#UnionBudget2016: No Change In Tax Slabs; Cigarettes, Luxury Cars To Become Dearer

On Sunday, Prime Minister Narendra Modi in his monthly radio show Mann Ki Baat drew an analogy between the presentation of the Union Budget and an exam and said he was fully confident about facing it.

The red letter day arrived a day later as Finance Minister Arun Jaitley, dressed in a classic blue Nehru jacket, presented the Union Budget 2016-17 in the Lok Sabha. Delivering a pro-poor and pro-rural Budget, Jaitley said the agenda for the next year was to undertake transformative measures, based on nine pillars of agriculture, rural sector, social sector, education and job creation, infrastructure investment, financial sector reforms, governance and ease of doing business, fiscal discipline and tax reforms.

While presenting his third Budget speech, Jaitley pledged to “spend prudently and wisely for the people, especially for the poor and downtrodden.”  

He said, “We inherited an economy of slow growth, high inflation and low faith in government...amidst global headwinds, the Indian economy has held its own.”

Some of the common takeaways from the Budget were an unchanged income tax slabs, tax exemption for house rent allowance raised from the current Rs 24,000 to Rs 60,000, service tax rates remaining unchanged at 14.5 per cent and an additional 1 per cent tax on luxury cars above Rs 10 lakh. The Centre will also impose an additional infrastructure tax of 2.5 per cent on diesel cars and 1 per cent on small petrol cars.

Excise duties on various tobacco products, other than beedi, have been raised between 10 per cent and 15 per cent, the FM said in Parliament.

However, this year's Budget focused mainly on farmers and poor of the country, with the FM announcing a slew of agri-related measures, health programmes and rural aid. The total allocation for agriculture, farmers' welfare and irrigation has been set at Rs 48,000 crore.

"We need to give back to our farmers. We need to think beyond food security to income security...will double the income of farmers by 2022," Jaitley said.

The minister said a new health protection scheme will provide health cover up to Rs 1 lakh per family and an additional Rs 30,000 for senior citizens.

Stressing on fiscal consolidation without compromising on its development agenda, a 3.5 per cent fiscal deficit target has been set for the upcoming fiscal. The public spending on infrastructure has been increased to Rs 2.21 lakh crore, which is an increase of 22.5 per cent over the last fiscal.

The minister announced that free LPG connections will be provided to 1.5 crore BPL households in 2016-17, which will continue for two more years to reach a total of 5 crore households.

Bringing some cheer for middle-class tax-payers, the minister raised the ceiling of tax rebate under Section 87A to Rs 5,000 for individuals with income less than Rs 5 lakh and by raising the limit of deduction of rent paid under section 80GG to Rs 60,000.

Commenting on this Ankur Dhawan, chief business officer (resale), at Proptiger.com, said, “For those staying in rented houses, a deduction of Rs 60,000 per annum will give boost to rental housing scenario.”

Giving impetus to the formal sector employment, the minister announced Rs 1,000 crore towards contributing 8.33 per cent on behalf of all the new employees enrolling in EPFO for the first three years of their employment. Jaitley also talked about the road map to phase out of exemptions under corporate taxes, abolishing small cesses, providing complete pass through of income-tax to securitization trusts and reducing the period of obtaining long-term capital gains treatment for unlisted companies to three years.

Reiterating the government's thrust towards promoting entrepreneurship, he announced to increase the turnover limit under Presumptive Taxation Scheme to Rs 2 crore. Also, the government will disburse loans worth Rs 1.8 lakh crore under Pradhan Mantri Mudra Yojana, he said. A 100 per cent deduction of profits for 3 out of 5 years for start-ups was also announced.

Giving smiles to the real estate and construction sector, Jaitley announced a slew of measures such as facilitating affordable housing by 100 per cent tax exemption for profits from small projects and encouraging small first-time home buyers by deducting an additional interest of Rs 50,000. He also announced the exemption of the Dividend Distribution Tax for REITs.

For the financial sector, Jaitley allocated Rs 25,000 crore towards recapitalising public sector banks (PSBs), listing government-owned general insurance companies, and spelling out a road map for consolidating PSBs. The minister, in order to reduce black money menace, announced a scheme under which one can declare undisclosed income by paying 45 per cent tax in a given compliance window.