Most awaited economic event of the country, the presentation of Union Budget for 2016 is over. In the background of a bleak global economy, sluggish industrial and agricultural growth, successive drought for two years, burden of the 7th Pay Commission and OROP of armed forces, the Finance Minister assisted by eight secretarial teams from PMOs office has prepared an innovative blueprint for transforming India into a developed country after seriously considering recommendations of Tax Administration Reforms and Justice Easwar Committee, practical inputs and suggestions made by various trade, professional, industry associations, subject experts and ground realities. Thrust has been to develop and strengthen infrastructure, rural, agriculture and finance sectors and facilitate ease of doing business for employment and growth. ‘Make in India’, ‘Skill India’, ‘Digital India’ are not just slogans. Actual road map is laid down for its achievements with commitment of substantial financial resources and new ideas.
Skill India – Though fifty four percent of the Indian population is below 25 years of age, only 5% of them have employable skills. India needs a large skilled labour force to boost major developments in manufacturing, rural and infrastructure sectors. Rs 1500 crore are earmarked for the Skill Mission to set up 1500 multi-skill training institutes, Vocational Training Centres with massive open on-line courses, IIMs and IITs in different fields, and for expansion of existing higher education institutions along with support of private sector to provide education and skills to one crore youths.
Make in India: Under the Start-Up Mission, Government has taken steps to promote young entrepreneurs with ideas to set up enterprises for which capital is available without security and guarantee. A fund is set up with Rs 10,000 crore for start-ups. Each bank branch is mandated to select minimum two such projects which will benefit at least 2.5 lakh entrepreneurs. Hundred per cent exemption from Income Tax is granted for three years. Registration and other procedural matters are simplified.
Digital India: The initiative will empower citizens to access digital devices, knowledge and information, and effective citizen services on line by providing computer literacy in villages with cyber connectivity; farmers all over India will have 24 hours access to price information to get best prices for their products. There will be no need for tax payers to visit income tax offices and there will be no face to face contacts with tax officials for assessments, refunds and even appeals which will be online through e-portals. Refunds will get credited to designated bank accounts within specified time. This is already happening.
Infrastructure, Rural and Agricultural development and ease of doing business: They are the major focus areas of the Budget. Rs 35,984 crore are allocated for agriculture and farmers welfare, for irrigation projects, soil fertility conservation, ground water management, expand storage capacity, crop insurance, dairy farming projects, timely and adequate flow of credits to farmers and connectivity from farms to markets. Hundred per cent FDI is allowed for marketing of food products produced or manufactured in India with warehousing and cold chain facilities. A cess of 0.5% is levied on all taxable services to be used exclusively for improvement of agriculture and farmers welfare.
Government has provided for massive capital expenditure of Rs 2,18,000 crore for construction of highways and rural roads and for expansion and modernization of railways along with civil aviation connectivity and national waterways.
Financial sector reforms: Public Sector Banks are saddled with doubtful loans to the tune of Rs 2.1 lakh crore for various reasons including stalled projects in power, coal, highways, sugar and steel sectors. Steps are taken by Government by providing funds for recapitalization of banks and regulations to revive stalled projects which are expected to improve banks recovery position. Apart from putting funds into these banks, Government has proposed Scheme through Asset Reconstruction Companies by revaluation of immovable properties at market price worth in crores but reflected in balance sheets at original cost for few lakhs.
Reducing black money and litigations: To reduce backlog of huge cases in first appeals and to enable the government to realise dues expeditiously, under new Dispute Resolution Scheme a tax payer can settle the case by paying disputed tax along with interest upto the date of assessment without any penalty if disputed tax is upto Rs 10 lakh and with 25% penalty if disputed tax is over 10 lakhs Penalty appeals can also be settled by paying only 25% of the amount of penalty. This scheme will be in operation from June 1, 2016 to December 31, 2016. Penalties for concealment of income are also substantially reduced and in certain circumstances remission are provided where taxes are paid and appeal is not filed.
Government has also taken drastic steps to reduce litigations by taking away rights of Assessing Officer to file appeals in certain circumstances. Further it is proposed to reduce time for rectification by Appellate Tribunals and allow only three months time to give effect to appellate orders. It is also proposed to increase the rate of interest on refund in case of delay over 3 months.
Those who have evaded tax by suppressing income or hiding assets can free themselves by paying 45% of the undisclosed income with full immunity from penalties and prosecutions. The disclosure scheme is valid from June 1 to September 30, 2016.
Taxation: Under Presumptive Taxation Scheme, businessmen with annual turnover of Rs 2 crore and professionals like doctors, advocates, etc with professional income upto Rs 50 lakh may not maintain any books of accounts provided businessmen pay income tax on 8% of the turnover and professional pay tax only on 50% of the gross annual professional receipts. The deductions eligible under Section 80C and other sections towards certain payments and investment like life insurance premiums, PPF contributions and other specified investments is allowed as a deduction while calculating tax.
Small tax payers with income upto Rs 5 lakh are not required to pay any tax. The income tax rates for individuals are exactly the same as last year except surcharge @ 15% for income over one crore. Dividends in excess of Rs 10 lakh per annum will attract 10% tax on gross amount.
Total projected plan and non plan expenditure is Rs 19.78 lakh crore which is being raised without burdening the common man. Government has maintained fiscal discipline by restricting borrowing to 3.5% of GDP. This will result in reduction of inflation and interest rates. Massive expenditures of the Government will boost demand for manufactured goods and agricultural commodities resulting in spurt in industrial and agriculture growth. Goa’s mining business will be revived on account of reduction in export duty on low grade iron ore.
The Indian economy is at a very exciting juncture. The several initiatives that have undertaken by the current Government in the last two years would start bearing fruits as reflected in all macroeconomic indicators to witness material improvement in the economic growth. Finance Minister and his team deserves ‘Thumbs Up’.
