Key Highlights of Union Budget 2017-18
Today on Date 1st February 2017, Finance Minister, Mr. Arun Jaitley presented Union Budget 2017 in parliament. Opening remarks of budget speech were:
- Massive war against black money has been launched.
- Government now seen as a trusted custodian of public money.
- We will focus on energizing youth to reap benefits of growth.
- World economy faces considerable uncertainty.
- Three major challenges for emerging economies: US Federal Reserve’s stance, uncertainty over commodity prices, especially crude prices and signs of increasing retreat from globalization as protectionist fears build up.
- India stands out as a bright spot.
- Govt has continued with steady path of fiscal consolidation.
- We are seen as an engine of global growth.
- There are two tectonic policy initiatives: GST implementation and demonetization.
- Demonetization was the continuation of series of measures taken in last two years and was a bold and decisive measure.
- Drop in economic activity due to demonetization is expected to have only a transient effect.
- Demonetization has strong potential to generate long-term benefits.
- Demonetization helps to transfer resources from tax evaders to govt.
- Firmly believe demonetization and GST will have epoch-making impact.
- Pace of remonetization will soon reach comfortable levels; effect of demonetization not expected to spill over into next year.
- Surplus liquidity in banking system will raise access to credit, leading to multiplier effect on economic activity: FM
- Overall approach in budget to spend more in rural areas.
- Budget 2017-18 contains 3 major reforms: advancement of date of presentation, merger of railway budget with general budget, abolition of Plan and non-Plan expenditure.
Mr. Jaitley divided his budget proposals into 10 themes:
- Farmers
- Rural population
- Energizing youth
- Poor and underprivileged
- Infrastructure
- Financial sector
- Digital economy
- Public service
- Prudent fiscal management
- Tax administration.
FARMERS:
- A record sum of Rs. 10 lakh crore is allocated as credit to farmers, with 60 days interest waiver.
- Govt to set up mini-labs in Krishi Vigyan Kendras for soil testing.
- Long-term irrigation fund in Nabard allocated Rs40,000 crore.
- Model law on contract farming to be circulated.
- Dairy processing infra fund with corpus of Rs8,000 crore.
- Dedicated micro-irrigation fund with Rs5,000 crore.
RURAL POPULATION:
- Mission Antyodaya to bring 1 crore households out of poverty by 2019.
- MGNREGA: Rs48,000 crore has been allocated; participation of women now at 55%; using space technology in a big way.
- Prime Minister Gram Sadak Yojana: Rs19,000 crore allocated; along with states, Rs27,000 crore will be spent in FY18.
- Pradhan Mantri Awas Yojana: Rs23,000 crore allocated.
- 100% village electrification by May 2018.
- Rural livelihood mission: Rs4,500 crore allocated.
- Mason training to be provided for 5 lakh people.
- Panchayat Raj: Human resource reform programme to be launched.
- Rs1,87,223 crore allocated for rural programmes.
YOUTH:
- Education: System of measuring annual learning outcomes, emphasis on science.
- Innovation fund for secondary education.
- Reforms in UGC: Colleges to be identified based on ranking and given more autonomy.
- Propose to leverage information technology with launch of SWAYAM platform for virtual learning.
- National testing agency to be established for all entrance exams, freeing up CBSE, AICTE and other bodies.
- 100 Indian international skill centres to be established with courses in foreign languages.
- Rs4,000 crore allocated to launch skill acquisition and knowledge awareness.
- Will take steps to create 5000 PG seats per annum.
- Special scheme for creating employment in leather/footwear sector.
- Tourism: Five special zones to be set up.
POOR AND UNPRIVILEGED:
- Mahila Shakti Kendras with Rs500 crore corpus.
- Stepped up allocation to Rs1.84 trillion for various schemes for women and children.
- Affordable housing to be given infrastructure status.
- Action plan to eliminate leprosy by 2018, TB by 2025, reduce IMR to 29 in 2019.
- To create additional PG medical seats per annum.
- Two new AIIMS in Jharkhand and Gujarat.
- New rules to be introduced for medical devices.
- Labour rights: Legislative reforms to simplify and amalgamate existing labour laws.
- Allocation to SCs increased to Rs52,393 crore; STs given Rs31,920 crore, minority affairs allocated Rs4,195 crore.
- Senior citizens: Aadhaar-based smart cards with health details to be provided.
INFRASTRUCTURE:
- Total capex and development expenditure of railways pegged at Rs1.31 Lakh Crore.
- Railways: Passenger safety—Safety fund corpus set up; unmanned level crossings to be eliminated by 2020.
- Railway lines of 3,500km to be commissioned.
- To launch dedicated tourism/pilgrimage trains.
- SMS-based ”clean my coach service” is put in place.
- High speed Internet to be allocated to 1,50,000 gram panchayats.
- 500 stations to be made differently-abled friendly.
- Cleanliness in railways: To introduce Coach Mitra facility; By 2019, biotoilets for all coaches.
- Railways to offer competitive ticket-booking facility; service charge withdrawn for tickets booked on IRCTC.
- New metro rail policy to be announced.
- Roads sector: Allocation for national highways at Rs64,000 crore
- Airports Authority of India Act to be amended to enable monetization of land resources.
- Total allocation to transport sector at Rs2 Lakh Crore.
- Telecom sector: Allocation to Bharat Net programme at Rs10,000 crore.
- To make India global hub for electronics manufacture.
- Export infra: New restructured central scheme to be launched.
- Total allocation for infrastructure: Rs3.96 Lakh Crore.
FINANCIAL SECTOR:
- Foreign Investment Promotion Board (FIPB) to be abolished.
- Commodities market: panel to study legal framework for spot and derivative markets.
- Resolution mechanism for financial firms.
- Cyber-security: Computer emergency response team to be set up.
- Listing of PSEs will foster public accountability; revised mechanism for time-bound listing.
- To create integrated public sector oil major.
- New ETF to be launched
- Pradhan Mantri Mudra Yojana: Lending target at Rs2.44 Lakh Crore.
- Stand-up India scheme: over 16,000 new enterprises have been set up
DIGITAL ECONOMY:
- Govt to launch two new schemes to promote BHIM app, including cashback scheme for merchants.
- Aadhaar Pay to be launched for people who don’t have mobile phones.
- To strengthen financial inclusion fund.
- Panel on digital payments has recommended structural reforms.
- To create payment regulatory board at RBI.
PUBLIC SERVICES:
- To use head post-office for passport services.
- Centralized defence travel system developed
- Centralized pension distribution system to be established.
- To introduce two-tier exam system for Govt. recruitment.
- Govt looks to introduce laws to confiscate assets of economic defaulters.
- High-level panel chaired by PM to commemorate Mahatma Gandhi’s 150th birth anniversary.
FISCAL MANAGEMENT:
- Total budget expenditure: Rs21 Lakh Crore.
- Rs3,000 crore to implement various budget announcements.
- Defence expenditure excluding pensions: Rs2.74 Lakh Crore.
- Consolidated outcome budget for all ministries being created.
- Fiscal deficit for FY18 pegged at 3.2% of GDP.
- Revenue deficit for FY18 at 1.9%.
TAX ADMINISTRATION:
- India’s tax to GDP ratio is not favourable.
- Out of 13.14 lakh registered companies, only 5.97 lakh firms have filed returns for 2016-17.
- Proportion of direct tax to indirect tax is not optimal.
- Individuals numbering 1.95 crore showed an income between Rs. 2.5 lakh to Rs. 5 lakh.
- Out of 76 lakh individual assessees declaring income more than Rs. 5 lakh, 56 lakh are salaried.
- Only 1.72 lakh people showed income of more than Rs. 50 lakh a year.
- Between November 8 to December 30, deposits ranging from Rs. 2 lakh and Rs. 80 lakh were made in 1.09 crore accounts.
- Direct tax collection not commensurate with income/expenditure pattern of India.
- We are largely a tax non-compliant society; predominance of cash in society enables tax evasion
- After demonetization, data received will increase tax net.
- No transaction above Rs 3 lakh is permitted in cash.
- The holding period for capital gains on sale of immovable property—land and building—to qualify as long term capital gains (LTCG) is proposed to be reduced to 2 years from 3 years in the Union Budget. Currently, capital gains on land and building qualify as long term capital gain if holding period is minimum 3 years.
- Transparency in political funding: Parties continue to receive anonymous donations; propose system of cleaning up.
- Maximum amount of cash donation that can be received by Political parties is Rs2,000.
- RBI to issue electoral bonds.
- Personal income tax: Rate reduced to 5% for income bracket of Rs2.5-5 lakh; All other categories to get uniform benefit of Rs12,500 per person; to levy surcharge 10% on income bracket Rs50 lakh-Rs1 crore
- Rebate U/s 87A is reduced to Rs. 2500/- for income group upto Rs. 3.5 Lakh.
- To have simple one-page ITR form for taxable income up to Rs5 lakh
- Not many changes to excise duties since GST will be implemented soon.
- Time period of revising tax returns reduced to 12 months
- Concessional withholding rate will be extended to 30 June 2020, rupee-denominated masala bonds to be included
- MAT not to be abolished at present; to allow carry-forward for 15 years.
- Under the corporate tax, in order to make MSME companies more viable, there is a proposal to reduce tax for small companies with a turnover of up to Rs 50 crore to 25%. About 67 lakh companies fall in this category. Ninety-six % of companies to get this benefit.
- The government proposes to reduce basic customs duty for LNG to 2.5% from 5%.
- Limit of cash donation for charitable trusts cut to Rs2,000.