Highlights of the Union Budget 2016-17

The Finance Minister, Arun Jaitley presented the Union Budget for 2016-17 in Parliament. The government has decided to adhere to the Fiscal Deficit target of 3.5% of GDP for 2016-17. The Budget has proposed a 15.3% increase in Plan expenditure to Rs.5.5 trillion while Non-plan expenditure is seen at Rs.14.28 trillion. The Finance Minister shared nine pillars for a transformational budget: Agriculture and farmers’ welfare, rural sector, social sector, educational skills and job creation, infrastructure and investment, financial sector reforms, governance and ease of doing business, fiscal discipline and tax reforms. Cars, cigarettes, branded garments, air travel will become more expensive, while footwear, solar lamps and routers are slated to be cheaper following a host of changes in the tax structure in the Budget for 2016-17. As a result of additional levy of Krishi Kalyan and infrastructure cess on all services, activities including eating out and payment of bills will also become more expensive. The highlights of the speech are as follows: The Union Budget 2016-17 had special emphasis on agriculture, rural spending, social schemes and infrastructure. The government aims to double the income of farmers by 2022. It proposed to spend Rs.850 billion on irrigation projects in the next 5 years. Implementation of 89 irrigation projects will be fastracked. A dedicated irrigation fund will be created under NABARD. Rs.170 billion has been allocated for Accelerated Irrigation benefits program for 2016-17. Rs.359.8 billion has been all ocated for the farming sector for 2016-17. A Unified agricultural market scheme has been announced to enhance farmer access to market. A total of Rs.385 billion has been allocated for MGNREGA in 2016-17. If implemented, this would be the highest ever annual spending on the scheme. The Government also announced its intention to achieve 100% village electrification by 1 May 2018. The government has proposed service tax exemption under its rural electrification plans. Other initiatives in the rural space include Rs.2.87 trillion grants to gram panchayats and municipalities, proposal to develop 300 "rurban" clusters and a digital literacy scheme to be launched to cover 60 million additional rural households. For 2016-17, Rs.877.7 billion has been allocated for rural development. Within the Infrastructure space, the government has allocated Rs.550 billion for roads and highways in 2016-17. It aims to construct 10,000 kms of national highways. Total outlay for infrastructure has been pegged at Rs.2,212.5 billion in 2016-17. The government has proposed to open up road transport in passenger segment to the private sector. It will also create a new credit rating system for infra. It will set up a new dispute redressal body for infrastructure projects. Under taxation, the government proposed to cut corporation tax to 29% from 2017-18 for companies with turnover less than Rs.50 million. New manufacturing companies after 1 March 2016 are proposed to be taxed at 25 per cent plus cess and surcharge. Long-term capital gains period for unlisted companies has been reduced from three to two years. In addition, Dividend Tax rate of 10% for individuals/HUF if dividend is in excess of 1 million/annum was introduced. The Finance Minister also stated that the government will not resort to retrospective taxation in the future. The government proposed to abolish 14 different cesses levied by ministers. The Finance minister announced infrastructure cess on cars. He also announced a Krishi Kalyan Cess of 0.5% on all taxable services. The Tax ceiling was raised from Rs.2,000 to Rs.5,000 for people with income below Rs.0.5 million per annum. HRA deduction under Section 80GG has been increased to Rs.60,000 per year from Rs.24,000. Tax has been exempt for 40 per cent of with withdrawal from NPS at retirement. The government will pay employers’ share of 8.33 per cent in the Employee Provident Fund (EPF) for all new employees for first three years. Items that will become more expensive next fiscal: - Cigarettes, cigar, tobacco, paper rolled beedis and guthka - All services like bill payments, eating out, air travel - Ready made garments and branded apparel of more than Rs 1,000 - Gold and Silver; jewellery articles excluding silver - Water including mineral water, aerated water containing added sugar or sweetener - Air Travel - Plastic bags and sacks - Ropeway, cable car rides - Imported imitation jewellery - Industrial solar water heater - Legal services - Lottery tickets - Traveling by hiring stage carriage - Hiring of packers & movers - E-reading devices - Instruments for VoIP (Voice over Internet Protocol) - Imported Golf Cars - Gold bars