Budget 2017

India’s Union Budget is a unique event and it is often a highly polarizing debate with pundits from various schools of thought expressing multiple opinions. For weeks before and after the budget speech, media discussions featuring various experts talk about expectations and effects of the Finance Minister’s speech. Then quite suddenly, the entire media circus ceases until next year.

The 2016 budget was no different – there were various expectations that did not come to fruition and there were somewhat unexpected developments. Some of the announcements even led experts to term the Union Budget 2016 as a populist, conservative and designed specifically to appease the masses. Before we take a look at some of our expectations from Union Budget 2017, let’s view what Budget 2016 announcements made headlines.

The Union Budget for 2017-18 will be presented in Parliament in the first quarter of 2017 on 1st Feb. Expectations from different industries and the public have already started coming in. We at Paisabazaar.com present you the top expectations from Budget 2017-18:

Modification in Income Tax Slabs and Rates

This is on top of every citizen’s list of expectations. With the demonetisation announcement in November leading to massive inconvenience for the common man, many are expecting the government to increase the tax exemption slab from Rs 2.5 lakhs to Rs 3 lakhs. There may also be a reduction in the tax rates, which currently stands at:

• 10 % for incomes above Rs. 2.5 lakhs
• 20 % for incomes above Rs 5 lakh
• 30 % for incomes above Rs 10 lakh

Also, a higher tax exemption slab and a reduction in tax rates may encourage more people to file taxes. Currently, only around 3% of India’s population file their taxes.

Budget 2017-18 Income Tax Slab Rate Expectations

Taxable Income	Tax Rate
Less than Rs. 4 lakhs	Nil
Rs. 4 lakhs to less than Rs. 8 lakhs	10% on taxable income exceeding Rs. 4 lakhs (Max. Rs. 40,000)
Rs. 8 lakhs to less than Rs. 12 lakhs	Rs. 40,000 + 20 % on taxable income over Rs. 8 lakhs (Max. Rs. 1.2 lakhs)
Rs. 12 lakhs and above	Rs. 1.2 lakhs + 25% on taxable income over Rs. 12 lakhs

Lower Tax Rates

The possibility of change in current direct tax norms such as Income Tax has gained further strength following the late December announcement by the Finance Minister that the focus should be on lower tax rates. The argument is that lower tax rates such as those prevalent in many economies actually have the potential to bring in greater revenues as they have a much broader tax base. India’s traditional mindset that higher tax rates lead to greater tax income needs to be changed according to the statement issued by the Finance Minister, Shri Arun Jaitley. By decreasing the tax rate, goods and services produced in India are expected to be more competitive in the global market enabling Indian companies to generate more revenues overseas.

More Incentives for Digital Payments

The government has already announced incentives for those making payments through digital mediums like debit/credit cards, mobile wallets etc. Service tax on payments for transactions upto Rs. 2000through debit/credit cards have been removed, 0.75% discount has been announced for digital payments at petrol stations. With a vision to move towards a cashless economy, the government may announce further measures to encourage digital payments.

Streamline Existing Tax Saving Vehicles

Usually, new tax-saving schemes are launched every few years but changes required to the existing schemes are often ignored. This means that most of the older options such as fixed deposits, pension plans, insurance policies, etc. are not in sync with the times.

This has an adverse effect on the elderly population, who invested in these schemes many years ago, largely due to lack of better options, and now do not have the resources to take advantage of the new tax saving options. Though the regulatory and fundamental changes required will take time to be implemented, the union budget of 2017 can be starting point to ensure the elderly get the same returns.

For instance, bank fixed deposits can provide returns of 7.5-8% to people over 65 years of age.

More taxes on capital gains from stock investments

There is widespread speculation that the Government, in Budget 2017-18, may introduce new rules for taxing capital gains from stock investments. Currently, there is no tax implication for gains made from stocks that have been held for a year. This minimum holding period, according to reports, may be raised to 2 or 3 years. There is also no limit on the tax-free gains, which might be capped at a high amount. Currently, there is a 15% tax on stocks sold within a year; this may be increased to 20%.

No Tax Payments on Pension Income

Another populist announcement, which many are demanding from some time now, is the pension income for senior citizens be made completely tax free.

This will not only help the elderly but will also reduce operational work for income tax authorities.

Like every other year not all expectations were met in the Budget speech of 2016 and these unmet expectations form the basis of our expectations from the Union Budget 2017. For starters, many experts were of the opinion that the tax exemption slab for individual tax payers would be raised from the current Rs. 2.5 lakhs level to a new level of Rs. 3 lakhs per annum. That of course did not happen, so this may be something to look forward to this year.

Another announcement in the Union Budget that led to protests across the country was the introduction of a new tax regime on schemes such as EPF. Currently, EPF is completely tax exempt but the 2016 budget showed an intention to make 60% of the corpus taxable at the time of withdrawal (NPS withdrawals are already similarly taxable). Thankfully this decision about EPF was retracted soon after due to protests across the country. However, there is still a possibility that such an attempt would be made again in the Union Budget 2017 or in another one in the near future.

There is saying “There are only 2 certainties in life – death and taxes” and if historic records are anything to go by, you don’t need a crystal ball to predict that the taxes of alcohol, tobacco, luxury goods and precious metals/gems will increase. The only question is by how much. Then there is the new player in the tax space to contend with as well – GST. The certainty about GST is that it will be introduced during the 2017-2018 fiscal. The uncertainty is whether it will be introduced in its current form which has polarised opinion or in a more watered down and less polarised format with amendments. Only time will tell and in 6 odd months we will have a definitive answer to these and other questions regarding Union Budget 2017. 

Feb 01, 2017 – Healthcare announcements in Union Budget 2017

An action plan has been prepared to check poor health conditions. The target is to eliminate tuberculosis by 2025, Kala Azar and Filariasis by 2017, Leprosy by 2018 and Measles by 2020. For its implementation, two new AIIMS hospital will be set up at Jharkhand and Gujarat and over 1.5 lakh health sub-centres will be transformed to health and wellness centres.  Also, new Aadhar based smart cards will be introduced for senior citizens indicating their health conditions.

Jan 31, 2017 – Economic Survey 2017 to be presented today in parliament

Finance Minister Arun Jaitley will present the Economic Survey for 2016-17 in parliament today, a day before the Union Budget 2017. The survey is expected to highlight the impact of demonetisation on Indian economy and outline the growth projections for next fiscal year. Earlier, India’s GDP growth was estimated at 7.1% for 2016-17, but for computing the final financial report, economic data for December would be the deciding factor.

The International Monetary Fund (IMF) has reduced India’s growth rate to 6.6% for financial year 2016-17 from the previous estimated growth rate of 7.1%. This happened because of the sudden economic slowdown due to demonetisation.  For 2017-18, IMF has projected growth rate of 7.2% which was previously estimated at 7.6%.

Jan 30, 2017- Defense Sector To witness Increased Investment in Budget 2017

In the forthcoming budget, it is likely to expect up 10% hike in defence allocation towards defence. The additional funds would be used for modernisation, acquisition of equipment and technology and this would also eventually be beneficial for stocks of BEML and BEL, which are heavily invested in the defence sector. . The current defence services capital expenses are estimated at Rs.78,586 crore which is expected to increase by up to 10 percent as per budget 2017 experience. In the previous budget, the defence ministry has decreased its budget by an estimated Rs. 35,000. The key area of increase is expected to be in the core defence services, while there is also an expectation that the government will provide incentives for building defence clusters as this would increase foreign company JVs in India’s defence sector.

Jan 30, 2017- Railway Budget 2017: New safety Cess might increase the Railway fares

With the merger of the the Railway budget with the general budget, in Union Budget 2017, the Finance Ministry is expected to introduce a safety cess. The funds thus generated would be put in a Rashtriya Rail Sanraksha Kosh worth Rs.1.2 crores for undertaking various safety measures. This is expected to significantly increase the railway fares for second class and AC-3 tier journeys, whereas, AC first class and AC 2 tier fares will witness only marginal increase. Finance Minister Arun Jaitley has agreed to finance only 25% for the special safety fund and suggested that Railways should finance the rest 75% by itself. However the final decision of raising the Railway fare is yet to be taken. The funds of Rashtriya Rail Sanraksha Kosh will be used to prevent train accidents by financing a modern signaling system and eliminating unmanned level crossings.

Jan 27, 2017- Government still undecided on BCTT

The government is still to follow up on its announcement regarding BCTT (Banking Cash Transaction Tax), which is expected to be charged on all cash deals valued at Rs. 50,000 or more. The government is expected to continue its examination of recommendations made by the chief ministers’ panel before they taking a final call on the issue. As per experts the BCTT is designed to discourage high value deals using physical currency. Additionally, the panel has also recommended that various incentives be provided to those using digital payment methods like credit cards. Such a levy was in fact introduced as early as 2005, however, it was subsequently withdrawn in 2009. As not now, there is no guarantee that the BCTT will in fact be introduced in 2017 Budget, however, there is definitely a possibility of it happening.

Jan 26, 2017- Sugar subsidy might be discontinued from next Fiscal

There is a possibility that Finance Minister Arun Jaitley might do away with subsidy on sugar. Currently, the government offers a subsidy of Rs 18.50 per kg to states for selling sugar through the public distribution system (PDS), also known as ration shops. Because of this subsidy, people belonging to the below poverty line (BPL) segment have to only Rs 13.50 for a kg of sugar, which would otherwise cost them Rs 32. However, the government is mulling discontinuing this subsidy from the next fiscal. While this decision will help the government save Rs 4,500 crores, it will impact 40 crore beneficiaries as well.

Jan 25, 2017 – Why 2017 Budget is fraught with uncertainty

Union Budget 2017 comes at a very uncertain time. For starters, the economic data available to the Finance Minister will not be able to factor in the effect of demonetisation impact due to the advanced budget 2017 date of February 1. Moreover, there is now little doubt that the global as well as domestic economy are slowly but surely slowing down. On the one hand, there is the need of economic stimulus, while alternately, there is little room to maneuver as there is the fear of rising inflation. There are also global cues that can put the Indian economy in the doldrums not the least of which are the continuously rising oil prices that India imports from various countries. Then of course there is demonetisation, whose adverse impact at present is shown through decline in overall consumption as well as through significant reduction in the number of personal loan applications that being submitted to leading banks within India.

Jan 24, 2017 – Corporate Income Tax and MAT Reduction on the Cards in Budget 2017

As far as 2017 Union Budget expectations go, corporate entities and startups are definitely gunning for tax cuts. With this in mind, some experts have proposed that the Minimum Alternate Tax (MAT) may be headed for a cut from the current 18.25% level. However, at the maximum level, MAT can be as high as 21.34% when one factors in the applicable surcharge and cess. The exact rate by which MAT will be reduced will depend on the Corporate Income Tax rate cut, which is expected to decline by an estimated 1.25% to 1.5%. The original point of MAT was to ensure that companies that would otherwise be able to continue paying no tax at all due to very low taxable income even after making operational profits. The new series of tax exemptions are in line with the government’s road map published in 2005, which laid the foundation the process by which corporate tax exemptions are being phase out.

Jan 23, 2017 – Union Budget 2017 Expectations for the IT Industry

With 2017 budget looming large, this key export industry of India was bound to have some key demands and they haven’t disappointed. For starters like many other sectors, IT industry is also seeking clarity on taxation across state and international borders with special note of how their tax liabilities will be impacted by roll out of the GST regime. There is also the outstanding issue regarding TDS refunds, which Industry analysts agree should take less than the current 3-4 year period, which decreases working capital and impacts growth of individual organisations as well as the industry as a whole.

One of the suggestions received by Mr. Arun Jaitley for Union Budget 2017 include the abolition of taxes that are collected up front and reimbursed at a later date such as in case of SAD and TDS in case of hardware companies. For some segments of the IT industry, demonetisation has come as a boon as the organised sectors are liable to witness growth at the cost of the cash-dominated unorganised sector.

Some of the key IT Industry expectations from 2017 Union Budget include –

• Reduced rates of personal and corporate taxes to improve coverage and compliance.
• Complete abolition of current TDS mechanism to help boost growth through faster refunds.
• Further government investment in cyber security to increase safety of government-citizen transactions.
• Further infrastructure investment to help develop internet services and telecommunications.

It is also expected that Union Budget 2017 will link GST and customs duty to total collections so as to help the cash-flow challenges of SMEs.

Jan 23, 2017 – Start-ups hope for tax breaks and more FDI in Budget 2017

After the Government of India’s “Start-Up” India campaign was launched, there have been high hopes that new entrants into the marketplace will have an environment wherein they can operate with ease through a well-defined framework. The first expectation that these companies have is that they will have better access to foreign funding as a result of demonetisation. This is because the organised sector is expected to grow further as more and more number of cashless businesses and transactions gain prominence in India. The current corporate tax applicable to start-ups is 30%, which is expected to be decreased to 25% in order to provide even greater boost to improve the entrepreneurial spirit of India. Additionally, it is also expected that new incubators will be created in order to help develop the start-up culture in India.

Jan 22, 2017-  Budget 2017 May Introduce New Capital Gains Taxation Rules

Budget 2017 may see the government take a second look at the capital gains taxation rules in order to increase the tax contribution of markets. As per current rules, any stock or mutual fund investment that has been held for 12 months or more will be suitable for long term capital gains rules. As per these rules, any long-term capital gains are free of tax. While any capital gains on shares held for less than 1 year are in the purview of short term capital gains that are taxes at 15%.

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Jan 21, 2017- Budget 2017 Date Confirmed for 1st February

In the run up to Budget 2017, certain political parties had raised an objection that the advancement of the budget could cause issues in the electoral process. This comes against the background that five states are scheduled to have elections from March onwards. With reference to this, the government has commented that the Union Budget 2017 will be held on 1st February as per the current plan and the 2017 Budget announcements will not have any announcements that are specifically directed at states who are to go on election in the coming months. This year’s budget will be kicked off by an address from the President of India, Shri Pranab Mukherjee on the 31st of January, who will also present the Economic Survey, which forms the basis of the Union Budget. This is the first time that there will not be a separate rail budget.

Jan 20, 2017 – Automobile Sector eyes 200% weighted deduction in 2017 Budget

Last year, many in the automobile sector felt that they had been dealt a rotten hand, when Budget 2016 announcement featured a reduction of the weighted deduction on Research and Development from the previous level of 200% to the new lower level of 150%. However, based on the fact that the automobile industry has been hard hit as a result of the demonetisation announcement, many experts expect Budget 2017 to feature a roll back of this revision to 200% weighted deduction on R&D expenses made by automotive companies. As R&D is the main stay of the automotive industry if they want to continue maintaining a competitive edge in the marketplace, the announcement of this change in the 2017 Union Budget will be welcomed and provide a much-needed respite for the Indian automobile manufacturers.

Jan 20, 2017

As the Budget 2017 draws closer, a few key industries are expecting unmatched growth offers from the finance minister. These industries include automobile, banking, infrastructure, cement, metals and many more. Though the number of industries are numerous, each of these industries has its own expectations. While metals industry expects protectionism measures so that they can compete with cheaper imports, the cement industry expects lower excise duty as the government moves towards providing affordable housing. The automobile sector expects special dispensation as their sales have been hit subsequent to demonetization, while infrastructure development expects big government investments in railways and roads. Additionally, there is the banking sector that expects some additional measures in UNION Budget 2017  to provide credit growth.

Jan 19, 2017- Union Budget 2017 to feature higher infrastructure investment

The Union Budget 2017, according to some experts, features plans that will significantly increase the government spending on infrastructure. This comes on the back of a significant slowdown in private investments within India as well as globally. This year unlike at the time of previous budgets, most experts agree that the only way to boost economic growth in India is through increased government investments in key sectors such as infrastructure. Shri Arun Jaitley is expected to oblige with 2017 Budget focusing specifically on railways and roads as key points of investment. At present, available data to the run up of Budget 2017 shows that the Indian economy’s investment demand is expected to witness a contraction of around 0.2% in the 2016-2017 period, as opposed to the 3.9% growth it had witnessed in the previous period i.e. 2015-2016.

Jan 18, 2017

In an effort to eradicate abject poverty, the Government of India in the Union Budget 2017 is expected by some to implement an income transfer programme. This one of a kind scheme is expected to be unprecedented as up to 200 million economically disadvantaged individuals get up to Rs. 1500 per month. The scheme is expected to require an investment of Rs. 3 lakh crore annually by the government after it is implemented in the 2017 budget. This scheme is pegged to be the basis of the national social security scheme that would initially focus on improving the lot of the most vulnerable sections of society. Such vulnerable sections of society would include the unemployed, women, differently-abled, etc. Some in fact  are in favour of such targeted transfers instead of the earlier proposed universal transfers.

Jan 18, 2017

The Union Budget 2017 is expected to feature a major employment generation drive in the agriculture sector. This has been much sought after as farmers at large have always looked for firm policy direction in budgets and 2017 budget is expected to deliver on this. One of the key propositions in budget 2017 is to implement tax-exemptions on advanced irrigation technology. This would help farmers grow crops even in the dry season and help generate even greater revenues. Additional investment is also expected in development and distribution of better quality seeds that can provide increased yields. In the Union Budget 2017, this drive may be implemented by means of a special incentive provided to states in order to ensure availability of high quality seeds to farmers across the country.

Jan 17, 2017

In an effort to eradicate abject poverty, the Government of India in the Union Budget 2017 is expected by some to implement an income transfer programme. This one of a kind scheme is expected to be unprecedented as up to 200 million economically disadvantaged individuals get up to Rs. 1500 per month. The scheme is expected to require an investment of Rs. 3 lakh crore annually by the government after it is implemented in the 2017 budget. This scheme is pegged to be the basis of the national social security scheme that would initially focus on improving the lot of the most vulnerable sections of society. Such vulnerable sections of society would include the unemployed, women, differently-abled, etc. Some in fact  are in favour of such targeted transfers instead of the earlier proposed universal transfers.

Jan 17, 2017 – Budget 2017 to introduce GAAR

As per a recent news report, Budget 2017 is expected to bring GAAR (General Anti Avoidance Rules) into effect from April 1, 2017 without any further delay. Organizations are hopeful that GAAR would come into play only when the purpose is to ‘avoid tax’ and would not affect the genuine business considerations. While the courts consider tax planning legitimate, tax avoidance is not acceptable and therefore much anticipation is associated with the introduction of GAAR in the upcoming session. However, CBDT has grandfathered several amendments to take care of the investments made before April 1 2017. However, fear of retrospective applicability of GAAR still lingers.

Jan 16, 2017 – Government to add a new “Fat tax” on junk foods

Government is considering raising the taxes on junk food and sugary drinks in the upcoming 2017-18 budget. The move has been taken to curb the growing diseases like heart diseases, obesity and diabetes. The Government is contemplating to add an additional “fat tax” on such junk food and sugary beverages which have high contents of sugar and saturated fats.
The decision has been taken by a team of 11 members including secretaries on health, sanitation and urban development in a meeting held by Prime Minister Narendra Modi. They had suggested that the revenue collected from such taxes can be used to increase the Government’s health schemes.

Jan 12, 2017

In the run up to the budget some sources have suggested that Union Budget 2017 would make digital payments cheaper than they were before. This move might be a result of demonetisation as many smaller business owners prefer not to use digital methods due to charges such as MDR that is levied on their earnings. At present, the payment methods which are expected to become cheaper include credit card, debir card as well as Internet banking. By offering discounts on such transactions, the government feels that it will provide incentive those who prefer to use cash as a result of e-payment charges and ATM transaction charges that are applicable when using digital transaction methods such as those mentioned above. This news comes on the back of State Bank of India’s decision to completely waive MDR charges till 31st December 2017 for small merchants accepting debit card payments through its machine.

Jan 11, 2017

Organisations are hopeful that Budget 2017 will feature an announcement from Shri Arun Jaitley does away with the ICDS, which was first introduced in the 2016-2017 fiscal. The introduction of ICDS has led to a situation, where corporate tax payers have to maintain multiple books namely, ICDS for IT purposes and a separate book of accounts as per the Companies Act. Having multiple books tends to create an additional compliance burden, interpretation issues as well as confusion. According to experts, ICDS is not aligned with the fundamental requirements of accounting such as materiality, prudence as well as accounting of foreseeable losses. As a result of these issues, some experts believe that Union Budget 2017 will do away with ICDS.

Jan 9, 2017

As part of the run up to the Union Budget 2017, Finance Minister Shri Arun Jaitley has invited comments and suggestion from Indian Twitter users regarding the Budget 2017-2018’s focus on employment generation. Moreover, the Twitterati can now vote till the 13th of Jan on schemes of their choice through the official handle of the Finance Ministry.  The initial Twitter voting trends which have been made public knowledge in the run of the 1st of February shows that most voters rank MSME highest in terms of 2017 budget employment generation priority followed by affordable housing initiatives. Other sectors of note that have been voted on by the participants include the agriculture sector and the automotive sector.

Jan 9, 2017

The 2017 Budget might feature a fiscal deficit target of around 3.5% of the country’s GDP according to some sources. This is because, the extra deficit can provide the government with additional  capital to finance key development projects such as those related to housing, infrastructure and other social schemes launched by the government. As per the existing roadmap, the Budget 2017 would target a fiscal deficit not exceeding 3% of India’s total Gross Domestic Product. The higher than projected 3.5% target may in fact be met driven by higher direct and indirect tax obtained by the government subsequent to the 2016 Budget. As is already apparent from the New Year’s Eve address of Prime Minister Modi, new measures to help the poor as well as renewed focus on education, health and job creation will be the cornerstone of the Union Budget 2017.

Jan 5, 2017

As part of the new budget announcement, some exporters are demanding exemption from tax payments under the new GST regime. The main concern in this regard is the fact that these tax refunds take a long time to process and block their working capital. Additionally, the exporters also suggest that this move would provide much needed impetus in view of the current economic slowdown. These issues were raised in the recent meeting with Shri Arun Jaitley and as a first measure, it has been proposed that the GST procedure will be streamlined so that the refunds are provided within 2 weeks. In case it is delayed beyond the 2 week period, interest will be paid on the refundable amount.

Jan 4, 2017

Arun Jaitley held a meeting with all the state finance ministers in the run up the 2017 budget. He reiterated that though the going has been tough since implementation of reforms such as demonetisation, the Indian economy is still expected to grow further. He added that India’s macro and micro economic factors were strong, therefore the current slowdown would give way to growth in the future and the Union Budget 2017 will be the guiding force. After the Finance Minister’s pre-budget speech, various suggestions were made by the state Finance Ministers chief among which was relaxing the FRBM limit. By relaxing this limit for States, they would be able to increase their borrowing capacity by 0.5% to 1% over current limits.

Jan 3, 2017

It has finally been confirmed from government sources that the Union Budget of 2017-2018 will be presented on the 1^st of February and as part of a break from tradition, there will be no separate Railway Budget this year. The first section of the Budget 2017 will now be presented on the 31^st of January 2017 and it is expected to feature the Economic Survey. This first phase would form the basis of the announcements of the 2017 Budget, which will be made the following day i.e. 1^st February. The amalgamation of the Rail Budget 2017 with the Union Budget 2017 is expected to help the government push through a larger number of populist reforms.

Jan 2, 2017

The finance minister has already been meeting with leaders in various fields such as agriculture, industry etc. Additionally, the all important GST council meeting is also being held from the 3^rd of January onwards. Subsequently, on the 4^th of January, Shri Arun Jaitley is expected to meet with state representatives who are expected to lobby for higher tax exemptions and deduction limit as part of dealing the woes of demonetisation. States are also expected to lobby for increased support from the central government to deal with the problems of demonetisation as well as to alleviate the expected loss of revenue subsequent to implementation of GST. Some of the less developed states may also seek special category status as well as additional centrally sponsored schemes to alleviate their lot.

Dec 28th, 2016 – Focus on Agriculture in 2017 Budget

As per recent news reports, Budget 2017 will focus on improving the farmer’s lot and a slew of measures to boost agriculture is expected to be announced. To determine the key areas in agriculture that need to be revamped, it has been reported that the Prime Minister has sought suggestions regarding the establishment of premier institutes focused on agriculture based on the present-day IIM and IIT models. There have also been discussions regarding methods that can be adopted by the government so that the income of farmers could be increased two fold by the year 2022. Other notable agriculture-related discussions in the run-up to the 2017 Budget included ways to bring agriculture in the purview of digital payments revolution and also the move towards high-value agricultural products.