BUDGET 2016

 

Finance Minister Arun Jaitley came out with the most awaited Budget Proposal in Lok Sabha on Monday.Budget 2016 comes at an interesting juncture. These are turbulent times where at one side the US, Europe, Japan are witnessing low growth and China is struggling with debt and slow down. On the other side, in the face of these challenges the Finance Minister has done a commendable juggling act and taken a number of key steps to keep the fiscal mood upbeat. Here’s a quick glimpse of what the Budget entails ,we list the important announcements made by the Finance Minister :

1)FOR TAXPAYERS :

Positives :  1) Withdrawal of up to 40% of the corpus at the time of retirement to be tax exempt in case of National Pension Scheme(NPS).

2)Limit of deduction on rent paid, where employer does not avail of HRA, increased to Rs 60,000 per year from Rs 24,000.

3)Section 87A raises tax rebate to Rs 5000 from Rs 2000 on Income less than Rs 5 lakh/ year.

Negatives:  1) Surcharge on Annual Income of over Rs1 crore increased to 15% from 12%.

2)60% of new Provident Fund(PF) contributions from April 1 will be taxed on withdrawal. is set to face strong resistance.

3) Exemption to employer’s contribution to recognized Provident funds limited to Rs 1.5 lakhs. the cap was up to 12% of salary.

EXAMPLE:  Individuals A’s Annual Income = Rs 4.5 lakhs  Current Tax = Rs 3090  Tax after Budget = NIL Individual B’s Annual Income = Rs 13.1 lakhs  Current Tax = Rs 1.68 lakhs  After Budget = NO CHANGE Super Rich Taxpayers will witness an increase in tax liability due to hike in Surcharge from 12% to 15%.

 

 

2) FOR INVESTORS :

Positive :  1) No capital gains tax on redemption of sovereign gold bonds ; interest and CG exempt under gold Monetisation Scheme.

Negatives:  1) 10% additional dividend tax where dividend exceeds Rs 10 lakhs per anum.

2) Securities Transaction Tax (STT) for options trading hiked threefold from 0.017% to 0.05%.

 

3) FOR CONSUMERS:

Positive:  1) Service Tax on single premium annuity (Insurance) policies reduced from 3.5% to 1.4% of the premium paid in certain cases.

Negatives:  1) Excise duty on aerated sugary drinks and mineral water increased from 18% to 21%.  Thus water ,soft drinks to cost more.

2)Mobiles,tabs to get costlier.

3) Taxable services costlier on Cess.

4)1% cess on Luxury cars excluding Rs10 lakhs in value. Infrastructure cess of 1% to 4% on all vehicles.

5)Cars and Air tickets to get costlier.

6)Excise duty on all tobacco products ( except Beedi ) raised to 15%.

7) Excise also up for branded garments above Rs 1000.

 

4) FOR BUSINESSES:

Positives :  1) 100% deduction of profits for 3 out of 5 years for startups set up during April 2016 to March 2019.MAT will apply in such cases.

2) Lower Corporate Tax rate for the next financial year for relatively small enterprises i.e. companies with turnover not exceeding Rs 5 crore to 29% plus Surcharge and less.

3) Basic Custom and excise duty on refrigerated container reduced to 5% and 6%.

4) Non Banking financial companies shall be eligible for deduction to the extent of 5% of its Income in respect for provision for bad and doubtful debts.

Negatives:  1) Deduction for R & D to be restricted to 150% from April 1, 2017 and 100% from 2020.

2) 10% rate of tax on Income from worldwide exploitation of Patents developed and registered in India by a resident.

 

5) FISCAL DISCIPLINE:

1) Fiscal Deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.  This fiscal prudence (sticking to the planned reduction of fiscal deficit to 3.5% of GDP) opens the way for interests rate cut by the RBI ,maybe within a few days.

2) Total expenditure projected at Rs 19.78 lakh crore.

3) Plan expenditure kept at Rs 5.50 lakh crore.

4) Non Plan Expenditure kept at Rs 14.28 lakh crore.

5) Plan/Non Plan to be done away with from 2017-18.

 

6) Government plans to launch a new initiative to provide cooking gas to BPL families with state support.  Finance Minister said over 75 lakh people had given up their subsidies in the #Giveup campaign introduced by government invoking people not needing LPG connections to give up.

 

7) AGRICULTURAL SECTOR:

1) Allocated Rs 35,984 crore for the farming sector.

2) 5 lakh crores to be brought under organic farming in the next 3 years under Krishi Vikas Yojana.

 

8) JOB CREATION :

1) Rs 38,500 crore allocated to MNREGA ( highest ever allocation Scheme has gotten).

2) Gol will pay contribution of 8.33% for all new employees enrolling in EPFO for the first 3 years of their employment.  Budget Provision of Rs 1000 crore for this scheme.

 

9) INFRASTRUCTURE :

1) Total outlay for infrastructure =Rs2, 21,246crore.

2) Action plan for revival of unserved and underserved airports to be drawn up in partnership with state governments.

3) Total investment in Road sector to be Rs 97,000 crore during 2016-17.

4) Allocation for roads = Rs 55,000 crore.

5) Additional Rs 15000 crore to be raised by NHAI through bonds.

 

10) SOCIAL SECTOR INCLUDING HEALTHCARE, EDUCATION AND SKILLS :

1) Allocation of Rs 1, 51, 581 crore.

2) New health protection scheme to provide health cover up to Rs 1 lakh per family.

3) For senior citizens an additional top-up package up to Rs 30,000 to be provided.

4) 62 New Navodaya Vidyalayas will be opened.

5) Highest education Financing Agency to be set up with initial capital base of Rs 1000 crores.

6) Regulating architecture to be provided 10 public and 10 private institutions to emerge as world class Teaching and Research Institutions.

7) Allocation for skill development =Rs1804 crores.

8) 1500 Multi Skill Training institutes to be set up.

 

11) IMPORTANT BUDGET ANNOUNCEMENT REGARDING BLACK MONEY:

1) Government came out with one time four month compliance window for domestic black money holders to come clean by paying tax and penalty of 45%.

2) The government plans to open the compliance window under the Income Tax Disclosure Scheme from June 1 to September 30, 2016 with option to lay amount due within 2 months of declaration.

According to us the Budget has attempted to cover everyone from a small hawker to the biggest business honcho of India. It seems to be a pro poor Budget which is good for our nation because a larger proportion of our population is grappling with this menace of poverty but we can see that like always this time also the middle class of the nation has been ignored.

 

By Monika Dhingra