On 01 February 2017, the Finance Minister of India, Mr. Arun Jaitley presented the Union budget for the fiscal year 2017/18. This was a historic budget as it was merged with the railway budget for the first time in the country. With the focus on reducing poverty line, the Government of India decided to increase its spending on providing food and shelter for the poor. Let’s summarise the changes made in this budget that will impact the road map of this fiscal year.
Changes Made in Personal Income Tax Liabilities
- Individuals earning income of Rs.2.5 lacs to Rs.5 lacs will pay only 5% taxes compared to 10% from existing slab.
- Individuals who have annual income of Rs.50 lacs to Rs.1 crore will have to pay surcharge of 10%.
- Income Tax Return can be filed with simple one-page form for the individuals who have income of up to Rs.5 lacs. (Business Income not included).
- With rebate an individual can save Income Tax for up to Rs.5 lac income. Without rebate, it will be 50% less from the existing rates.
- 60 years old citizens will pay zero tax for up to Rs.3 lacs and 80 years old are exempted for up to Rs.5 lacs. While both will have to pay 20% income tax for income between Rs.5 lacs and Rs.10 lacs and 30% for income above Rs.10 lacs.
Fiscal Deficit and Expenditure
- Government estimates the fiscal deficit of 2017-18 at 3.2% of the Gross Domestic Product.
- Government aims to keep fiscal deficit of 2018-19 at 3% of the GDP.
- Government estimates a total budget of Rs.21.47 trillion ($317.65 billion) for the fiscal year 2017-18.
- Spending on CapEx is hiked by 25.4% for year 2017-18.
- Interest expenses on debt funding is estimated at Rs.5.23 trillion which is nearly equal to India’s federal spending in a quarter.
Growth and Inflation
- FM says India is seen as an engine of global growth.
- GDP growth seen at 11.75 pct in 2017-18 on annual basis.
- CPI inflation is expected remain probably in the mandate range of 2 to 6%.
Railway and Aviation
- Allocated railway budget of Rs.550 billion with an aim to invest Rs.1.31 trillion in railway sector for 2017-18.
- 5 year plan for railway safety with a funding of Rs.1 trillion.
- Proposes to build 3500km railway lines in 2017-18. Last year it was 2800km.
- Withdrawal of service tax from online train ticket booking.
- Monetize land around tier 2 airports and upgrade aviation sector.
Banking and Divestment Plans
- Rs.100 billion to infuse in public sector banks in 2017-18.
- Bad loan provisions of banks have been increased to 8.5%, previously it was 7.5%.
- New laws to be formed for finance offenders.
- Rs.725 billion will be the total disinvestment for this fiscal year.
Borrowing, Buy Back and Foreign Investment
- For year 2017-18 market borrowing is estimated at Rs.3.48 trillion while Gross market borrowing at Rs.6.05 trillion.
- Government may switch Rs.250 billion of bonds in 2017-18 and buy back bonds worth net Rs.750 billion.
- Government abolished Foreign Investment Promotion Board and exempted FIIs from Indirect Transfer Provisions(ITP).
Agriculture and Rural Budget
- With an expectation of 4.1% growth in agriculture, its credit target is fixed at Rs.10 trillion for this fiscal year.
- Rs.400 million are allotted for long term irrigation funding and Rs.80 billion for milk processing (3 year period).
- New contract farming laws will be introduced to all states.
- 10% hike in Farm insurance: it will now cover 40% of net sown land, previously it was 30%.
- Rs.1.87 trillion been allotted for agriculture, rural and such lands. It has been spiked to 24% than that in last fiscal year.
- Rs.480 billion for rural jobs and Rs.190 billion for rural road schemes will be allotted in 2017-18.
- Rs.48 billion has been allotted under rural electrification scheme with an attempt to provide 100% electric connectivity in villages by 01 May 2018.
Infrastructure, Manufacturing and Commodities
- Rs.3.96 trillion has been allotted for infrastructure and Rs.2.41 trillion for transport sector in 2017-18.
- Rs.640 billion has been proposed for the investments in national and state highways.
- Taking steps to escalate in electronics manufacturing by new infrastructure export schemes.
- Legislative reforms been taken to change labour laws.
- Aims to develop integrated oil production company and two oil storage facility in couple of states.
- Government reduced import tax on LNG to 2.5%.
- Options trading within derivatives segments will be integrated in commodity trading.
Housing and Welfare programme
- Rs.200 billion will be provided for housing loans by national housing banks.
- Cheaper houses to be allotted via organized infrastructure status.
- No long term capital tax on property after 2 years of possession instead of 3 years.
- Economic reforms in the welfare of the poor.
- Rs.40 billion allocated for youth for market related training.
- Rs.1.84 trillion for women and children benefits.
- Doubled lending target to Rs.2.44 trillion under Mudra Yojana
Political Party Funding
- A gentle push for transparency to the funding of political parties and also to file income tax return.
- Rs.2000 will be the maximum individual cash donation limit.
- Central bank to issue electoral bonds for political parties.
Subsidies
- Rs.1.45 trillion as food subsidy for 2017-18. Previously it was Rs.1.35 trillion.
- Rs.250 billion as fuel subsidy compared to Rs.275 billion last year.
- Rs.700 billion subsidy for fertiliser. (Unchanged).
- Rs.1.31 trillion for federal government pension schemes. Previously it was 1.28 trillion.
- Rs.489 billion for health care sector. Previously it was Rs.399 billion.
