Key Features of Budget 2016-2017

Key Features of Budget 2016-2017
INTRODUCTION
 Growth of Economy accelerated to 7.6% in 2015-16.
 India hailed as a ‘bright spot’ amidst a slowing global economy by IMF.
 Robust growth achieved despite very unfavourable global conditions
and two consecutive years shortfall in monsoon by 13%
 Foreign exchange reserves touched highest ever level of about 350
billion US dollars.
 Despite increased devolution to States by 55% as a result of the 14th
Finance Commission award, plan expenditure increased at RE stage in
2015-16 – in contrast to earlier years.
CHALLENGES IN 2016-17
 Risks of further global slowdown and turbulence.
 Additional fiscal burden due to 7th Central Pay Commission
recommendations and OROP.
ROADMAP & PRIORITIES
 'Transform India' to have a significant impact on economy and lives of
people.
 Government to focus on –
 ensuring macro-economic stability and prudent fiscal
management.
 boosting on domestic demand
 continuing with the pace of economic reforms and policy
initiatives to change the lives of our people for the better.
 Focus on enhancing expenditure in priority areas of - farm and rural
sector, social sector, infrastructure sector employment generation and
recapitalisation of the banks.
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 Focus on Vulnerable sections through:
 Pradhan Mantri Fasal Bima Yojana
 New health insurance scheme to protect against hospitalisation
expenditure
 facility of cooking gas connection for BPL families
 Continue with the ongoing reform programme and ensure passage of
the Goods and Service Tax bill and Insolvency and Bankruptcy law
 Undertake important reforms by:
 giving a statutory backing to AADHAR platform to ensure benefits
reach the deserving.
 freeing the transport sector from constraints and restrictions
 incentivising gas discovery and exploration by providing
calibrated marketing freedom
 enactment of a comprehensive law to deal with resolution of
financial firms
 provide legal framework for dispute resolution and
re-negotiations in PPP projects and public utility contracts
 undertake important banking sector reforms and public listing of
general insurance companies undertake significant changes in FDI
policy.
AGRICULTURE AND FARMERS’ WELFARE
 Allocation for Agriculture and Farmers’ welfare is ` 35,984 crore
 ‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission
mode. 28.5 lakh hectares will be brought under irrigation.
 Implementation of 89 irrigation projects under AIBP, which are
languishing for a long time, will be fast tracked
 A dedicated Long Term Irrigation Fund will be created in NABARD with
an initial corpus of about ` 20,000 crore
 Programme for sustainable management of ground water resources
with an estimated cost of ` 6,000 crore will be implemented through
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multilateral funding
 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
2017.
 2,000 model retail outlets of Fertilizer companies will be provided with
soil and seed testing facilities during the next three years
 Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’
and 'Organic Value Chain Development in North East Region'.
 Unified Agricultural Marketing ePlatform to provide a common emarket
platform for wholesale markets
 Allocation under Pradhan Mantri Gram Sadak Yojana increased to `
19,000 crore. Will connect remaining 65,000 eligible habitations by
2019.
 To reduce the burden of loan repayment on farmers, a provision of `
15,000 crore has been made in the BE 2016-17 towards interest
subvention
 Allocation under Prime Minister Fasal Bima Yojana ` 5,500 crore.
 ` 850 crore for four dairying projects - ‘Pashudhan Sanjivani’, ‘Nakul
Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for
indigenous breeds
RURAL SECTOR
 Allocation for rural sector - ` 87,765 crore.
 ` 2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and
Municipalities as per the recommendations of the 14th 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 ` 38,500 crore allocated for MGNREGS.
 300 Rurban Clusters will be developed under the Shyama Prasad
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Mukherjee Rurban Mission
 100% village electrification by 1st 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.
 Priority allocation from Centrally Sponsored Schemes to be made to
reward villages that have become free from open defecation.
 A new Digital Literacy Mission Scheme for rural India to cover around 6
crore additional household within the next 3 years.
 National Land Record Modernisation Programme has been revamped.
 New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation
of ` 655 crore.
SOCIAL SECTOR INCLUDING HEALTH CARE
 Allocation for social sector including education and health care –
`1,51,581 crore.
 ` 2,000 crore allocated for initial cost of providing LPG connections to
BPL families.
 New health protection scheme will provide health cover up to ` One
lakh per family. For senior citizens an additional top-up package up to `
30,000 will be provided.
 3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be
opened during 2016-17.
 ‘National Dialysis Services Programme’ to be started under National
Health Mission through PPP mode
 “Stand Up India Scheme” to facilitate at least two projects per bank
branch. This will benefit at least 2.5 lakh entrepreneurs.
 National Scheduled Caste and Scheduled Tribe Hub to be set up in
partnership with industry associations
 Allocation of ` 100 crore each for celebrating the Birth Centenary of
Pandit Deen Dayal Upadhyay and the 350th Birth Anniversary of Guru
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Gobind Singh.
EDUCATION, SKILLS AND JOB CREATION
 62 new Navodaya Vidyalayas will be opened
 Sarva Shiksha Abhiyan to increasing focus on quality of education
 Regulatory architecture to be provided to ten public and ten private
institutions to emerge as world-class Teaching and Research Institutions
 Higher Education Financing Agency to be set-up with initial capital base
of ` 1000 Crores
 Digital Depository for School Leaving Certificates, College Degrees,
Academic Awards and Mark sheets to be set-up.
SKILL DEVELOPMENT
 Allocation for skill development – ` 1804. crore.
 1500 Multi Skill Training Institutes to be set-up.
 National Board for Skill Development Certification to be setup in
partnership with the industry and academia
 Entrepreneurship Education and Training through Massive Open Online
Courses
JOB CREATION
 GoI will pay contribution of 8.33% for of all new employees enrolling in
EPFO for the first three years of their employment. Budget provision of
` 1000 crore for this scheme.
 Deduction under Section 80JJAA of the Income Tax Act will be available
to all assesses who are subject to statutory audit under the Act
 100 Model Career Centres to operational by the end of 2016-17 under
National Career Service.
 Model Shops and Establishments Bill to be circulated to States.
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INFRASTRUCTURE AND INVESTMENT
 Total investment in the road sector, including PMGSY allocation, would
be ` 97,000 crore during 2016-17.
 India’s highest ever kilometres of new highways were awarded in 2015.
To approve nearly 10,000 kms of National Highways in 2016-17.
 Allocation of ` 55,000 crore in the Budget for Roads. Additional `
15,000 crore to be raised by NHAI through bonds.
 Total outlay for infrastructure - ` 2,21,246 crore.
 Amendments to be made in Motor Vehicles Act to open up the road
transport sector in the passenger segment
 Action plan for revival of unserved and underserved airports to be
drawn up in partnership with State Governments.
 To provide calibrated marketing freedom in order to incentivise gas
production from deep-water, ultra deep-water and high pressure-high
temperature areas
 Comprehensive plan, spanning next 15 to 20 years, to augment the
investment in nuclear power generation to be drawn up.
 Steps to re-vitalise PPPs:
 Public Utility (Resolution of Disputes) Bill will be introduced during
2016-17
 Guidelines for renegotiation of PPP Concession Agreements will be
issued
 New credit rating system for infrastructure projects to be
introduced
 Reforms in FDI policy in the areas of Insurance and Pension, Asset
Reconstruction Companies, Stock Exchanges.
 100% FDI to be allowed through FIPB route in marketing of food
products produced and manufactured in India.
 A new policy for management of Government investment in Public
Sector Enterprises, including disinvestment and strategic sale,
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approved.
FINANCIAL SECTOR REFORMS
 A comprehensive Code on Resolution of Financial Firms to be
introduced.
 Statutory basis for a Monetary Policy framework and a Monetary Policy
Committee through the Finance Bill 2016.
 A Financial Data Management Centre to be set up.
 RBI to facilitate retail participation in Government securities.
 New derivative products will be developed by SEBI in the Commodity
Derivatives market.
 Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC
to hold up to 100% stake in the ARC and permit non institutional
investors to invest in Securitization Receipts.
 Comprehensive Central Legislation to be bought to deal with the
menace of illicit deposit taking schemes.
 Increasing members and benches of the Securities Appellate Tribunal.
 Allocation of ` 25,000 crore towards recapitalisation of Public Sector
Banks.
 Target of amount sanctioned under Pradhan Mantri Mudra Yojana
increased to ` 1,80,000 crore.
 General Insurance Companies owned by the Government to be listed in
the stock exchanges.
GOVERNANCE AND EASE OF DOING BUSINESS
 A Task Force has been constituted for rationalisation of human
resources in various Ministries.
 Comprehensive review and rationalisation of Autonomous Bodies.
 Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and
Services by using the Aadhar framework to be introduced.
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 Introduce DBT on pilot basis for fertilizer.
 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.
 “Ek Bharat Shreshtha Bharat” programme 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.
FISCAL DISCIPLINE
 Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.
 Revenue Deficit target from 2.8% to 2.5% in RE 2015-16
 Total expenditure projected at ` 19.78 lakh crore
 Plan expenditure pegged at ` 5.50 lakh crore under Plan, increase of
15.3%
 Non-Plan expenditure kept at ` 14.28 lakh crores
 Special emphasis to sectors such as agriculture, irrigation, social sector
including health, women and child development, welfare of Scheduled
Castes and Scheduled Tribes, minorities, infrastructure.
 Mobilisation of additional finances to the extent of ` 31,300 crore by
NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising
Bonds.
 Plan / Non-Plan classification to be done away with from 2017-18.
 Every new scheme sanctioned will have a sunset date and outcome
review.
 Rationalised and restructured more than 1500 Central Plan Schemes
into about 300 Central Sector and 30 Centrally Sponsored Schemes.
 Committee to review the implementation of the FRBM Act.
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RELIEF TO SMALL TAX PAYERS
 Raise the ceiling of tax rebate under section 87A from `2000 to `5000
to lessen tax burden on individuals with income upto `5 laks.
 Increase the limit of deduction of rent paid under section 80GG from
`24000 per annum to `60000, to provide relief to those who live in
rented houses.
BOOST EMPLOYMENT AND GROWTH
 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 assessees in the MSME category.
 Extend the presumptive taxation scheme with profit deemed to be 50%,
to professionals with gross receipts up to `50 lakh.
 Phasing out deduction under Income Tax:
 Accelerated depreciation wherever provided in IT Act will be
limited to maximum 40% from 1.4.2017
 Benefit of deductions for Research would be limited to 150% from
1.4.2017 and 100% from 1.4.2020
 Benefit of section 10AA to new SEZ units will be available to those
units which commence activity before 31.3.2020.
 The weighted deduction under section 35CCD for skill development
will continue up to 1.4.2020
 Corporate Tax rate proposals:
 New manufacturing companies incorporated on or after 1.3.2016
to be given an option to be taxed at 25% + surcharge and cess
provided they do not claim profit linked or investment linked
deductions and do not avail of investment allowance and
accelerated depreciation.
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 Lower the corporate tax rate for the next financial year for
relatively small enterprises i.e companies with turnover not
exceeding ` 5 crore (in the financial year ending March 2015), to
29% plus surcharge and cess.
 100% deduction of profits for 3 out of 5 years for startups setup during
April, 2016 to March, 2019. MAT will apply in such cases.
 10% rate of tax on income from worldwide exploitation of patents
developed and registered in India by a resident.
 Complete pass through of income-tax to securitization trusts including
trusts of ARCs. Securitisation trusts required to deduct tax at source.
 Period for getting benefit of long term capital gain regime in case of
unlisted companies is proposed to be reduced from three to two years.
 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
debts.
 Determination of residency of foreign company on the basis of Place of
Effective Management (POEM) is proposed to be deferred by one year.
 Commitment to implement General Anti Avoidance Rules (GAAR) from
1.4.2017.
 Exemption of service tax on services provided under Deen Dayal
Upadhyay Grameen Kaushalya Yojana and services provided by
Assessing Bodies empanelled by Ministry of Skill Development &
Entrepreneurship.
 Exemption of Service tax 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.
 Basic custom and excise duty on refrigerated containers reduced to 5%
and 6%.
MAKE IN INDIA
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 Changes in customs and excise duty rates on certain inputs to reduce
costs and improve competitiveness of domestic industry in sectors like
Information technology hardware, capital goods, defence production,
textiles, mineral fuels & mineral oils, chemicals & petrochemicals,
paper, paperboard & newsprint, Maintenance repair and overhauling
[MRO] of aircrafts and ship repair.
MOVING TOWARDS A PENSIONED SOCIETY
 Withdrawal up to 40% of the corpus at the time of retirement to be tax
exempt in the case of National Pension Scheme (NPS). Annuity fund
which goes to legal heir will not be taxable.
 In case of superannuation funds and recognized provident funds,
including EPF, the same norm of 40% of corpus to be tax free will apply
in respect of corpus created out of contributions made on or from
1.4.2016.
 Limit for contribution of employer in recognized Provident and
Superannuation Fund of ` 1.5 lakh per annum for taking tax benefit.
Exemption from service tax for Annuity services provided by NPS and
Services provided by EPFO to employees.
 Reduce service tax on Single premium Annuity (Insurance) Policies from
3.5% to 1.4% of the premium paid in certain cases.
PROMOTING 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 to apply.
 Deduction for additional interest of `50,000 per annum for loans up to
`35 lakh sanctioned in 2016-17 for first time home buyers, where
house cost does not exceed ` 50 lakh.
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 Distribution made out of income of SPV to the REITs and INVITs having
specified shareholding will not be subjected to Dividend Distribution
Tax, in respect of dividend distributed after the specified date.
 Exemption from service tax on construction of affordable houses up to
60 square metres under any scheme of the Central or State
Government including PPP Schemes.
 Extend excise duty exemption, presently available to Concrete Mix
manufactured at site for use in construction work to Ready Mix
Concrete.
RESOURCE MOBILIZATION FOR AGRICULTURE, RURAL ECONOMY AND
CLEAN ENVIRONMENT
 Additional tax at the rate of 10% of gross amount of dividend will be
payable by the recipients receiving dividend in excess of ` 10 lakh per
annum.
 Surcharge to be raised from 12% to 15% on persons, other than
companies, firms and cooperative societies having income above ` 1
crore.
 Tax to be deducted at source at the rate of 1 % on purchase of luxury
cars exceeding value of ` ten lakh and purchase of goods and services in
cash exceeding ` two lakh.
 Securities Transaction tax in case of ‘Options’ is proposed to be
increased from .017% to .05%.
 Equalization levy of 6% of gross amount for payment made to nonresidents
exceeding ` 1 lakh a year in case of B2B transactions.
 Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016.
Proceeds would be exclusively used for financing initiatives for
improvement of agriculture and welfare of farmers. Input tax credit of
this cess will be available for payment of this cess.
 Infrastructure cess, of 1% on small petrol, LPG, CNG cars, 2.5% on diesel
cars of certain capacity and 4% on other higher engine capacity vehicles
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and SUVs. No credit of this cess will be available nor credit of any other
tax or duty be utilized for paying this cess.
 Excise duty of ‘1% without input tax credit or 12.5% with input tax
credit’ on articles of jewellery [excluding silver jewellery, other than
studded with diamonds and some other precious stones], with a higher
exemption and eligibility limits of ` 6 crores and ` 12 crores
respectively.
 Excise on readymade garments with retail price of ` 1000 or more
raised to 2% without input tax credit or 12.5% with input tax credit.
 ‘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 duties on various tobacco products other than beedi raised by
about 10 to 15%.
 Assignment of right to use the spectrum and its transfers has been
deducted as a service leviable to service tax and not sale of intangible
goods.
PROVIDING CERTAINITY IN TAXATION
 Committed to providing a stable and predictable taxation regime and
reduce black money.
 Domestic taxpayers can declare undisclosed income or such income
represented in the form of any asset by paying tax at 30%, and
surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the
undisclosed income. Declarants will have immunity from prosecution.
 Surcharge levied at 7.5% of undisclosed income will be called Krishi
Kalyan surcharge to be used for agriculture and rural economy.
 New Dispute Resolution Scheme to be introduced. No penalty in
respect of cases with disputed tax up to ` 10 lakh. Cases with disputed
tax exceeding ` 10 lakh to be subjected to 25% of the minimum of the
imposable penalty. Any pending appeal against a penalty order can also
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be settled by paying 25% of the minimum of the imposable penalty and
tax interest on quantum addition.
 High Level Committee chaired by Revenue Secretary to oversee fresh
cases where assessing officer applies the retrospective amendment.
 One-time scheme of Dispute Resolution for ongoing cases under
retrospective amendment.
 Penalty rates to be 50% of tax in case of underreporting of income and
200% of tax where there is misreporting of facts.
 Disallowance will be limited to 1% of the average monthly value of
investments yielding exempt income, but not exceeding the actual
expenditure claimed under rule 8D of Section 14A of Income Tax Act.
 Time limit of one year for disposing petitions of the tax payers seeking
waiver of interest and penalty.
 Mandatory for the assessing officer to grant stay of demand once the
assesse pays 15% of the disputed demand, while the appeal is pending
before Commissioner of Income-tax (Appeals).
 Monetary limit for deciding an appeal by a single member Bench of
ITAT enhanced from ` 15 lakhs to ` 50 lakhs.
 11 new benches of Customs, Excise and Service Tax Appellate Tribunal
(CESTAT).
SIMPLIFICATION AND RATIONALIZATION OF TAXES
 13 cesses, levied by various Ministries in which revenue collection is
less than ` 50 crore in a year to be abolished.
 For non-residents providing alternative documents to PAN card, higher
TDS not to apply.
 Revision of return extended to Central Excise assesses.
 Additional options to banking companies and financial institutions,
including NBFCs, for reversal of input tax credits with respect to nontaxable
services.
 Customs Act to provide for deferred payment of customs duties for
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importers and exporters with proven track record.
 Customs Single Window Project to be implemented at major ports and
airports starting from beginning of next financial year.
 Increase in free baggage allowance for international passengers. Filing
of baggage only for those carrying dutiable goods.
TECHNOLOGY FOR ACCOUNTABILITY
 Expansion in the scope of e-assessments to all assessees in 7 mega
cities in the coming years.
 Interest at the rate of 9% p.a against normal rate of 6% p.a for delay in
giving effect to Appellate order beyond ninety days.
 ‘e-Sahyog’ to be expanded to reduce compliance cost, especially for
small taxpayers.