Key Highlights of Union Budget 2017

Union Budget 2017 has been a historic one with many firsts to its name. This was the first budget to be presented at the start of February instead of the last day of the month. Further, it was the first time Rail Budget and General Budget were presented together giving a full picture of the finances of the Government.

Finance Minister’s budget speech laid the foundation to implement the government’s vision to empower India through 10 broad themes, viz farmers, rural population, youth, poor and the underprivileged, infrastructure, financial sector, digital economy, public service, prudent fiscal management and tax administration.

Here are some of the key highlights of Union Budget 2017: 

Farmers and Rural Economy

Setting it on the top of the wishlist, FM showcased his priorities to focus on the agriculture sector. The coverage of the Fasal Bima Yojana, which will secure farmers from natural calamities, has been increased to 40% cropped areas in 2017-18 and 50% cropped areas in 2018-19.

Long-term irrigation fund set up by NABARD will see an addition of Rs. 20,000 Crores to its corpus adding to a total of Rs. 40,000 Crores. Micro irrigation fund is also to be set up by NABARD with an initial corpus of Rs. 5000 Crores to achieve the goal of ‘per drop more crop’.

Govt. has set an optimistic target to bring 1 crore households out of poverty by 2019. To achieve 100% electrification target by May 2018, the budget allocation has been increased under Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY). 

Personal Taxation

This is always the most awaited section of the FM’s budget speech. The basic tax exemption limit has been retained at Rs. 2.50 lakh. While there has not been any change in the personal tax rate slabs as was largely expected, the tax rate has been reduced from 10% to 5% for the income from 2.5 lakhs till Rs. 5 lakh.

The tax rates on the higher incomes have not been tinkered with. In fact, a super-rich surcharge has now been imposed on individuals earning between Rs. 50 lakhs and Rs. 1 crore @ 10%. Earlier, this surcharge was only applicable for individuals earning more than Rs. 1 crore @ 15% which continues to be levied.

So, in a nutshell, the tax burden has been halved for the people earning till Rs. 5 lakh while people earning between Rs. 5 lakh to Rs. 50 lakh stand to benefit by reduction of Rs. 12,875 in their annual tax outgo. 

Capital Markets

The target of disinvestment receipts during the next year has been set at Rs. 72,500 crores. FM also mentioned in his budget speech that the shares of Railway Public Sector Enterprises like IRCTC, IRFC and IRCON will be listed on stock exchanges. Further, a new ETF with diversified CPSE stocks and other Government holdings will be launched in 2017-18. So, the next year will be an exciting year for the capital market investors as well with several PSU stocks entering the capital markets.

Railways

Govt. has set out four focus areas in Railways including passenger safety, capital & development works, cleanliness and reforms in finance & accounting system. A fund called ‘Rashtriya Rail Sanraksha Kosh’ with a corpus of Rs. 1 Lakh crores over a period of five years will be created towards passenger safety. Unmanned level crossings on Broad Gauge lines will be eliminated by 2020. Further, to stress upon its thrust on renewable energy, Railways will feed about 7,000 stations with solar power in the medium term. A beginning has already been made in 300 stations and work will be taken up for 2,000 railway stations as part of 1000 MW solar mission.

Real Estate Sector

With a view to promoting the real-estate sector and to make it more attractive for investment, government has decided to reduce the period of holding from the existing 36 months to 24 months in the case of immovable property, being land or building or both, to qualify as a long-term capital asset. It is important to state here that long-term capital gains are subject to various concessions like eligibility for tax exemptions, indexation benefits etc.

Less-Cash and Cash-less Economy

In order to provide cashless economy and transparency, Section 80G has been proposed to be amended to restrict the deductions in respect of donations not exceeding Rs. 2,000 if such donation has been made in cash, instead of Rs. 10,000 as per the present provisions. Similarly, any cash expenditure in excess of Rs. 10,000 will not be allowed as a deduction from the income of the assessee. Further, to incentivise the cashless transactions in the businesses, Govt. has reduced the deemed profit of 6% for business receipts received through electronic means instead of 8% of those received in cash. 

Taxing the Markets

In a public address earlier in the month of January, Hon’ble PM had hinted on the change in the taxation of the capital market transactions, no mention of the same in the budget speech and the fine print is indeed a welcome measure.

No Major Changes in Excise Duty & Service Tax

In view of the fact that Goods & Service Tax is due to be implemented by Sept. 2017, no major changes were made in the rates of excise duty and service tax.

Strengthening the Financial Sector

The focus of the Govt. on the resolution of stressed legacy accounts of banks continues. The legal framework has been strengthened to facilitate resolution, through the enactment of the Insolvency and Bankruptcy Code and the amendments to the SARFAESI and Debt Recovery Tribunal Acts. In line with the ‘Indradhanush’ roadmap, Govt. has provided Rs. 10,000 crores for the recapitalisation of Banks in 2017-18. Further, to deal with big-time offenders, including economic offenders fleeing the country to escape the reach of the law, Government is considering the introduction of legislative changes to confiscate the assets of such persons located within the country.

Other Noteworthy Highlights

A few of the other Noteworthy Highlights in the Budget are:

• Affordable housing will now be given infrastructure status which will enable these projects to avail the associated benefits.
• Fiscal deficit estimated for 2017-18 at 3.2% of GDP.
• Political funding reforms announced where the maximum amount of cash donation to a political party is restricted to Rs. 2,000 from one person
• One page income tax return to be filed by the individuals with taxable income less than Rs. 5 lakhs
• The person with income less than Rs. 5 lakhs filing the return for the first time will not be subjected to scrutiny.

While the budget was largely expected to be a populist one on the backdrop of demonetisation and slowing economy, the Finance Minister played the balancing game quite well.

As it is said, ‘stock exchange is the barometer of the economy’, the budget was given a thumbs up with BSE Sensex rising almost 500 points.

What is your take on the budget?

Simardeep Singh is a Chartered Accountant based in Delhi. He loves sharing his knowledge about personal finance and investment. He blogs regularly at  www.simardeep.com.