A well-focused budget! All the relevant changes have been made. All such good steps will be good for industry, markets and the masses. How will this budget prove to be a boon for the common man? Here is a view:
1. With better monsoon, agriculture is expected to grow at 4.1% in 2016-17
2. Already there is evidence of increased digital transactions. The BHIM app has been launched. It will unleash the power of mobile phones for digital payments and financial inclusion. 125 lakh people have adopted the BHIM app so far. The Government will launch two new schemes to promote the usage of BHIM; these are, Referral Bonus Scheme for individuals and a Cashback Scheme for merchants. This should be a good move to help merchants to adopt more of digital transactions.
3. Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly. This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones. A Mission will be set up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards. Banks have focused on introducing additional 10 lakh new PoS terminals by March 2017. They will be encouraged to present 20 lakh Aadhar based PoS by September 2017.
4. Senior Citizens health details in their Aadhaar Card
5. 8% Senior Citizen Guaranteed Return in LIC policy but 8% p.a. but with maximum of Rs.7.5 lacs with a term of 10 yrs
6. 500 railways stations to be made disable-friendly, to be equipped with lifts and escalators
7. FIPB to be abolished
8. Service charge on e-tickets booked through IRCTC will be withdrawn
9. Govt to introduce two new schemes to promote the new BHIM app – referral bonus for users and cash back for traders.
10. Direct tax proposals do not commensurate with Indian economy.
11. As against estimated 4.2 crore persons engaged in organised sector employment, the number of individuals filing return for salary income are only 1.74 crore. As against 5.6 crore informal sector individual enterprises and firms doing small business in India, the number of returns filed in this category are only 1.81 crore. Out of the 13.94 lakh companies registered in India up to 31st March, 2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17. Of the 5.97 lakh businesses that have filed their returns for Assessment Year 2016-17 so far, as many as 2.76 lakh companies have shown losses or zero income. 2.85 lakh companies have shown profit before tax of less than ` 1 crore. 28,667 companies have shown profit between ` 1 crore to ` 10 crore, and only 7781 companies have profit before tax of more than ` 10 crores.Among the 3.7 crore individuals who filed the tax returns in 2015-16, 99 lakh show income below the exemption limit of ` 2.5 lakh p.a., 1.95 crore show income between ` 2.5 to ` 5 lakh, 52 lakh show income between ` 5 to ` 10 lakhs and only 24 lakh people show income above ` 10 lakhs. Of the 76 lakh individual assesses who declare income above ` 5 lakh, 56 lakh are in the salaried class. The number of people showing income more than ` 50 lakh in the entire country is only 1.72 lakh. We can contrast this with the fact that in the last five years, more than 1.25 crore cars have been sold, and number of Indian citizens who flew abroad, either for business or tourism, is 2 crore in the year 2015. From all these figures we can conclude that we are largely a tax non-compliant society. The predominance of cash in the economy makes it possible for the people to evade their taxes. When too many people avoid taxes, the burden of their share falls on those who are honest and compliant.
12. At present, the houses which are unoccupied after getting completion certificates are subjected to tax on notional rental income. For builders for whom constructed buildings are stock-in-trade, the budget proposed to apply this rule only after one year of the end of the year in which completion certificate is received so that they get some breathing time for liquidating their inventory. Great move!
13. The budgets propose to make some changes in the capital gain taxation provisions in respect of land and building. The holding period for considering benefit from immovable property to be long term is 3 years now. This is proposed to be reduced to 2 years. Also, the base year for indexation is offered to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property. This move will significantly reduce the capital gain tax liability while encouraging the mobility of assets. It also plans to extend the basket of financial instruments in which the capital gains can be invested without payment of tax
14. There is a scheme of possible income tax for small and medium taxpayers whose turnover is up to Rs. 2 crores. At present, 8% of their turnover is counted as presumptive income. The budget proposed to make this 6% in respect of turnover which is received by non-cash means. This benefit will be applicable for transactions undertaken in the current year also.
15. The budget increases the threshold limit for an audit of business entities who opt for presumptive income scheme from Rs. 1 crore to Rs. 2 crores. Similarly, the threshold for maintenance of books for individuals and HUF is being increased from turnover of Rs. 10 lakhs to Rs. 25 lakhs
16. To allow the people to claim the refund expeditiously, the time period for revising a tax return is being reduced to 12 months from completion of the financial year, at par with the time period for filing of return. Also the time for completion of scrutiny assessments is being compressed further from 21 months to 18 months for Assessment Year 2018-19 and further to 12 months for Assessment Year 2019-20 and after that.
17. Rate of growth of advance tax & personal income tax is as high as 34.8% in last 3 quarters
18. Demonetization led to a 34.8% increase in personal income tax declarations
19. Companies with turnover up to 5 crore will get tax deduction of 5%-Corporate tax for companies with turnover of up to Rs 50 crore cut to 25% from 30%-96 per cent Indian companies to benefit from lowered corporate tax for SMEs
20. Capital Gains Tax On Housing Payable On Year In Which Project Is Completed.
21. Cash transactions above Rs 3 lakh to banned from April 1
22. Charitable trusts can now receive cash donations only up to Rs 5000. No cash transaction to be permitted over Rs 3 lakhs.
23. To cleanse the system of political funding maximum cash donation for parties will be Rs2000 from one source from existing limit of 20,000. Political parties can now receive a maximum cash donation of Rs 2000: The maximum contribution a political party can receive from anyone source is Rs 2000; Political parties will need to file income tax returns. Propose to amend RBI Act for the issue of electoral bonds for political funding.
24. Personal Income Tax rate changes:
1. Reduced the current rate of taxation for individual assesses between the income of Rs. 2.5 lakhs to Rs. 5 lakhs to 5% from the present rate of 10%.
2. This would reduce the tax liability of all persons below Rs. 5 lakh income either to zero (with rebate) or 50% of their current liability.
3. the current benefit of rebate available to the same group of beneficiaries is being reduced to Rs. 2500 available only to assesses up to income of Rs. 3.5 lakhs. The combined effect of both these measures will mean that there would be zero tax liability for people getting income up to Rs. 3 lakhs p.a. and the tax liability will only be Rs. 2,500 for people with income between Rs. 3 and Rs. 3.5 lakhs.
4. Those in the tax slab of Rs 2.5 lakh to Rs 5 lakh –( have got slab changed to 5% instead of 10%). Further, it is interesting to note is that an existing rebate under Section 87A (currently given to people with income up to Rs 5 lakh) is now reduced to Rs 2500 from the current Rs 5000 for individuals earning between Rs 2.5 lakh to Rs 3.5 lakh.
5. If the limit of Rs. 1.5 lakh under Section 80C for investment is used entirely, then the tax would be zero for people with income of Rs. 4.5 lakhs.
6. While the taxation liability of people with income up to `5 lakhs is being reduced to half, all the other categories of tax payers in the subsequent slabs will also get a uniform benefit of `12,500/- per person. Therefore, all other categories will also get a uniform benefit of Rs.12,500. All other classes of taxpayers in subsequent brackets will get the benefit of Rs 12,500. Rs 12,500 would be the tax saving for those in 20%, 30% tax brackets. Basically a Rs. 12,500 tax cut for all.
7. Additional Surcharge of 10% on people with income Rs 50 lakh to Rs 1 crore. Surcharge on Rs 1 crore and more stays. Tax the rich! Are you Rich? More than 1 crore : 15% surcharge (already exists)
8. A single one-page form for filing IT returns for taxable income up to 5 lakh rupees.
9. For quick refund of tax -returns time-frame reduced to 12 months.
10. Now you can revise your Income Tax return only within 12 months. Processing time to reduce too.
11. Thus, the combined effect of the new slab along with Section 87A rebate for those with income up to Rs 3 lakh would be zero. Besides, tax burden those in the Rs 3 lakh to Rs 3.5 lakh bracket would be Rs 2500.
12. Moreover, those tax payers who earn Rs 4.5 lakh will now reduce their tax liability to zero by taking the benefits of investing in Section 80C.
25. .Duty exempted on various machines with POS and iris readers to encourage
26. Proposed amendment in RBI Act to enable issuance of electoral bonds that government will issue.
27. Government to unveil scheme for leather and footwear sector
28. No relief for NRI, Rich.
29. No changes in limit under section 80C
30. masses should be happy that LTCG and STCG have not been touched!
31. 5% TDS on Insurance agents removed but only for those whose income is not in the tax payable limit. Not for all agents.
Proposed new slabs could be:
Income Slab Tax Rate
Income up to Rs 2,50,000* No Tax
Income from Rs 2,50,000 – Rs 5,00,000 5%
Income from Rs 5,00,000 – 10,00,000 20%
Income more than Rs 10,00,000 30%
Surcharge: 15% of income tax, where total income exceeds Rs.1 crore.
About the Author: Taresh Bhatia is a CFPCM – Certified Financial Planner cm.