Union Budget 2016 – 17

On 29th February 2016, Finance Minister Arun Jaitley presented his third Union Budget for 2016-17 citing the acceleration of GDP growth to 7.6%. CPI inflation has come down to 5.4%.

Before heading towards the complete highlights of Union Budget let’s take brief view on the history of Union Budget.

Under the Article 112 of the Constitution of India, Union Budget is aka Annual financial statement. Every year it is presented on the last working day of February by the Finance Minister of India in Parliament. The budget is presented by means of the Financial bill and Appropriation bill which has to be passed by the houses.

• Union Budget comes into effect from April 1.
• On November 26, 1947, the first Union budget of independent India was presented by R. K. Shanmukham Chetty.
• In 1951-52, C D Deshmukh was the first Indian governor of RBI who presented the Interim Budget.
• In 1958-59, Pandit Jawaharlal Nehru was first PM who presented the Union Budget.
• In 1959, Morarji Desai, who became the finance minister of India, has presented the maximum number of budgets so far i.e. 10. He presented two budgets on his birthday – 1964 and 1968 as he was born on February 29.
• From 1970 to 1971, Indira Gandhi was only woman Finance Minister who took over the Finance portfolio.
• Union Budget 1973-74 is known as “Black Budget” of India as budget deficit rose to Rs 550 crore.
• In 1997-98, P Chidambaram presented a Budget that was termed as “Dream Budget”.
• In 1994, Manmohan Singh started the service tax.

Now, here come the complete highlights of Union budget

Nine pillars of budget – Governance and ease of doing business, fiscal discipline, tax reforms, Agriculture and farmers welfare , Rural sector with focus on employment, social sector with healthcare, Educational skills and job creation, Infrastructure and investment & financial sector reforms.

Tax Proposals – No changes have been made to existing income tax slabs

Tax relief

• Taxpayers with income below Rs. 5 Lakh per year – Relief of 3000 p.a. under section 87A.
• Taxpayers living in rented houses – HRA deduction up from Rs. 24, 000 to 60,000 p.a. under section 80 GG.

Corporate tax

• Corporate IT rate for companies not exceeding Rs. 5 crore turnover has been decreased to 25% plus surcharge.
• New manufacturing companies incorporated on or after 3.2016 to be taxed at 25% plus cess plus surcharge.

Start up

• 100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019 except MAT.

Affordable Housing

• 100% deduction for profits to an undertaking in housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities approved during June 2016 to March 2019 and completed in three years. MAT will apply.
• First time home buyers get additional Rs 50,000 deduction for housing loans up to 35 lakh, provided cost of house is not above Rs. 50 lakh.

Service Tax Exemption

• For houses built less than 60 square metres.
• Services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and by Assessing Bodies empanelled by Ministry of Skill Development & Entrepreneurship.
• On general insurance services provided under Niramaya Health Insurance Scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability.
• Exemption from service tax for Annuity services provided by NPS and Services provided by EPFO to employees.

National Pension Scheme

• 40% of withdrawal at the time of retirement under NPS to be tax exempt.

Tax on rich

• Surcharge on income tax for those with incomes exceeding 1 crore per annum increased from 12% to 15%.

Tax on Car

• 1 % infra cess on small cars, 2.5 % on diesel and 4% high capacity tax for SUVs.
• 1% service charge on purchase of luxury cars over 10 lakh and in cash purchase of goods and services over Rs. 2 lakh.

MSME Category

• Increase the turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act to 2 crores to bring big relief to a large number of assessee in the MSME category.

Others

• Rs 1,000 crore allocated for new EPF (Employees’ Provident Fund) scheme.
• Krishi Kalyan Cess @ 0.5% on all taxable services, w.e.f. 1 June 2016.
• Clean Energy Cess levied on coal, lignite and peat renamed to Clean Environment Cess and rate increased from 200 per tonne to 400 per tonne.
• Excise on readymade garments with retail price of 1000 or more rose to 2% without input tax credit or 12.5% with input tax credit.
• Excise duty of 1% without input tax credit or 12.5% with input tax credit on articles of jewellery.
• 10% rate of tax on income from worldwide exploitation of patents developed and registered in India by a resident.
• Non-banking financial companies shall be eligible for deduction to the extent of 5% of its income in respect of provision for bad and doubtful.
• Infrastructure and agriculture cess to be levied.
• Commitment to implement General Anti Avoidance Rules (GAAR) from 4.2017.
• Excise duty on tobacco increased by 10-15% except beedi.
• Basic custom and excise duty on refrigerated containers reduced to 5% and 6%.

Agriculture and Farmers Welfare – Rs 35,984 crore

Govt will reorganize agricultural policy to double farmer income in five years. Here is the allocation:

Enhancing of Dairy Farming – Rs 850 crore
4 new schemes – Pashudhan Sanjivani, Nakul Swasthya Patra, E-Pashudhan Haat and National Genomic Centre for indigenous breeds have been introduced to enhance dairy farming in India at Rs 850 crore.

Other Proposals under Irrigation

• Pradhan Mantri Krishi Sinchai Yojana to be implemented in mission 28.5 lakh hectares will be brought under irrigation.
• Promote organic farming through Parmparagat Krishi Vikas Yojana and Organic Value Chain Development in North East Region.
• 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA
• Soil Health Card scheme will cover all 14 crore farm holdings by March.
• 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years
• Unified Agricultural Marketing e-Platform to provide a common e-market platform for wholesale markets.

Rural Economy – Rs 87,765 crore

Below Poverty Line (BPL) Families – Rs 2000 crore allocated for 5 years
Government is launching a new initiative to provide cooking gas to BPL families with state support. LPG connections to be provided under the name of women members of family.

Other Proposals:

• 2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities as per the recommendations of the 14^th Finance Commission.
• Every block under drought and rural distress will be taken up as an intensive Block under the Deen Dayal Antyodaya Mission.
• A sum of Rs 38,500 crore allocated for MGNREGS.
• 300 Rurban Clusters will be developed under the Shyama Prasad Mukherjee Rurban Mission
  100% village electrification by 1^st May, 2018.
• District Level Committees under Chairmanship of senior most Lok Sabha MP from the district for monitoring and implementation of designated Central Sector and Centrally Sponsored Schemes.
• A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional household within the next 3 years.
• National Land Record Modernization Programme has been revamped.
• New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of 655 crore.
• Hub to support SC/ST entrepreneurs.

Investments and Infrastructure – Rs. 2, 21,246 crore

Total allocation for road construction including PMGSY – Rs 97,000 crore

• 27,000 crore to be spent on roadways.
• 65 eligible habitats to be connected via 2.23 lakh kms of road.
• 55,000 crore for roads and highways.

Other Proposals:

• 100% FDI in marketing of food products produced and marketed in India.
• Shops to be given option to remain open all seven days in a week across markets.
• New Greenfield ports to be developed on east and west coasts
• Revival of underserved airports – Centre to Partner with States to revive small airports for regional connectivity
• of Disinvestment to be renamed as Dept. of Investment and Public Asset Management.
• Govt will amend Motor Vehicle Act in passenger vehicle segment to allow innovation.

Banking – Rs 25,000 crore towards recapitalization of PSBs

• Banking Board Bureau will be operationalised.
• Target of disbursement under MUDRA increased to 1, 80,000 crore.
• Process of transfer of government stake in IDBI Bank below 50% started (currently its 80%).
• General Insurance companies will be listed in the stock exchange.
• Govt to increase ATMs, micro-ATMs in post offices in next 3 years.
• Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to hold up to 100% stake.
• A Financial Data Management Centre to be set up.

Nuclear Power Sector – Rs 3000 crore

• Govt drawing comprehensive plan to be implemented in next 15-20 years for exploiting nuclear energy.
• Govt to provide incentive for deep-water gas exploration.

Education and Skill Development

• Higher Education Financing Agency to be set-up with initial capital base of Rs 1000 Crores.
• Sarva Shiksha Abhiyan to increasing focus on quality of education.
• Scheme to get 500 cr for promoting entrepreneurship among SC/ST.
• Digital repository for all school leaving certificates and diplomas.
• 1,700 crore for 1500 multi-skill development centres.
• 62 new navodaya vidyalayas to provide quality education
• 10 public and 10 private educational institutions to be made world-class.
• Digital literacy scheme to be launched to cover 6 crore additional rural households.
• Objective to skill 1 crore youth in the next 3 years under the PM Kaushal Vikas Yojna.
• 100 Model Career Centres to operational by the end of 2016-17 under National Career Service.
• National Skill Development Mission has imparted training to 76 lakh youth.

Health

• A new health protection scheme for health covers upto 1 lakh per family. Senior citizens will get additional healthcare cover of Rs 30,000 under the new scheme.
• National Dialysis Service Prog with funds through PPP mode to provide dialysis at all district hospitals.
• PM Jan Aushadhi Yojana to be strengthened and 300 generic drug store to be opened.

Governance and Ease of Doing Business

“Ek Bharat Shreshtha Bharat” Programme
It 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.

Other Proposals:

• A Task Force has been constituted for rationalisation of human resources in various Ministries.
• Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhaar framework to be introduced.
• Automation facilities will be provided in 3 lakh fair price shops by March 2017.
• Amendments in Companies Act to improve enabling environment for start-ups.
• Price Stabilisation Fund with a corpus of 900 crore to help maintain stable prices of Pulses.