Key Features of Budget 2016-2017

INTRODUCTION
 Growth of Economy accelerated to 7.6% in 2015-16.
 India hailed as a ‘bright spot’ amidst a slowing global economy by IMF.
 Robust growth achieved despite very unfavourable global conditions
and two consecutive years shortfall in monsoon by 13%
 Foreign exchange reserves touched highest ever level of about 350
billion US dollars.
 Despite increased devolution to States by 55% as a result of the 14th
Finance Commission award, plan expenditure increased at RE stage in
2015-16 – in contrast to earlier years.
CHALLENGES IN 2016-17
 Risks of further global slowdown and turbulence.
 Additional fiscal burden due to 7th Central Pay Commission
recommendations and OROP.
ROADMAP & PRIORITIES
 'Transform India' to have a significant impact on economy and lives of
people.
 Government to focus on –
 ensuring macro-economic stability and prudent fiscal
management.
 boosting on domestic demand
 continuing with the pace of economic reforms and policy
initiatives to change the lives of our people for the better.
 Focus on enhancing expenditure in priority areas of - farm and rural
sector, social sector, infrastructure sector employment generation and
recapitalisation of the banks.
2
 Focus on Vulnerable sections through:
 Pradhan Mantri Fasal Bima Yojana
 New health insurance scheme to protect against hospitalisation
expenditure
 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
 Undertake important reforms by:
 giving a statutory backing to AADHAR platform to ensure benefits
reach the deserving.
 freeing the transport sector from constraints and restrictions
 incentivising gas discovery and exploration by providing
calibrated marketing freedom
 enactment of a comprehensive law to deal with resolution of
financial firms
 provide legal framework for dispute resolution and
re-negotiations in PPP projects and public utility contracts
 undertake important banking sector reforms and public listing of
general insurance companies undertake significant changes in FDI
policy.
AGRICULTURE AND FARMERS’ WELFARE
 Allocation for Agriculture and Farmers’ welfare is ` 35,984 crore
 ‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission
mode. 28.5 lakh hectares will be brought under irrigation.
 Implementation of 89 irrigation projects under AIBP, which are
languishing for a long time, will be fast tracked
 A dedicated Long Term Irrigation Fund will be created in NABARD with
an initial corpus of about ` 20,000 crore
 Programme for sustainable management of ground water resources
with an estimated cost of ` 6,000 crore will be implemented through
3
multilateral funding
 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
 Soil Health Card scheme will cover all 14 crore farm holdings by March
2017.
 2,000 model retail outlets of Fertilizer companies will be provided with
soil and seed testing facilities during the next three years
 Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’
and 'Organic Value Chain Development in North East Region'.
 Unified Agricultural Marketing ePlatform to provide a common emarket platform for wholesale markets
 Allocation under Pradhan Mantri Gram Sadak Yojana increased to `
19,000 crore. Will connect remaining 65,000 eligible habitations by
2019.
 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
 Allocation under Prime Minister Fasal Bima Yojana ` 5,500 crore.
 ` 850 crore for four dairying projects - ‘Pashudhan Sanjivani’, ‘Nakul
Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for
indigenous breeds
RURAL SECTOR
 Allocation for rural sector - ` 87,765 crore.
 ` 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
 Every block under drought and rural distress will be taken up as an
intensive Block under the Deen Dayal Antyodaya Mission
 A sum of ` 38,500 crore allocated for MGNREGS.
 300 Rurban Clusters will be developed under the Shyama Prasad
4
Mukherjee Rurban Mission
 100% village electrification by 1st May, 2018.
 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.
 Priority allocation from Centrally Sponsored Schemes to be made to
reward villages that have become free from open defecation.
 A new Digital Literacy Mission Scheme for rural India to cover around 6
crore additional household within the next 3 years.
 National Land Record Modernisation Programme has been revamped.
 New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation
of ` 655 crore.
SOCIAL SECTOR INCLUDING HEALTH CARE
 Allocation for social sector including education and health care –
`1,51,581 crore.
 ` 2,000 crore allocated for initial cost of providing LPG connections to
BPL families.
 New health protection scheme will provide health cover up to ` One
lakh per family. For senior citizens an additional top-up package up to `
30,000 will be provided.
 3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be
opened during 2016-17.
 ‘National Dialysis Services Programme’ to be started under National
Health Mission through PPP mode
 “Stand Up India Scheme” to facilitate at least two projects per bankbranch. This will benefit at least 2.5 lakh entrepreneurs. National Scheduled Caste and Scheduled Tribe Hub to be set up inpartnership with industry associations Allocation of ` 100 crore each for celebrating the Birth Centenary ofPandit Deen Dayal Upadhyay and the 350th Birth Anniversary of Guru5Gobind Singh.EDUCATION, SKILLS AND JOB CREATION 62 new Navodaya Vidyalayas will be opened Sarva Shiksha Abhiyan to increasing focus on quality of education Regulatory architecture to be provided to ten public and ten privateinstitutions to emerge as world-class Teaching and Research Institutions Higher Education Financing Agency to be set-up with initial capital baseof ` 1000 Crores Digital Depository for School Leaving Certificates, College Degrees,Academic Awards and Mark sheets to be set-up.SKILL DEVELOPMENT Allocation for skill development – ` 1804. crore. 1500 Multi Skill Training Institutes to be set-up. National Board for Skill Development Certification to be setup inpartnership with the industry and academia Entrepreneurship Education and Training through Massive Open OnlineCoursesJOB CREATION GoI will pay contribution of 8.33% for of all new employees enrolling inEPFO for the first three years of their employment. Budget provision of` 1000 crore for this scheme. Deduction under Section 80JJAA of the Income Tax Act will be availableto all assesses who are subject to statutory audit under the Act 100 Model Career Centres to operational by the end of 2016-17 underNational Career Service. Model Shops and Establishments Bill to be circulated to States.6INFRASTRUCTURE AND INVESTMENT Total investment in the road sector, including PMGSY allocation, wouldbe ` 97,000 crore during 2016-17. India’s highest ever kilometres of new highways were awarded in 2015.To approve nearly 10,000 kms of National Highways in 2016-17. Allocation of ` 55,000 crore in the Budget for Roads. Additional `15,000 crore to be raised by NHAI through bonds. Total outlay for infrastructure - ` 2,21,246 crore. Amendments to be made in Motor Vehicles Act to open up the roadtransport sector in the passenger segment Action plan for revival of unserved and underserved airports to bedrawn up in partnership with State Governments. To provide calibrated marketing freedom in order to incentivise gasproduction from deep-water, ultra deep-water and high pressure-hightemperature areas Comprehensive plan, spanning next 15 to 20 years, to augment theinvestment in nuclear power generation to be drawn up. Steps to re-vitalise PPPs: Public Utility (Resolution of Disputes) Bill will be introduced during2016-17 Guidelines for renegotiation of PPP Concession Agreements will beissued New credit rating system for infrastructure projects to beintroduced Reforms in FDI policy in the areas of Insurance and Pension, AssetReconstruction Companies, Stock Exchanges. 100% FDI to be allowed through FIPB route in marketing of foodproducts produced and manufactured in India. A new policy for management of Government investment in PublicSector Enterprises, including disinvestment and strategic sale,7approved.FINANCIAL SECTOR REFORMS A comprehensive Code on Resolution of Financial Firms to beintroduced. Statutory basis for a Monetary Policy framework and a Monetary PolicyCommittee through the Finance Bill 2016. A Financial Data Management Centre to be set up. RBI to facilitate retail participation in Government securities. New derivative products will be developed by SEBI in the CommodityDerivatives market. Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARCto hold up to 100% stake in the ARC and permit non institutionalinvestors to invest in Securitization Receipts. Comprehensive Central Legislation to be bought to deal with themenace of illicit deposit taking schemes. Increasing members and benches of the Securities Appellate Tribunal. Allocation of ` 25,000 crore towards recapitalisation of Public SectorBanks. Target of amount sanctioned under Pradhan Mantri Mudra Yojanaincreased to ` 1,80,000 crore. General Insurance Companies owned by the Government to be listed inthe stock exchanges.GOVERNANCE AND EASE OF DOING BUSINESS A Task Force has been constituted for rationalisation of humanresources in various Ministries. Comprehensive review and rationalisation of Autonomous Bodies. Bill for Targeted Delivery of Financial and Other Subsidies, Benefits andServices by using the Aadhar framework to be introduced.8 Introduce DBT on pilot basis for fertilizer. Automation facilities will be provided in 3 lakh fair price shops byMarch 2017. Amendments in Companies Act to improve enabling environment forstart-ups. Price Stabilisation Fund with a corpus of ` 900 crore to help maintainstable prices of Pulses. “Ek Bharat Shreshtha Bharat” programme will be launched to linkStates and Districts in an annual programme that connects peoplethrough exchanges in areas of language, trade, culture, travel andtourism.FISCAL DISCIPLINE Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%. Revenue Deficit target from 2.8% to 2.5% in RE 2015-16 Total expenditure projected at ` 19.78 lakh crore Plan expenditure pegged at ` 5.50 lakh crore under Plan, increase of15.3% Non-Plan expenditure kept at ` 14.28 lakh crores Special emphasis to sectors such as agriculture, irrigation, social sectorincluding health, women and child development, welfare of ScheduledCastes and Scheduled Tribes, minorities, infrastructure. Mobilisation of additional finances to the extent of ` 31,300 crore byNHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raisingBonds. Plan / Non-Plan classification to be done away with from 2017-18. Every new scheme sanctioned will have a sunset date and outcomereview. Rationalised and restructured more than 1500 Central Plan Schemesinto about 300 Central Sector and 30 Centrally Sponsored Schemes. Committee to review the implementation of the FRBM Act.9RELIEF TO SMALL TAX PAYERS Raise the ceiling of tax rebate under section 87A from `2000 to `5000to lessen tax burden on individuals with income upto `5 laks. Increase the limit of deduction of rent paid under section 80GG from`24000 per annum to `60000, to provide relief to those who live inrented houses.BOOST EMPLOYMENT AND GROWTH Increase the turnover limit under Presumptive taxation scheme undersection 44AD of the Income Tax Act to ` 2 crores to bring big relief to alarge number of assessees in the MSME category. Extend the presumptive taxation scheme with profit deemed to be 50%,to professionals with gross receipts up to `50 lakh. Phasing out deduction under Income Tax: Accelerated depreciation wherever provided in IT Act will belimited to maximum 40% from 1.4.2017 Benefit of deductions for Research would be limited to 150% from1.4.2017 and 100% from 1.4.2020 Benefit of section 10AA to new SEZ units will be available to thoseunits which commence activity before 31.3.2020. The weighted deduction under section 35CCD for skill developmentwill continue up to 1.4.2020 Corporate Tax rate proposals: New manufacturing companies incorporated on or after 1.3.2016to be given an option to be taxed at 25% + surcharge and cessprovided they do not claim profit linked or investment linkeddeductions and do not avail of investment allowance andaccelerated depreciation.10 Lower the corporate tax rate for the next financial year forrelatively small enterprises i.e companies with turnover notexceeding ` 5 crore (in the financial year ending March 2015), to29% plus surcharge and cess. 100% deduction of profits for 3 out of 5 years for startups setup duringApril, 2016 to March, 2019. MAT will apply in such cases. 10% rate of tax on income from worldwide exploitation of patentsdeveloped and registered in India by a resident. Complete pass through of income-tax to securitization trusts includingtrusts of ARCs. Securitisation trusts required to deduct tax at source. Period for getting benefit of long term capital gain regime in case ofunlisted companies is proposed to be reduced from three to two years. Non-banking financial companies shall be eligible for deduction to theextent of 5% of its income in respect of provision for bad and doubtfuldebts. Determination of residency of foreign company on the basis of Place ofEffective Management (POEM) is proposed to be deferred by one year. Commitment to implement General Anti Avoidance Rules (GAAR) from1.4.2017. Exemption of service tax on services provided under Deen DayalUpadhyay Grameen Kaushalya Yojana and services provided byAssessing 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 theWelfare of Persons with Autism, Cerebral Palsy, Mental Retardation andMultiple Disability. Basic custom and excise duty on refrigerated containers reduced to 5%and 6%.MAKE IN INDIA11 Changes in customs and excise duty rates on certain inputs to reducecosts and improve competitiveness of domestic industry in sectors likeInformation 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.MOVING TOWARDS A PENSIONED SOCIETY Withdrawal up to 40% of the corpus at the time of retirement to be taxexempt in the case of National Pension Scheme (NPS). Annuity fundwhich goes to legal heir will not be taxable. In case of superannuation funds and recognized provident funds,including EPF, the same norm of 40% of corpus to be tax free will applyin respect of corpus created out of contributions made on or from1.4.2016. Limit for contribution of employer in recognized Provident andSuperannuation Fund of ` 1.5 lakh per annum for taking tax benefit.Exemption from service tax for Annuity services provided by NPS andServices provided by EPFO to employees. Reduce service tax on Single premium Annuity (Insurance) Policies from3.5% to 1.4% of the premium paid in certain cases.PROMOTING AFFORDABLE HOUSING 100% deduction for profits to an undertaking in housing project for flatsupto 30 sq. metres in four metro cities and 60 sq. metres in other cities,approved during June 2016 to March 2019 and completed in threeyears. MAT to apply. Deduction for additional interest of `50,000 per annum for loans up to`35 lakh sanctioned in 2016-17 for first time home buyers, wherehouse cost does not exceed ` 50 lakh.12 Distribution made out of income of SPV to the REITs and INVITs havingspecified shareholding will not be subjected to Dividend DistributionTax, in respect of dividend distributed after the specified date. Exemption from service tax on construction of affordable houses up to60 square metres under any scheme of the Central or StateGovernment including PPP Schemes. Extend excise duty exemption, presently available to Concrete Mixmanufactured at site for use in construction work to Ready MixConcrete.RESOURCE MOBILIZATION FOR AGRICULTURE, RURAL ECONOMY ANDCLEAN ENVIRONMENT Additional tax at the rate of 10% of gross amount of dividend will bepayable by the recipients receiving dividend in excess of ` 10 lakh perannum. Surcharge to be raised from 12% to 15% on persons, other thancompanies, firms and cooperative societies having income above ` 1crore. Tax to be deducted at source at the rate of 1 % on purchase of luxurycars exceeding value of ` ten lakh and purchase of goods and services incash exceeding ` two lakh. Securities Transaction tax in case of ‘Options’ is proposed to beincreased from .017% to .05%. Equalization levy of 6% of gross amount for payment made to nonresidents exceeding ` 1 lakh a year in case of B2B transactions. Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016.Proceeds would be exclusively used for financing initiatives forimprovement of agriculture and welfare of farmers. Input tax credit ofthis cess will be available for payment of this cess. Infrastructure cess, of 1% on small petrol, LPG, CNG cars, 2.5% on dieselcars of certain capacity and 4% on other higher engine capacity vehicles13and SUVs. No credit of this cess will be available nor credit of any othertax or duty be utilized for paying this cess. Excise duty of ‘1% without input tax credit or 12.5% with input taxcredit’ on articles of jewellery [excluding silver jewellery, other thanstudded with diamonds and some other precious stones], with a higherexemption and eligibility limits of ` 6 crores and ` 12 croresrespectively. Excise on readymade garments with retail price of ` 1000 or moreraised to 2% without input tax credit or 12.5% with input tax credit. ‘Clean Energy Cess’ levied on coal, lignite and peat renamed to ‘CleanEnvironment Cess’ and rate increased from `200 per tonne to `400 pertonne. Excise duties on various tobacco products other than beedi raised byabout 10 to 15%. Assignment of right to use the spectrum and its transfers has beendeducted as a service leviable to service tax and not sale of intangiblegoods.PROVIDING CERTAINITY IN TAXATION Committed to providing a stable and predictable taxation regime andreduce black money. Domestic taxpayers can declare undisclosed income or such incomerepresented in the form of any asset by paying tax at 30%, andsurcharge at 7.5% and penalty at 7.5%, which is a total of 45% of theundisclosed income. Declarants will have immunity from prosecution. Surcharge levied at 7.5% of undisclosed income will be called KrishiKalyan surcharge to be used for agriculture and rural economy. New Dispute Resolution Scheme to be introduced. No penalty inrespect of cases with disputed tax up to ` 10 lakh. Cases with disputedtax exceeding ` 10 lakh to be subjected to 25% of the minimum of theimposable penalty. Any pending appeal against a penalty order can also14be settled by paying 25% of the minimum of the imposable penalty andtax interest on quantum addition. High Level Committee chaired by Revenue Secretary to oversee freshcases where assessing officer applies the retrospective amendment. One-time scheme of Dispute Resolution for ongoing cases underretrospective amendment. Penalty rates to be 50% of tax in case of underreporting of income and200% of tax where there is misreporting of facts. Disallowance will be limited to 1% of the average monthly value ofinvestments yielding exempt income, but not exceeding the actualexpenditure claimed under rule 8D of Section 14A of Income Tax Act. Time limit of one year for disposing petitions of the tax payers seekingwaiver of interest and penalty. Mandatory for the assessing officer to grant stay of demand once theassesse pays 15% of the disputed demand, while the appeal is pendingbefore Commissioner of Income-tax (Appeals). Monetary limit for deciding an appeal by a single member Bench ofITAT enhanced from ` 15 lakhs to ` 50 lakhs. 11 new benches of Customs, Excise and Service Tax Appellate Tribunal(CESTAT).SIMPLIFICATION AND RATIONALIZATION OF TAXES 13 cesses, levied by various Ministries in which revenue collection isless than ` 50 crore in a year to be abolished. For non-residents providing alternative documents to PAN card, higherTDS not to apply. Revision of return extended to Central Excise assesses. Additional options to banking companies and financial institutions,including NBFCs, for reversal of input tax credits with respect to nontaxable services. Customs Act to provide for deferred payment of customs duties for15importers and exporters with proven track record. Customs Single Window Project to be implemented at major ports andairports starting from beginning of next financial year. Increase in free baggage allowance for international passengers. Filingof baggage only for those carrying dutiable goods.TECHNOLOGY FOR ACCOUNTABILITY Expansion in the scope of e-assessments to all assessees in 7 megacities in the coming years. Interest at the rate of 9% p.a against normal rate of 6% p.a for delay ingiving effect to Appellate order beyond ninety days. ‘e-Sahyog’ to be expanded to reduce compliance cost, especially forsmall taxpayers.<