Highlights of Union Budget 2017-18

Income Tax

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:

  1. Massive war against black money has been launched.
  2. Government now seen as a trusted custodian of public money.
  3. We will focus on energizing youth to reap benefits of growth.
  4. World economy faces considerable uncertainty.
  5. 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.
  6. India stands out as a bright spot.
  7. Govt has continued with steady path of fiscal consolidation.
  8. We are seen as an engine of global growth.
  9. There are two tectonic policy initiatives: GST implementation and demonetization.
  10. Demonetization was the continuation of series of measures taken in last two years and was a bold and decisive measure.
  11. Drop in economic activity due to demonetization is expected to have only a transient effect.
  12. Demonetization has strong potential to generate long-term benefits.
  13. Demonetization helps to transfer resources from tax evaders to govt.
  14. Firmly believe demonetization and GST will have epoch-making impact.
  15. Pace of remonetization will soon reach comfortable levels; effect of demonetization not expected to spill over into next year.
  16. Surplus liquidity in banking system will raise access to credit, leading to multiplier effect on economic activity: FM
  17. Overall approach in budget to spend more in rural areas.
  18. 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:

  1. Farmers
  2. Rural population
  3. Energizing youth
  4. Poor and underprivileged
  5. Infrastructure
  6. Financial sector
  7. Digital economy
  8. Public service
  9. Prudent fiscal management
  10. Tax administration.

 

FARMERS:

  1. A record sum of Rs. 10 lakh crore is allocated as credit to farmers, with 60 days interest waiver.
  2. Govt to set up mini-labs in Krishi Vigyan Kendras for soil testing.
  3. Long-term irrigation fund in Nabard allocated Rs40,000 crore.
  4. Model law on contract farming to be circulated.
  5. Dairy processing infra fund with corpus of Rs8,000 crore.
  6. Dedicated micro-irrigation fund with Rs5,000 crore.

RURAL POPULATION:

  1. Mission Antyodaya to bring 1 crore households out of poverty by 2019.
  2. MGNREGA: Rs48,000 crore has been allocated; participation of women now at 55%; using space technology in a big way.
  3. Prime Minister Gram Sadak Yojana: Rs19,000 crore allocated; along with states, Rs27,000 crore will be spent in FY18.
  4. Pradhan Mantri Awas Yojana: Rs23,000 crore allocated.
  5. 100% village electrification by May 2018.
  6. Rural livelihood mission: Rs4,500 crore allocated.
  7. Mason training to be provided for 5 lakh people.
  8. Panchayat Raj: Human resource reform programme to be launched.
  9. Rs1,87,223 crore allocated for rural programmes.

YOUTH:

  1. Education: System of measuring annual learning outcomes, emphasis on science.
  2. Innovation fund for secondary education.
  3. Reforms in UGC: Colleges to be identified based on ranking and given more autonomy.
  4. Propose to leverage information technology with launch of SWAYAM platform for virtual learning.
  5. National testing agency to be established for all entrance exams, freeing up CBSE, AICTE and other bodies.
  6. 100 Indian international skill centres to be established with courses in foreign languages.
  7. Rs4,000 crore allocated to launch skill acquisition and knowledge awareness.
  8. Will take steps to create 5000 PG seats per annum.
  9. Special scheme for creating employment in leather/footwear sector.
  10. Tourism: Five special zones to be set up.

POOR AND UNPRIVILEGED:

  1. Mahila Shakti Kendras with Rs500 crore corpus.
  2. Stepped up allocation to Rs1.84 trillion for various schemes for women and children.
  3. Affordable housing to be given infrastructure status.
  4. Action plan to eliminate leprosy by 2018, TB by 2025, reduce IMR to 29 in 2019.
  5. To create additional PG medical seats per annum.
  6. Two new AIIMS in Jharkhand and Gujarat.
  7. New rules to be introduced for medical devices.
  8. Labour rights: Legislative reforms to simplify and amalgamate existing labour laws.
  9. Allocation to SCs increased to Rs52,393 crore; STs given Rs31,920 crore, minority affairs allocated Rs4,195 crore.
  10. Senior citizens: Aadhaar-based smart cards with health details to be provided.

INFRASTRUCTURE:

  1. Total capex and development expenditure of railways pegged at Rs1.31 Lakh Crore.
  2. Railways: Passenger safety—Safety fund corpus set up; unmanned level crossings to be eliminated by 2020.
  3. Railway lines of 3,500km to be commissioned.
  4. To launch dedicated tourism/pilgrimage trains.
  5. SMS-based ”clean my coach service” is put in place.
  6. High speed Internet to be allocated to 1,50,000 gram panchayats.
  7. 500 stations to be made differently-abled friendly.
  8. Cleanliness in railways: To introduce Coach Mitra facility; By 2019, biotoilets for all coaches.
  9. Railways to offer competitive ticket-booking facility; service charge withdrawn for tickets booked on IRCTC.
  10. New metro rail policy to be announced.
  11. Roads sector: Allocation for national highways at Rs64,000 crore
  12. Airports Authority of India Act to be amended to enable monetization of land resources.
  13. Total allocation to transport sector at Rs2 Lakh Crore.
  14. Telecom sector: Allocation to Bharat Net programme at Rs10,000 crore.
  15. To make India global hub for electronics manufacture.
  16. Export infra: New restructured central scheme to be launched.
  17. Total allocation for infrastructure: Rs3.96 Lakh Crore.

FINANCIAL SECTOR:

  1. Foreign Investment Promotion Board (FIPB) to be abolished.
  2. Commodities market: panel to study legal framework for spot and derivative markets.
  3. Resolution mechanism for financial firms.
  4. Cyber-security: Computer emergency response team to be set up.
  5. Listing of PSEs will foster public accountability; revised mechanism for time-bound listing.
  6. To create integrated public sector oil major.
  7. New ETF to be launched
  8. Pradhan Mantri Mudra Yojana: Lending target at Rs2.44 Lakh Crore.
  9. Stand-up India scheme: over 16,000 new enterprises have been set up

DIGITAL ECONOMY:

  1. Govt to launch two new schemes to promote BHIM app, including cashback scheme for merchants.
  2. Aadhaar Pay to be launched for people who don’t have mobile phones.
  3. To strengthen financial inclusion fund.
  4. Panel on digital payments has recommended structural reforms.
  5. To create payment regulatory board at RBI.

 

PUBLIC SERVICES:

  1. To use head post-office for passport services.
  2. Centralized defence travel system developed
  3. Centralized pension distribution system to be established.
  4. To introduce two-tier exam system for Govt. recruitment.
  5. Govt looks to introduce laws to confiscate assets of economic defaulters.
  6. High-level panel chaired by PM to commemorate Mahatma Gandhi’s 150th birth anniversary.

 

FISCAL MANAGEMENT:

  1. Total budget expenditure: Rs21 Lakh Crore.
  2. Rs3,000 crore to implement various budget announcements.
  3. Defence expenditure excluding pensions: Rs2.74 Lakh Crore.
  4. Consolidated outcome budget for all ministries being created.
  5. Fiscal deficit for FY18 pegged at 3.2% of GDP.
  6. Revenue deficit for FY18 at 1.9%.

TAX ADMINISTRATION:

  1. India’s tax to GDP ratio is not favourable.
  2. Out of 13.14 lakh registered companies, only 5.97 lakh firms have filed returns for 2016-17.
  3. Proportion of direct tax to indirect tax is not optimal.
  4. Individuals numbering 1.95 crore showed an income between Rs. 2.5 lakh to Rs. 5 lakh.
  5. Out of 76 lakh individual assessees declaring income more than Rs. 5 lakh, 56 lakh are salaried.
  6. Only 1.72 lakh people showed income of more than Rs. 50 lakh a year.
  7. Between November 8 to December 30, deposits ranging from Rs. 2 lakh and Rs. 80 lakh were made in 1.09 crore accounts.
  8. Direct tax collection not commensurate with income/expenditure pattern of India.
  9. We are largely a tax non-compliant society; predominance of cash in society enables tax evasion
  10. After demonetization, data received will increase tax net.
  11. No transaction above Rs 3 lakh is permitted in cash.
  12. 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.
  13. Transparency in political funding: Parties continue to receive anonymous donations; propose system of cleaning up.
  14. Maximum amount of cash donation that can be received by Political parties is Rs2,000.
  15. RBI to issue electoral bonds.
  16. 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
  17. Rebate U/s 87A is reduced to Rs. 2500/- for income group upto Rs. 3.5 Lakh.
  18. To have simple one-page ITR form for taxable income up to Rs5 lakh
  19. Not many changes to excise duties since GST will be implemented soon.
  20. Time period of revising tax returns reduced to 12 months
  21. Concessional withholding rate will be extended to 30 June 2020, rupee-denominated masala bonds to be included
  22. MAT not to be abolished at present; to allow carry-forward for 15 years.
  23. 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.
  24. The government proposes to reduce basic customs duty for LNG to 2.5% from 5%.
  25. Limit of cash donation for charitable trusts cut to Rs2,000.