Budget 2016

Highlights of Union Budget 2016-17

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MFM FIRST YEAR (SEM II) BY SAYALI WARE 111 YOGITA ZOPE 119 NIRAJ TRIVEDI 103 SHASHANK SHAH 106 DHERAJ KANCHAN 77 RAHUL SRIVASTAV 99Union Finance Minister Arun Jaitley presented Union Budget 2016-17 in the Parliament. It was the second full year Budget of the NDA government under leader-

CURRENT AFFAIRS 2016 1

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ship of Prime Minister of Narendra Modi and the third budget of Arun Jaitley as Fi-nance Minister. Union Finance minister has announced 9 pillars of the budget. They are rural sector, social sector including healthcare, education, skills and job creation, Agriculture and farmers’ welfare, Infrastructure, ease of doing business, financial sector reforms, fiscal discipline, tax reforms to reduce compliance burden.

Key Highlights

1. Higher allocation for agriculture, infrastructure and social sectors. 2. Fiscal deficit pegged at 3.5%, Revenue deficit was at 2.5% during 2015-16.

Taxation

1. 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.

2. Companies with revenue less than 5 crore rupees will be taxed at 29% plus surcharge.

3. 0.5 per cent Krishi Kalyan Cess to be levied on all services. Infrastructure cess to be levied.

4. 1% excise imposed on articles of jewellery, excluding silver. 5. 1% Pollution cess of on small petrol, CNG and LPG cars; 2.5% on diesel cars

of certain specifications and on higher-end models 4% cess.

Personal Finance

1. No changes have been made to existing income tax slabs 2. 1,000 crore rupees will be allocated for Employees’ Provident Fund (EPF)

scheme. 3. Government will pay 8.33% EPF contribution for all new employees for first

three years 4. Exemption of 50,000 rupees for housing loans up to 35 lakh rupees, provided

cost of house is not above 50 lakh rupees. 5. 15% surcharge on income above Rs. 1 crore.

Social

1. Allocation of Rs. 38,500 crore for MGNREGA for 2016-17 2. Allocation of Rs.9,500 crores for Swacch Bharat Abhiyan. 3. LPG connections will be provided under the name of women members of

family. Rs 2000 crore will be allocated for 5 years for BPL families. 4. Government to launch new initiative to provide cooking gas to BPL families

with state support.


5. Grants of 2.87 lakh crore rupees to gram panchayats and municipalitie. 6. Under Shyama Prasad Mukherji Rurban Mission 300 urban clusters to be set

up. 7. Four schemes for animal welfare.

Health

1. New health protection scheme will be launched for health cover upto 1 lakh per family.

2. Additional healthcare cover of Rs 30,000 will be provided to senior citizens under it.

3. National Dialysis Service Programme will be launched at all district hospitals with funds through PPP mode.

4. PM Jan Aushadhi Yojana will be strengthened and 300 generic drug store to be opened

Education

1. For promoting entrepreneurship among SC/ST, Rs.500 crore will be allocated to Scheme

2. 10 public and 10 private educational institutions will be made world-class. 3. Digital repository mandatory for all school leaving certificates and diplomas. 4. For higher education financing, allocation of Rs. 1,000 crore. 5. Allocation of 1,700 crore rupees for 1500 multi-skill development centres. 6. 62 navodaya vidyalayas to be established to provide quality education. 7. Digital literacy scheme will be launched to cover 6 crore additional rural

households. 8. Entrepreneurship training will be provided at schools, colleges and massive

online courses. 9. Provide skill training to 1 crore youth under the PM Kaushal Vikas Yojna in

the next 3 years. 10. 1500 Multi-skill training institutes will be set up.

Energy

1. Allocation of 3000 crore for nuclear power generation 2. Government to chalk out comprehensive plan for exploiting nuclear energy. 3. Government to provide incentive for deepwater gas exploration and market

freedom for it. 4. Pre-determined ceiling price will be on landed price of alternate fuels.

Investments and infrastructure


1. 65 eligible habitats will be connected via 2.23 lakh kms of road. Current con-struction pace is 100 kms/day.

2. Allocation of Rs. 27,000 crore on roadways and Rs. 55,000 crore for roads and highways.

3. Total allocation of Rs 97,000 crore for road construction under PMGSY. 4. Shops to be given option to remain open 24*7 across markets. 5. On east and west coasts, new greenfield ports will be developed. 6. Underserved airports will be revived. For regional connectivity centre to part-

ner with States to revive small airports. 7. 100 per cent FDI in food processing and marketing of food products produced

and marketed in India. 8. Department of Disinvestment to be renamed as Department of Investment

and Public Asset Management. 9. Government to amend Motor Vehicle Act in passenger vehicle segment to al-

low innovation. 10. 100 per cent tax exemption for startups for 3 years.

Agriculture

1. Total allocation of Rs 35984 crore for agriculture and farmer welfare. 2. 5 lakh hectares of land will be brought under irrigation. 5 lakh acres will be

brought under organic farming over a three year period. 3. Allocation of 60,000 crore rupees for recharging of ground water to focus on

drought hit areas cluster development for water conservation. 4. 20,000 crore rupees Dedicated Irrigation Fund in NABARD. 5. Under the PM Fasal Bima Yojna, nominal premium and highest ever compen-

sation in case of crop loss.

Banking

1. Allocation of Rs 25,000 crore towards recapitalisation of public sector banks. 2. Banking Board Bureau will be operationalised. 3. Govt to increase ATMs, micro-ATMs in post offices in rural areas in next three

years 4. General Insurance companies will be listed in the stock exchange 5. Under MUDRA, target of disbursement increased to 1,80,000 crore.


IMPACTS ON EPF

Salaried people across income levels have reacted with anger against the proposal to tax 60% of the EPF corpus created after April 1, 2016. "I understand that investing the money in an annuity will ensure pension for life, but the government shouldn't dictate how I use my retirement corpus," fumes Hoshang Pathak.

The Mumbai-based finance professional had smiled when the Budget proposed a hike in tax relief for those earning less than Rs 5 lakh a year. But his delight turned into dismay after the tax on EPF was announced.

New entrants to the EPF like Pathak will be the worst affected. If his income grows by 8% every year and Pathak continues to put money in the EPF, he would accumu-late around Rs 3.46 crore in his PF by the time he retires at 58. But almost 59% of this, or Rs 2 crore would be taxable. It is learnt that the government is planning to tweak the rule and tax only the interest portion, not the principal. Even then, 41% of Pathak's nest egg (or Rs 1.42 crore) will be taxable.


Older subscribers who have periodically dipped into their PFs will also see a big chunk of their savings go into tax. IT professional Satyamurthy Balasubramaniam is 48 but has only Rs 14 lakh in his PF account. "The PF is not only for retirement but other needs as well. Even if you withdraw your PF money for a medical emergency or your child's education, you will get taxed," he says.

On the other hand, invest-and-forget subscribers must be feeling relieved. The new rule will not apply to PF balance accumulated till April 2016 and the interest it earns thereafter.

Gurgaon-based Radhika Sachdeva is glad that she didn't withdraw her Provident Fund whenever she changed jobs in the past 12 years. "This is my fourth job, but my PF balance is still lying in the three accounts opened by my previous employers," says the 35-year-old assistant vice-president with a large MNC. Not everyone does this. Though withdrawals before completing five years are taxable, it does not dis-courage people from cleaning out their PF balances when they switch jobs.

The ambiguities in the Budget proposals have only added to the frustration of the salaried class. Last year's Budget had talked about the need to allow EPF sub-scribers to migrate to the NPS. But no steps were taken to facilitate that migration.

This year's Budget has gone a step further and said that a one-time switch from EPF to NPS will be tax free. But again, there is no clarity on how subscribers can mi-


grate.

Finance Minister Arun Jaitley will be unveiling the Union Budget for the financial year

2016-17 on February 29. The previous two Union Budgets saw the Narendra Modi govern-

ment, in a bid to boost investment and economic growth, offer incentives to businesses. Im-

plementing the Goods and Services Tax, however, remains one of the promises that the gov-

ernment still has to deliver.

The highlights of last year’s budget were 100% deduction for contribution to Swachh Bharat

and Clean Ganga projects, service Tax rate hiked to 14%, from 12.36%, and incentivised use

of credit, debit cards.


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• Union Budget 2016: The Fine Print

• Budget 2016: Everything you need to know

EXPECTATIONS FROM BUSINESS LEADERS ON UNION BUDGET 2016-17:

February 28:

Tata Steel Managing Director T V Narendran: “Just as the government has done a com-

mendable job in improving the ease of doing business, we would like more initiatives to re-

duce the cost of doing business as well,” Narendran said, adding that he expects the govern-

ment to further build on its reform agenda.


For the steel sector, which is hit by massive imports, the government could offer a major

stimulus by making domestic steel procurement mandatory for smart cities, T V Narendran

said.

Debjani Ghosh, Managing Director of Intel South Asia, said, “The Budget needs to walk the

talk and show real execution towards the government’s intent of making it easier to do busi-

ness.”

Ghosh said she hopes that the Budget takes a relook at procurement norms by focusing on

quality and cost based procurement, and brings in a single independent authority to ease

‘Digital India’ implementation.

“There is a dire need for a strong and well-structured innovation agenda/policy for ‘Digital

India’ and ‘Make in India’ to be a reality,” she said.

Hemant Kanoria, Chairman and Managing Director of Srei Infra Finance, said the Budget

should focus on streamlining regulations to reduce tax uncertainties and improve the ‘ease

of doing business’. “The finance minister must make provisions to broaden the tax net, and

one way to achieve this is to increase PAN registrations, which will result in substantial re-

duction in black money transactions.

On the infra side, Hemant Kanoria said the government should set up an Infrastructure Dis-

pute Redressal Tribunal, so that the industry can resolve long-pending disputes.

Muthoot Pappachan Group Chairman Thomas John Muthoot: “This will also make the pro-

posed requirement of PAN card for purchases above Rs 1 lakh easy to implement.”

Daksha Baxi of Khaitan & Co said Finance Minister Arun Jaitley should simplify and bring

clarity in tax laws, which will undoubtedly improve tax compliance, thereby increasing rev-

enue. “Removal or significant reduction in MAT rate will put significant cash flow in the

hands of taxpayers to make much needed investments,” Baxi said.

Yes Bank Managing Director Rana Kapoor said he expects the Budget to do everything to

restart capital formation and investment cycle.


The finance minister also needs to restore the confidence of the private sector by furthering

the reform process that is already under way to improve ease of doing business and de-

stress the capital markets, he said.

“The private sector has subdued animal spirits which need to be revived. We need to get

more high-octane energy in the economy, the catalyst for which is good capex spends and

an accelerated resolution and reforms process,” Kapoor said.

Vikas Oberoi of Oberoi Realty said the Budget should boost the realty sector by expediting

the enactment of the Real Estate Bill, as this can go a long way in protecting consumer inter-

ests by curbing fraudulent practices.

“The realty industry expects a specific date for the implementation of GST, which will give

the industry a very clear taxation structure and induce a big change for the logistics architec-

ture,” Oberoi said.

He also expects the government to introduce a single-window clearance system covering

both Central and state laws, with pre-defined timelines for speedy clearances.

Spicejet Managing Director Ajay Singh called for exempting airlines from the MAT ambit till

they wipe off all the accumulated losses, apart from giving exemption from withholding tax

on aircraft/engine lease rentals.

February 27:

“From being a vertical niche, Information Technology has become a horizontal technology,

being used in a wide range of sectors – including but not limited to policy priorities like edu-

cation, healthcare, infrastructure development and financial inclusion. As the country is ad-

vancing towards becoming a knowledge economy under the Digital India initiative with

technology as the pivot, the upcoming budget is a perfect opportunity to reinstate the blue-

print for sustained growth and we hope to see an increase in the annual budget for IT

projects.

Moreover, from a technology adoption point of view, while mobility and cloud adoption are

on the rise, India continues to ranks high both as source and destination of cyberattacks.

These risks can impede the potential benefits of ‘Digital India’ programme. Hence, it is im-


perative to allocate 10% of the IT budgets exclusively for cyber and information security to

ensure that the citizens are truly empowered to use the IT infrastructure and e-governance

services.” – Shrikant Shitole, Managing Director, India, Symantec

February 26:

Richard Rekhy, CEO, KPMG in India: While the growth-range forecast of 7 to 7.75 per cent

for FY17 is lower than earlier projections, however looking at the current global economic

scenario, it is significant. The large growth range given reflects the instability in the Eco-

nomic environment, which in turn reflects the challenge at hand in navigating the economy

through in the coming financial year. Increase in macro-stability, steady growth

forecasts and relenting inflation make for a conducive growth combination. It is crucial to

differentiate between what is important and what is urgent. Addressing key problems such

as scaling up investment, downsizing subsidies, creating a predictable and clean tax policy

environment, and quickening disinvestment might need to be the milestones in the short-

term road map for the Indian economy.

Pratibha Advani, Chief Financial Officer, Tata Communications: The corporate world al-

ways has very specific asks pertaining to their industries before every budget. Ours is no dif-

ferent. Our expectation from the budget this year is a fervent hope that the government

harmonises the definition of “process” in the Indian Income tax Act with that defined in

OECD & DTAAs.

In the Finance Bill 2012 the definition of Royalty for the word “process” is identical as in the

Income Tax Act as well as the Double Tax avoidance Agreement (DTAA) which reads as,

“consideration for the use of, or the right to use, transfer of all or any right in respect of se-

cret formula or process.” To elaborate on this point: by inserting Explanation 6 to Section

9(1)(vi) it was further clarified in the Finance Bill, 2012, that the expression “process” also

includes transmission by satellite (including up-linking, amplification, conversion for down-

linking of any signal), cable, optic fiber or by any other similar technology, whether or not

such process is secret. This amendment enables tax officers to detain the payments to in-

ternational carriers for connectivity, roaming and interconnect usage charges. These charges

are covered within the scope of the word royalty thereby raising huge demands. Interna-


tional carriers do not accept withholding tax since they cannot claim credit for taxes with-

held in India since the amendment supersedes the provisions of DTAA.

Our second ask is that, if any benefits are extended to any industry in terms of tax exemp-

tion/concessions, such benefits should be extended to the telecom sector as well, not only

in terms of direct & indirect taxes but also in providing export concessions/benefits. This is

an industry that requires huge investments in developing infrastructure with a long gesta-

tion period. Telecom industry should also be entitled to R&D benefits similar to those avail-

able in other countries such as UK, Singapore & Canada to encourage companies to conduct

their R&D activity within the country, instead of outsourcing the same.

Thirdly, the government should also work on simplifying the administrative procedures to

enable ease of doing business such as, expeditious disposal of appeals especially if the issues

are repetitive, and an automatic stay of demand by the tax officer till disposal of appeal at

ITAT. Similarly, the government needs to expedite its grant of refunds and scaling up of in-

terest on the refunds if they are not granted within the stipulated period of time, from the

day it becomes due.

February 25:

Debjani Ghosh, Vice President, Sales and Marketing Group and Managing Director for

South Asia at Intel

This year’s budget needs to walk the talk and show real execution towards the govern-

ment’s intent of making it “easier to do business in India” as well as towards “developing In-

dia as an innovation hub” for India and the world. Towards fulfilling the Digital India vision,

we also expect that this year’s budget will address anomalies like differential duty structure

for PCs as provided to other compute devices.

We also hope that the budget relooks at procurement norms to focus on quality & cost

based procurement and brings in a single independent authority to ease Digital India imple-

mentation. There is a dire need for a strong and well-structured innovation agenda/policy

for Digital India and Make in India to be a reality. We hope that this budget incentivizes or-

ganizations who’ve already set up innovation labs, R&D hubs (including captive R&D) and


manufacturing facilities to ‘Innovate for or in India’ while continuing to foster the start-up

ecosystem

February 23

Rajesh Agarwal, Co-founder, Micromax Informatics:

Growth, Infrastructure development and Employment should be the three big pillars of the

upcoming Union Budget 2016. PM Modi’s Make in India and Digital India are well thought

out initiatives that can fuel the slackened growth and help India achieve the projected GDP

growth rate at 8-8.5%. India has a great potential to become the next global hub for elec-

tronic manufacturing to address the needs of both local as well as the global markets in the

ICT segment. However to make ‘Make in India’ a success policy amendments with respect to

fair, predictable and rational taxation practices have to be implemented. In the budget, the

government must do away with extremely cumbersome and complex IGCR processes for

availing duty concessions on import of parts, components for manufacture of mobile

phones.

Moreover, non-availability of duty concessions on the import of capital equipment for hand-

set manufacturing is a serious bottleneck. Restrictions imposed by Ministry of Environment

and Forest on import of second hand capital goods on grounds of E-Waste should be also be

removed. On behalf of the entire handset makers of India, we would expect the government

to introduce regulatory restrictions for ETA (Equipment Type Approval) and licensing re-

quirements from DOT to import low powered wireless equipment which are very critical for

success of the Digital India and Make in India vision. Government must also focus on having

a quicker and predictable time frame to complete CRS (compulsory registration scheme) for-

malities to comply to nation’s product safety standards. Another important area of focus in

the Union Budget 2016 is to bring labour law reforms to boost growth in this sector. There is

a dire need for income tax holiday to make it viable and attractive for the industry and in-

vestors just the way it is in countries like Vietnam. On the Export front too, it is quintessen-

tial that export incentives should be enhanced from the current 2% MEIS to 5% MEIS to at-

tract investments for the exports of mobile handsets.

February 19


Koichiro Koide, MD, NEC India: IT sector has seen a tremendous growth in the last fiscal

globally. Indian Prime Minister announcing the Smart cities mission, Digital India mission to

promote various sectors has been really encouraging. The Government’s step towards de-

veloping smart cities is an indication that inclusive growth is the top priority. Most recently,

the Indian government has been promoting its urban transformation, putting great empha-

sis on creating smart cities and security.

Leveraging on the power of ICT and with good governance, I believe that India will be able

to achieve its goal of achieving its Smart Cities mission in the long term. We appreciate that

the Indian government has taken significant steps in the last one year to promote Smart

Cities and the country’s 100 Smart Cities Mission which would be an encouraging boost to

companies such as NEC. The union budget 2016 must focus and encourage investment in

the IT sector to make the Government’s plan of building smart and cities safe.

Mr Anil Valluri, President, NetApp India & SAARC: To my mind, this budget should see the

Government take further steps to accelerate its flagship initiatives which have been struc-

tured holistically in the form of JAM to reach the last mile and transform lives of every citi-

zen. Start- Up India was an excellent example of the Government proactively putting it’s

might behind India’s up and coming entrepreneurs who are brimming with new ideas. Of

particular interest is the further steps to make Digital India a distinct reality coupled with

the pace of Infrastructure building as these will propel growth across various sectors. I am

optimistic and look forward to India continue its march to be a leading economy on the

global map.

CEO K Shankar of Feedback Business Consulting says that fiscal deficit should be contained

at 3.5 % as promised in the last budget. It will be a challenge to keep it at 3.5 % levels practi-

cally but the government will look at aggressive means around revenue side to keep it at 3.5

%. India can pull another year with a Fiscal deficit of 3.7 % provided there will be an all-

round GDP growth of 8-8.5%.

February 17


What the education sector expects?

Dr Harivansh Chaturvedi, Director, BIMTECH says higher education will require huge funds

to meet manpower needs for Make-in-India.

Ms. Geetha Kannan, Managing Director, The Anita Borg Institute (ABI) India:

Over the past year many of the government’s policies and initiatives have been focused on

digitization, technology, entrepreneurship, education, skills-development, sanitation and so

on. The government has been riding high on drivers that are imperative to the economic

and social growth of the country. We are yet to see deliverables on many fronts, but there is

no denying that these steps are positive. In 2016 we expect the government to continue this

growth orientation.

With more and more women joining the workforce and increasing their contribution to In-

dia’s economic status, we would like to propose ‘gender mainstreaming’ for Budget 2016. It

is time we integrate the gender perspective to all relevant policies and initiatives, to pro-

mote equality between women and men. For example, the government had recently an-

nounced a Rs 10,000 crore fund for entrepreneurs during the release of the action plan for

the Startup India campaign. Can the government consider allocating 20% of this fund only

for women entrepreneurs? This would definitely help in encouraging and growing the num-

ber of women entrepreneurs in our country.

The ‘100 Smart City’ is another much talked about initiative and there are many expecta-

tions of increased funds for this project. We would like to see a specific focus on women-

friendly facilities and infrastructure in the detailed roadmap of this project. There should

also be budget allocations and incentives for creating women-safety mechanisms and de-

vices, to ensure safety of our women in these smart cities at all times.

The Digital India initiative needs to have specific plans that will aim to digitally empower

more women and girls right from the grass root levels. Year after year our budgets have al-

ways included women empowerment and support for the girl child. Our union budget has to

get more aggressive on women–specific policies and measures that are lucrative and im-

pactful in encouraging the full-participation of women in all spheres of life.


Dr. Arun Singh – Senior Economist – Dun & Bradstreet India

Higher import duty on steel products, particularly long and flat steel products: Flat and long

steel products are some of the largest imported steel products to India. Government, in its

upcoming budget is expected to hike import duty on these products.

Reduction in import duty on iron ore imports: Iron ore production in India declined from 218

Mn tonnes in FY10 to 125 Mn tonnes in FY15. The shortfall is normally met through imports.

A reduction in the import duty is expected which will help to reduce cost of production.

Reduction in import duty on coking coal: Coking coal is a key input in steel manufacturing

and in the absence of domestic resources, steel manufacturers resort to imports for their

coking coal needs. A reduction in the import duty is expected which will help to control the

input costs.

February 16

Sudhir Gharpure, vice president, MP Group: With the union budget scheduled to be an-

nounced on February 29, entrepreneurs from the B2B industry have set all new expecta-

tions from the government. Sudhir Gharpure, Vice President, M.P. Group, an Integrated sup-

port Services company says “For PPP Projects, in Urban City Bus contracts should be pre-ap-

proved by banks for which ease of funding is there and implementation starts on time. As

per the company’s act the life cycle of bus is Six years whereas it should be considered as

Thirteen Years as the new type of buses and its body are sustainable to work over Twelve

years.

These projects should not be considered under Commercial Vehicle loan but should be un-

der infrastructure project as urban/public transport is been considered under the smart city

development which has a major share. The subsidy given to the bus purchasers should be

increased to a viable level. The state / central government should encourage and support

such organizations dealing in PPP projects which will enhance the transport industry to grow

further. Such transport service providers should also be exempted from service tax and ex-

cise duty so that they can do business with ease.

Major Prashant Rai, founder and CEO, OneTimeJobs.com: With Budget 2016 set to be an-

nounced on February 29, Startups have their own set of expectations from this year’s Bud-


get. While most of the new age companies are setting up with a strong funding foot, Major

Prashant Rai, Founder and CEO, OneTimejobs.com, is expecting more relaxation, possible

tax exemptions and incentives with an easy entry into services and exit plans thereafter ,

along with more clarity on the norms. Prashant says that as the honorable Prime Minister

Mr. Narendra Modi unveiled the startup action plan by announcing excellent measures,

now it depends on how the policy takes its shape in the budget 2016! He further opines that

it is imperative for Indian ‘on demand service market place start-ups’ to raise funds in a

more structured, regulated yet in a stimulating environment and been featured in Indian Ex-

change.

Dinesh Agarwal, founder and CEO, IndiaMART: With the Union Budget round the corner,

startups in India are holding the highest stakes following the Prime Minister’s initiatives

around ease of doing business and building a start-up friendly ecosystem. Faster setting up

of enterprises, correction to duty structures and streamlining of procurement processes are

some of the areas where the industry expects key announcements. The Industry is expecting

a quick implementation of GST, streamlining processes for speedier implementation of large

infrastructure projects. Development of infrastructure is a prerequisite for growth. Similar

to road and rail, creation of Digital Highways is elementary providing high bandwidth net-

work of Internet across India. We’d like to see avenues of PPP in the coming union budget

which will give shape to Digital India.

February 12

Anurag Jain, Chairman of AccessHealthcare: “With the Government’s thrust on IT, digitisa-

tion and technology driven initiatives, we are upbeat about the Union Budget for 2016 –

2017.We hope that the Government will come up with some positive announcements and

tax sops to cut through the growth barriers. Any thrust on growth, infrastructure, job cre-

ation and skill development is likely to have a positive impact for the IT / BPO sector. The

Narendra Modi Government has recognised IT start-ups and the need to address various

concerns in order to achieve sustainable growth and employment generation in this sector.

Also with the Government’s continued efforts and focus towards positioning India as an in-

vestment hub and a business friendly destination, we hope that the upcoming Budget will

bring back more investor confidence and positivity for the IT / BPO sector. We also look for-

ward to the Finance Minister announcing some monetary encouragement for companies to


focus more on research & development in order to develop products and services that are

at par with international standards. More funds allocation for ‘Digital India’ will also fuel

economic growth by creating income-generating activities which in turn will boost job cre-

ation in this sector.”

Bhaskar Pramanik, Chairman, Microsoft India: “We have much to celebrate in what the

country has achieved in the last one year. The Government of India has ably implemented

the contours of the country’s growth framework through its all-encompassing vision to

boost digital inclusion, local manufacturing, and entrepreneurial spirit. As we step into the

new fiscal year, I am looking forward to the Government presenting a growth oriented bud-

get that addresses gaps and sets a clear way forward to ensure that the optimism is not

short-lived.”

February 5

Tarun Wig, co-founder of Innefu Labs: “Present scenario is quite threatening as we can see

recently website of Kerala as well as the Orissa Government came under cyber attack. The

government should allocate a specific amount in budget for ensuring that these types of cy-

ber attacks can be prevented.”

Govind Bansal, co-founder of Aqua Mobiles: “Government is promoting the local manufac-

turing and we hope that it will be continued. We also expect the introduction of the GST as

early as possible. Furthermore, mobile industry is a good contributor to GDP, so it should be

rewarded with some much needed incentives like relaxation in the corporate taxes for the

benefit of the industry as well as consumers.”

Anurav Rane, CEO of PlanMyMedicalTrip.com: “We are looking forward to a positive turn

out from the Union Budget for start-ups and emerging entrepreneurs. Being a startup, the

amount of direct and indirect taxes we pay, handicaps us from expanding at our true poten-

tial. We are hoping for an exemption from all these taxes in the upcoming budget. As per

the government guidelines, we are also overburdened by the tremendous amount of paper-

work every month. We expect the centre to undo the tedious documentation process so


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that we can save on precious time and expend our energies on building the business in

stead. The government should also strategies on improving the purchasing power of cus-

tomer-enabling organisations like ours to allow us in improving the overall quality of ser-

vice.”

February 4

Saurav Kumar, CEO & Co-founder, Cube26: “This Union Budget, we expect the government

to make patents simpler, and offer schemes and incentives that encourage startups to take

risks. We also expect government to approach India’s smart devices market through sup-

portive and encouraging regulations to expedite the ecosystem for smart device manufac-

turing. To promote Make in India, we believe that the government should offer subsidies on

investments and incentives for Indian device manufacturers. This will help them to build a

price advantage over the increasing international competition from brands. Also, reduction

of import duties with an option to allow businesses to Make in India will be a welcome

move. Digital literacy and mobile internet penetration in tier 2, tier 3 cities are other areas

onto which we would like to see the Union Budget’s focus. Substantial funds should be allo-

cated to develop a robust network infrastructure and realise the government’s ‘Digital India’

mission.”

Shailesh Jain, Co-founder , Mirraw.com: “We are a fast growing eCommerce company and

government should make this industry very flexible to operate in. They should bring in

number of laws like No capital gains tax for first time entrepreneurs & esop holders, lower

interest rates for business loans and easy long term repayments of turn around companies.

Special package for companies revival under hand-loom & ethnic wear market For the ben-

efits of the employees the budget should have tax exemption limit increment for women

employees earning upto Rs. 5 lacs, reduce housing loan deduction limit to Rs. 3lacs on Inter-

est paid.

Anupam Tulsyan, Co-founder & MD, Peachmode.com: “As an e-commerce company we are

expecting easy taxation across states. For eg: we cannot ship COD shipments to kerala be-

cause of kerala govt rules. Now on unstitch material in Bihar they are putting sales tax above


Rs 2000. For e-commerce companies which sells across states. Delhi has introduced DVAT

for e-comm companies as compulsion. it creates lot of problems. Either GST comes soon or

taxation improves.”

Vipin Pathak, Co-Founder & CEO, Care24: “Budget 2016 is highly awaited where everyone is

expecting policy level changes to promote growth. At the juncture where global growth is

not so promising, everyone is eying on Indian Growth story and we have to leverage this sit-

uation. Government has started great initiatives like “Make in India”, “Startup India Initia-

tive”, the budget has to support at monitory, infrastructure and policy level to realise these

dreams. Some of the expectation we have is further easy FDI investment norms, licensing

and startup support (tax, documentation, licensing, legal). Entrepreneurs should feel pro-

tected and supported on ground level to make actual difference.

February 2

Ankur Bhatia, Executive Director, Bird Group on aviation industry:

“The Indian aviation industry is on a high growth trajectory and is poised to become the

third largest travel market by 2026. The draft aviation policy as well as airport development

in tier-I and Tier-II cities is a welcome move in identifying certain relevant aspects affecting

the aviation sector. Yet there are several challenges related to complex policies, aggressive

price cuts, multi-tiered tax system and infrastructure deterring the true potential of the In-

dian aviation industry. I look forward these challenges to be addressed in the upcoming

union budget. There is an immense growth potential for Indian civil aviation and with the

right infrastructure and policies will serve as a key enabler for economic growth, employ-

ment creation and tax revenues. It is imperative that success of civil aviation is seen as a na-

tional priority, a goal shared by different ministries, government agencies and the industry.”

On tourism:

“Tourism has been a key contributor to the Indian economy with immense possibilities of

growth. While the government’s initiatives to strengthen domestic connectivity as well as in-

ternational accessibility have borne positive results, there is a huge gap in terms of travel fa-

cilities, infrastructure, hotels, recreational outlets, high taxes and tourist safety that still

needs to be addressed. A thriving tourism industry not only reinforces the hospitality sector


but contributes significantly to the economic growth and drives direct and indirect employ-

ment. This union budget we are hopeful that the government will focus on the overall envi-

ronment of the tourism industry and help drive the industry towards its projected growth. It

is time to showcase brand India globally and provide sufficient impetus to put India firmly on

the international tourist radar and we are hopeful that the government will consider effec-

tive solutions for the same.”

Sunil Jose, Managing Director, Teradata India on IT/BPO industry

“India has developed a world-class IT industry that has contributed significantly to its eco-

nomic growth, technology exports and employment generation. The Modi government is

doing a great job in projecting India as a capital investment hub and business-friendly desti-

nation and the focus on bringing back investor confidence has worked well for the IT/BPO

industry since the last budget announcement. We expect this to have a cascading effect in

terms of continued business growth when the new budget is announced. New initiatives an-

nounced in the budget to further complement previous initiatives are eagerly awaited. Con-

tinued measures and policies to support and enhance India’s competitiveness for Make in

India will be a huge enabler for the manufacturing sector. Greater support for Digital India

initiatives and enhancing access to internet connectivity in rural India should be a priority to

boost economic growth and income-generating activities which in turn will boost domestic

spending. The government should also consider reducing excise duty on hardware so that

better technology becomes more accessible to a wider market. This would be a huge en-

abler to the IT industry including us and help provide superior technology to a wider audi-

ence at more competitive rates.”

Anuj Puri, Chairman & Country Head, JLL India on real estate:

Offer financial protection from project delays to home buyers

The Union Budget should pay specific heed to this pressing need. On purchase into an un-

der-construction property, buyers can only claim tax benefits of Rs. 2 lakh after possession if

construction is completed within three years. The benefits reduce to Rs. 30,000 if the

builder delays construction beyond this – and they pay higher interest. First-time home buy-

ers purchasing properties for self-use additionally pay rent.


Instead of allowing home buyers tax benefits post-possession, the Union Budget should

make a provision that allows these from the time they start paying interest on housing

loans. This will ease their monetary burden considerably and make increase the velocity of

home loan disbursements. Similarly, if an under-construction property is purchased from

capital gains, its construction must be completed within three years of its sale to avail ex-

emption. There can be delays by developer in such cases too. These deductions should be

brought at par and the construction timeline should be extended from the current three

years to five years.

Provide more tax saving on housing loan and house insurance premiums

The government should increase the tax deduction limit for housing loans, especially for

buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant given the ticket

sizes in cities like Mumbai, where most houses are priced at Rs 1 crore and above. Also, tax

concessions on house insurance premiums could be introduced to encourage end users to

insure their homes. Similarly, the tax exemption limit should be increased by about Rs 1 lakh

and be auto-set to match inflationary trends in a financial year.

Raise house rent deduction limit

Salaried persons get house rent allowance (HRA) as a component of their total salary, and

can therefore claim a deduction. This deduction can be substantial in cases where the salary

and its HRA component are higher. However, self-employed persons and those who draw

lump sum pays without an HRA component can only claim a maximum deduction of Rs

2,000 a month under Section 80GG. The Budget can and should address this anomaly.

CONCLUSION

Despite accounting for higher government salaries (7th Pay Commission) and not increasing taxes sharply, FM Jaitley stuck to the 3.5% fiscal deficit target (as a proportion of FY17 GDP). The net government borrowing target of Rs 4.25t was significantly below expectations. BNPP chief economist Richard Iley opines, and we agree, that RBI could reward this with a rate cut in the near term.


Assumption of 11% nominal GDP growth in FY17 and an 11.7% increase in tax revenue appear credible to us. However, the assumption of Rs 500 bn non-tax revenue from telecom spectrum auctions and Rs 565 bn from divest-ments appear aggressive and could upset the fiscal arithmetic towards end-FY17e.

The FY17 budget had raised hopes of growth-supportive measures and rural stimulus, possibly even at the cost of fiscal discipline. In the end, FM Jaitley stuck to the promised fiscal deficit target and provided the necessary rural stimulus, but the hopes of acceleration in capital expenditure were somewhat dashed, with a trifling 3.9% budgeted increase in total capex. Including the railway budget and central enterprises, the total capex outlay wasn’t so disap-pointing (23% increase over FY16 RE), but implementation of railway capex disappointed severely in FY16— and the FY17 capex target will have to be monitored closely against actual progress.


Budget 2016

Economy & Finance

Transcript of Budget 2016