An in depth analysis on Union budget 2016 and the possible implications on different sectors

1. Union Budget 2016

2. Highlights of Union Budget
Boosting rural development
and farmer’s income
Status quo on Fiscal
Deficit(3.5%)
Boost on infra spending

3. Roadmap for Fiscal
prudence
Revenue expenditure budgeted to
rise by 11%
Tax revenues expected to go
up by 11% over current year’s
RE
Projected one time spectrum charges
to be 99,000 crores
Disinvestment target
of Rs.56,500 crores

4. Agriculture
Doubling Farmer’s income by 2022
•Allocation for Agriculture and Farmer’s welfare to be Rs36,000 crores up ~6% from Current Year RE
•0.5% ‘Krishi Vikas Cess’ to be imposed increasing Service tax to 15% drawing closer towards of the proposed
GST rate of 17-18%
Pradhan Mantri Krishi Sinchayi Yojana
•28.5 lakh hectares of land to be brought under irrigation
•Long term irrigation fund to be created with NABARD with an initial corpus of Rs20,000 Crores
Farmer’s Welfare
•Provision of Rs. 15,000 crore made to reduce the burden of loan repayment of the farmers
•Crop insurance allocation increased to Rs.5,500 crores

5. Rural sector
29422
12%
3%
2%
11%8885 10%
32%
9%
31%0
20000
40000
60000
2012-13 2013-14 2014-15 2015-16 2016-17
(BE)
Increase in Govt spending for
Rural development
Amount spent on MGNREGA (in Rs. Cr)
Amount spent on PMGSY (in Rs. Cr)
Gram Panchayats
•Rs. 2.87 lakh crores, a quantum jump of 228% to be provided to Gram panchayats
•To enable the issues to be solved locally and bring transformation in small villages and
towns
Rural
Electrification
•5542 villages electrified till February 2016
•Additional 8500 Crores allocated to support electrification of remaining 13000+ villages
by April 2018
Digital Literacy
•DISHA and Digital literacy scheme announced
•To cover 6 crore additional households within next 3 years

6. Infrastructure
Big Positives
Cement sector facing from overcapacity and under utilization to benefit Infra sector facing high debt and poor cash flows will be a bigger beneficiary
Modernization of Ports and Airports
800 crores for modernization and improving efficiency for ports Revival of 160 airports and airstrips of state governments
Higher Allocation for Roads
Total outlay worth ~Rs.97 billion for Roads To approve 10,000 kms of highways with 50,000 kms for State highways

7. Automobile
Additional 1%
TDS for luxury
cars
Infra cess
between 1-4%
for different
cars
Increase in
Vehicle Prices
Negative for Automobiles
Power
Neutral for Power sector
(with rural electrification and more taxes)
Rs.3000 Crores
for Nuclear
power
generation
Excise duty on
capital goods
reduced to 6%
Clean Energy
Cess increased
twice to Rs. 400
PMT

8. Other Sectors
Dividend income of more than
Rs. 10 lakh to be taxed at 10%
Rs. 25,000 Crores towards
recapitalization of PSBs
STT in Options increased ‘thrice’
to 0.017%
NBFCs eligible for additional 5%
deduction in respect for
provision of bad loans
Bank and
Financials
Aviation
Excise duty on ATF
to increase from 8
to 14%
Metals
Export duty on
bauxite reduced
from 20 to 15%
Excise duty on iron
ore, chrome ore to
reduce to ‘Nil’ from
30%
Real Estate
Deduction of
additional Rs.50,000
as interest for
houses below 50
lakh
REITS free from any
DDT

9. Tax amendments and reforms
No change in Corporate tax laws (reduced only for new manufacturing companies and SMEs subject to conditions)
100% Deduction in profits to an undertaking from a housing project up to 30 sq.mt in Metro and 60 sq.mt in
other cities
100% FDI in Food Processing to bring in more revenues and upliftment of farmers
Excise Duty of 1% on Jewelry articles
Excise Duty on tobacco products except Beedi to increase by 10-15%

10. Individuals, Startups
and SMEs
Surcharge increased from
12 to 15% for person with
income above Rs.1 Crore
Ceiling under Sec 87 A
increased by Rs. 3000 pm
for people below Rs. 5 lpa
income
Presumptive taxation for
SMEs increased to Rs. 2
crore turnover limit
100% deduction in 3 out of
5 years of profits for
Startups till March 2019
Income tax lowered to 25%
for new mfg. cos and 29%
for SMEs with turnover not
exceeding 5 crores
Voluntary Disclosure
Scheme
Declaring any undisclosed income at a tax rate of
30% with a penalty of 30%
2015
Budget
Declaring any undisclosed income at a tax rate of
30%, surcharge of 7.5% and a penalty of only
7.5% - a total of 45% of tax is proposed
2016
Budget
Govt seems to realize that the penalties imposed
earlier did not bring out much results and hence
they look to bring down to a realizable level and
Encourage more people to disclose their incomes

11. Budget Analysis
The budget seemed
to be fairly balanced
without any big
bang reforms
Push for
infrastructure, rural
revival, and
agriculture positive
for the economy
Focus on the above
mentioned sectors
will invariably boost
corporate India as
well, since an
increase in
disposable farm
incomes will augur
well for sales of
tractors, two
wheelers, and
consumer goods as
well
Areas of concern
include no
allocation towards
the PM’s ambitious
solar power
development and
the no reduction in
corporate tax rate
On the taxation
front, the idea has
been to tax the rich
and allocate it to
the poor, which is
the nature of
progressive taxation
Fiscal prudence is a
mature decision,
but the fiscal math
to achieve it needs
to be looked at
more cautiously

12. Thank You!
- Bhagyesh Shah