Finance Minister Arun Jaitley tabled the highly awaited Annual Budget in Lok Sabha on Tuesday.

This year’s budget has surfaced amongst exceedingly volatile times and a month prior than the scheduled date. Interestingly it has been merged with the Railway Budget. Anticipations and speculations for this year’s budget had been at an all time high because of a turbulent atmosphere created by national and global level macro risks. These included a series of protectionist trade policies by leading G20 nations, faltering global growth projections, disruptions to investor sentiment by the Brexit and the Italian banking crisis. At the local level,disturbances on account of demonetisation and uncertainties pertaining to GST created an unfavourable sentiment in the economy.  In response to these challenges, the FM has displayed a consistent commitment to ensure financial discipline and start the financial year with a positive sentiment.

Following is a quick glimpse of the important announcements made by the Finance Minister:

 

  1. For Taxpayers:

 POSITIVES:

a. Tax rates for the slab Rs.2.5 – 5 lakh reduced to 5% from 10%. This would reduce their tax liability to either 0 (with rebate) or to roughly 50% of the present liability.

b. Increase in deduction available in case of a self employed subscriber of National Pension System (NPS) from 10% of gross total income to 20%.

c. Tax payers in slabs beyond Rs.5 Lakh to get a uniform benefit of Rs.12500 per person.

 

NEGATIVES:

a. The existing rebate to taxpayers in the Rs.2.5 – 5 lakh bracket reduced to Rs.2500 from Rs.5000.

b. Surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs.50 lakh to Rs. 1 crore.

c. Withdrawal of upto 25 % of the corpus prior to retirement to be tax exempt in case of NPS. This is down from 40% as per last year’s limit.

 

 

  1. For Investors:

POSITIVES:

a. Foreign Investment Promotion Board (FIPB) to be done away with in 2017-18 and further liberalisation of FDI policy is underway.

b. A new ETF with diversified CPSE (Central Public Sector Undertaking) stocks and other Government holdings will be launched in 2017-18.

c. In consistency with the Indradhanush roadmap, Rs.10000 crores outlay to be approved for recapitalisation of banks.

d. The base year for calculation of Capital Gains Tax to be shifted from 1981 to 2001. Thus, capital gains value for the purpose of computation of tax liability may come down.

 

NEGATIVES:

a. Exemption under section 10(38) for income arising on transfer of equity shares shall be available if acquisition of shares is chargeable to STT ( Securities Transaction Tax) and acquired on or after October 1,2004. Previously this was applicable on acquisition made on or after October 1, 2014.

b. LTCG ( Long Term Capital Gains) tax rates and STT tax rates remain untouched.

 

 

  1. For Consumers:

POSITIVES: Following is a list of things that will turn cheaper on account of a cut in duties-

a. Booking Railway tickets online.

b. LNG and solar tempered glass in solar panels.

c. Fuel Cell and Wind operated power generating systems.

d. POS machine card and fingerprint readers.

 

NEGATIVES: Following is a list of things that will turn costlier on account of increase in duties-

a. Cigarettes, pan masala, cigar, cheroots, bidis and chewing tobacco.

b. LED lamp components.

c. Aluminium ores and concentrates.

d. Polymer coated MS tapes used in manufacturing of optical fibres.

e. Silver coins and medallions.

 

 

  1. For Businesses:

 POSITIVES:

a. 100% deduction of profits for 3 out of 7 years for startups set up after March 31, 2016. MAT will apply in such cases.

b. Increase in threshold limit for audit of business firms who opt presumptive income scheme from Rs.1 crore to Rs.2 crore. Similarly, the threshold for maintenance of books for individuals and HUF is being increased from turnover of Rs.10 Lakh to Rs.25 lakh.

c. Corporate tax to be reduced to 25% for companies with revenues of less than Rs.50 crores.’

d. MAT ( Minimum Alternate Tax) on special economic zones to be carried forward for 15 years from 10 years.

 

NEGATIVES:

a. Corporate tax rates for companies  with revenues over Rs.50 crores left untouched.

b. No weighted deduction on R & D and skill development expenses for IT companies.

 

 

  1. Fiscal Management:

 aStepped up allocation for capital expenditure by 25.4% over the previous year.

b. Total Resources being transferred to the states and union territories with legislatures is Rs.4.11 lakh crores against Rs. 3.60 lakh crores in 2016-17.

c. Revenue Deficit of 2.3% in 2016-17 stands reduced to 2.1% in the revised estimates. The revenue deficit for next year is pegged at 1.9% against 2% mandated by the FRBM act.

d. Fiscal Deficit for 2017-18 is targeted at 3.2% of GDP and 3% in the next year.

 

  1. Farmers:

a. Coverage under Fasal Bima Yojana scheme will be increased from 30% of cropped area in 2016-17 to 40% in 2017-18 and 50% in 2018-19.

b. New mini labs in Krishi Vigyan Kendras (KVKs) and 100% coverage of all KVKs for soil sample testing.

c. Funds to the tune of Rs. 20,000 crores allocated for irrigation under NABARD.

d. Dairy Processing and Infrastructure Development Fund to be set up in NABARD with a corpus of  Rs. 2000 crores.

 

  1. Rural Population:

a. MGNREGA allocation highest ever at Rs. 48,000 crores in 2017-18.

b. Allocation for Pradhan Mantri Awaas Yojana – Gramin increased from Rs. 15,000 crores in 2016-17 to Rs. 23,000 crores in 2017-18.

c. Allocation for Prime Minister’s Employment Generation Program and
Credit Support Schemes has been increased three fold.

 

  1. Youth:

a. SWAYAM platform, to be launched with at least 350 online courses.

b. Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) to be launched at a cost of Rs. 4000 crores.

c. Next phase of Skill Strengthening for Industrial Value Enhancement (STRIVE) will also be launched in 2017-18 at a cost of Rs. 2,200 crores.

  1. Infrastructure:

a. The total capital and development expenditure of Railways has been pegged at  Rs. 1,31,000 crores.

b. Rashtriya Rail Sanraksha Kosh will be created with a corpus of  Rs. 1 lakh crores over 5 years.

c. Budget allocation for highways increased from Rs. 57,976 crores in 2016-17 to Rs. 64,900 crores in 2017-18.

d. Second phase of Solar Park development to be taken up for additional 20,000 MW capacity.
e. By 2019, all coaches of Indian Railways will be fitted with bio toilets.

 

  1. Digital Economy & Transparent Electoral Funding:

a. Cash transactions to be limited to Rs. 3,00,000 and cash holding capped at RS. 15,00,000.

b. Maximum amount of cash donation, a political party can receive, will be Rs. 2000/- from one person.

c. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act .

 

All in all the budget has been very well balanced and offers sustainable provisions for long term growth of manufacturing and skill development. Amidst demonetisation, the push towards digitisation of the economy has been well incorporated.