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