure, the focus will be now on capital and revenue expenditure, Jaitley said. "I have stepped up the allocation of capital expenditure by 25.4 per cent over the previous year. This will have multiplier effect and will lead to higher growth.
"The total resources being transfered to the states and the Union Territories with legislatures is Rs 4.11 lakh crore against Rs 3.60 lakh crore in Budget Estimate of 2016-17," he said.
Outlining the fiscal deficit roadmap of 3 per cent recommended by the FRBM committee, the Minister has pegged it for 2017-18 at 3.2 per cent of GDP and said he will remain committed to achieving 3 per cent in the following year.
"With this gradual approach, I have ensured adherence to fiscal consolidation, without compromising the requirements of public investment," he said.
The net market borrowing of the government has been limited at Rs 3.48 lakh crore after buyback, much lower than Rs 4.25 lakh crore in the current fiscal. "More importantly, the revenue deficit of 2.3 per cent in BE 2016-17 stands reduced to 2.1 per cent in the revised estimates. The revenue deficit for next year is pegged at 1.9 per cent, against 2 per cent mandated by the FRBM Act," he said.
As measures for stimulating growth, the Budget extended the concessional withholding rate of 5 per cent on interest earned by foreign entities in ECBs or in bonds and government securities by 3 years to June 2020. This benefit is also extended to rupee denominated masala bonds.
Jaitley reduced the peak rate of income tax for small companies with turnover of upto Rs 50 crore to 25 per cent, benefiting as many as 6.67 lakh firms out of 6.94 lakh which file returns. The concession would lead to a revenue loss of Rs 7,200 crore per annum.
"My direct tax proposals for exemption, etc. would result in revenue loss of Rs 22,700 crore but after counting for revenue gain of Rs 2,700 crore for additional resource mobalisation proposal, the net revenue loss in direct tax would come to Rs 20,000 crore. There is no significant loss or gain in my direct tax proposal," he said.
Personal Income Tax
-No tax on income up to Rs 3 lakh
-Existing rate of taxation of those with income between Rs 2.5 lakh to Rs 5 lakh reduced from 10 percent to 5 percent
-Lowering of tax rate will benefit all other income categories by up to Rs 12,500
-10 percent surcharge on people earning between Rs 50 lakh and 1 crore
-15 percent surcharge on income above Rs 1 cr will continue
-Simple one page form for tax payees up to Rs 5 lakh
-3 year period for long-term capital gains tax on immovable property reduced to 2 years
-Carpet area and not built up area to be considered for affordable housing
-Propose to amend RBI Act for issue of electoral bonds for political funding
-Maximum donation political party can receive by cash capped at Rs 2000; down from Rs 20,000
-Cheques and e-transactions for political donations above Rs 2000
-Government considering option to amend Negotiable Instruments Act to ensure that holders of -Dishonoured cheques get payment
Tax exemption for land pooling
- Profit linked deductions for start-ups reduced to 3 years out of 7 years
-National Housing Bank will refinance loans worth Rs 20,000 crore
-LNG basic custom duty halved from 5 percent
-Allocation of Rs 10,000 crore for Bharat Net project for providing high-speed broadband through optical fiber
-No transaction above Rs 3 lakhs to be permitted in cash
-A political party can receive a maximum of Rs 2000 cash donation from any one source
-Political parties can receive donation by cheque of digital payments from donors
-Electoral bond scheme to be launched- a donor a purchase bonds from banks through cheque of -epayments and can be encashed only via the official account of the parties
-Those whose land was used as land pool for development of Andhra Pradesh’s new capital have been exempted from capital gains
-Capital gains tax holding period down to 2 years from 3 years
-Not practical to remove MAT
-Tax relief for builders will unsold flats
-Income tax for companies with annual turnover of less than 50 crore reduced to 25 percent
-96 percent of India’s companies will benefited by the 5 percent reduction in the tax
-Data mining through demonetisation will help in increasing the tax net
-17% increase in tax collections
-Will make tax collection effective
-Rate of growth in advance in personal income tax in last 3 quarters is over 34.8%
-Affordable housing: the carpet area of 30 and 60 sq meteres will now be counted.
-30 sq meteres will be counted only in the municipal limits of 4 metros
-Houses which remain unoccupied one year after completion certificate will attract tax
-Changes in capital gains on sale of property
-Direct tax collection is not commensurate with income and expenditure in the country
-3.7 crore people filed returns in 2015 out of them 99 lakh show income of less than 2 lakh
-76 lakh people declared income more than 5 lakhs and out of them 56 lakh are salaried class
-Corporate returns filed very low
-Only 24 lakh individual show income over 10 lakhs
125 lakh people have adopted BHIM App
-Two new schemes will be launched to increase the reach of BHIM App
-Aadhar Pay to be launched
-Additional 10 lakh POS by March 2017
-20 lakh Aadhar POS by end of 2017
-Target of 2500 crore digital payments
-A payment regulatory board to be set up in RBI
-India of cusp of digital revolution
3% fiscal deficit roadmap recommended for the next 3 years
-Fiscal target for 2017-18 has been pegged at 3.2 percent
-Target will be 3 percent next year
-Rs 2,147,000 crore – total expenditure
-Capital expenditure increased by 25.4 percent
-Defense expenses, excluding pensions: Rs 2,74,114 crore
8 district of Haryana and Chandigarh have become kerosene free
-Head post offices will act as passport offices
-Web-based system of defense pensioners will be established
-Will merge tribunals wherever appropriate
-Big time offenders, including economic offenders, have fled the country. Government proposes new law to confiscate of assets of such offenders in the country
Rs 500 cr allocated to set up Mahila Shakti Kendras; Allocation raised from Rs 1.56 lakh cr to Rs 1.84 lakh cr for women & child welfare
-PM Kaushal Kendras will be extended to 600 districts; 100 international skill centres to be opened to help people get jobs abroad
-In higher education, we will undertake reforms in UGC, give autonomy to colleges and institutions
-The allocation for rural agri and allied sector in 2017-18 is record Rs 1,81,223 crore
-1 crore households to be brought out of poverty under Antodya Scheme
-To construct one crore houses by 2019 for homeless. PM Awas Yojana allocation raised from Rs 15,000 cr to Rs 23,000 cr
-Sanitation coverage in villages has increased from 42% in Oct 2016 to 60%, a rise of 18%
-We propose to provide safe drinking water to 28,000 arsenic and fluoride affected habitations
-Rs 27,000 cr on to be spend on PMGSY; 1 cr houses to be completed by 2017-18 for houseless
-100% electrification of villages to be completed by May 2018
-Govt to set up dairy processing fund of Rs 8,000 crore over three years with initial corpus of Rs 2,000 crore
-Our agenda for next year is to transform, energise and clean India
-World Bank expects GDP growth rate at 7.6% in FY18 and 7.8% in FY19