Budget 2017 Highlights and Main Points

Key Takeaways of 2017 Budget

• Tax liability for individuals earning between Rs 2.5-5 lakh per year reduced to 5% from 10%
• Zero tax liability for people earning up to Rs 3 lakh per annum
• Surcharge of 10% for people earning Rs 50 lakh to Rs 1 crore per year
• Bans on general cash transactions over Rs. 3 lakh.
• Limit of cash donations to political parties reduced from Rs. 20,000 to Rs. 2,000.
• Small businesses (MSMEs) with annual turnover of Rs 50 lakh will get a 5% reduction in corporate tax
• Foreign investors exempted from paying tax on offshore funds with Indian assets.
• Foreign Investment Promotion Board (FIPB) abolished
• Regulatory Board to be created at RBI to oversee e-wallets companies like PayTM, Mobikwik, Freecharge.
• Fiscal deficit up to 3.2% of GDP in FY2017-18; expected to be 3% in fiscal 2018-19
• Total expenditure of Budget 2017-18 is Rs. 21.47 lakh crore. Capital expenditure increased by nearly almost 25%. Total resources devolved to states will be Rs. 4.11 lakh crore. Defence expenditure, excluding pensions, pegged at Rs. 2.74 lakh crore.

Macro-Outlook

• India stands out as a bright spot in world economic stage despite US Federal Reserve’s policies that may lead to outflows from emerging markets and unstable global crude oil prices.
• The country has become the 6^th largest manufacturer in the world.
• Demonetisation will lead to lower borrowing costs.

Digital Drive

• India is at the cusp of a massive digital revolution and the shift to digital platform has huge benefits.
• The government plans to launch two more schemes for use of the BHIM app, including a cashback scheme.

Tax

• Major push to be made on income tax declaration. Only 24 lakh people have declared income of above 10 lakh per annum.
• The income tax limit from Rs. 2.5 – 5 lakh has been reduced to 5%.
• There will be zero tax liability for those earning up to Rs. 3 lakh.
• There will be a 10% surcharge on people earning between Rs. 50 lakh to Rs. 1 crore.
• There will be a tax liability of Rs. 2,500 for annual income of Rs. 3 – 3.5 lakh. Any person who earns Rs 4.5 lakh per annum will not pay any tax if they use 80C provisions of the Income Tax Act to the full. In effect, it means 50% savings in income for someone earning up to Rs. 5 lakh a year.
• Corporate Income Tax on medium and small enterprises has been reduced. MSMEs with Rs. 50 crore turnover will get a 5% reduction in corporate income tax.
• There will be no capital gains if the owner sells his / her house after 2 years.
• The Customs Duty on LNG has been reduced from 5% to 2.5% for FY2017-18
• Foreign investors will not have to pay any tax if they sell their offshore derivative investments that have India assets.
• The GST Bill received strong support due to its potential to streamline the economy.
• No changes made to Excise and Service Tax
• The tax changes will mean a potential loss of nearly Rs. 23,000 crore to the government.

Finance and Industry

• The Foreign Investment Promotion Board will be abolished.
• A new FDI policy is under consideration. The revised procedure will list PSU firms and a new Exchange Traded Fund (ETF) comprising of PSU stocks will be launched in the next 2017-18 fiscal.
• 10,000 crore has been allocated for bank capitalisation.
• The government will create a Payment Regulatory Board at the RBI to regulate FinTech companies like PayTM.
• An expert panel will be set-up integrate spot and derivative markets.
• The PM Mudra Yojana will focus on lending to Dalit, minority and women. It has a double lending target from 2016-17 at Rs. 2.44 lakh crores.
• There will be a new law to attach the assets of absconders who flee the country.
• There will be no cash transactions above Rs. 3 lakh.
• Maximum limit for cash donations to political parties from one source reduced to Rs. 2,000 from Rs. 20,000.
• There is a proposal to RBI to launch electoral bonds

Inflation and Deficit

• The CPI inflation number has declined from 6% to 3% and is expected to remain within the RBI band.
• The country’s deficit has decreased – the Current Account Deficit decreased to 0.3% of the GDP.

Agriculture

• Plans to double farmers’ income in 5 years.
• Adequate credit to be made available to farmers including credit to the farmers for them to buy tractors
• The government will initiate a model law for contract farming.
• The agriculture sector is expected to grow at 4.1% in this year and agricultural credit will reach Rs 10 lakh crore.

Energy

• Two new crude oil reserves will be set up.
• The second phase of solar power development for an additional 20,000 MW of power will be set-up.

Employment

• MNREGA allocation increased to the highest ever at Rs. 48,000 crore.
• Focus will be on energising the youth to reap the benefits of growth.

Civic and Social Infrastructure

• Infrastructure has been allocated Rs. 3,96,135 crore, a record high.
• The allocation for highways has increased to Rs. 64,000 crore and 2,000 coastal roads have been identified for development.
• Affordable housing has been given the status of an infrastructure sector. 1 crore houses will be build for the economically weaker sections of society by 2019. There has been a 35% increase in fund allocation up to Rs 52, 393 crore for schedule castes.
• The government intends to have 100% electrification of the rural sector by 2019.
• Head Post Offices will now act as front offices for Passport services.
• The coverage for the Swacch Bharat campaign has increased to 60% from 42% in October 2014.
• There will be changes in housing schemes. The Carpet Area instead of Built Up Area will be considered for low-cost housing.

Education

• A National Testing Agency will be established to conduct national level examinations and relieve CBSE and other bodies from holding exams.
• The Swayam platform has been launched. It will allow students to access courses of the best teachers, take tests and access their academic grades.
• Reforms process will be initiated in the UGC.
• There will be an emphasis on science and on design of better curriculums.
• An innovation fund will be set up for secondary education.
• There will now 25,000 PG seats for medicine studies

Health and Welfare

• The allocation for women and children welfare has increased to Rs. 1.85 crore from Rs. 1.57 crore.
• The Drug and Cosmetics Rules will be changed to give a fillip to affordable drugs.
• New rules will be formulated for Medical Devices to attract investment and reduce costs of these devices.
• 2 new AIIMS will be established in Gujarat and Jharkhand.
• Aadhaar-based smart cards will be introduced for senior citizens.

Railways

• There has been a 22% increase in the Rail Budget with capital and development expenditure in 2017-18 to be Rs. 1,31,000 crore.
• The Railways Safety Fund is targeted to reach Rs. 1 lakh crore in over 5 years.
• There will be a focus on safety with clear guidelines. Unmanned crossings will be eliminated by 2020.
• Railway corridors will be modernised.
• 25 stations have been identified for redevelopment, and 500 stations will get lifts and escalators. 500 stations will be made friendly for differently-abled people.
• Bio toilets will be available in all trains by 2019, and Waste-to-Energy plants will be set up in New Delhi and Jaipur.
• Solar power will be used in 2,000 stations.
• Dedicated tourism and pilgrimage trains will be launched.
• There will be no more service charge on e-Tickets.

Defence

• The total defence expenditure, excluding pension, will be Rs 2.74 lakh crore.