On Monday, February 29, 2016, Arun Jaitley, Union Finance Minister, delivered his third budget speech in the Parliament. He mentioned how India wasworking towards strengthening its economy at a time when the rest of the world was struggling to battle a growing economic crisis.
With a strong focus on agriculture and rural welfare—along with significant tax and financial sector reforms—he defined the pillars of a transformed India.
Among the many elements constituting the Union Budget, one of the human-interest driven faces of the document was the acceptance of a request (put forth to Rahul Gandhi) that Braille equipment and papers be made exempt from taxation. Braille sheets are the main medium of learning for the visually challenged, prompting the Congress Vice President to urge the commerce ministry to slash import duty on specialised equipment designed to aid the visually impaired.
The budget converged its focus on the welfare of farmers and upliftment of the rural economy. The FDI policy will closely address all the important needs of the farmers, and its chief objective is to double the income of farmers by 2022.
The new budget aims at increasing job creation and ameliorating education and core skill-sets to bolster productivity, knowledge and vocational capabilities of the Indian economy.
In line with this objective, the budget announced the promotion of 100 model career centres by the end of this year; setting up of 1,500 multi-skilled training institutes; and setting asideINR 1,700 crore for skill training institutes.
An increased allocation of INR 1,80,000crore under the PM MUDRA Yojana was also announced, wherein low-cost loans would be provided to small and medium scale enterprises.
In addition, INR 500 crorewas scheduled for allocation to the‘Stand-up India’ program, in order toencourage entrepreneurship amongst SC, ST and women entrepreneurs.
Additionally, 100% tax deduction will be available for startups for the first three years.
Small shops will be allowed to remain open for businessthroughout the week.
The budget also announced an amendment of the Passenger Vehicles Act —wherein, entrepreneurs will be permitted to operate fleet services/buses. This in turn should propel employment for the youth enunciating a multiplier effect on the economy.
The Government has announced the launch of a new initiative to provide cooking gas to Below Poverty Line (BPL) families.
INR 9,000 croreswould be allocatedto the Swachh Bharat Abhiyan(clean streets, roads, construction of toilets in rural India, better infrastructure).
To expedite road construction,INR 55,000 crorewould be invested in highways and roads development by next year.
To improve regional connectivity, the construction ofsmall airports and air strips will be undertaken.
The Public Utility and Resolution Bills will draw focus on streamlining conflicts in the infrastructure domain, and architect a credit rating system for infrastructure projects.
The Union Budget emphasised on working towards resolving the problems of bankruptcy and insolvency. In 2016, a New Bankruptcy code will be introduced in the Parliament.
A set of stringent measures are slated to be adopted in order to fight bankruptcy in PSU banks - INR 25,000 crore for re-capitalisation of Public Sector Banks and clearer definition for the consolidation of PSU banks.
The Fiscal Deficit target is pegged at 3.5%, while the revised revenue deficit target stands at 2.5%.
The debt recovery tribunal will be further bolstered, ensuring accuracy and rationalization.
Additional duty will be imposed on jewellery.
The excise duty on tobacco products has been hiked by 10-15%.
ArunJaitley proposed a 2% excise duty levy on readymade branded garments along with made-up textile articles of retail selling price of INR 1,000 and higher. This duty will only be applicable for manufacturers who do not claim Central Value Added Tax (Cenvat) paid on raw materials —those who stake claim only need to pay 12.5% excise duty. Until the new budget was announced, there was no excise duty on manufactures without the Cenvat claim, and was 6-12.5% for those who claimed the same.
Petrol prices have been slashed by INR 3.02 per litre, whereas diesel prices are upped by INR 1.47 per litre.
There is a surcharge on luxury vehicles priced INR10 lakh upwards and 4% on Sports Utility Vehicles (SUVs).
In an endeavour to curb rising pollution levels, 1% infrastructure cess has been proposed—the Clean Energy Cess would be renamed as the Clean Environment Cess.
The Finance Minister has decided to impose a 2.5% cess on diesel vehicles (length not more than 4 meters, engine capacity not over 1,500cc); while higher engine capacity cars, SUVs and larger sedans areto bear a cess of 4% of the vehicle value. Not to forget, these are over and above a 1% cess on CNG/LPG/petrol vehicles with length not over 4 meters and maximum engine capacity of 1,200cc.
The income tax slabs remain untouched — however, for those, whose annual income is up to INR 5 lakh, the tax relief has been increased to INR 5,000 per annum (previously INR 2,000).
The deadline to disclose undeclared income is September 30.
40% of the Corpus of the National Pension Scheme withdrawn at the time of retirement is nowtax-free.
Much to the relief of the common man, the maximum deduction available under section 80GG has been raised to INR 60,000 per annum. This deduction can be availed by assessees who do not have an HRA component in their salary structure, and the deduction is available towards home rent paid in a year.
For first-time home buyers, there is INR 50,000 deduction available on a loan up to INR 30 lakhs –subject to the fact that the house cost does not exceed INR 50 lakh.
Affordable houses up to 60 square metres will be exempt from service tax.