New Delhi: Health, literacy and roads remained the main focus of 2016 budget even as finance minister Arun Jaitley announced a bevy of sops to boost rural economy.
The “populist” budget catered to BJP’s core Hindutva ideology, attempted to appease poll-bound Punjab but lacked anything Kashmir-specific much to the chagrin of PDP that is publicly appearing to be in doldrums on renewing alliance with BJP.
The Rs19.78 lakh-crore budget for 2016-17 evoked mixed response from political leaders, industry stakeholders and common people.
The finance minister made cars, especially in the luxury segment, SUVs and cigarettes more expensive, but spared bidis. While he increased the tax rebate for those earning up to Rs 5 lakh a year, he increased the surcharge on income tax for those with an annual income of over Rs 1 crore. If the finance minister had used the words “farmers” and “rural” 19 times in his budget speech last year, he used them 54 times on Monday.
Observers said that the obvious shift in the government’s focus came against a backdrop of a year of electoral reverses, be it in the Delhi and Bihar assembly elections or in the civic polls in many BJP-ruled states. Coming as it did before the assembly elections in four states and one union territory in April-May, Budget 2016-17 is expected to help the BJP counter the Opposition’s projection of the NDA government as anti-poor and a “suit-boot ki sarkar”.
While much to the chagrin of Peoples Democratic Party (PDP) in Jammu and Kashmir, there was unexpectedly nothing Kashmir-specific in the union budget, the BJP continued to pursue its ideological journey besides catering to the upcoming electoral requirements.
The allocation of Rs 100 crore to celebrate the birth centenary of Pandit Deen Dayal Upadhyay should please the BJP’s ideological patron, the Rashtriya Swayamsevak Sangh. Jaitley drew applause from politicians from poll-bound Punjab as he set aside an initial sum of Rs 100 crore to celebrate the 350th birth anniversary of Guru Gobind Singh.
Analysts say that if PDP was reluctant to renew its alliance with the BJP pending some budgetary sops and allocations, the absence of Kashmir-specific initiatives in the budget is likely to throw spanners in the formation of new government.
Some analysts called it a “political budget” but Jaitley offered a sound economic rationale for this. Given that foreign markets were weak, he had to rely on domestic demand and Indian markets. Besides, as the recent agitation by the Jat community indicated, there is growing unrest among agrarian communities.
The direct impact on taxpayers from the proposals announced during the 100-minute budget speech will be a Rs 3,000 rebate, benefiting 20 million assessees. Those living in rented homes will get a higher exemption of Rs 60,000 now, against Rs 24,000 earlier. But the tax slabs remain unchanged.
At the same time, withdrawal of provident fund and pension upon retirement are partially taxable.
Prime Minister Narendra Modi was quick to appreciate the budget and said its focus on development of agriculture, farmers, women and rural areas will give a major push to India’s agrarian economy. “It will also help the poor man realise the dream of owning a house,” he said.
Jaitley also announced an amnesty for those with disputed tax claims, with a waiver of penalty on amounts up to Rs 10 lakh. He said 300,000 such cases were pending before appellate authorities, for an amount totalling Rs 5.5 lakh crore.
Similarly he also unveiled a limited tax compliance window from June 1 to September 30 for people to declare their undisclosed incomes, with a tax liability of 45 percent of value, including the surcharge and penalties — together with immunity from scrutiny, enquiry and prosecution.
His other steps include a pilot project to extend the direct cash benefit transfers, currently in areas like cooking gas to the fertiliser sector, as also Rs.25,000 crore for the recapitalisation of state-run banks that are under financial stress on account of mounting bad loans.
While there were misgivings over money set aside for additional capital for banks, Jaitley told a press conference later that more money will follow as and when warranted. “The budget is not the last word on this,” he said, adding he was also open to consolidation of commercial banks.
On cutting subsidies, he promised a bill soon to use Aadhaar for direct transfer of cash.
Jaitley also said the government will meet its fiscal targets but said that from next year he proposed to do away with the classification of plan and non-plan expenditure — a move bound to stir up a controversy.
Jaitley also enhanced the total expenditure for this fiscal to Rs 19.78 lakh crore from Rs 17.85 lakh crore in the revised estimates for this fiscal — a hike of 10.7 percent — while the plan expenditure component was revised upward by 15.3 percent.
“A broad understanding over years has been plan expenditures are good and non-plan expenditures are bad. This results in skewed allocations in the budget,” he said, adding this would be dispensed with from 2017-18 to focus on revenue and capital classification of expenditure.
This move is likely to face stiff opposition.
Among the various sectors, the allocation for the ministry of agriculture and farmers’ welfare was enhanced by 93 percent to Rs 44,485 crore, for rural development by 10.7 percent at Rs 87,765 crore and for health and family welfare by 13 percent to Rs 39,533 crore.
A major boost was also given to infrastructure including energy with a 11.3 percent hike in the outlay to Rs 246,246 crore, as also for human resource development with allocation up by 7 percent at Rs 72,394 crore.
Deduction limit under Section 87A of the Income Tax Act raised from Rs 2,000 to Rs 5,000 per annum. This will help over 2 crore taxpayers save more.
Taxpayers who live in rented houses and don’t get house rent allowance (HRA) can deduct Rs 60,000 PA from their income from the current Rs 24,000.
EPF decision to make Rs 6 crore employees frown
Budget 2016 proposes to tax part of Employee Provident Fund (EPF) withdrawals from April 1, 2016.
Currently, withdrawals from EPF are completely exempt from IT after five years of continuous service, but once the new measure kicks in, employees will have to pay IT on 60 per cent of withdrawal amount from EPF. The remaining 40 per cent will be tax free.
Some cheer for entrepreneurs
2.5 lakh entrepreneurs will benefit from the “Stand Up India Scheme”, which will facilitate at least two projects per bank branch.
Health protection scheme will provide health cover up to Rs 1 lakh per family. For senior citizens an additional top-up package up to Rs 30,000 will be provided.
Start-ups to get 100% tax exemption for 3 years except MAT which will apply from April 2016-2019.
No more smoke
The government will provide LPG connections to all poor households, setting aside Rs 2000 crore for the purpose.