New Delhi: Finance Minister Arun Jaitley pledged relief for middle class taxpayers and small and medium-sized companies in the Union Budget 2017 on Wednesday, saying the government would spend thousands of crores to double farmers’ incomes, upgrade ramshackle infrastructure and provide cheap housing.
In presenting to Parliament the Union Budget for fiscal year that starts April 1, Finance Minister Arun Jaitley said the economy was doing well despite slowing growth in other emerging economies and a massive demonetization order late last year that affected the country’s mostly cash-based business activities.
Arun Jaitley projected economic growth of between 6.75 and 7.5 percent in 2017-18.
Softening the demonetization blow, the Union Budget for 2017-18 today halved tax to 5 per cent on incomes up to Rs 5 lakh but proposed a new surcharge of 10 per cent on incomes between Rs 50 lakh and Rs 1 crore.
Jaitley, however, retained the 15 per cent surcharge on taxable income above Rs 1 crore. While the surcharge alone would net Rs 2,700 crore a year, his give-away on direct tax proposals would result in a loss of Rs 15,500 crore.
The change in the personal income tax for individual assessees between Rs 2.5 lakh and Rs 5 lakh income would reduce the tax liability of all below Rs 5 lakh to either to zero (with rebate) or 50 per cent of their existing liability.
The existing benefit of rebate available to people is being reduced to Rs 2,500 for only those who have income up to Rs 3.5 lakh.
While the tax liability of people with income up to Rs 5 lakh is being reduced to half, all other categories of tax payers in the subsequent slabs will also get a uniform benefit of Rs 12,500 per person.
In case of senior citizens above 60 years, there will be no tax up to Rs 3 lakh, while the exemption will be up to Rs 5 lakh in case of citizens above 80 years. Both categories will attract income tax of 20 per cent on income between Rs 5 lakh and Rs 10 lakh and 30 per cent for income above Rs 10 lakh.
Finance Minister Arun Jaitley’s 2017 Union Budget was a break from the past as it merged the Railway Budget within the general and was also presented a month in advance.
Since taking office in May 2014, Prime Minister Narendra Modi’s government has been pumping funds into boosting education, while increasing spending on roads, irrigation and other infrastructure. It has also been reforming India’s tax regime.
The Union Budget proposes total spending for the fiscal year of 21.47 trillion rupees. Arun Jaitley said spending on highways would rise to 650 billion rupees ($9.54 billion) in 2017-18, up from 580 billion rupees in 2016-17.
Noting that India is “a non-compliance tax society”, Arun Jaitley said he hoped cutting tax rates would persuade people to pay up. He announced a five percent reduction in tax rates for small and medium-sized businesses with annual turnover of up to 500 million rupees.
He also abolished income tax for people earning up to 300,000 rupees a year.
C. Rangarajan, former governor of India’s central bank, said it was a fairly routine budget. “There have not been much changes on the revenue side. Nevertheless, I am happy that the fiscal deficit is maintained at 3.2 per cent. The original road map has set it at 3 percent.”
Finance Minister Arun Jaitley also stepped up allocations for infrastructure, rural, agriculture and the social sectors.
Against the backdrop of demonetization intended to eliminate black money and introduce clean transactions, the Budget barred any transaction in cash above Rs 3 lakh. As a measure of transparency in political funding, Arun Jaitley lowered to one-tenth the donation that political parties can accept in cash to Rs 2000 per donor.
The Finance Minister expressed confidence that the pace of demonetization had picked up and would soon reach comfortable levels with its harsher consequences not expected to spill over into the next fiscal.
Since the proposed GST is expected to be rolled out soon, he left indirect taxes largely untouched expect for some changes in duties on tobacco products, solar panels and circuit for mobile phones.
While excise duty on pan masala has been hiked to 9 per cent from 6 and that on unmanufactured tobacco to 8.3 per cent from 4.2, the same on filter and non-filter cigarettes of all lengths was also hiked.
Mobile phones will be costlier with the Budget proposing a 2 per cent special auxillary duty on import of populated printed circuit boards (PCBs).
The Finance Minister ruled out the abolition of Minimum Alternate Tax (MAT) on companies but allowed them a carry-forward facility for 15 years instead of 10 to allow them MAT credit.
In a bid to boost the rural and informal sectors hurt by the note ban, the Budget raised the target for agriculture credit during the coming year to a record Rs 10 lakh crore that will ensure flow of credit to under serviced areas.
The Budget provides for Rs 9000 crore under the Crop Insurance Scheme and proposed to set up a dedicated micro-irrigation fund under NABARD with an initial corpus of Rs 5,000 crore.
The Budget provisions under rural employment guarantee scheme MGNREGA has been increased from Rs 38,500 crore in the current year to Rs 48,000 crore in 2017-18, while Rs 19,000 crore has been given under the rural roads program.
The total allocation for rural, agriculture and allied sectors has been pegged at Rs 187,223 crore, which is 24 per cent higher than the previous year.
In a bid to boost infrastructure spending, the minister proposed a total of Rs 1,31,000 crore towards capital and development expenditure of the Railways which includes Rs 55,000 crore provided by the government.
The Railways will focus on four major areas of passenger safety, capital and development work, cleanliness and finance and accounting reforms. A passenger safety fund is being created with a corpus of Rs 1 lakh crore over five years. There will also be modernization and upgradation of identified corridors.
Railway lines of 3,500 km will be commissioned in the next fiscal against 2,800 km in the previous year. Steps would be taken to dedicated trains for tourism and pilgrimages.
In the road sector, allocation for highways has been stepped up to Rs 64,900 crore against Rs 57,976 crore in 2016-17.
For the transportation sector as a whole, including rail, road and shipping, the Union Budget 2017 provides for Rs 2,41,387 crore in FY18. “This magnitude of investment will spur a huge amount of economic activity across the country and create more job opportunities,” Arun Jaitley said.