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Jaitley's Budget 2017 softens demonetisation blow: Major tax relief for small taxpayers, cash transaction above Rs 3 lakh barred; safety fund for Railways announced

Softening The Demonetisation Blow, The Budget For 2017-18 On Wednesday Halved The Tax To 5% On Incomes Upto Rs 5 Lakh But Proposed A New Surcharge Of 10% On Incomes Between Rs 50 Lakh And Rs 1 Crore And Raised Duties On Cigarettes And Pan Masala While Stepping Up Allocations For Infrastructure, Rural, Agriculture And Social Sectors.

Agencies | Updated on: 01 Feb 2017, 03:04:29 PM
Jaitley's Budget 2017 softens demonetisation blow (Newsnation Image)

New Delhi:

Softening the demonetisation blow, the Budget for 2017-18 on Wednesday halved the tax to 5% on incomes upto Rs 5 lakh but proposed a new surcharge of 10% on incomes between Rs 50 lakh and Rs 1 crore and raised duties on cigarettes and pan masala while stepping up allocations for infrastructure, rural, agriculture and social sectors.

Breaking from the past, Finance Minister Arun Jaitley presented a historic Budget in which the railway budget has been merged and the date advanced by a month, retaining the 15 per cent surcharge on taxable income above Rs 1 crore.

While the surcharge alone would net Rs 2,700 crore a year, his give away on direct tax proposals will result in a loss of Rs 15,500 crore.

The change in the personal income tax rate for individual assessees between Rs 2.5 lakh and Rs 5 lakh income would reduce the tax liability of all persons below Rs 5 lakh to either to zero (with rebate) or 50 per cent of their existing liability.

Read | Budget 2017: As it happened

In order to have duplication of benefit, the existing benefit of rebate available to them is being reduced to Rs 2,500 available only to assessees upto income of Rs 3.5 lakh.

While the taxation liability of people with income upto Rs 5 lakh is being reduced to half, all other categories of tax payers in the subsequent slabs will also get a uniform benefit of Rs 12,500 per person.

In the case of senior citizens above 60 years, there will be no tax upto Rs 3 lakh, while the exemption will be upto Rs 5 lakh in case of citizens above 80 years. Both the categories will attract income tax of 20 per cent on income between Rs 5 lakh and Rs 10 lakh and 30 per cent for income above Rs 10 lakh.

Read | FM Jaitley cuts Income Tax from 10% to 5% for 2.5 lakh to 5 lakh slab

Against the backdrop of demonetisation intended to eliminate blackmoney and introduce clean transactions, the Budget barred any transaction in cash above Rs 3 lakh. As a measure of transparency in political funding, he lowered to one-tenth the donation that political parties can accept in cash to Rs 2000 per donor.

The Finance Minister expressed confidence that the pace of remonetisation has picked up and would soon reach comfortable levels with effects not expected to spillover into the next fiscal.

To boost slowdown-hit real estate sector, the government today announced infrastructure status to affordable housing to encourage investment in this segment and offered tax sops for developers sitting on completed unsold inventories.

Read |  Full coverage: Budget 2017

The National Housing Bank will refinance individual housing loans of about Rs 20,000 crore in 2017-18.

To promote affordable homes, the government also proposed to amend the Section 80-IBA, relaxing the condition of period of completion of the project for claiming deduction from the current three years to 5 years.

"We propose to facilitate higher investment in affordable housing. Affordable housing will now be given infrastructure status, which will enable these projects to avail the associated benefits," Finance Minister Arun Jaitley said.

With surplus liquidity created by demonetisation, he said the banks have already started reducing their lending rates, including those for housing. Interest subvention for housing loans has also been announced by the Prime Minister.

Read | Highlights of Budget 2017

Stating that affordable housing is one of the thrust area of tax proposals, he said: "In my budget proposals last year, I had announced a scheme for profit-linked income tax exemption for promoters of affordable housing scheme which has received a very good response."

To make this scheme more attractive, Jaitley proposed certain changes in the scheme. "First of all, instead of built up area of 30 and 60 sq meter, the carpet area of 30 and 60 sq meter will be counted".

Moreover, Jaitley said that the 30 sq meter limit will apply only in case of municipal limits of four metropolitan cities while for the rest of the country, including in the peripheral areas of metros, limit of 60 sq meter will apply.

In order to be eligible, the scheme was to be completed in 3 years after commencement, he said, and proposed to extend this period to 5 years.

The government also announced tax sops for builders sitting on a huge unsold stocks amid multi-year slowdown in the real estate sector, particularly housing segment.

What's next: Finance Minister Arun Jaitley to answer queries about Union Budget on Twitter

"At present, the houses which are unoccupied after getting completion certificates are subjected to tax on notional rental income. For builders for whom constructed buildings are stock-in-trade, I propose to apply this rule only after one year of the end of the year in which completion certificate is received so that they get some breathing time for liquidating their inventory," Jaitley said.

The Finance minister also proposed to make a number of changes in the capital gain taxation provisions in respect of land and building.

"The holding period for considering gain from immovable property to be long term is 3 years now. This is proposed to be reduced to 2 years. Also, the base year for indexation is proposed to be shifted from April 1, 1981 to April 1, 2001 for all classes of assets including immovable property," he said.

Jaitley also unveiled measures to leverage India's "huge demographic advantage" and maximise the employability potential of the youth, and also announced a Rs 4,000-crore programme 'SANKALP', aimed at providing market relevant training to 3.5 crore youth across the country.

Presenting Budget for 2017-18 in Parliament, Jaitley described "energising youth through education, skills and jobs" as one of the government's 10 important focus areas.

He said the government proposes to extend Pradhan Mantri Kaushal Kendras to more than 600 districts across the country, from 60 districts at present.

Moreover, 100 India International Skill Centres will be established across the country to offer advanced training and also courses in foreign languages, which Jaitley said, "will help those of our youth who seek job opportunities outside the country".

The Finance Minister said that in 2017-18, a programme SANKALP (Skill Acquisition and Knowledge Awareness for Livelihood Promotion Programme) will be launched at a cost of Rs 4,000 crore. SANKALP will provide market relevant training to 3.5 crore youth.

Besides, Jaitley said the next phase of skill strengthening for industrial value enhancement (STRIVE) will be launched in 2017-18 at a cost of Rs 2,200 crore. STRIVE will focus to improve on the quality and the market relevance of vocational training provided in ITIs and strengthen the apprenticeship programme through industry-cluster approach.

With railways plagued by repeated derailments, government today proposed setting up of a special safety fund of Rs 1 lakh crore that will cover upgradation of tracks and signalling besides elimination of unmanned level crossings.

The Railway Budget, merged with General Budget 2017-18, also provides for commissioning of new railway lines of 3,500 km will against 2,800 kms in 2016-17.

Finance Minister Arun Jaitley announced the Plan size for the next fiscal for the Railways at Rs 1,31,000 crore as against Rs 1.21 lakh crore last year.

He proposed creation of 'Rashtriya Rail Sanraksha Kosh' (National Rail Safety Fund) with a corpus of Rs 1 lakh crore.

Emphasising on safety, the Budget proposed elimination of all unmanned level crossings on the broad gauge network by 2020.

Addressing concerns of the differently-abled persons, Jaitley announced that 500 stations would be made disbaled friendly.

The Budget also promised to equip all coaches with bio toilets and announced "Clean my coach' App for passengers.

In order to encourage E-ticketing, Jaitley announced withdrawal of service charges from tickets booked through IRCTC.

Railway PSUs IRCTC, IRFC and Concor are to be listed on various stock exchanges. 

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First Published : 01 Feb 2017, 02:51:00 PM

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