Union Budget 2016

Finance Minister Arun Jaitley today (29th February 2016) presented the Union Budget for the year 2016-17. This is his 3rd Union Budget. ith an eye on supporting the small tax-payer and the small investor, the Minister announced a slew of schemes, and income tax exemptions.

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 unfavorable 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.

Nine pillars of the Budget

1. Governance, 
2. Ease of doing business, 
3. Fiscal discipline, 
4. Tax reforms, 
5. Agriculture and farmers welfare , 
6. Rural sector with focus on employment , 
7. Social sector with healthcare , 
8. Educational skills and job creation , 
9. Infrastructure and Investment and financial sector reforms are the nine pillars on which the budget has been prepared.

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 recapitalization of the banks.
• Focus on Vulnerable sections through:
• Pradhan Mantri Fasal Bima Yojana
• New health insurance scheme to protect against hospitalization 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
• incentivizing 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.

Sector-wise Highlights of Union Budget 2016

• Tax

• Infrastructure and agriculture to be levied.
• Excise duty raised from 10 to 15 per cent on tobacco products other than beedis
• 1 per cent service charge on purchase of luxury cars over Rs. 10 lakh and in-cash purchase of goods and services over Rs. 2 lakh.
• SUVs, Luxury cars to be more expensive. 4% high capacity tax for SUVs.
• Companies with revenue less than Rs 5 crore to be taxed at 29% plus surcharge
• Limited tax compliance window from Jun 1 - Sep 30 for declaring undisclosed income at 45% incl. surcharge and penalties
• Excise 1 per cent imposed on articles of jewellery, excluding silver.
• 0.5 per cent Krishi Kalyan Cess to be levied on all services.
• Pollution cess of 1 per cent on small petrol, LPG and CNG cars; 2.5 per cent on diesel cars of certain specifications; 4 per cent on higher-end models.
• Dividend in excess of Rs. 10 lakh per annum to be taxed at additional 10 per cent.

• Personal Finance

• No changes have been made to existing income tax slabs
• Rs 1,000 crore allocated for new EPF (Employees' Provident Fund) scheme
• Govt. will pay EPF contribution of 8.33% for all new employees for first three years
• Deduction for rent paid will be raised from Rs 20,000 to Rs 60,000 to benefit those living in rented houses.
• Additional exemption of Rs. 50,000 for housing loans up to Rs. 35 lakh, provided cost of house is not above Rs. 50 lakh.
• Service tax exempted for housing construction of houses less than 60 sq. m
• 15 per cent surcharge on income above Rs. 1 crore

• Social

• Rs. 38,500 crore for Mahtma Gandhi MGNREGA for 2016-17
• Swacch Bharat Abhiyan allocated Rs.9,500 crores.
• Hub to support SC/ST entrepreneurs
• Government is launching a new initiative to provide cooking gas to BPL families with state support.
• LPG connections to be provided under the name of women members of family: Rs 2000 crore allocated for 5 years for BPL families.
• 2.87 lakh crore grants to gram panchayats and municipalities - a quantum jump of 228%.
• 300 urban clusters to be set up under Shyama Prasad Mukherji Rurban Mission
• Four schemes for animal welfare.

• Health

• 2.2 lakh renal patients added every year in India. Basic dialysis equipment gets some relief.
• A new health protection scheme for health cover upto 1 lakh per family.
• National Dialysis Service Prog with funds thru PPP mode to provide dialysis at all district hospitals.
• Senior citizens will get additional healthcare cover of Rs 30,000 under the new scheme
• PM Jan Aushadhi Yojana to be strengthened, 300 generic drug store to be opened

• Education

• Scheme to get Rs.500 cr for promoting entrepreneurship among SC/ST
• 10 public and 10 private educational institutions to be made world-class.
• Digital repository for all school leaving certificates and diplomas. Rs. 1,000 crore for higher education financing.
• Rs. 1,700 crore for 1500 multi-skill development centers.
• 62 new navodaya vidyalayas to provide quality education
• Digital literacy scheme to be launched to cover 6 crore additional rural households
• Entrepreneurship training to be provided across schools, colleges and massive online courses.
• Objective to skill 1 crore youth in the next 3 years under the PM Kaushal Vikas Yojna-FM Jaitley
• National Skill Development Mission has imparted training to 76 lakh youth. 1500 Multi-skill training institutes to be set up.

• Energy

• Rs. 3000 crore earmarked for nuclear power generation
• Govt drawing comprehensive plan to be implemented in next 15-20 years for exploiting nuclear energy
• Govt to provide incentive for deep water gas exploration
• Deep water gas new disc to get calibrated market freedom, per-determined ceiling price based on landed price of alternate fuels.

• Investments and infrastructure

• Rs. 27,000 crore to be spent on roadways
• 65 eligible habitats to be connected via 2.23 lakh kms of road. Current construction pace is 100 kms/day
• Shops to be given option to remain open all seven days in a week across markets.
• Rs. 55,000 crore for roads and highways. Total allocation for road construction, including PMGSY, - Rs 97,000 crore
• India's highest-ever production of motor vehicles was recorded in 2015
• Total outlay for infrastructure in Budget 2016 now stands at Rs. 2,21,246 crore
• New greenfield ports to be developed on east and west coasts
• Revival of underserved airports. Centre to Partner with States to revive small airports for regional connectivity
• 100 per cent FDI in marketing of food products produced and marketed in India
• Dept. of Disinvestment to be renamed as Dept. of Investment and Public Asset Management
• Govt will amend Motor Vehicle Act in passenger vehicle segment to allow innovation.
• MAT will be applicable for startups that qualify for 100 per cent tax exemption
• Direct tax proposals result in revenue loss of Rs.1060 crore, indirect tax proposals result in gain of Rs.20,670 crore

• Agriculture

• Total allocation for agriculture and farmer welfare at Rs 35984 crores
• 28.5 lakh hectares of land will be brought under irrigation.
• 5 lakh acres to be brought under organic farming over a three year period
• Rs 60,000 crore for recharging of ground water recharging as there is urgent need to focus on drought hit areas cluster development for water conservation.
• Dedicated irrigation fund in NABARD of Rs.20.000 cr
• Nominal premium and highest ever compensation in case of crop loss under the PM Fasal Bima Yojna.

• Banking

• Banks get a big boost: Rs 25,000 crore towards recapitalization of public sector banks. Jaitley says: Banking Board Bureau will be operational, we stand solidly behind public sector banks.
• Target of disbursement under MUDRA increased to 1,80,000 crore
• Process of transfer of government stake in IDBI Bank below 50% started
• General Insurance companies will be listed in the stock exchange
• Govt to increase ATMs, micro-ATMs in post offices in next three years