Union budget 2016: Hits and Misses
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Transcript of Union budget 2016: Hits and Misses
Union Budget 2016
Highlights of Union Budget
Boosting rural development and farmer’s income
Status quo on Fiscal Deficit(3.5%)
Boost on infra spending
Roadmap for Fiscal prudence
Revenue expenditure budgeted torise by 11%
Tax revenues expected to go up by 11% over current year’s RE
Projected one time spectrum chargesto be 99,000 crores
Disinvestment target of Rs.56,500 crores
3.5%Fiscal Deficit
AgricultureDoubling Farmer’s income by 2022• Allocation for Agriculture and Farmer’s welfare to be Rs36,000 crores up
~6% from Current Year RE• 0.5% ‘Krishi Vikas Cess’ to be imposed increasing Service tax to 15%
drawing closer towards of the proposed GST rate of 17-18%
Pradhan Mantri Krishi Sinchayi Yojana• 28.5 lakh hectares of land to be brought under irrigation• Long term irrigation fund to be created with NABARD with an initial corpus
of Rs20,000 Crores
Farmer’s Welfare• Provision of Rs. 15,000 crore made to reduce the burden of loan
repayment of the farmers• Crop insurance allocation increased to Rs.5,500 crores
Rural sector
2012-13 2013-14 2014-15 2015-16 2016-17 (BE)
05000
1000015000200002500030000350004000045000
2942212%
3%
2%
11%
8885 10%
32%
9%
31%
Increase in Govt spending for Rural development
Amount spent on MGNREGA (in Rs. Cr)Amount spent on PMGSY (in Rs. Cr)
Gram Panchayats
• Rs. 2.87 lakh crores, a quantum jump of 228% to be provided to Gram panchayats
• To enable the issues to be solved locally and bring transformation in small villages and towns
Rural Electrificatio
n
• 5542 villages electrified till February 2016• Additional 8500 Crores allocated to support electrification of
remaining 13000+ villages by April 2018
Digital Literacy
• DISHA and Digital literacy scheme announced• To cover 6 crore additional households within next 3 years
Infrastructure
Big PositivesCement sector facing from overcapacity and
under utilization to benefitInfra sector facing high debt and poor cash
flows will be a bigger beneficiary
Modernization of Ports and Airports800 crores for modernization and improving efficiency for ports
Revival of 160 airports and airstrips of state governments
Higher Allocation for RoadsTotal outlay worth ~Rs.97 billion for Roads To approve 10,000 kms of highways with
50,000 kms for State highways
Automobile
Additional 1% TDS
for luxury cars
Infra cess between 1-4% for different
cars
Increase in Vehicle
Prices
Negative for Automobiles
Power
Neutral for Power sector (with rural electrification and more
taxes)
Rs.3000 Crores for Nuclear power
generation
Excise duty on capital
goods reduced to
6%
Clean Energy Cess
increased twice to Rs.
400 PMT
Other Sectors
Dividend income of more than Rs. 10 lakh
to be taxed at 10%
Rs. 25,000 Crores towards
recapitalization of PSBs
STT in Options increased ‘thrice’ to
0.017%
NBFCs eligible for additional 5%
deduction in respect for provision of bad loans
Bank and Financials
Aviation
Excise duty on ATF to increase from 8 to
14%
Metals
Export duty on bauxite reduced
from 20 to 15%
Excise duty on iron ore, chrome ore to reduce to
‘Nil’ from 30%
Real EstateDeduction of
additional Rs.50,000 as interest for
houses below 50
lakh
REITS free from any
DDT
Tax amendments and reforms
No change in Corporate tax laws (reduced only for new manufacturing companies and SMEs subject to conditions)
100% Deduction in profits to an undertaking from a housing project up to 30 sq.mt in Metro and 60 sq.mt in other cities
100% FDI in Food Processing to bring in more revenues and upliftment of farmers
Excise Duty of 1% on Jewelry articles
Excise Duty on tobacco products except Beedi to increase by 10-15%
Individuals, Startups and SMEs
Surcharge increased from 12 to 15% for person with income above Rs.1 Crore
Ceiling under Sec 87 A increased by Rs.
3000 pm for people below Rs. 5 lpa
income
Presumptive taxation for SMEs increased to Rs. 2
crore turnover limit
100% deduction in 3 out of 5 years of
profits for Startups till March 2019
Income tax lowered to 25% for new mfg.
cos and 29% for SMEs with turnover
not exceeding 5 crores
Voluntary Disclosure Scheme
Declaring any undisclosed income at a tax rate of 30% with a penalty of 30%
2015 Budget
Declaring any undisclosed income at a tax rate of 30%, surcharge of 7.5% and a penalty of only 7.5% - a total of 45% of tax is proposed
2016 Budget
Govt seems to realize that the penalties imposedearlier did not bring out much results and hencethey look to bring down to a realizable level andEncourage more people to disclose their incomes
Budget Analysis
The budget seemed to be fairly balanced without any big bang reforms
Push for infrastructure,
rural revival, and agriculture
positive for the economy
Focus on the above mentioned
sectors will invariably boost
corporate India as well, since an
increase in disposable farm
incomes will augur well for
sales of tractors, two wheelers, and consumer goods as well
Areas of concern include no
allocation towards the PM’s
ambitious solar power
development and the no reduction in corporate tax
rate
On the taxation front, the idea
has been to tax the rich and
allocate it to the poor, which is the
nature of progressive
taxation
Fiscal prudence is a mature
decision, but the fiscal math to
achieve it needs to be looked at
more cautiously
Thank You!
- Bhagyesh Shah