Union Budget 2016: The Fine Print

Union Finance Arun Jaitley, who presented his third budget on Monday, showered sops on agriculture and rural sector.

Updated: March 1, 2016 12:15 pm
BIGpic16-17 Complete breakdown of Union Budget 2016

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AGRICULTURE

Subsidy reforms remain on paper in rural sector

Arun Jaitley’s budget hardly has anything to offer as far as rationalisation of farm subsidies and their replacement with targeted direct benefit transfers (DBT) goes.

There is only a token announcement proposing introduction of DBT “on pilot basis for fertiliser in a few districts across the country, with a view to improve the quality of service delivery to farmers”.

At the same time, no attempt has been made to increase farm gate prices of urea, which the latest Economic Survey had recommended in order to prevent diversion of the nutrient for non-agricultural applications, mainly at the expense of small and marginal farmers. The maximum retail price of urea has been at Rs 5,360 per tonne since November 2012. READ MORE

CAPITALmarkets

Sensex takes a roller-coaster ride

Stock markets on Monday went on a roller-coaster ride as a series of tax proposals upset the apple cart of bulls who were expecting several sops to boost the market and India Inc. Dalal Street witnessed sharp swings to the tune of 850 points with the Sensex even plunging 660 points at one stage. The fabled index closed lower by over 152 points at 23,002 on a flurry of buying activity by domestic institutions. On the other hand, bonds and the rupee rallied after Finance Minister Arun Jaitley said the government would stick to its fiscal deficit target of 3.5 percent for 2016-17, raising expectations the Reserve Bank of India (RBI) may cut interest rates before its next policy review in April. The benchmark 10-year bond yield ended down 16 bps at 7.62 percent, after falling as much as 18 bps intraday, the lowest since January 22, 2016. The 10-year benchmark bond yield posted its biggest single-day fall since June 8, 2015. READ MORE

INFRASTRUCTURE

On the road to development

As part of the NDA government’s renewed thrust on infrastructure, Finance Minister Arun Jaitley has focused on the roads sector, alongside railways and ports, as a key vehicle for catalysing public investments. Jaitley Monday announced an outlay of Rs 97,000 crore for the roads sector in his Budget for the next fiscal. “I have proposed an allocation of Rs 55,000 crore in the Budget for roads and highways. This will be further topped up by an additional Rs 15,000 crore to be raised by NHAI through bonds. Thus the total investment in the roads sector, including Pradhan Mantri Gram Sadak Yojana (PMGSY) allocation, would be Rs 97,000 crore during 2016-17,” Jaitley said in his Budget speech. READ MORE

PERSONALFINANCE

To boost demand in the affordable housing category and provide more tax benefits to home buyers, the government proposed an additional deduction of Rs 50,000 on interest component of home loan EMI for first-time buyers in cases where the property is valued up to Rs 50 lakh and the sanctioned loan does not cross Rs 35 lakh. While home buyers already are allowed to claim tax deduction of up to Rs 2 lakh on the interest component of the loan, the move will take the overall deduction benefit to Rs 2.5 lakh. Individuals who qualify for this benefit and fall in the highest tax bracket will witness an additional tax saving of Rs 15,450 on account of the increase in the deduction limit by Rs 50,000 for the year. READ MORE

SOCIALsector

Jaitley sends a get-well-soon message

A new health protection scheme on the road to universal coverage, a national dialysis programme and a 13-per cent hike in Budget allocation — it was relative windfall for the health sector that has stagnated since the beginning of the current five-year plan, and for a couple of years before that. The government stopped short of implementing a health cess on tobacco products, although it did increase the excise duty on cigarettes by 10-15 per cent. The continued exemption for beedis would be a dampener. The Budget allocation for the health ministry went up from Rs 33,765 crore in 2015-16 to Rs 38,892 crore, slightly less than the Rs 40,000 crore the ministry had demanded. The RE for the current financial year is Rs 35,534 crore. This is apart from Rs 1,326.20 crore for AYUSH that brought the total sectoral allocation to Rs 38,892. READ MORE

START-UPS

Tax sops give big push for Start-Up India

TO PROMOTE entrepreneurship, the budget for 2016-17 announced a number of incentives for start-ups, including allowing 100 per cent deduction of profits for three out of five years for start-ups set up during April 2016 to March 2019. Individuals and Hindu Undivided Family (HUF) setting up start-ups by deploying capital gains from sale of residential property will also get tax relief. The lure of profit deduction was, however, dampened by a levy of Minimum Alternate Tax that will be imposed on the start-ups. The budget also proposed to establish a Fund of Funds to raise Rs 2,500 crore annually for four years to finance the start-ups. READ MORE

FINANCIALsector

Rs 25K cr falls short of PSU banks’ hopes

The government announced a host of measures Monday to salvage the public sector banks, including a Rs 25,000 crore bailout in the form of recapitalisation, but experts said this infusion may not be enough to bail out the PSU banks roiled by soaring non-performing assets (NPAs) and losses. Unveiling the plan, Finance Minister Arun Jaitley said PSU banks will get the infusion crore next fiscal. The government is also planning to bring down its stake in IDBI Bank — which made a loss of Rs 2,184 crore in the third quarter — to below 50%, he said while presenting Budget 2016-17. READ MORE

TAXATION

Undisclosed asset declaration: Window for domestic taxpayers

After the introduction of a compliance window for overseas undisclosed assets last year, the government on Monday announced a similar “limited period” compliance window for domestic taxpayers. In his Budget speech for 2016-17, finance Minister Arun Jaitley proposed a four-month compliance window for domestic taxpayers for undisclosed income from any asset and clearing up past transgression by paying tax at 30 per cent, a surcharge at 7.5 per cent, a penalty at 7.5 per cent, which is total of 45 per cent of undisclosed income.

“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 is also proposed subject to certain conditions. The surcharge levied at 7.5 per cent of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy,” Jaitley said. READ MORE