Indian budget focuses on small tax payers, rural economy

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Indian Finance Minister Arun Jaitley on Monday gave relief to small tax payers, nudged the affluent to shell out more while focusing on the rural economy with much higher fiscal outlays, as he presented India’s national budget for 2016-17 in the Lok Sabha.

More growth for nation, More benefits for people

Jaitley reiterated a forecast that India would grow by 7.6 percent in the fiscal year that is drawing to a close.

Presenting his third budget, Jaitley described Asia’s third-largest economy as a bright spot in a gloomy landscape and reiterated a forecast that it would grow by 7.6 percent in the fiscal year that is drawing to a close.

But he said the government wanted to ensure that the benefits of growth were more widely shared among India’s 1.3 billion people.

Deductions for homeless and low income class

He also said that people living in rented houses will be eligible for deductions of up to Rs 60,000 now – up from Rs 24,000. He also said the ceiling of tax rebate for people with income up to Rs 500,000 per annum was being raised to Rs 5,000 from the present Rs 2,000.

Hike in IT surcharge for the wealthy

But for larger tax payers, he said, the income tax surcharge of 12 percent at present was being hiked to 15 percent for incomes exceeding Rs 1 crore per annum.

“Tax evasion will be countered strongly,” he warned.

Fiscal deficit will be met : Jaitley

Jaitley also said that the fiscal deficit target of 3.9 perecent of GDP for the current fiscal will be met, even as the target for next year has been fixed at 3.5. “Prudence lies in adhering to fiscal targets,” he said.

Three priroties

Jaitley described his three priorities as:

  • strengthening India’s firewalls by ensuring macroeconomic stability and prudent fiscal management
  • driving growth through domestic demand
  • and reforms to boost economic opportunity

Key areas of policy focus would be farming, social reforms, infrastructure and recapitalising India’s banking system.

Budget Highlights

Here are the highlights of Jaitley’s budget for the fiscal year that begins on April 1.

RURAL ECONOMY

  • Rural jobs programme allocated 385 billion rupees ($5.61 billion) in 2016/17
  • Farmer welfare budget to total 359.84 billion rupees
  • Rural road development to get 190 billion rupees
  • Target of agriculture credit at 9 trillion rupees
  • Interest subvention towards farm loans at 150 billion rupees

TAXATION

  • Will not resort to retrospective taxation in future; one time tax dispute resolution proposed for retrospective taxation
  • To rationalise corporate tax for new manufacturing companies
  • To implement general anti avoidance tax rule from April 1, 2017
  • Security transaction tax on options raised to 0.05 percent
  • Proposes to levy infrastructure cess of 1-4 percent on certain models of cars
  • Raises factory gate tax on various tobacco products by 10-15 percent
  • Proposes limited compliance window on undeclared income of domestic tax payers
  • Proposes new dispute resolution scheme to resolve tax disputes
  • Proposes to abolish 13 different levies

INFRASTRUCTURE

  • Allocates 2.21 trillion rupees for infrastructure development for 2016/17
  • Allocation for roads and highways development at 550 billion rupees
  • Capital expenditure on roads and rail development at 2.18 trillion rupees

INVESTMENT

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  • 100 percent foreign direct investment to be allowed in food processing industry
  • Promises further reforms in foreign direct investment policy in insurance, pension, asset recast companies

FISCAL DEFICIT

  • Fiscal deficit seen at 3.9 percent of GDP in 2015/16
  • Fiscal deficit seen at 3.5 percent of GDP in 2016/17
  • Plan expenditure seen at 5.5 trillion rupees in 2016/17
  • Proposes to set up panel to review fiscal responsibility management act

– NRICafe.com with inputs from Agencies

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