The budget will be presented on the 1st of February one month in advance this year. Why is it coming one month in advance?
According to experts, the advancement of budget announcement date will help the entire budgetary exercise to be over by, and the Finance Bill to be passed and implemented from 1st April onward, instead of June. It will help companies and households to finalize their savings, investment and tax plans.
The railway budget will also be released with the financial budget ending a 92 years old practice because it will remove the distinction between the plan and unplanned expenditures of both the sectors.
We all know a budget is an annual announcement of governments fiscal policy changes i.e. the changes in the tax reforms and how the government is planning to spend its revenue the following year.
It fulfills the obligations of the states and shows the financial transactions of the year. It is a political statement of the priorities of the government.
It concentrates on selected economic indicators such as:-
- Fiscal development and Public Finance
- Energy , infrastructure and communications
- Poverty and human development
- Financial intermediaries and markets
- Price and monetary management
- Industrial Production (Manufacturing sector)
- Agriculture and food management(Agriculture sector)
The last year’s budget was summed up with three little words which reflected big:-
Desire: To provide socio-economic security to every Indian
Dream: To have a prosperous nation
Vision: To transform India
The budget had focus on improving agriculture and scaling infrastructure and with proper focus on social sector reforms and recapitalizing the country’s banking system.
What is expected in the year 2017-2018
- Agriculture sector
Last two years faced rising rural distress and with back to back droughts the agriculture sector became the top priority of the budget and Rs. 35984 Crore were allocated for the agriculture sector in the fiscal year, the outlay under Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was enhanced to Rs. 38500 Crore and 300 urban clusters were also set to be developed. It was a step to show the movement from food security to income security.
Rs 20000 Crore was allocated to long term irrigation to solve the major problems of droughts in states like Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Orissa, Bihar and Andhra Pradesh. These areas were facing a large number of farmer suicides due to failure in crops.
Rs 412 Crore was provided for promoting organic agriculture so that the farmers can have extra income and to ensure environment sustainability.
Enhanced public investment is expected for improving and creating infrastructure for the development of agriculture such as warehouses, cold storage, roads and markets. The lack of right infrastructure for post-harvest products caused a loss of Rs 92651 Crore and further problems are faced by farmers due to lack of infrastructure.
A step towards improving the productivity and quality of agricultural produce to help the Indian farmers to produce the products at power with the global standards.
The taxes and duties on agricultural produce should be rationalized, thereby encouraging farmers to produce and at the same time maintain affordable prices for the consumers. Bringing digitization will improve procurement, streamline payments, converge producers with consumers and help in implementing new farm technologies.
More initiatives like Pradhan Mantri Fasal Bima Yojana(PMFBY) to minimize the risk of crop failure and its effects on farmers.
- Manufacturing sector
- Safe harbour rule for contract manufacturing
Central Board of Direct taxes notifies safe harbour rules which prescribed margins to avoid litigation for sectors like auto component manufactures, IT/ITES and KPO. This should be further extended to companies manufacturing and exporting products as contract manufacturer for better certainty.
- Exchange rate difference on acquisition of assets
The taxpayers are permitted to adjust the cost of acquisition of imported assets in respect of exchange difference arising on loan obtained in foreign currency but no adjustment is permitted for acquisition of asset in India or from indigenous sources, this should also be treated on par with that utilized for imported assets
- Deduction of CSR expenses
The Companies Act makes CSR expenditure compulsory for companies but no deduction under Income Tax Act is provided for this expenditure. Considering the fact that expenditure is mandatory, deduction should be provided for this type of expenditure. This will encourage the private sector to do such kind of expenditures.
- Restoring incentives on R&D expenditure
Research is very important for every business, the weighted deduction benefit should be extended by another five years to promote innovation in sectors such as defense, manufacturing automobiles etc. Similar benefits should be provided to renewable solar industries and technology development.
- Clarity on investment allowance benefits , conversion of company to partnership benefits and benefits under section 80-IA of Income Tax Act
- Financial Sector and tax reforms
Various financial reforms were introduced in budget 2016 like comprehensive code for bankruptcy and solvency and efforts were made to deal with such high levels of NPAs and bad debts of state run banks by allocation of Rs 25000 Crore for recapitalizing public sector banks
Change in Upper Limit of Various Exemptions
Tax reforms like abolition of various cesses in which the revenue collection was less than Rs 50 Crore were made. Formulation of a high level committee headed by revenue secretary to oversee fresh cases on retrospective taxation was done.
Certain changes that can be expected are:-
- Increase in holding period to 2-3 years from 1 year for availing long term capital gain expectations
- Increase in short term capital gain tax which is 15%
- Decrease in taxes i.e. more exemptions provided to start-ups.
- Incentive in income tax for senior citizens by varying tax slabs etc.
- The banks want an increase in income tax slabs so that there is more income in hand of consumers
- Digitization should be brought i.e. more transactions through digital wallets etc. Government may impose tax on cash withdrawals to prevent the same.
These are the various steps that can be expected from the finance minister in the budget of 2017 various other steps should also be taken to affect various other sectors like real estate and technology and they are also quite essential for economy.
Indian economy is going through a crucial stage after steps like demonetization but proper infrastructure should also be developed so that the steps taken are not in vain and the plans don’t back fire. More and more people are using there plastic cards and e-wallets thus fostering an electronic payment system.
On the tax front the expectations are that the government should revise the tax slabs for corporate and personal income tax thus reducing the tax burden on the consumer thus it will help in less tax evasion , digitalization will be followed more easily and consumers will end up with more money and that can be pumped into the economy.
Certain reforms are also needed to uplift the agriculture sector as it is the backbone of the economy and it provides raw material to manufacturing sector and will help India in becoming a food grain surplus country. An organised agriculture sector will result in mechanization of agriculture sector and the schemes formulated my government can reach the marginal farmers easily.
Overall, The expectations from the budget 2017 are great and on 1st of February 2017 all eyes will be on finance minister Arun Jaitley. While it will be difficult to please everybody but economy must be fixed and the budget is the most important part of the puzzle.
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