Impact of the 2017 Budget on the common man – Part 2

In the second part of this series, we look at some more focus areas of this year’s Budget and what it means for us.

In his continued presentation of the Union Budget 2017, the Finance Minister announced measures to help the youth, the poor and underprivileged. To boost the infrastructure sector, he turned his attention to the financial sector, digital economy, public service, fiscal management and tax administration areas.

1) Financial sector

What was said:

• More than 90% of FDI inflows are now automated, leading to the abolition of the Foreign Investment Promotion Board.
• In keeping with the disinvestment program, shares of Railway PSUs like IRCTC, IRCON and IRFC will be listed on stock exchanges. A revised mechanism will be introduced to ensure time-bound listing of CPSEs.
• A Bill on resolution of financial firms will be introduced in this session of Parliament.
• The Pradhan Mantri Mudra Yojana lending target has been fixed at Rs. 2.44 lakh crore for 2017-18. Net market borrowing has been lowered to Rs. 3.48 lakh crore from Rs 4.25 lakh crore.
• The Negotiable Instruments Act might be amended to ensure compliance.
• To prevent economic offenders fleeing India, the Government will introduce a legislative change or a law to confiscate assets of loan defaulters within the country.

How will it impact you: The disinvestment program will help make stocks in these institutions easy to avail, and provide more depth to the market. Insurance, infrastructure and financial sector companies should benefit, offering the common man more investment opportunities in these sectors. An infusion of more funds by the Mudra Yojana will help the economy move forward, while decreasing the net market borrowing might reduce interest rates, which will be good for banking stocks.

Related: How Macro-Level Budget Decisions Will Impact Us (Part -1)

2) Digital Economy

What was said:

• The government will introduce two schemes to promote BHIM App - referral bonus for users and cash back for traders.
• As part of the Digital India program, import duties on certain items used in this sector, such as fingerprint scanners etc. will be reduced.
• The formation of a computer emergency response team for the financial sector was also announced.
• Aadhar-enabled payments for merchants will be introduced, along with Senior citizen Aadhar-based Smart health cards.

How will it impact you: All these steps will bring about the government’s plan of moving towards a reduced cash transaction economy, paving the way for easier payments through digital means.

Related: What makes mobile banking safer?

3) Fiscal situation

What was said:

• Plan and non-plan expenditure will be abolished to meet the fiscal deficit target of 3.2 percent for FY18, and 3 percent in the following year.
• The focus will be on capital expenditure, which will be 25.4 percent.
• Expenditure for science and technology was announced at Rs. 37,435 crore. Revenue deficit is 1.9 percent, with the total expenditure at Rs. 21, 47,000 crore.

How will it impact you: The fiscal deficit targets and revenue deficit figures indicate the health of our economy and its future.

Related: The key budget takeaways you need to know! [infographic]?

4) Public Service

What was said:

• Addressing the measures affecting political funding in the country, the maximum amount of cash donation for political parties will be Rs. 2,000 from any one source as against 20,000 earlier.
• Political parties will be entitled to receive donations by cheque or digital mode from donors.
• An amendment is being proposed to the RBI Act to enable issuance of electoral bonds, which donors will be able to purchase from banks or post offices. Only registered political parties will be able to redeem them.

How will it impact you: Transparency in political funding will go a long way in reducing corruption and black money.

Related: 3 reasons why the RBI maintained status quo on repo rates

5) Tax administration

What was said:

• India’s tax to GDP ratio is unfavourable. Out of 13.14 lakh registered companies, only 5.97 lakh firms have filed returns for 2016-17. Net tax revenue of 2013-14 was Rs. 11.38 lakh crore. Rate of growth of advance tax in Personal IT is 34.8 percent in the last three quarters of this financial year.
• Holding period for long term capital gains from fixed assets will be lowered to 2 years.
• A carry-forward of MAT for 15 years has been proposed.
• Taxes on small companies with a turnover of up to Rs. 50 crore will be reduced to 25 percent.
• The Income Tax Act will be amended to ensure that no transaction above Rs. 3 lakhs is permitted in cash.
• Existing tax rate for individuals earning between Rs. 2.5 lakhs and Rs. 5 lakhs has been reduced to 5 percent from 10 percent.
• Individual incomes between Rs. 50 lakhs and Rs. 1 crore will attract a 10 percent surcharge in taxes, while the 15 percent surcharge on individual incomes above Rs. 1 crore will continue.
• Individuals filing IT returns for the first time will not come under any government scrutiny.
• A simple one-page return form for people with an annual income of Rs. 5 lakh, other than business income was also proposed.

How will it impact you: Reducing the holding period of long term capital gains on fixed assets should bring down property prices. Lower taxes on SMEs will impact 96 percent of companies. Individuals earning up to Rs. 3 lakhs will not have to pay any taxes. While incomes up to Rs. 2.5 lakhs will not attract any tax, income between Rs. 2.5 lakhs to Rs. 3 lakhs will earn a rebate (under Section 87A), which will make their tax liability zero. Meanwhile, incomes over 5 lakhs will get a benefit of Rs. 12,500.