Indias Union Budget 2016-17

Was presented by Finance Minister Arun Jaitley when we are

evidencing the global economy in a serious crisis. Over the last
two years, global growth has contracted to 3.1% whereas India
has presented a steadfast GDP growth rate of 7.6%. Consumer
Price Inflation for January 2016 is reported at 5.69% which is also
accredited to be at the 17-month high. Last year, Government of
India entered in to Monetary Policy Framework Agreement with
RBI, to keep inflation below 6%. RBI and Government of India
needs to be congratulated to be able to keep the same in control
and as per the desired expectations (largely thanks to historically
low oil prices). Foreign Direct Investments have risen from $60
million in February 2014 to $3.74 billion in December 2015.
The International Monetary Fund has hailed India as a bright spot
amidst a slowing global economy. The World Economic Forum has
said that Indias growth is extraordinarily high. Much said about
past. Now, the time has come wherein the government has
presented its budget for the Financial Year 2016-17. Budget is
regarded as a document which spells out the intent, commitment
and priority of the government for the next fiscal year. It is one of
those horses on which the economic conditions for the next year
would ride upon. It will also set path and pace for the various
developmental and socio-economic concerns of India, its economy
and its citizenry.

LET US TAKE A CATEGORICAL VIEW

OF COMPARABLE DEVELOPMENTS OF
THE 2 BUDGETS.

Budget Estimates:
Let us look at the big figures of major components of the budget
(so that we can know little bit of the scale government deals with)

Budget 2016-17
Non-Plan expenditure estimates
for the Financial Year are
estimated at Rs. 14, 28,050
crore.
Plan expenditure is estimated to
be Rs. 5, 50,010 crore.
Total Expenditure has
accordingly been estimated at
Rs. 19, 78,060 crore.
Gross Tax receipts are estimated
to be Rs. 16, 30,888 crore.
Devolution to the States is
estimated to be Rs. 5, 70,337.
Share of Central Government
will be Rs. 10, 54,101.
Non Tax Revenues for the next
fiscal are estimated to be Rs. 3,
22,921 crore.
Fiscal deficit will be 3.5 per cent
of GDP and Revenue Deficit will
be 2.3 per cent of GDP.

Budget 2015-16
Non-Plan expenditure estimates
for the Financial Year are
estimated at Rs. 13, 12,200
crore.
Plan expenditure is estimated to
be Rs. 4, 65,277 crore.
Total Expenditure has
accordingly been estimated at
Rs. 17, 77,477 crore.
Gross Tax receipts are estimated
to be Rs. 14, 49,490 crore.
Devolution to the States is
estimated to be Rs. 5, 23,958.
Share of Central Government
will be Rs. 9, 19,842.
Non Tax Revenues for the next
fiscal are estimated to be Rs. 2,
21,733 crore.
Fiscal deficit will be 3.9 per cent
of GDP and Revenue Deficit will
be 2.8 per cent of GDP.

Individuals:
Budget 2016-17
Rebate under section 87A has
been increased from Rs. 2,000
to Rs, 5,000. This rebate is
available to taxpayers having

Budget 2015-16
Limit of deduction of health
insurance premium increased
from Rs. 15000 to Rs. 25000,
for senior citizens limit increased

income below Rs. 5,00,000

from Rs. 20000 to Rs. 30000.
Taxpayers who do not own any
house property, are living in a
rented premises and who do not
Senior citizens above the age of
receive any HRA (House Rent
80 years, who are not covered
Allowance) from their
by health insurance, to be
employers, will get an increased
allowed deduction of Rs. 30000
deduction of Rs. 5,000 per
towards medical expenditures.
month (Earlier Rs. 2,000 per
month) under section 80GG of
the Income Tax Act.
The turnover limit to avail the
Presumptive Tax Scheme under
section 44AD has been
increased from Rs. 1 crore to Rs.
2 crore. The taxpayers carrying Deduction limit of Rs. 60000
a business will be allowed to
with respect to specified
avail this scheme for which they decease of serious nature
will have to declared profits at
enhanced to Rs. 80000 in case
minimum 8% of the total
of senior citizen.
turnover and they will be
exempted from the requirement
of maintaining any books of
accounts.
Earlier the Presumptive Tax
Additional deduction of Rs.
Scheme under section 44AD was 25000 allowed for differently
available only to individuals
abled persons.
carrying a business. With effect
from 1st April 2016, the benefits
of this scheme has also been
extended to the Professionals
whose annual turnover does not
exceed Rs. 50,00,000, provided
the declared profits from such
profession are not less than
50%. The professional availing
these schemes will be exempted
from maintaining any books of

accounts.
For the first time home buyers,
additional deduction of Rs.
Limit on deduction on account of
50,000 annually will be allowed
contribution to a pension fund
under section 80EE for interest
and the new pension scheme
payments towards loans taken
increased from Rs. 1 lakh to Rs.
upto Rs. 35 lakhs. The value of
1.5 lakh.
the house should not exceed Rs.
50 lakhs.
Any amount withdrawn from NPS
(New Pension Scheme) at the
Additional deduction of Rs.
time of retirement will be
50000 for contribution to the
exempted upto 40% of the total new pension scheme u/s 80CCD.
Withdrawal amount.
Payments to the beneficiaries
including interest payment on
deposit in Sukanya Samriddhi
scheme to be fully exempt.
Service-tax exemption on
Varishtha Bima Yojana.
Any gains resulting from trading Conversions of existing excise
duty on petrol and diesel to the
of securities of unlisted firms
would be long term capital gains extent of Rs. 4 per litre into
if the period of holding of such Road Cess to fund investment.
securities is 24 months or more. To mitigate the problem being
faced by many genuine
Earlier the holding period
charitable institutions, it is
requirement was 36 months.
proposed to modify the ceiling
on receipts from activities in the
nature of trade, commerce or
business to 20% of the total
receipts from the existing ceiling
of Rs. 25 lakh.

The buzzword of the town is ease of doing business and start-ups.

Lets see whats in the box.

Budget 2016-17

Budget 2015-16

Penalty provision in indirect

taxes are being rationalised to
encourage compliance and early
dispute resolution.
Wealth-tax replaced with
Amendments in Companies Act additional surcharge of 2 per
to improve enabling
cent on super rich with a taxable
environment for start-ups.
income of over Rs. 1 crore
annually
Price Stabilisation Fund with a
Domestic transfer pricing
corpus of Rs. 900 crore to help threshold limit increased from
maintain stable prices of Pulses. Rs. 5 crore to Rs. 20 crore.
New manufacturing companies
incorporated on or after
Online central excise and service
1.3.2016 to be given an option
tax registration to be done in
to be taxed at 25% + surcharge
two working days.
and cess provided on fulfilment
of certain conditions
10% rate of tax on income from Time limit for taking CENVAT
worldwide exploitation of
credit on inputs and input
patents developed and
services increased from 6
registered in India by a resident. months to 1 year.
100% deduction of profits for 3 Donation made to National Fund
out of 5 years for start-ups setup for Control of Drug Abuse
during April, 2016 to March,
(NFCDA) to be eligible for 100%
2019. MAT will apply in such
deduction u/s 80G of Income-tax
cases.
Act.
Individuals and Hindu Undivided Seized cash can be adjusted
Family (HUF) setting up start-ups towards assesses tax liability
by deploying capital gains from
sale of residential property will
also get tax relief
The budget also proposed to
establish a Fund of Funds to
raise Rs 2,500 crore annually for
four years to finance the startAutomation facilities will be
provided in 3 lakh fair price
shops by March 2017.

ups.

Financial Markets / Sectors

The financial markets importance has been increasing immensely
as and when we advance on technological and global front. The
closer we move to the concept of global village, the higher is the
integration of financial factors world over.

Budget 2016-17
A comprehensive Code on
Resolution of Financial Firms to
be introduced.
A Financial Data Management
Centre to be set up
RBI to facilitate retail
participation in Government
securities

Budget 2015-16
Public Debt Management
Agency (PDMA) bringing both
external and domestic
borrowings under one roof to be
set up this year.
Forward Markets commission to
be merged with SEBI.
Proposal to create a Task Force
to establish sector-neutral
financial redressal agency that
will address grievance against
all financial service providers.

Amendments in the SARFAESI

Act 2002 to enable the sponsor
India Financial Code to be
of an ARC to hold up to 100%
introduced soon in Parliament
stake in the ARC and permit non
for consideration.
institutional investors to invest
in Securitization Receipts
Allocation of Rs. 25,000 crore
Vision of putting in place a direct
towards recapitalisation of Public tax regime, which is
Sector Banks.
internationally competitive on
General Insurance Companies
rates, without exemptions.
owned by the Government to be

listed in the stock exchanges

Budget has also proposed great
incentives for International
Financial Service Centres (IFSCs)
like GIFT City in Gujarat.

Make In India
Let us have a birds eye view on the take of Make in India in the
Budget. There are other various efforts being contributed offbudget towards this scheme.

Budget 2016-17
Changes in customs and excise
duty rates on certain inputs to
reduce costs and improve
competitiveness of domestic
industry in sectors like
Information technology
hardware, capital goods,
defence production, textiles,
mineral fuels & mineral oils,
chemicals & petrochemicals,
paper, paperboard & newsprint,
Maintenance repair and
overhauling [MRO] of aircrafts
and ship repair.

Budget 2015-16
Additional investment allowance
(@ 15%) and additional
depreciation (@35%) to new
manufacturing units set up
during the period 01-04-2015 to
31-03-2020 in notified backward
areas of Andhra Pradesh and
Telangana.
Rate of Income-tax on royalty
and fees for technical services
reduced from 25% to 10%, to
facilitate technology inflow.

HIGHLIGHTS
Affirming that the economy is right on track, Finance Minister
Arun Jaitley presented the Union Budget for 2016-17. Citing that
the CPI inflation has come down to 5.4% from 9 plus, he said it is
huge relief for the public.

Tax
Infrastructure and agriculture cess to be levied.
Excise duty raised from 10 to 15 per cent on tobacco products
other than beedis
1 per cent service charge on purchase of luxury cars over Rs. 10
lakh and in-cash purchase of goods and services over Rs. 2 lakh.
SUVs, Luxury cars to be more expensive. 4% high capacity tax for
SUVs.
Companies with revenue less than Rs 5 crore to be taxed at 29%
plus surcharge
Limited tax compliance window from Jun 1 - Sep 30 for declaring
undisclosed income at 45% incl. surcharge and penalties
Excise 1 per cent imposed on articles of jewellery, excluding
silver.
0.5 per cent Krishi Kalyan Cess to be levied on all services.
Pollution cess of 1 per cent on small petrol, LPG and CNG cars; 2.5
per cent on diesel cars of certain specifications; 4 per cent on
higher-end models.
Dividend in excess of Rs. 10 lakh per annum to be taxed at
additional 10 per cent.

Personal Finance
No changes have been made to existing income tax slabs
Rs 1,000 crore allocated for new EPF (Employees' Provident Fund)
scheme

Govt. will pay EPF contribution of 8.33% for all new employees for
first three years
Deduction for rent paid will be raised from Rs 20,000 to Rs 60,000
to benefit those living in rented houses.
Additional exemption of Rs. 50,000 for housing loans up to Rs. 35
lakh, provided cost of house is not above Rs. 50 lakh.
Service tax exempted for housing construction of houses less than
60 sq. m
15 per cent surcharge on income above Rs. 1 crore

Social
Rs. 38,500 crore for Mahtma Gandhi MGNREGA for 2016-17
Swacch Bharat Abhiyan allocated Rs.9, 500 crores.
Hub to support SC/ST entrpreneurs
Government is launching a new initiative to provide cooking gas
to BPL families with state support.
LPG connections to be provided under the name of women
members of family: Rs 2000 crore allocated for 5 years for BPL
families.
2.87 lakh crore grants to gram panchayats and municipalities - a
quantum jump of 228%.
300 urban clusters to be set up under Shyama Prasad Mukherji
Rurban Mission
Four schemes for animal welfare.

Health
2.2 lakh renal patients added every year in India. Basic dialysis
equipment gets some relief.

A new health protection scheme for health covers upto 1 lakh per
family.
National Dialysis Service Prog with funds thru PPP mode to
provide dialysis at all district hospitals.
Senior citizens will get additional healthcare cover of Rs 30,000
under the new scheme
PM Jan Aushadhi Yojana to be strengthened, 300 generic drug
store to be opened

Education
Scheme to get Rs.500 cr for promoting entrepreneurship among
SC/ST
10 public and 10 private educational institutions to be made
world-class.
Digital repository for all school leaving certificates and diplomas.
Rs. 1,000 crore for higher education financing.
Rs. 1,700 crore for 1500 multi-skill development centres.
62 new navodaya vidyalayas to provide quality education
Digital literacy scheme to be launched to cover 6 crore additional
rural households
Entrepreneurship training to be provided across schools, colleges
and massive online courses.
Objective to skill 1 crore youth in the next 3 years under the PM
Kaushal Vikas Yojna-FM Jaitley
National Skill Development Mission has imparted training to 76
lakh youth. 1500 Multi-skill training institutes to be set up.

Energy
Rs. 3000 crore earmarked for nuclear power generation
Govt drawing comprehensive plan to be implemented in next 1520 years for exploiting nuclear energy
Govt to provide incentive for deepwater gas exploration
Deepwater gas new disc to get calibrated market freedom, predetermined ceiling price based on landed price of alternate fuels.

Investments and infrastructure

Rs. 27,000 crore to be spent on roadways
65 eligible habitats to be connected via 2.23 lakh kms of road.
Current construction pace is 100 kms/day
Shops to be given option to remain open all seven days in a week
across markets.
Rs. 55,000 crore for roads and highways. Total allocation for road
construction, including PMGSY, - Rs 97,000 crore
India's highest-ever production of motor vehicles was recorded in
2015
Total outlay for infrastructure in Budget 2016 now stands at Rs. 2,
21,246 crore
New Greenfield ports to be developed on east and west coasts
Revival of underserved airports. Centre to Partner with States to
revive small airports for regional connectivity
100 per cent FDI in marketing of food products produced and
marketed in India
Dept. of Disinvestment to be renamed as Dept. of Investment and
Public Asset Management

Govt will amend Motor Vehicle Act in passenger vehicle segment

to allow innovation.
MAT will be applicable for start-ups that qualify for 100 per cent
tax exemption
Direct tax proposals result in revenue loss of Rs.1060 crore,
indirect tax proposals result in gain of Rs.20,670 crore

Agriculture
Total allocation for agriculture and farmer welfare at Rs 35984
crores
28.5 lakh heactares of land wil be brought under irrigation.
5 lakh acres to be brought under organic farming over a three
year period
Rs 60,000 crore for recharging of ground water recharging as
there is urgent need to focus on drought hit areas cluster
development for water conservation.
Dedicated irrigation fund in NABARD of Rs.20.000 cr
Nominal premium and highest ever compensation in case of crop
loss under the PM Fasal Bima Yojna.

Banking
Banks get a big boost: Rs 25,000 crore towards recapitalisation of
public sector banks. Jaitley says: Banking Board Bureau will be
operationalised; we stand solidly behind public sector banks.
Target of disbursement under MUDRA increased to 1, 80,000 crore
Process of transfer of government stake in IDBI Bank below 50%
started
General Insurance companies will be listed in the stock exchange

Govt to increase ATMs, micro-ATMs in post offices in next three

years

REACTIONS ON UNION BUDGET BY

STAKEHOLDERS ON FINANCIAL
SECTOR:
Abizer Diwanji, Partner and National Leader - Financial Services,
EY LLP

The budget seems to have thought through the bank

capitalization agenda well. Whilst on the face of it Rs 25,000 crore
seems too small (market estimates capital requirements of Rs 2,
50,000-3, 50,000 crore by 2019), the finance minister has focused
on reforming the banking sector as envisaged in the economic
survey. He has said that additional capital would be available if
required.
He said that he read that as successful implementation of
'Indradhanush' the PSU reform program. The first steps got taken
a day before the budget with the formation of the Bank Board
Bureau, he would have much preferred capitalizing a bank
holding company and levering it to meet further capital
requirements, it is a more robust way to fund banks than to rely
on budgetary support to fund 70 per cent of the banking system
in an economy expected to grow at 7.5 per cent.
Asset Reconstruction Companies formed under SARFESI
advocated wide shareholding to ensure that asset reconstruction
business is better governed. However, ARCs were unable to get
the requisite capital to fund its skin in the game, be it the
minimum 15 per cent contribution or the 100 per cent asset
purchase. The Budget permits 100 per cent FDI and Sponsor
ownership on Asset Reconstruction companies. This is likely to
boost the effectiveness of ARCs in resolution of distressed assets.

The finance minister also indicated that the Bankruptcy code will
be introduced during the year.
With this the finance minister has addressed the remaining two Rs
of the Economic survey, i.e. Resolution and Reform whilst the RBI
has played its role in recognition of the NPA issue.
The sceptic in him says that that whilst the framework is in
place, the devil is in the detail. The level of autonomy and change
that Indradhanush can get, the vigour with which PSU banks will
help resolve assets and the pace at which reform will happen in
terms of credit culture are the details that need attention. Banks
should sell to ARCs realizing the cost of capital gap that presently
results in the price divide between then. Banks need to realize
that they are better lenders than resolvers. The system should
make sure that the delinquent asset rate remains low and credit
is assessed better.
FDI in Insurance has now moved to the automatic route than the
FIBP route. This would cut down the process significantly
especially given the protective rights incorporated in various
agreements. Given that these were not defined well, two levels of
approvals, i.e. at an IRDA level and at an FIBP level would lead to
different interpretations. However, FDI in insurance will remain
slack until the Insurance Act is amended to allow foreign control.
That too, given floor dynamics is improbable now.
To Sum up, I think a prudent budget which lays the legislative and
guiding principles on which to implement reform in the financial
sector which could have been more effective had floor dynamics
been in the favour of the finance minister. However, a lot more
work needs to be done on the implementation as the DEVIL is in
the DETAIL.

Deepak Premnarayen, Executive Chairman, Founder,

Ics Group:
"The Budget Has Several Good Components Like The Boost To
Agriculture Through Schemes Like Crop Insurance, Mandi
Connectivity And Roads Program. However, The Finance Minister
Missed Out On The Banking Sector. He Had An Opportunity To Go
In For A 'Good Bank-Bad Bank'. Equity Cannot Be Raised In Capital
Market And Liquidation Is Also Difficult. Given The Assets We Have
Lying With Banks, We Had An Opportunity To Consolidate Them
And Take It For Funds.

POLITICAL MOTIVE BEHIND UNION BUDGET

As Finance Minister Arun Jaitley gets set to unveil Union Budget
2015 on Saturday, he has almost everything working in his
favour, making him the most fortunate FM in Indian history. Here
are some reasons why:
1. Rail budget is balance of pragmatism and populism with the
latter at the minimum giving the FM a huge boost to eye
alternatives that have been unexplored for long and disappoint
those expecting handouts, which is diametrically opposite of what
happened during the UPA regime.
2. Economic survey has put Indian economy in sweet spot:
* Inflation seen at 5.5.5%
* Commodity prices, like oil are down 60 pct and even gold is
behaving

* Sensex has risen over 4400 pts since PM Narendra Modi took
over
* Fiscal deficit at 4.1%
3. This strong foundation gives FM the leeway to launch economic
reforms like those by Manmohan Singh 19191-92, P
Chidambaram in 1997-98 and Yashwant Sinha in 2000-01.
4. Rupee has stopped its yo-yo ride and inflation is down by half
and more and above all, the US economy is strong while that
may hurt the foreign inflows it will definitely help Indian exporters
5. Arun Jaitley is the first FM since 1984 whose political party has
the mammoth mandate to push through standout economic
reforms. He can now axe subsidies on diesel, kerosene, fertiliser,
LPG and more, giving the govt a much leaner and, if possible,
meaner profile. He can even target Labour reforms, which are a
crying need and which India In has been screaming about for
decades.
6. There is a political angle to the Budget equation too, a very
pressing one, indeed. That the BJP was drubbed by the Arvind
Kejriwal led AAP in Delhi Assembly elections. With the Bihar
elections in the offing, the BJP power brokers dont want another
fiasco. The good thing is that apart from Bihar there are almost no
other major elections coming a big blessing indeed.
7. That the economic foundation is strong has already been
factored in by the markets which have risen strongly on Economic
survey day by as much as 473.47 pts to near all-time high of

29220.12 pts albeit a minor hiccup on the way that happened

on Rail Budget day.
They, like most of India, await a Big Bang Budget.
Expectations are that Arun Jaitley will build on that solid
foundation and unveil a Union Budget that is both tough and yet
put more money in the pockets of the common man as well as the
middle class to kick-start a consumer-spending led boom that will
cheer India Inc as well as encourage them to stop their reluctance
to spend on ramping up their infrastructure that will in itself
create jobs and power PM Narendra Modis Make in India
programme, not to mention, get the Indian economy humming
again.

Thank you
By:
Group-6
Gayatri Parimi (15BBA0077)
Nigama vedya (15BBA0080)
Hasya (15BBA0071)
Uday Chand (15BBA0070)

Sarala Devi (15BBA00

Shiva Bakhya kani (15BBA00