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The Finance Bill 2017 was presented in the Indian Parliament on 1st February, 2017. The nation waited with bated breath, anticipating surprises, sops and shocks. However, Finance Minister Arun Jaitley preferred to play a steady test match rather than a slam-bang 20-20 innings. The underlying theme of Clean Up India was very much evident throughout his speech.

Expectations were high, as Finance Minister, Arun Jaitley, rose to present his fourth Finance Bill for 2017-18 in Parliament. Breaking from tradition, Jaitley presented a consolidated budget wherein the Railway and General Budgets were merged in the Finance Bill, 2017. Besides, the date of tabling the Finance Bill was preponed to 1st February, 2017. This was the first time in more than 90 years that such a merger of two important Bills has been undertaken. The intention behind this is to avoid a Vote on Account as the Parliament will have enough time to debate the proposals contained in the Finance Bill and pass them well before the beginning of the Financial Year 2017-18. The other significant change has been that the Economic Survey was presented to Parliament on 31st January, 2017.

Finance Bill: A few highlights

The important highlights of this year’s Budget speech are as follows:

  • We start with the most favourite issue rankling in the minds of the salaried class. The Income Tax rate for individuals has been cut to 5% from the prevailing 10%. The working class eagerly expected major changes in the tax rates. Individuals with a taxable income of more than 50 lakhs and up to Rs 1 crore will now have to pay an additional surcharge of 10%. This is over and above the existing 15% surcharge on taxable income above Rs 1 crore. Social media hype reached a crescendo just as FM Jaitley rose to present the Finance Bill. However, Jaitley failed to live up to the expectations of the humongous salaried class in India who had anticipated drastic changes in the tax rates. His primary justification for not needling the tax rates was that direct tax collection was not in sync with the income earned.
  • Jaitley stated that Consumer Price Index had fallen from 6% in July, 2016 to 3.40% in December 2016 owing to prudent macro economic management. Inflation, which was in double digits, has been controlled; sluggish growth has been replaced by high growth. He expects inflation to be well within the RBI’s range, between 2% and 6% in the coming financial year.
  • Current Account Deficit declined from about 1% of GDP last year to 0.3% of GDP in the first half of 2016-17.
  • Foreign Direct Investment (FDI) increased from Rs 1,07,000 crore in the first half of last year to Rs 1,45,000 crore in the first half of 2016-17. This translates into a cover of imports of 12 months.
  • The International Monetary Fund has projected a GDP growth of 7.2% in 2017 and 7.7% in 2018.
  • Proposals to facilitate multi modal transport planning between railways, highways and inland waterways shall be implemented while retaining the functional autonomy of the Railways.
  • This year onwards, the Government has done away with the plan and non-plan classification of expenditure.
  • The motto for the coming year has been coined as “Transform, Energise and Clean India”, which is, TEC India. This agenda of TEC India seeks to Transform the quality of governance and quality of life of people, Energise various sections of society, especially the youth and the vulnerable, and enable them to unleash their true potential; and Clean the country from the evils of corruption, black money and non-transparent political funding.
  • The broad 10 themes on which this year’s Finance Bill is based are Farmers, Rural Population, Youth, Poor & Underprivileged, Infrastructure, Financial Sector, Digital Economy, Public Service, Prudent Fiscal Management and Tax Administration.

Farmers

  • The target for agricultural credit in 2017-18 has been fixed at a record level of Rs 10 lakh crore. Special efforts shall be undertaken to ensure adequate flow of credit to the under serviced areas, the Eastern States and Jammu & Kashmir. Interest has been waived for 60 days in respect of the farmers’ loans from the cooperative credit structure.
  • In order to enable seamless credit to small and marginal farmers, The National Agriculture And Rural Development Board (NABARD) shall be given support for computerisation and integration of all 63,000 functional Primary Agriculture Credit Societies with the Core Banking System of District Central Cooperative Banks at an estimated cost of Rs 1900 crore.
  • Coverage of Fasal Bima Yojana shall be increased from 30% of cropped area in 2016-17 to 40% in 2017-18 and 50% in 2018-19 with a budgetary provision of Rs 9000 crore. For the 2016 Kharif season, the total insurance coverage is pegged at Rs 1,41,625 crore.
  • There are 648 Krishi Vigyan Kendras in India. Mini laboratories shall be set up in these Kendras for testing the nutrient levels of soil samples. Moreover, 1000 new mini labs shall be set up by qualified local entrepreneurs with the support of the Government through credit linked subsidy.
  • The corpus of Long Term Irrigation Fund under NABARD has been proposed to be hiked to Rs 40000 crore in the Finance Bill.
  • Optimisation of crop produce has been planned by creating a dedicated Micro Irrigation Fund under NABARD with an initial finance allocation of Rs 5000 crore.
  • The coverage of National Agricultural Market (e-NAM) will be expanded from the current 250 markets to 585 APMCs. Each e-NAM shall be given a financial assistance of Rs 75 lakh for establishment of cleaning, grading and packaging facilities which will add value to the farmers’ produce.
  • A Dairy Processing and Infrastructure Development Fund will be set up in NABARD with a corpus of Rs 8,000 crore over 3 years. Initially, the Fund will start with a corpus of Rs 2,000 crore.

Rural Population

  • Mission Antyodaya shall be initiated to bring one crore households out of poverty and to make 50,000 gram panchayats poverty-free by 2019 to provide focused micro plan for sustainable livelihood for every deprived household.
  • The government’s resolve to double the farmers’ income shall be reinforced by taking up 5 lakh farm ponds under MGNREGA for drought proofing of gram panchayats. Participation of women in MGNREGA has increased to 55% as of now. The budgetary provision for MGNREGA has been increased to Rs 48000 crore in 2017-18.
  • The Pradhan Mantri Gram Sadak Yojana has been provided Rs 27,000 crore for construction of roads in 2017-18 in the Finance Bill.
  • Allocation to Pradhan Mantri Awaas Yojana – Gramin has been increased to Rs 23000 crore for construction of 1 crore houses for the homeless and those residing in unstable houses.
  • In the Finance Bill, the Deendayal Upadhyaya Gram Jyoti Yojana has been allocated Rs 4814 crore for 100% electrification of villages by 1st May, 2018.
  • The Deendayal Antyodaya Yojana – National Rural Livelihood Mission for promotion of skill development and livelihood opportunities for people in rural areas has been allocated Rs 4,500 crore in 2017-18.
  • Swachh Bharat Mission (Gramin) has successfully gained inroads into the Indian villages with coverage in rural India going up from 42% in October 2014 to about 60%. Piped water supply is being provided on priority basis to Open Defecation Free villages.
  • With a view to impart new skills to the people in the rural areas, mason training will be provided to 20,000 persons by 2017-18 and 5 lakh persons by 2022.
  • The total allocation for the rural, agriculture and allied sectors in 2017-18 is Rs 1,87,223 crore.

Youth

  • Local innovation shall be given encouragement on 3479 educationally backward blocks by creating an Innovation Fund for Secondary Education. This will ensure universal access, gender parity and quality improvement. This will include ICT enabled learning transformation.
  • Reforms to the University Grants Commission shall be initiated to provide greater administrative and academic autonomy to institutions of good quality, identified on the basis of accreditation and ranking.
  • A digital platform “Swayam” shall be launched to enable students earn academic grades by virtually attending educational courses online. More than 350 courses shall be made available on Swayam with access to the best faculty, high quality reading resources, discussion fora, online tests etc. The reach of this platform shall be widened by linking it to DTH channels.
  • An autonomous and self-sustained premier National Testing Agency shall be established to conduct all entrance examinations for higher educational institutions so that CBSE, AICTE and other premier institutions can focus more on academics.
  • The Skill India Mission has been launched to train over 400 million people in different skills for creating a well trained workforce that aligns with the demands of employers and also with the aspirations for sustainable livelihoods. In this context, the Pradhan Mantri Kaushal Kendras shall be extended to 600 districts apart from the launch of 100 India International Skills Centres across the country. Foreign languages will also be part of academics in these Centers for youth seeking jobs abroad.
  • Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) is proposed to be launched to provide relevant training to 3.5 crore youth. A sum of Rs 4000 crore has been allocated for this programme.
  • Vocational training and apprenticeship programmes will get a boost through The Skill Strengthening for Industrial Value Enhancement (STRIVE) initiative to improve the quality and market relevance of vocational training provided in ITIs through industry cluster approach.
  • Special schemes for creating employment in textile, leather and footwear industries have been contemplated.
  • The Incredible India 2.0 Campaign shall be launched across the world in order to boost employment in the tourism sector through five special tourism zones in partnership with the States through Special Purpose Vehicles.

The Poor & Underprivileged

  • Mahila Shakti Kendra will be set up at village level with an allocation of Rs 500 crore in 14 lakh ICDS Anganwadi Centres for empowering rural women with opportunities for skill development, employment, digital literacy, health and nutrition.
  • Pregnant women who undergo institutional delivery and vaccinate their children shall be paid Rs 6000 each by direct transfer to their bank account.
  • Infrastructure Status will be given to Affordable housing projects. This will enable these projects to avail the associated benefits.
  • 5 lakh Health Sub Centres will be transformed into Health and Wellness Centres and a concentrated approach will be implemented to eliminate Kala-Azar,Filariasis, Leprosy,Tuberculosis and Measles over the next four years.
  • It is proposed to create additional 5,000 Post Graduate seats per annum for ensuring availability of specialist doctors. DNB courses shall be commenced in big District Hospitals. Post Graduate Faculty shall be strengthened in select ESI and Municipal Corporation Hospitals. Reputed Private Hospitals shall be encouraged to start DNB courses. In this regard, two new AIIMS shall be set up in Jharkhand and Gujarat.
  • New welfare schemes for Scheduled Castes, Scheduled Tribes and Minorities are on the anvil. The NITI Ayog shall monitor the expenditure on these schemes.
  • Senior Citizens shall benefit from Aadhar based smart cards which will contain information on their health. The Life Insurance Corporation of India shall launch a plan for senior citizens that would provide pension with a guaranteed return of 8% per annum for ten years.

Infrastructure

  • Investments in railways, roads, waterways and civil aviation shall be synergised. The Rashtriya Rail Sanraksha Kosh shall be created for passenger safety. Unmanned level crossings on Broad Gauge lines will be eliminated by 2020. 25 railway stations are slated for redevelopment and 500 stations shall be made compatible for the differently-abled with the help of lifts and escalators. 7000 stations shall be fed with solar power. Emphasis on cleanliness shall be boosted through the SMS-based Clean My Coach Service, Coach Mitra facility, introduction of bio toilets in all coaches and solid waste management. Railways will implement an end-to-end integrated transport solution through partnership for front and back end connectivity. Service charge on e-tickets booked online has been withdrawn.
  • Select airports in Tier 2 cities will be taken up for operation and maintenance in the PPP mode.
  • For transportation sector as a whole, including rail, roads, shipping, a sum of Rs 2,41,387 crore has been provided for, in 2017-18.
  • In the telecom sector, 155000 km of Optical Fibre Cables have been laid under the BharatNet project. A sum of Rs 10000 crore has been allocated for this initiative to ensure high speed broadband connectivity to 150000 gram panchayats. A DigiGaon initiative will be launched to provide telemedicine, education and skills through digital technology.
  • Strategic Crude Oil Reserves shall be enhanced by two additional caverns at Chandikhole in Odisha and Bikaner in Rajasthan. India’s reserves capacity shall stand at 15.33 MMT
  • With an intention of creating a global hub for electronics manufacturing in India, the allocation for incentive schemes viz. M-SIPS and EDF shall be increased to Rs 745 crore.
  • The second phase of Solar Park development has been planned with an additional capacity of 20,000 MW.
  • To boost exports, a new scheme, Trade Infrastructure for Export Scheme (TIES), will be launched.
  • The total allocation for infrastructure development in 2017-18 stands at Rs 3,96,135 crore.

Financial Sector

  • The Foreign Investment Promotion Board is set to be abolished in 2017-18.
  • An operational and legal framework shall be set up to integrate spot market and derivatives market for commodities trading.
  • Regulatory gaps in the Multi State Cooperative Societies Act shall be amended to curb the menace of illegal deposit schemes.
  • Amendments to the Arbitration and Conciliation Act 1996, shall be initiated to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts.
  • A Computer Emergency Response Team for our Financial Sector (CERT-Fin) will be established to safeguard the integrity and stability of the financial sector.
  • Public Sector Undertakings and Public Sector Enterprises like IRCTC, IRFC and IRCON are proposed to be listed in Stock Exchanges.
  • It is proposed to create an integrated public sector ‘oil major’, which will be able to match the performance of international and domestic private sector oil and gas companies.
  • A new Exchange Traded Fund with diversified CPSE stocks and other Government holdings will be launched in 2017-18.
  • An amount of Rs 10000 crore has been allocated for recapitalisation of banks.
  • The lending target for Pradhan Mantri Mudra Yojana for funding the unfunded and underfunded has been set at Rs 2.44 lakh crore with priority lending for Dalits, Tribals, Backward Classes, Minorities and Women.
  • The Government will launch two new schemes to promote the usage of BHIM app, viz. Referral Bonus Scheme for individuals and a Cashback Scheme for merchants.
  • Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly. This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones. A mission will be set up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards. Banks have targeted to introduce additional 10 lakh new PoS terminals by March 2017. They will be encouraged to introduce 20 lakh Aadhar based PoS by September 2017.

Public Service

  • Head Post Offices shall be used as front offices for rendering passport services.
  • A Centralised Defence Travel System has now been developed through which travel tickets can be booked online by armed forces personnel. A comprehensive web based interactive Pension Disbursement System for Defence Pensioners will be established.
  • Government recruitment shall be streamlined through a system of single registration and two tier system of examination.
  • Introduction of legislative changes to confiscate the assets of economic offenders fleeing the country, located within the country, till they submit to the jurisdiction of the appropriate legal forum.

Prudent Fiscal Management

  • Classification of Planned and Non-Planned expenditure abolished.
  • A provision of Rs 3,000 crore has been made under the Department of Economic Affairs to implement various Budget announcements and other 26 new schemes in 2017-18.
  • For Defence expenditure, excluding pensions, a sum of Rs 2,74,114 crore has been allocated, including Rs 86,488 crore for Defence capital. Allocation for Scientific Ministries shall be upped to Rs 37,435 crore in 2017-18.
  • Fiscal deficit for 2017-18 shall be pegged at 3.2% of GDP and 3% in 2018-19. Revenue deficit stands at 1.90%.

TAX PROPOSALS

  • Changes in the profit-linked income tax exemption for promoters of affordable housing scheme have been envisaged. First of all, instead of built-up area of 30 and 60 square metres, the carpet area of 30 and 60 square metres will be counted. Also a limit of 30 square metres will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country, including the peripheral areas of metros, a limit of 60 square metres will apply. In order to be eligible, the scheme was to be completed in 3 years after commencement. This time limit has now been extended to 5 years.
  • Tax relief has beenproposed for real estate developers on unsold stock. Now, the liability to pay capital gains on inventories will arise only in the year a project is completed.
  • The holding period, for considering gain from immovable property as long term, is proposed to be reduced to 2 years. The base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property.
  • The concessional rate of 5% on interest earned by foreign entities in external commercial borrowings or in bonds and government securities has been extended up to 30.6.2020. This benefit is also extended to Rupee Denominated (Masala) Bonds.
  • Income tax rate for smaller companies, with annual turnover up to Rs 50 crore, has been reduced to 25%.
  • The allowable provision for Non-Performing Asset for Banks has been upped to 8.5%.
  • Basic customs duty on LNG has been reduced to 2.5%.
  • The presumptive income of small and medium tax payers whose turnover is up to Rs 2 crore is proposed to be reduced to 6%.
  • Cash expenditure allowable as deduction, both for revenue as well as capital expenditure has been proposed to be limited to 10,000. Further, donations received by charitable trusts in cash have been restricted to Rs 2000. No cash transaction shall be permitted above Rs 300,000.
  • Donations to political parties in cash shall not be permitted above Rs 2000.
  • Commission payments to insurance agents shall not be subject to TDS if Form 15H is submitted.
  • A new scheme for presumptive taxation for professionals with a receipt of up to Rs 50 lakh pa is proposed to be introduced.

The above proposals actually brought a sense of relief to the equity markets since it was expected that FM Jaitley would capitalise on the opportunity provided by impending legislative assembly elections in some states and launch populist schemes. But that was not to be. On the other hand, the salaried class had expected more bang from ‘the Finance Bill’ but all went in vain. Overall, Jaitley has kept the momentum of Clean Up India going, thereby, building higher expectations from next year’s Finance Bill.

 

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