No Budget can satisfy all expectations, much less aspirations. It would be judged on whether the preferred options and the balancing act are credible and compelling. The current state of the nation is of despondency and what is required is pushing the development agenda for India with increased vigor. There is a pressing need for financial prudence and equally pressing need for increasing public investment. Each segment of the country is equally happy and sad, and that is one good aspect of any good agreement, which keeps all parties equally dissatisfied.
Some are of the view that the Budget 2016 has more of an imprint of PM modi than that of FM Jaitley. A new word seems to have been coined RURBAN (Rural-Urban) and equally important has been the focus towards startups. From subsidy scheme for BPL families for cooking gas to doubling the income of farmers by 2020 and allocation of increased funds for agricultural sector. Startups to be taxed at 25%, incubation centers to be set up. 29% corporate tax rates for other companies and increase in charge for some of them.
The JAM movement has been brought in, which includes the Jan Dhan, Aadhaar and Mobile to facilitate financial inclusion and subsidy rationalization by way of Direct Benefit Transfer (DBT).
In light of the objective for “Housing for All”, the aam aadmi sees incentive in buying homes. This additional deduction has been given on interest for loan up to Rs 35 lakh, whereas the cost of house should not be more than Rs 50 lakh. The spice that is added further to this is, proposed to give 100% deduction for profits to an undertaking from a housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019, and is completed within three years of the approval. MAT however, shall apply.
Small tax payers and rent payers did not have any opportunity to see his third eye. What came as a bliss, is that the ceiling of tax rebate under Section 87A of IT Act has been proposed to be raised to Rs 5,000 from Rs 2,000 for individuals with income less than Rs. 5 lakhs. Seems, he still has not axed much the above 2 crore tax payers as they would get a relief of Rs 3,000.
The limit of deduction of house rent paid under section 80GG has also been raised to Rs 60,000 from the existing Rs 24,000 per annum to give relief to employees who live in rented houses.
If there’s something that comes for those employed, there’s something more for those who are on the verge of retirement. Jaitley has proposed to make withdrawal up to 40% of the corpus at the time of retirement tax exempt in the case of National Pension Scheme (NPS).
In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of corpus created out of contributions made after 1.4.2016. Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases.
He also proposed a monetary limit for contribution of employer in recognized Provident and Superannuation Fund of Rs. 1.5 lakh per annum for taking tax benefit.
He proposed to exempt from service tax the Annuity services provided by the National Pension Scheme (NPS) and Services provided by EPFO to employees. Also, he proposed to reduce service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid in certain cases.
Marginal Relief has been proposed to be increased from Rs. 2000/- to Rs. 5000/- to encourage savings.
What was however missed was the long pending GST, amendments to land acquisition process, and easier labour laws.
The bad loan crisis in the banking sector has severely constrained the ability of the banks to fund long-gestation infrastructure projects. Jaitley announced changes in SARFESI Act and more amendments to laws that permit further investments in asset reconstruction companies.
One-time dispute resolution scheme for those involved in retrospective tax disputes to pay only arrears; interest, penalty to be waived.
It has affected common man’s spending and savings plan. It’s a pro-poor and pro-startups budget. It is a sweet-bitter pill for the common man, or maybe a coconut, hard on the outer and soft in the interiors. It was explicitly focused on improving the situation in rural India and providing relief to the agricultural sector.
In short, the nine pillars of this budget — agriculture and farmers’ welfare, rural sector, social sector including healthcare, education, skills and job creation, infrastructure, financial sector reforms, ease of doing business, fiscal discipline, tax reforms to reduce compliance burden. Each and every paisa of public money, as the Budget Proposal puts forward, shall be dedicated to the welfare of poor, needy, weaker sections, farmers, labourers and youth. Thus, though not perfect, but progressive.
The above article has been compiled and authored by CS Reema Jain. She may be contacted at [email protected]