Union Budget FY 2016-17 Highlights

Union Finance Minister Arun Jaitley presented the Union Budget 2016 and the Finance Bill at the Parliament today. Below are the key highlights:


Fiscal Related:



  • GDP growth has accelerated to 7.6% while CPI inflation has come down to 5.4%.

  • Fiscal deficit in for FY 2015-16 and FY 2016-17 retained at 3.9% and 3.5% respectively

  • Revenue Deficit target from 2.8% to 2.5% in FY 2015-16

  • Current account deficit seen at 1.4% of GDP- for FY 2015-16

  • Total expenditure projected at Rs 19.78 lakh crore




  • Plan expenditure pegged at Rs 5.50 lakh crore under Plan, increase of 15.3%

  • Non-Plan expenditure kept at Rs 14.28 lakh crores

  • India is considered as a 'bright spot' amidst a slowing global economy by IMF.

  • Foreign exchange reserves touched highest ever level of USD 350 billion

  • Additional fiscal burden due to 7th Central Pay Commission recommendations and OROP implementation


 


Roadmap and priorities:



  • 'Transform India' to have a significant impact on economy and lives of people.

  • Better Government to focus on ensuring macro-economic stability and prudent fiscal management and boosting on domestic demand

  • 100% village electrification by 1st May, 2018

  • Higher focus on enhancing expenditure in priority areas of - farm and rural sector, social sector, infrastructure sector employment generation and recapitalisation of the banks.

  • Focus on Vulnerable sections through Pradhan Mantri Fasal Bima Yojana, New health insurance scheme to protect against hospitalisation expenditure and facility of cooking gas connection for BPL families

  • Continue with the ongoing reform programme and ensure passage of the Goods and Service Tax bill and Insolvency and Bankruptcy law

  • Provide legal framework for dispute resolution and re-negotiations in PPP projects and public utility contracts

  • Dept of Disinvestment renamed as Dept of Investment and Public Asset Management



Agriculture and farmers' welfare related:



  • Allocation for Agriculture and Farmers' welfare is Rs 35,984 crore

  • -'Pradhan Mantri Krishi Sinchai Yojana' to be implemented in mission mode in which 28.5 lakh hectares will be brought under irrigation.

  • A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about Rs 20,000 crore

  • 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

  • Allocation under Pradhan Mantri Gram Sadak Yojana increased to Rs 19,000 crore. Will connect remaining 65,000 eligible habitations by 2019.

  • Allocation under Prime Minister Fasal Bima Yojana Rs 5,500 crore.

  • Rs 850 crore was allocated for four dairying projects - 'Pashudhan Sanjivani', 'Nakul Swasthya Patra', 'E-Pashudhan Haat' and National Genomic Centre for indigenous breeds


 


 


Rural sector development related:



  • 38,500 crore for Mahtma Gandhi MGNREGA for 2016-17 and Rs 9,500 crores for Swacch Bharat Abhiyan

  • Special Hub to support SC/ST entrpreneurs

  • LPG connections to be provided under the name of women members of family: Rs 2000 crore allocated for 5 years for BPL families.

  • 300 urban clusters to be set up under Shyama Prasad Mukherji Rurban Mission

  • Allocation for rural sector - Rs 87,765 crore.

  • Rs 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

  • 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


 


Education, skills and Job related:



  • 62 new Navodaya Vidyalayas will be opened

  • Allocation for skill development - Rs 1804 crore

  • 1500 Multi Skill Training Institutes to be set-up

  • Regulatory architecture to be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions

  • Higher Education Financing Agency to be set-up with initial capital base of Rs 1000 Crores

  • Government 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.


Infrastructure and investment related:



  • Total investment planned in the road sector, including PMGSY allocation, will be Rs 97,000 crore during 2016-17.

  • Nearly 10,000 kms of National Highways will be built in 2016-17.

  • Allocation of Rs 55,000 crore in the Budget for Roads. Additional Rs 15,000 crore to be raised by NHAI through bonds.

  • Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.

  • 100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.

  • 3000 crore allocated for nuclear power generation

  • 160 airports and airstrips are chosen which can be revived

  • Additional allocation of Rs 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising Bonds.








Financial sector reforms:



  • Statutory basis for a Monetary Policy framework and a Monetary Policy Committee through the Finance Bill 2016.

  • RBI to facilitate retail participation in Government securities.

  • 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.

  • Allocation of Rs 25,000 crore towards recapitalisation of Public Sector Banks.

  • Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to Rs 1,80,000 crore.

  • Amendmends to boost Asset Reconstruction Companies to manage NPAs of public sector banks


 


On ease of doing business related:



  • A Task Force has been constituted for rationalisation of human resources in various Ministries.

  • Comprehensive review and rationalisation of Autonomous Bodies.

  • Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhar framework to be introduced.

  • Introduce DBT on pilot basis for fertilizer.

  • Amendments in Companies Act to improve enabling environment for start-ups.



Tax related:


 



  • Committed to providing a stable and predictable taxation regime and reduce black money.

  • 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.

  • Surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.

  • Raise the ceiling of tax rebate under section 87A from Rs 2000 to Rs 5000 to reduce tax burden on individuals with income upto Rs. 5 lakhs.

  • Increase the limit of deduction of rent paid under section 80GG from Rs 24000 per annum to Rs 60000, to provide relief to those who live in rented houses.

  • Accelerated depreciation wherever provided in IT Act will be limited to maximum 40% from 1.4.2017

  • Benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020

  • Excise duty raised from 10 to 15% on tobacco products other than beedis

  • Deduction for additional interest of Rs50,000 per annum for loans up to Rs35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does not exceed Rs 50 lakh.

  • 1% service charge on purchase of luxury cars over Rs. 10 lakh and in-cash purchase of goods and services over Rs. 2 lakh.

  • SUVs, Luxury cars to be more expensive. 4% high capacity tax for SUVs.

  • Companies with revenue less than Rs 5 crore to be taxed at 29% plus surcharge

  • Limited tax compliance window from Jun 1 - Sep 30 for declaring undisclosed income at 45% incl. surcharge and penalties

  • Excise 1% imposed on articles of jewellery, excluding silver.

  • 5% Krishi Kalyan Cess to be levied on all services.

  • Pollution cess of 1% on small petrol, LPG and CNG cars; 2.5% on diesel cars of certain specifications; 4% on higher-end models.

  • Dividend in excess of Rs. 10 lakh per annum to be taxed at additional 10%

  • Lower the corporate tax rate for the next financial year for relatively small enterprises i.e companies with turnover not exceeding Rs 5 crore (in the financial year ending March 2015), to 29% plus surcharge and cess.

  • 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.

  • Commitment to implement General Anti Avoidance Rules (GAAR) from 1.4.2017.

  • 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.

  • 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.

  • 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.

  • Reduce service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid in certain cases.

  • Surcharge to be raised from 12% to 15% on persons, other than companies, firms and cooperative societies having income above Rs 1 crore.

  • Securities Transaction tax in case of 'Options' is proposed to be increased from .017% to .05%. > Equalization levy of 6% of gross amount for payment made to non- residents exceeding Rs 1 lakh a year in case of B2B transactions.


'Clean Energy Cess' levied on coal, lignite and peat renamed to 'Clean Environment Cess' and rate increased from Rs200 per tonne to Rs400 per tonne.