The world today faces a riddle called “income inequality”. India too has to get rid of this problem. 10% of India’s population has 70% wealth. Quoting Joseph Stiglitz, “Income inequality has been a choice, not an unexpected, unfortunate economic outcome. That’s unnerving, but it also means that citizens and politicians have the opportunity to fix the problem before it gets worse.”
The writing was already on the wall. Tax the “haves” and support the “have nots”. The Budget 16-17 tries to address the problem of income inequality and awaken the rural economy from its deep slumber and thus boost the economy from the backend. This will help to slowly and gradually narrow down the gap.
The individual tax payers have not received any substantial tax-breaks. But, a marginal increase in the Service tax rate; will definitely help maintain the size of your pocket. The taxation for Small and Medium Enterprises has been simplified which will support the initiative of Make in India and Start Up India. The government plans to increase expenditure on infrastructure.
Almost 2 years after winning the General Election and 3 years for the next elections; the Government is standing at a peculiar crossroad. Which path should they follow? Reduce deficit or increase Growth or be a populist? The Finance Minister has chosen to follow the path of prudence, fiscal consolidation and credibility along with growth.
— BUDGET HIGHLIGHTS —
- Farmer – 28.5 lakh hectares will be brought under irrigation. Crop Insurance under Fasal Bima Yojana. Direct Benefit Transfer to be started as a pilot project for fertilizer subsidy after the success for LPG connections. ₹38,500 crores allocated for MGNREGS. 100% rural electrification by 2018. ₹2.7 lakh crores to be given as a grant in aid to Gram Panchayats and Municipalities.
- Salaried Individual – Rebate u/s 87A has been increased from ₹2,000 to ₹5,000. HRA u/s 80GG has been increased from ₹24,000 to ₹60,000. Surcharge has been increased from 12% to 15% for individual having an income of above ₹1crore. 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.
- Housewife – ₹ 2,000 crores has been allocated to provide LPG connections to Below Poverty Line families. CPI inflation has fallen to 5.4%. This means that the day to day expenses are at a reasonable level.
- Senior Citizens – Additional top-up packages upto ₹30,000 will be provided for senior citizens. 3000 generic drug stores to be set up.
- Trader in the equity markets – The STT on Options has been increased from 0.017% to 0.05%.
- Professional – Professionals with gross receipts upto ₹50 lakhs can avail of the presumptive taxation scheme, where profits will be deemed to be 50%.
- Business – New manufacturing companies incorporated on or after 01/03/2016 will be given an option to be taxed @ 25% + surcharge and cess. Startups set up between April 2016 and March 2019, will be allowed a 100% deduction of profits for 3 out of 5 years.
- For dividend received from companies, exceeding ₹10 lakhs per annum additional tax @ 10% is payable by the recipient. However, there is no change on dividend received from Mutual Funds.
- 1st time house buyers can claim an additional deduction of ₹50,000 per annum provided that the loan is upto ₹35 lakhs and the house cost is ₹50 lakhs or lower.
- Service tax is exempted on construction of affordable housing up to 60 sq. meters.
- Tax will be deducted at source @1% for purchases of luxury cars exceeding value of ₹10 lakhs and for purchases of goods and services in cash exceeding ₹2 lakhs.
- Krishi Kalyan Cess applicable of 0.5% on all taxable services. Hence, Service Tax rate will move upwards from 14.5% to 15%.
- Infrastructure cess of 1% on small petrol, CNG and LPG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs.
- Undisclosed income can be declared and tax can be paid @ 45% inclusive of penalties.
- For Non-residents without PAN card, lower TDS can be applied by providing additional documents.
- 9% will be paid for delay in giving effect to Appellate order beyond 90 days, in regards to Income Tax.
- Fiscal deficit has been maintained at 3.5%.
- ₹97,000 crores has been allocated to develop roads. Previously, large expenditure was undertaken for the Golden Quadrilateral; which resulted in a boost for the economy through more jobs and speedy transport.
- ₹25,000 crores to be allocated towards recapitalization of public sector banks.
Growth is driven by consumption, investments and government expenditure. Consumption can be increased by subsiding good and services or by financially empowering the people. The budget makes a bold statement by financially empowering the masses through initiatives other than subsidies. Government has also allocated the fiscal resources prudently. This will be a factor for sustainable and inclusive growth of the economy.
This Budget Has Focused On –
CONVERTING CHALLENGES INTO OPPORTUNITIES!
The Government is investing its resources in the Indian Growth Story.
Are you investing your resources??