Union Budget 2016 : The Game Changers

From my perspective, Union Budget 2016-17 has adopted a balanced approach. It reflects the Government’s intention to boost investment in
Agriculture, Social Sector, Infrastructure and employment generation and simultaneously sticks to the path of fiscal consolidation. This is substantiated by a 15.3% jump in Plan outlay and 9% increase in Non-Plan outlay in 2016-17
over RE (2015-16) while simultaneously conforming to the fiscal deficit target of 3.5%.

Meanwhile on the market borrowing front, the government budgeted a net market borrowing of Rs.4,26,670 crore for FY17, which is 6.5% lower than the budgeted estimates for net market borrowing in FY16. A lower than expected government borrowing will help the private sector to participate more in raising credit.

Overall, the budget was a balanced one for the debt markets, and it remains to be seen how the central bank now reads into the budgetary measures (especially on fiscal consolidation and inflation), and takes action on the monetary policy front.

Budget Highlights at a Glance

• Tax will be applicable at 10% for persons and HUFs receiving dividend more than Rs 10 Lakhs
• For income Not more than Rs 5 Lakhs, ceiling raised under 87 (a) from Rs 2000 to Rs 5000 under sec 87A.
• HRA deduction raised from Rs 24,000 to Rs 60,000 under Section 88G
• 0.5% cess called Krishi Kalyan Cess on all taxable services, making Service Tax to increase from 14.5 to 15 per cent
• No Change in Income tax slabs
• 1% tax on luxury goods and cars exceeding Rs. 10 Lakhs
• 1 % service charge on in-cash purchase of goods and services over Rs. 2 lakh.
• 15 % surcharge to be levied on income tax for those with incomes exceeding 1 crore
• For first home buyers, an additional Rs 50,000 tax exemption for houses under Rs 50 Lakhs with loan amount less than Rs 35 Lakhs
• Creation of a higher education financing agency with corpus of Rs 1000 crore
• 40% withdrawal at maturity for NPS investments made tax free
• Rs 500 crore allocated for Start-up India and Stand Up India.

Financial sector reforms

• A comprehensive Code on Resolution of Financial Firms to be introduced.
• Allocation of Rs. 25,000 crore towards recapitalisation of Public Sector Banks.
• General Insurance companies owned by the Government to be listed on the stock exchanges.
• Debt recovery tribunals to be strengthened

Affordable housing

• For first home buyers, an additional Rs 50,000 tax exemption for houses under Rs 50 lakh
• No service tax for houses being built in less than 40 sq meters for 4 metros
• No service tax for houses being built in less than 60 sq meters for non metros

Key Takeaways

1. Digital Depository of Documents: A digital depository of academic certificates will be a great step towards  financial services.

2. Universal Aadhaar: Statutory backing for Aadhaar will be a game changer!  technology will democratize finance, cut inefficiency & fraud.

3. 22 Million Low Cost Homes by 2022: The increased focus on affordable housing is going to boost India's investment environment.