Taxation
Jaitley opens coffers for rural India, unveils another tax amnesty
New Delhi : Focusing on rural economy and infrastructure with minor rebate for small taxpayers but amnesty for defaulters, Finance Minister Arun Jaitley on Monday unveiled a Rs.19.78 lakh crore ($300 billion) budget for 2016-17, earmarking more money for health, literacy and roads.
 
The direct impact on taxpayers from the proposals announced during the 100-minute budget speech will be a Rs.3,000 rebate, benefiting 20 million assessees. Those living in rented homes will get a higher exemption of Rs.60,000 now, against Rs.24,000 earlier. But the tax slabs remain unchanged.
 
At the same time, withdrawal of provident fund and pension upon retirement are partially taxable.
 
Jaitley also announced an amnesty for those with disputed tax claims, with a waiver of penalty on amounts up to Rs.10 lakh. He said 300,000 such cases were pending before appellate authorities, for an amount totalling Rs.5.5 lakh crore.
 
Similarly he also unveiled a limited tax compliance window from June 1 to September 30 for people to declare their undisclosed incomes, with a tax liability of 45 percent of value, including the surcharge and penalties -- together with immunity from scrutiny, enquiry and prosecution.
 
His other steps include a pilot project to extend the direct cash benefit transfers, currently in areas like cooking gas to the fertiliser sector, as also Rs.25,000 crore for the recapitalisation of state-run banks that are under financial stress on account of mounting bad loans.
 
While there were misgivings over money set aside for additional capital for banks, Jaitley told a press conference later that more money will follow as and when warranted. "The budget is not the last word on this," he said, adding he was also open to consolidation of commercial banks.
 
On cutting subsidies, he promised a bill soon to use Aadhaar for direct transfer of cash.
 
Prime Minister Narendra Modi was quick to appreciate the budget and said its focus on development of agriculture, farmers, women and rural areas will give a major push to India's agrarian economy. "It will also help the poor man realise the dream of owning a house," he said.
 
Jaitley also said the government will meet its fiscal targets but said that from next year he proposed to do away with the classification of plan and non-plan expenditure -- a move bound to stir up a controversy.
 
"I have weighed the policy options and decided that prudence lies in adhering to fiscal targets. Consequently, the fiscal deficit in revised estimated 2015-16 and budget estimates 2016-17 have been retained at 3.9 percent and 3.5 percent of GDP, respectively," he said.
 
Jaitley also enhanced the total expenditure for this fiscal to Rs.19.78 lakh crore from Rs.17.85 lakh crore in the revised estimates for this fiscal -- a hike of 10.7 percent -- while the plan expenditure component was revised upward by 15.3 percent.
 
"A broad understanding over years has been plan expenditures are good and non-plan expenditures are bad. This results in skewed allocations in the budget," he said, adding this would be dispensed with from 2017-18 to focus on revenue and capital classification of expenditure.
 
This move is likely to face stiff opposition.
 
Jaitley, a lawyer by profession, decided to bring his fellow practitioners under the service tax net of 14 percent. He also imposed an across-the-board cess of 0.5 percent on services towards farmer welfare, which will add 50 paise for every Rs.100 one spends on food to mobile bills.
 
He also left the market mood sullen by proposing to hike securities transaction tax for options to 0.05 percent from 0.017 percent, levy an additional dividend distribution tax of 10 percent payable by recipients in excess of Rs.10 lakh per annum and 1 percent surcharge on luxury cars.
 
This was enough to sully the market mood. The sensitive index of the BSE dipped sharply to a 52-week low soon after the finance minister read out these proposals, but eventually recovered slightly towards the end of the day, but still down 152.30 points, or 0.66 percent, at 23,002.00 points.
 
Jaitley said the bulk of his tax plan was in nine categories: Relief to small assessees, boosting growth and employment, incentivising "Make in India", encouraging pension, promoting affordable housing, pushing rural economy, reducing litigation, taxation simplification and accountability.
 
Among the various sectors, the allocation for the ministry of agriculture and farmers' welfare was enhanced by 93 percent to Rs.44,485 crore, for rural development by 10.7 percent at Rs.87,765 crore and for health and family welfare by 13 percent to Rs.39,533 crore.
 
A major boost was also given to infrastructure including energy with a 11.3 percent hike in the outlay to Rs.246,246 crore, as also for human resource development with allocation up by 7 percent at Rs.72,394 crore.
 
The budget also used the opportunity to send out signals to the global investor, seeking to ease the foreign equity norms. Notably, 100 percent such equity will now be permitted in multi-brand retailing where the produce sold has been processed and sourced locally.
 
In a bid to boost entrepreneurship, a lower corporate tax rate has been proposed for small firms with a turnover of below Rs.5 crore, to 29 plus surcharge and cess, and 100 percent deduction of profits for three out of five years for start-ups set up between April 2016 and March 2019. 
 
Similarly to boost "Make in India", changes were proposed in customs and excise levies on certain inputs to reduce costs and improve competitiveness in sectors such as IT hardware, capital goods, defence, textiles, minerals fuels, chemicals and petrochemicals, and aircraft and ship repair.
 
Jaitley opened his speech saying while the global economy was in stress, India was still going strong. "The risks of further global slowdown and turbulence are mounting. This complicates the task of economic management for India," he said.
 
"We see these challenges as opportunities." 
 
He also used the opportunity to make a political statement. "Our initiatives in the last 21 months have not only placed the economy on a faster growth trajectory but have bridged the trust deficit, created by the previous Government."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Nifty, Sensex may try to rise – Monday closing report
While the trend is down, Nifty can rally if it closes above 7,050
 
We had mentioned in Friday’s closing report that Nifty, Sensex were not yet out of the woods and that a disappointing budget may push the market down again. The budget has disappointed many investors and the Sensex and Nifty briefly touched their 52-week lows during Monday’s trading. The trends of the major indices during Monday’s trading are given in the table below:
 
 
Union Budget announcements, combined with negative Asian cues, and a dip in the rupee value depressed the Indian equity markets during Monday’s trading. During the Union Budget announcements, the Sensex plunged to a fresh 52-week low of 22,494.61. However, recovered somewhat but still closed negative. Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) touched a fresh 52-week low of 6,825.80 points.
 
The Union Budget 2016-17 was tabled in parliament on Monday. Finance Minister Arun Jaitley disclosed the government's spending on the rural sector, infrastructure and agricultural credit. Market analysts observed that many investors were disappointed, as they expected some out-of-box reform measures. The budget did provide some measures, as well as healthy fiscal deficit targets. Roads and infrastructure sector were supported. There were some big negatives like the hike in securities transaction tax and lower bank recapitalisation levels. Big positives include the hike in rural spending and infrastructure sector.
 
 
Continuing government efforts to deal with the high levels of non-performing assets (NPAs), or bad debts, of state-run banks, Finance Minister Arun Jaitley on Monday allocated Rs25,000 crore towards their recapitalisation in the next fiscal. He made the announcement while presenting in parliament the union budget proposals for the next fiscal. Jaitley plans to provide Rs25,000 crore capital each in the current and next fiscal years, while Rs20,000 crore would be provided during 2017-18 and 2018-19. In July last, the government had presented to parliament a supplementary demand for grants to provide for Rs12,000 crore towards recapitalisation of public sector banks (PSBs). 
 
The Rs25,000 crore this year are being provided through three tranches. Around 40% of the amount is to be given to those banks which require support, and all PSBs will be brought to the level of at least 7.5% core capital by the end of fiscal 2016, the finance ministry has said. 
 
In the second tranche, 40% of capital is to be allocated to State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank and IDBI Bank. The remaining 20% is to be allocated to the banks based on their performance during the three quarters in the current year. As per estimates, PSBs would need additional capital of up to Rs240,000 crore by 2018 to meet the Basel III capital adequacy norms, put in place to guard against a repeat of the situation following the 2008 US financial crisis. The quantum of exposure of Indian scheduled banks in terms of gross non-productive assets, re-cast loans and write-offs was Rs9.5 lakh crore as of September last year. 
 
Meanwhile, the government on Sunday named former comptroller and auditor general Vinod Rai has been named the first chairman of the Banks Board Bureau that will give advice on how to recover the bad loans of state-run banks. The members co-opted to the board are Anil K Khandelwal, former chairman of Bank of Baroda, HN Sinor, former joint managing director of ICICI Bank and Rupa Kudwa, former managing director and chief executive of Crisil. Taking the first step towards a holding company structure for state-run banks, the government, in August last, announced the setting up of a Banks Board Bureau (BBB) that will recommend appointment of directors in PSBs and advise on ways of raising funds and dealing with stressed assets.
 
In line with budget proposals’ rural focus, Prime Minister Narendra Modi said he dreams of seeing farmers' income getting doubled by 2022 when the country completes 75 years of its independence. Addressing a big gathering of farmers during a 'Kisan Rally' here, Modi highlighted various initiatives undertaken by his government for their welfare. Stating that while most of the governments wait for the election year to roll out welfare schemes and incentives for farmers, Modi said it was not the case with his National Democratic Alliance government. "Farmers look towards governments after God and it is imperative on us to ensure that the farmers are looked after well," the prime minister said.  "I exhort all state governments that they should work on the road map before them and I am sure that my dream and your dream will succeed," he added. The prime minister also described the service, manufacturing and agriculture sectors as the backbone of the Indian economy.
 
The central parity rate of the Chinese currency renminbi, or the yuan, weakened 114 basis points to 6.5452 against the US dollar on Monday, according to the China Foreign Exchange Trading System. In China's spot foreign exchange market, the yuan is allowed to rise or fall by two percent from the central parity rate each trading day, Xinhua reported. The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
 
Tokyo stocks rose from the off on Monday as hopes following the G20 finance ministers' agreement to help stabilise markets, coupled with the yen's comparative weakness spurred an upbeat market mood. 
 
Aditya Birla-led UltraTech Cement on Sunday announced acquisition of Jaiprakash Associates Ltd's cement plants, with total capacity of 22.4 million tons per annum (mtpa), for Rs.16,500 crore (about $2.5 billion), situated in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka. "The assets will give the company access to the newer markets of Satna, UP East, Himachal Pradesh and coastal Andhra where it does not have a presence as of now. Upon consummation of the proposed transaction, the company's cement capacity will stand augmented to 90.7 mtpa (current 68.3 mtpa)," UltraTech said. It was unclear whether this agreement includes two cement plants of Jaiprakash Associates, the purchase of which were cancelled last week by UltraTech owing to lack of necessary approvals. UltraTech had on Friday said it was calling off that deal with Jaiprakash Associates, which has been selling its assets in a bid to reduce debt and improve its balance sheet. UltraTech Cement closed at Rs2,767.05, down 0.30% on the BSE.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

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Budget will accomplish 'housing for all' dream: PM Modi
New Delhi : Prime Minister Narendra Modi on Monday hailed his Finance Minister Arun Jaitley for the poor-friendly general budget that will also fulfil their dream of owning a house.
 
"Ask a common man, ask a poor man. They have a dream to own a house… and the government can help them fulfil that dream," Modi said in his post-budget comments which were televised on national TV. 
 
Modi said the government in its budget has laid emphasis on "strengthening the houses sector and give a house to poor" in India.
 
"Through this budget, the housing sector will be strengthened and this will boost our dream of 'Housing for All'."
 
In his budget speech in the Lok Sabha, Jaitley said the government will provide assistance to those looking to purchase their first homes.
 
The finance minister announced deduction for additional interest of Rs.50,000 per annum for loans up to Rs.35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does not exceed Rs.50 lakh.
 
The government also proposed to provide relief to millions of families living in rented houses in the country. "Deduction for rent paid will be raised from Rs 20,000 to Rs 60,000 to benefit those living in rented houses," Jaitley said.
 
Modi also said that the general budget was focused on the development of agriculture, farmers, women and rural areas.
 
"The budget clearly calls for electrifying all villages thus giving an impetus to rural infrastructure," he said in his comments.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Nanda Patel

12 months ago

1. poor does not pay tax. (so except subsidy there are no benefits, as one is not in the tax net at all)

2. by the governments definition of "poor". No bank is going to lend them any money (*earn bellow 32Rs/day or 10000 Rs/Year may be double that money as the numbers are from 2007 and still no bank is going to lend them). The income parity is just unfortunate in India.


This budget will benefit the lower middle class( mostly government employees)


*"Not poor if you earn Rs.32 a day: Planning Commission"(http://indiatoday.intoday.in/story/plann...

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