JOIN USJaitley taxes PF, boosts farm, infra
Finance Minister Arun Jaitley on Monday presented a pro-poor and pro-farmer Budget, handed out some relief to individual tax payers but gave a jolt to the salaried class by proposing to tax their provident fund withdrawals, impacting nearly six crore employees.
Beaten by two consecutive droughts and a slowdown in rural demand, the agriculture sector got a big boost in allocation and other incentives, in a move that will help dispel the pro-business image of Prime Minister Narendra Modi government.
The Budget for 2016-17 proposed that 60% of the Employee Provident Fund (EPF) withdrawals will be taxed if the same is not invested in annuity. The proposal brings all pension funds including NPS and other superannuation funds at par.
The rule will apply to those funds which are created out of contributions made by employees from April 1. At present, the EPF is taxed only in case of an employee leaving his job before completion of five years.
A small relief to individual tax payers came in the form of an increase in tax deduction limit to Rs 60,000 per annum from the current Rs 24,000 on house rent. An additional Rs 50,000 tax relief was also announced on interest on loans for first time home buyers. A tax relief of Rs 5,000 was also proposed on income between Rs 2.5 lakh and Rs 5 lakh, up from Rs 2000 so far. The surcharge on the super-rich was hiked to 15% from 12% for total income exceeding Rs 1 crore.
The agriculture sector got an allocation of close to Rs 36,000 crore. A Rs 15,000 crore interest subsidy was also proposed for agriculture credit and Rs 5,500 crore for the new crop insurance scheme. MNREGA employment guarantee scheme got an enhanced allocation of Rs 38,500 crore. A subsidy scheme for BPL families was announced for cooking gas.
A provision for 0.5 per cent agriculture welfare cess was proposed to be levied on all services from June 1. The move will increase the service tax rate from the current 14.5% to 15%, making services across all sectors costlier.
An infrastructure cess at the rate of 1 per cent was also levied on small petrol, LPG, CNG cars, making cars costlier in all three segments. Big diesel cars will attract a 2.5% cess and higher engine capacity vehicles, SUVs and bigger sedans are proposed to attract 4% infra cess.
Three wheelers, electrically-operated vehicles, hybrid vehicles, hydrogen vehicles based on fuel cell technology were spared from the infra levy.
Talking to reporters after presenting the Budget, Jaitley said, the taxation reforms undertaken were converging in the direction of the proposed Goods and Services Tax.
With all the farmer-centric measures, Jaitley said, the government intended to double the income of farmers by 2020. The Budget also proposed to tackle the leakage of subsidies by gradually linking all of them to Jandhan-Aadhaar-Mobile (JAM) platform.
Infrastructure sector got a Rs 2.21 lakh crore boost with the road sector alone being allocated Rs 97,000 crore with a special emphasis on prime minister’s rural road scheme. Higher outlays to infra sector is in line with the government’s commitment to increase public investment at a time when the private sector balance sheet is stressed.
All government flagship programmes, including ‘Make in India,’ ‘Startup India,’ ‘Skill India’ and “Digital India’ got an outlay boost in the Budget. These sectors are expected to help in job creation and economic growth, Jaitley said.
To tackle the problem of stressed assets in the banking sector, Jaitley proposed to empower Asset Reconstruction Companies (ARCs) through an amendment to SARFAESI Act of 2002 and also allocated Rs 25,000 crore towards recapitalisation.For a stable taxation regime, Jaitley proposed 'Direct Tax Dispute Resolution Scheme' to resolve cases pending in courts and tribunals. He also offered one-time settlement in retrospective tax cases by asking companies to pay the basic tax demand and get waiver for interest and penalty.
To check domestic black money, Jaitley proposed a one-time four-month compliance window for paying tax and penalty of 45%. He said there will be no scrutiny or enquiry of the disclosure made under this window.
Cheering investors, rating agencies and the Reserve Bank of India, Jaitley said he will stick to the fiscal deficit target of 3.9% of GDP this year and 3.5% in 2016-17.