2016-17 Union Budget Monday February 29,2016

 

2016-17 Union Budget Highlights

I rise to present the Budget for the year 2016-17

I am presenting this Budget when the global economy is in serious crisis. Global growth has slowed down from 3.4% in 2014 to 3.1% in 2015. Financial markets have been battered and global trade has contracted. Amidst all these global headwinds, the Indian economy has held its ground firmly. Thanks to our inherent strengths and the policies of this Government, a lot of confidence and hope continues to be built around India.

My Budget proposals are, therefore, built on this transformative agenda with 9 distinct pillars. These include:

(i) Agriculture and Farmers' Welfare: with focus on doubling farmers' income in five years;
(ii) Rural Sector: with emphasis on rural employment and infrastructure;
(iii) Social Sector including Healthcare: to cover all under welfare and health services;
(iv) Education, Skills and Job Creation: to make India a knowledge based and productive society;
(v) Infrastructure and Investment: to enhance efficiency and quality of life;
(vi) Financial Sector Reforms: to bring transparency and stability;
(vii) Governance and Ease of Doing Business: to enable the people to realise their full potential;
(viii) Fiscal Discipline: prudent management of Government finances and delivery of benefits to the needy; and
(ix) Tax Reforms: to reduce compliance burden with faith in the citizenry.

ROADMAP & PRIORITIES
1. 'Transform India' to have a significant impact on economy and lives of people.
2. Government to focus on –
a)ensuring macro-economic stability and prudent fiscal management.
b) boosting on domestic demand
c) continuing with the pace of economic reforms and policy initiatives to change the lives of our people for the better.
3. Focus on enhancing expenditure in priority areas of - farm and rural sector, social sector, infrastructure sector employment generation and recapitalisation of the banks.
4. Focus on Vulnerable sections through:
a) Pradhan Mantri Fasal Bima Yojana
b) New health insurance scheme to protect against hospitalisation expenditure
c) facility of cooking gas connection for BPL families
5. Continue with the ongoing reform programme and ensure passage of the Goods and Service Tax bill and Insolvency and Bankruptcy law
6. Undertake important reforms by:
a) giving a statutory backing to AADHAR platform to ensure benefits reach the deserving.
b) freeing the transport sector from constraints and restrictions
c) incentivising gas discovery and exploration by providing calibrated marketing freedom
d) enactment of a comprehensive law to deal with resolution of financial firms
e) provide legal framework for dispute resolution and re-negotiations in PPP projects and public utility contracts
f) undertake important banking sector reforms and public listing of general insurance companies undertake significant changes in FDI policy.

AGRICULTURE AND FARMERS’ WELFARE
1. Allocation for Agriculture and Farmers’ welfare is Rs 35,984 crore
2. ‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission mode. 28.5 lakh hectares will be brought under irrigation.
3. Implementation of 89 irrigation projects under AIBP, which are languishing for a long time, will be fast tracked
4. A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about ` 20,000 crore
5. Programme for sustainable management of ground water resources with an estimated cost of ` 6,000 crore will be implemented through 3 multilateral funding
6. 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
7. Soil Health Card scheme will cover all 14 crore farm holdings by March 2017.
8. 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years
9. Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’ and 'Organic Value Chain Development in North East Region'.
10. Unified Agricultural Marketing ePlatform to provide a common e- market platform for wholesale markets
11. Allocation under Pradhan Mantri Gram Sadak Yojana increased to ` 19,000 crore. Will connect remaining 65,000 eligible habitations by 2019.
12. 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
13. Allocation under Prime Minister Fasal Bima Yojana Rs 5,500 crore.
14. Rs 850 crore for four dairying projects - ‘Pashudhan Sanjivani’, ‘Nakul Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for indigenous breeds
FISCAL DEFICIT
1. Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.
2. Revenue Deficit target from 2.8% to 2.5% in RE 2015-16
3. Total expenditure projected at ` 19.78 lakh crore
4. Plan expenditure pegged at ` 5.50 lakh crore under Plan, increase of 15.3%
5. Non-Plan expenditure kept at ` 14.28 lakh crores.
6. 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.
7. Mobilisation of additional finances to the extent of ` 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising Bonds.
8. Plan / Non-Plan classification to be done away with from 2017-18. Every new scheme sanctioned will have a sunset date and outcome review.
9. Rationalised and restructured more than 1500 Central Plan Schemes into about 300 Central Sector and 30 Centrally Sponsored Schemes.
10. Committee to review the implementation of the FRBM Act.
SOCIAL SECTOR INCLUDING HEALTH CARE
1. Allocation for social sector including education and health care – Rs 1,51,581 crore.
2. Rs` 2,000 crore allocated for initial cost of providing LPG connections to BPL families.
3. New health protection scheme will provide health cover up to Rs One lakh per family. For senior citizens an additional top-up package up to Rs 30,000 will be provided.
4. 3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be opened during 2016-17.
5. ‘National Dialysis Services Programme’ to be started under National Health Mission through PPP mode
6. “Stand Up India Scheme” to facilitate at least two projects per bank branch. This will benefit at least 2.5 lakh entrepreneurs.
7. National Scheduled Caste and Scheduled Tribe Hub to be set up in partnership with industry associations
8. Allocation of ` 100 crore each for celebrating the Birth Centenary of Pandit Deen Dayal Upadhyay and the 350th Birth Anniversary of Guru 5 Gobind Singh.
EDUCATION, SKILLS AND JOB CREATION
1. 62 new Navodaya Vidyalayas will be opened
2. Sarva Shiksha Abhiyan to increasing focus on quality of education
3. Regulatory architecture to be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions
4. Higher Education Financing Agency to be set-up with initial capital base of Rs 1000 Crores
5. Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up.
RURAL ECONOMY
1. Allocation for rural sector - Rs 87,765 crore.
2. 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
3. Every block under drought and rural distress will be taken up as an intensive Block under the Deen Dayal Antyodaya Mission
4. A sum of Rs 38,500 crore allocated for MGNREGS.
5. 300 Rurban Clusters will be developed under the Shyama Prasad4 Mukherjee Rurban Mission
6. 100% village electrification by 1st May, 2018.
7. 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.
8. Priority allocation from Centrally Sponsored Schemes to be made to reward villages that have become free from open defecation.
9. A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional household within the next 3 years.
10. National Land Record Modernisation Programme has been revamped.
11. New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of 655 crore.
BANKING REFORMS
* Government to infuse 250 billion rupees capital into state-run banks in 2016/17; will find resources for additional capital for banks if required
TAXATION
1. Committed to providing a stable and predictable taxation regime and reduce black money.
2. 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.
3. Surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.
4. New Dispute Resolution Scheme to be introduced. No penalty in respect of cases with disputed tax up to `Rs10 lakh. Cases with disputed tax exceeding `Rs 10 lakh to be subjected to 25% of the minimum of the imposable penalty. Any pending appeal against a penalty order can also 14 be settled by paying 25% of the minimum of the imposable penalty and tax interest on quantum addition.
5. High Level Committee chaired by Revenue Secretary to oversee fresh cases where assessing officer applies the retrospective amendment.
6. One-time scheme of Dispute Resolution for ongoing cases under retrospective amendment.
7. Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.
8. 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.
9. Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty.
10. 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).
11. Monetary limit for deciding an appeal by a single member Bench of ITAT enhanced from Rs 15 lakhs to Rs 50 lakhs.
12. 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
SKILL DEVELOPMENT
1. Allocation for skill development – Rs 1804. crore
2. 1500 Multi Skill Training Institutes to be set-up
3. National Board for Skill Development Certification to be setup in partnership with the industry and academia
4. Entrepreneurship Education and Training through Massive Open Online Courses
JOB CREATION
1. 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 Rs 1000 crore for this scheme.
2. Deduction under Section 80JJAA of the Income Tax Act will be available to all assesses who are subject to statutory audit under the Act
3. 100 Model Career Centres to operational by the end of 2016-17 under National Career Service.
4. Model Shops and Establishments Bill to be circulated to States.
INFRASTRUCTURE AND INVESTMENT
1. Total investment in the road sector, including PMGSY allocation, would be Rs 97,000 crore during 2016-17.
2. India’s highest ever kilometres of new highways were awarded in 2015.
3. To approve nearly 10,000 kms of National Highways in 2016-17.
4. Allocation of ` 55,000 crore in the Budget for Roads. Additional Rs 15,000 crore to be raised by NHAI through bonds.
5. Total outlay for infrastructure - Rs 2,21,246 crore.
6. Amendments to be made in Motor Vehicles Act to open up the road transport sector in the passenger segment
7. Action plan for revival of unserved and underserved airports to be drawn up in partnership with State Governments.
8. To provide calibrated marketing freedom in order to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature areas
9. Comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation to be drawn up.
10. Steps to re-vitalise PPPs:  Public Utility (Resolution of Disputes) Bill will be introduced during 2016-17
11. Guidelines for renegotiation of PPP Concession Agreements will be issued
12. New credit rating system for infrastructure projects to be introduced
13. Reforms in FDI policy in the areas of Insurance and Pension, Asset
14. Reconstruction Companies, Stock Exchanges.
15. 100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.
16. A new policy for management of Government investment in Public Sector Enterprises, including disinvestment and strategic sale, 7 approved.
FINANCIAL SECTOR REFORMS
1. A comprehensive Code on Resolution of Financial Firms to be introduced.
2. Statutory basis for a Monetary Policy framework and a Monetary Policy Committee through the Finance Bill 2016.
3. A Financial Data Management Centre to be set up.
4. RBI to facilitate retail participation in Government securities.
5. New derivative products will be developed by SEBI in the Commodity Derivatives market.
6. 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. 7. Comprehensive Central Legislation to be bought to deal with the menace of illicit deposit taking schemes.
8. Increasing members and benches of the Securities Appellate Tribunal.
9. Allocation of ` 25,000 crore towards recapitalisation of Public Sector Banks.
10. Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to Rs 1,80,000 crore.
11. General Insurance Companies owned by the Government to be listed in the stock exchanges.
GOVERNANCE AND EASE OF DOING BUSINESS
1. A Task Force has been constituted for rationalisation of human resources in various Ministries.
2. Comprehensive review and rationalisation of Autonomous Bodies.
3. Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhar framework to be introduced.
4. Introduce DBT on pilot basis for fertilizer.
5. Automation facilities will be provided in 3 lakh fair price shops by March 2017.
6. Amendments in Companies Act to improve enabling environment for start-ups.
7. Price Stabilisation Fund with a corpus of ` 900 crore to help maintain stable prices of Pulses.
8. “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.
BOOST EMPLOYMENT AND GROWTH
1. 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.
2. Extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to Rs 50 lakh.
3. Phasing out deduction under Income Tax:  Accelerated depreciation wherever provided in IT Act will be limited to maximum 40% from 1.4.2017
4. Benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020
5. Benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020.
6. The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020
7. 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.
8. 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.
9. 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. 10% rate of tax on income from worldwide exploitation of patents developed and registered in India by a resident.
11. Complete pass through of income-tax to securitization trusts including trusts of ARCs. Securitisation trusts required to deduct tax at source.
12. 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.
13. 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.
14. Determination of residency of foreign company on the basis of Place of Effective Management (POEM) is proposed to be deferred by one year.
15. Commitment to implement General Anti Avoidance Rules (GAAR) from 1.4.2017.
16. 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.
17. 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.
18. Basic custom and excise duty on refrigerated containers reduced to 5% and 6%.
MAKE IN INDIA
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

1)First home buyers to get additional deduction of Rs 50,000. However, this benefit is only for loans up to Rs 35 lakhs where the cost of house is less than Rs 50 lakh.

2)The ceiling of tax rebate under Section 87A of IT Act has been proposed to be raised to Rs 5,000 from Rs 2,000 for individuals with income less than Rs 5 lakhs.

3)Withdrawal from NPS corpus of up to 40% at the time of retirement has been made tax exempt. Similarly, 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 after 1 April 2016.
Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases. The FM has also reduced the service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid

4)The limit of turnover under the presumptive taxation scheme revised from Rs 1 crore to Rs 2 crore for medium or small enterprises.
So, anyone with a business of Rs 2 crore can presume that an income of 8% and would not require to maintain books, profit & loss statements or audits.
As per Section 44AD of the Income-Tax Act, under the presumptive method, the tax liability is calculated on the basis of a 'presumed business income', irrespective of what your actual income may be.
Moreover, Section 44AD now extended to Professionals as well. This frees them from burden of books of accounts and getting audit done. Professionals with gross receipts up to Rs 50 lakh can now avail this benefit by paying tax at 50% of gross receipts.  

5)As recommended by The Easwar committee, now NRIs who do not have PAN cards would not be subjected to a higher TDS of 20% if they submit Tax Identification Number.

6)A limited period Compliance Window for domestic taxpayers will be created between 1 June to 30th September to declare undisclosed income or income.
To clear up their past tax transgressions taxpayers will have to pay tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. They will have to pay up the taxes within two months of declaration.
There will be no scrutiny or enquiry regarding income declared in these declarations under the Income Tax Act or the Wealth Tax Act and the declarants will have immunity from prosecution. Immunity from Benami Transaction (Prohibition) Act, 1988 will also be providd. The surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.

7)The penalties will be steeper for tax evaders. FM plans to modify the entire scheme of penalty by providing different categories of misdemeanor with graded penalty and thereby substantially reducing the discretionary power of the tax officers.
The penalty rates will now be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts. Currently, the Income-tax Officer has discretion to levy penalty at the rate of 100% to 300% of tax sought to be evaded

8)The FM has proposed a Tax At Source at the rate of 1% on purchase of luxury cars exceeding value of Rs. 10 lakh and purchase of goods and services in cash exceeding Rs. 2 lakh.
An 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 and SUVs will also be levied.
The excise duty on branded readymade garments and other items made of textiles with a retail sale price of Rs 1,000 and cigarettes along with other tobacco products (other than beedi) has also been increased.

9)100% deduction for profits to an undertaking from a 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 is completed within three years of the approval. Minimum Alternate Tax will however apply to these undertakings. 

10)The limit of deduction of house rent paid under section 80GG has also been raised to Rs 60,000 from the existing Rs 24,000 per annum to give relief to employees who live in rented houses.

11)The government proposes to pay 8.33 per cent for all new employees for first three years of employment. A total of Rs 1,000 crore has been allocated towards it.
From the employee's basic salary, 12 percent of it goes towards his EPF account while the employer also contributes an equal amount.
However, not all amount of employer's contribution moves into employee's EPF but only 3.67 percent is diverted into it. The balance i.e. 8.33 percent of employer's monthly contribution moves into employee's pension scheme (EPS).
As per the proposals of Budget 2016, government proposes to pay 8.33 per cent for all new employees for first three years of employment. A total of Rs 1,000 crore has been allocated towards it.