Highlights of Union Budget 2017-18

Narendra Kumar

30 Sep, 2020

Union Budget 2017-18, presented by the Finance Minister, had some of the exclusive areas for a more inclusive economy in selected sectors. The allocations in the Union budget certainly target some wide spectrum areas, which shall help in improving the perennial issues of the society amidst a slow growth environment.

Major Highlights of Union Budget 2017-18

1. A total budget of ₹21.47 Lakh crores for 2017-18.
2. An increase in direct tax collection by 34% after demonetization.
3. The holding period for LTCG for land and building reduced to 2 years.
4. A carry forward of MAT credit for 15 years, instead of 10 years.
5. 5% tax exemption for companies having turnover below ₹ 50 crores.
6. 6% presumptive tax for turnover up to ₹ 2 crores.
7. No cash transaction above ₹ 3 lakhs shall be permitted.
8. Maximum donation receivable from the unknown source by a political party will be ₹ 2 lakh.
9. Change in the period of limitation for scrutiny assessment.
10. 5% tax for income below ₹ 5 lakh.
11. No tax for income up to ₹ 3 lakh.
12. 10% surcharge for assessed income between₹ 50 lakhs to₹ 1 crore.
13. One page income tax return proposed.

Other Highlights

1. Goods and service tax (GST)- No changes in service tax and excise duty as GST draft will be launching soon as per Union Budget 2017-18.
2. Disinvestment shall continue through ETF’s and timely disinvestment of PSU’s, target ₹ 72500 crores.
3. Banking- ₹10,000 Crores to PSU banks for recapitalization, Double landing targets to bank  ₹ 2.44 lac crores,  ₹ 2.44 lac crores under mudra scheme.
4. Income Tax – Companies with turnover less than₹ 50 crores will pay 5% less tax, effective.
5. Infrastructure- the Insurance company has to invest 25% in infrastructure bonds.
6. FIPB (Foreign Investment Promotion Board) to be abolished in the year 2017-2018.

Few Points that are Quite Noticeable:

Startups and SMEs

The SMEs are quite important to the economy. The reduction in initial tax rates for the first ₹ 500000 of income from 195 to 18% is certainly welcomed. Also, a boost up to SMEs through lower tax rates will spur them to reinvest in the business, and also expand the same. The government has given income tax exemptions to start-ups with certain conditions. For the purpose of carrying forward losses in respect of startups, the condition of the continuous holding of 51% of voting rights has been relaxed. Also, profit-linked deduction, available to the startups for 3 years out of 5 years, is changed to 3 years out of 7 years. This is a welcome step for startups in India. A lot has not yet been done in this sector, as the nation still is lagging behind favourable economics in the region. For this to work, a radical measure is going is to promote innovation, and research and development. A lot of startup companies are not profitable yet. A forward-thinking policy would give a boost to these sectors by providing rebates.

Improving Digital Connectivity

This new concept is exciting as it could be a game changer for us. The MSC initiative certainly propelled toward a forward-thinking policy. This can be helpful in creating an attractive destination digital hub.

Real Estate

In this sector, the promotion has been done for affordable housing with a mixture of options given by the government; such as, selling houses at affordable prices or offering rental properties, particularly for the younger generation. A significant factor, that gained interest, is that the holding period for long-term capital gain for land and building be reduced to 2 years. The change is positive for real estate, as the tax liability will come down from marginal rates to 20% (with indexation) for anyone who is selling land or building between 2 years and 3 years of holding.

Job Opportunities For The Youth

For this, the government has come up with a new metro rail policy, which will be announced with a focus on innovative models of implementation and financing needs, and also standard indigenization of hardware and software. This shall open new job opportunities for youth. It shall also facilitate greater private participation and investment in construction and operation.

FDI Policy

As one of the significant sectors, the government has undertaken substantive reforms in FDI policy in the past 2 years, as more than 90% of the total FDI inflows are now through an automatic route. Also, the abolishment of FIPB shall help in the further liberalization of FDI policy. The Insolvency and Bankruptcy Code, a resolution mechanism for financial firms shall ensure the comprehensiveness of the resolution system. Trading and listing of the security receipts issued by the securitization/reconstruction company under the SARFAESI Act^[1] shall be permitted in the recognized stock exchange. This shall be helpful in enhancing the capital flows in this industry, which will help in dealing with bank NPAs.

Income Tax

Some other relevant changes were that individual tax has now been reduced for income ₹ 2.5 to ₹ 5 lac tax rate to 5%.

Conclusion

The government sought to ramp up spending on rural areas and infrastructure as well as hand out marginal tax relief to the middle class and small businesses. All in all, this is a decent budget, although a few eminent sectors went missing; such as measures as to beat the fallout of demonetization.

Read our article:All Key Income Tax Changes in Interim Union Budget 2019