Budget FY2018: An Overview
BY GAURAV KULSHRESHTHA | 01 FEB 2017
India Finance Minister Arun Jaitley presented the Union Budget 2017-18 with a clear focus on rural and farm spending that would be increased by 24%, as part of a plan to double the farmer’s income in the next five years. This Budget has been presented against a challenging backdrop of heightened global political and economic uncertainties. The Finance Minister has managed to strike a balance between the need for fiscal support for the slowing demand in the aftermath of Demonetization, and yet maintain fiscal prudence.
Nifty ended the day with a gain of 1.8% while the Benchmark 10-year yield was stable at close.
The agenda laid down for Fiscal Year 2017-18 through the Budget is “Transform, Energise and Clean India” and to achieve this, The Government will focus on 10 themes:
- Farmers – Double income in 5 years
- Rural Population – Providing employment and basic infrastructure
- Youth – energize through education, skills and job
- The Poor and Underprivileged – strengthening social security, healthcare and affordable housing
- Infrastructure – improving efficiency and productivity.
- Financial Sector – supporting growth and stability, with stronger institutions
- Digital Economy – supporting speed, accountability and transparency
- Public Service – effective Governance
- Prudent Fiscal Management – optimal deployment of resources, preserve fiscal stability
- Tax Administration – honoring the honest
We present to you the key highlights of the Budget proposal*:
- Fiscal deficit for FY2017-18 is targeted at 3.2% of GDP and 3% in 2018-19
- Revenue Deficit for FY2017-18 is pegged at 1.9%, against 2% mandated by the Fiscal Responsibility and Budget Management Act
- Net market borrowings of The Government restricted to INR 3.48 lakh crores, much lower than INR 4.25 lakh crores in the previous year
- Gross market borrowing seen at INR 6.05 lakh crores for FY2017-18
- Allocation for Capital expenditure stepped up by 25.4% over the previous year
- Foreign Investment Promotion Board to be abolished in FY2017-18 and further liberalisation of FDI policy is under consideration
- An expert committee will be constituted to explore integration of spot and derivatives market in the agricultural sector for commodities trading
- The shares of Railway PSEs such as IRCTC, IRFC and IRCON will be listed on stock exchanges
- INR 10,000 crores for recapitalisation of Banks provided in FY2017-18
- A new Metro Rail Policy will be announced with focus on innovative models of implementation and financing
- Budget allocation for highways increased from INR 57,976 crores in Budget Estimate’s 2016-17 to INR 64,900 crores in FY2017-18
- Proposed setting up strategic crude oil reserves at two more locations, namely, Chandikhole in Odisha and Bikaner in Rajasthan. This will take India’s strategic reserve capacity to 15.33 MMT.
- 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
- For the transportation sector as a whole, including rail, roads, shipping, a provision of INR 2,41,387 crores has been made in FY2017-18.
HOUSING & REAL ESTATE
- Affordable housing to be given infrastructure status
- The holding period for getting Long-term capital gain treatment on immovable property reduced to 2 years from 3 years
- The base year for indexation is proposed to be shifted to 1.4.2001, from 1.4.1981, for all classes of assets including immovable property
- MAT credit is allowed to be carried forward up to a period of 15 years instead of 10 years at present
- Allowable provision for Non-Performing Asset of Banks increased to 8.5% from 7.5%
- Under scheme of presumptive income for small and medium tax payers whose turnover is up to INR 2 crores, the present 8% of their turnover, which is counted as presumptive income, is reduced to 6% in respect of turnover, which is by non-cash means
- No transaction above INR 3 lakh would be permitted in cash
- Maximum amount of cash donation a political party can receive will be rupees 2000/- from one person
- Amendment to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that The Government would frame in this regard
- Every political party would have to file its return within the time prescribed in accordance with the provision of the Income Tax Act
- Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly
- Existing rate of taxation for individual assesses between incomes of INR 2.5 lakhs to INR 5 lakhs reduced to 5% from the present rate of 10%.
- Surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between INR 50 lakhs and INR 1 crore.
- In order to make MSME companies more viable, income tax for companies with annual turnover up to INR 50 crore is reduced to 25%
- Foreign Portfolio Investor (FPI) Category I & II exempted from indirect transfer provision
- The Long Term Capital Gain treatment on equity was retained without any change