01 Feb 2017 15:24 IST

Jaitley pump-primes economy with more public spend, delivers some tax cuts

Bans cash transactions over Rs. 3 lakh; exempts FPIs from indirect transfers

Giving a soothing balm to the economy and taxpayers post the demonetisation stick, Finance Minister Arun Jaitley’s fourth budget saw massive push to public spending while giving away some tax rate cuts to middle class individuals and smaller and medium businesses.

To further clamp down on black money and also promote digitisation in the economy, cash transactions cannot henceforth be made for more than ₹3 lakh.

He also delivered a big relief to foreign portfolio investors (category I and II) by exempting them from indirect transfer provisions (Vodafone tax).

For individuals, the income tax rate has been halved for those falling in the tax slab of ₹2.5 and ₹5 lakh to 5 per cent from 10 per cent now.

There will be zero tax liability for those earning upto ₹3 lakh (non business income) annually.

For companies with annual turnover of upto ₹50 crore, corporate tax rate has been slashed to 25 per cent from 30 per cent now.

The centre’s budget size has been pegged at ₹21.47 lakh crore, with an increase of 25.47 per cent in capital expenditure.

As regards fiscal consolidation, Jaitley has targeted fiscal deficit of 3.2 per cent for 2017-18 as against earlier target of 3 per cent,

For agriculture and rural sector, Jaitley has increased the allocation by 24 per cent to ₹1.87 lakh crore for 2017-18. In the case of infrastructure, the planned public investment stood at massive ₹3.96 lakh crore.

On the anvil are also listing of Railway PSUs such as IRCON, IRFC, and IRCTC, Jaitley announced. As part of Indradhanush, Jaitley also announced additional bank capital infusion of ₹10,000 crore.

The 10 main focus areas of the Budget, according to Jaitley, are farmers, rural population, youth, poor and underprivileged, infrastructure, financial sector, digital economy, public service, prudent fiscal management and tax administration.

Besides proposing to abolish the Foreign Investment Promotion Board (FIPB), Jaitley’s Budget had a significant announcement for pushing digital payments in the country.

No service charges will be levied on transactions put through the IRCTC website. Also, two new schemes are to be rolled out for promoting BHIM App — one is referral and the other cash-back.

The Finance Minister also made it clear that he does see demonetisation’s effect spillover to the next fiscal.

“Demonetisation was a bold and decisive strike in a series of measures to arrive at a new normal of bigger, cleaner and real GDP”, Jaitley said.

Belying expectations that the Budget would see a sharp cut in the corporate tax rate and also the MAT rate, Jaitley however only delivered partial benefits on this front.

He has allowed carry forward of MAT for 15 years from 10 years now without removing the levy.

To tackle the menace of bank defaulters running away from the country, Jaitley has proposed a new law to confiscate assets of such offenders.

As part of the clean-up of political funding, the Budget has also proposed the introduction of electoral bonds that could be bought at banks by donors and utilised by political parties. Cash donations to political parties have been capped at ₹2,000 per source.

In the backdrop of the GST rollout from July 1, Jaitley refrained from tinkering too much with indirect tax levies, except for some duty changes on customs.

The Budget has also proposed to introduce surcharge of 10 per cent for individuals with annual income between ₹50 lakhs and ₹1 crore. The surcharge of 15 per cent on those earning over Rs. 1 crore remains unchanged.

Meanwhile, Congress Vice-President Rahul Gandhi in his immediate reaction to the Budget said “it was a damp squib”.

Congress leader Veerappa Moily said the Budget has not squarely addressed the concerns raised by the Economic Survey as regards the need to encourage job creation and improve the education system.