On February 01, 2017 the Finance Minister of India, presented the Union Budget 2017-18. Through this alert we seek to apprise our clients about the Budget and seek to analyse the same.
HIGHLIGHTS OF THE ECONOMY
India is the fastest growing major economy in 2017.
India is the 6th largest manufacturing country in the world.
Consumer Price Index inflation declined from 6% in July 2016 to 3.4% in December 2016.
Current Account Deficit declined from 1% Gross Domestic Product (“GDP”) last year to 0.3% of GDP in the first half of 2016-17.
Foreign Direct Investment (“FDI”) increased from Rs.1,07,000 crores (USD 16084 million) in the first half of last year to Rs.1,45,000 crores (USD 21796 million) in the first half of 2016-17.
More than 90% of the total FDI Inflows are now through the automatic route.
Foreign Exchange Reserves reached to USD 361 billion.
The World Bank projects the GPD growth of 7.6% in 2017-18 and 7.8% in 2018-19.
Fiscal Deficit for 2017-18 pegged at 3.2%.
Revenue Deficit of 2.3% in 2016-17 stands reduced to 2.1% in 2017-18.
*Post demonetisation: deposits of Rs.2,00,000(USD 2984) to Rs.80,00,000 (USD 119376) were made in 1.09 crore accounts and deposits of more than Rs.80,00,000 (USD 119376) were made in 1.48 lakh accounts with average deposit size of Rs.3.31 crores (USD 493920).
HIGHLIGHTS OF THE BUDGET
1. Financial Sector
Foreign Investment Promotion Board (FIPB) to be abolished to ease foreign investments.
Multi State Cooperative Societies Act, 2002 to be amended.
A comprehensive bill for resolution of disputes of financial firms to be introduced.
Computer Emergency Response Team (CERT-Fin) to be established for safeguarding the interest of financial sector.
Central Public Sector Enterprises (CPSEs) to be listed on stock exchanges.
Rs.10,000 crores (USD 1503.138 million) allocated for recapitalization of Banks in 2017-18.
Listing and Trading of Security Receipts issued by Securitization or a Reconstruction company under the SARFAESI Act to be permitted in SEBI registered stock exchanges.
Further integration of commodities and securities derivate market.
Registration of financial market intermediaries like mutual funds, brokers, portfolio managers to be made fully online by SEBI.
For Foreign Portfolio Investors (FPIs), a common application form for registration, opening of bank and demat accounts and issue of PAN to be introduced.
Non-Banking Financial Companies regulated by Reserve Bank of India to be categorised now as Qualified Institutional Buyers (QIBs).
Capital gains tax holding period in respect of land and building reduced from 3 years to 2 years.
Concessional with-holding rate of 5% charged on interest earned by foreign entities in external commercial borrowings, bonds and Government securities to be extended to Denominated (Masala) Bonds till June 30, 2020.
Start-ups - condition of continuous holding of 51% of voting rights relaxed provided that holding of original promoter(s) continues. Profit linked deduction available to start-ups changed to 3-7 years.
Minimum Alternate Tax can be carried forward for 15 years now instead of 10 years.
Income Tax for Companies with annual turnover upto Rs.50 crores (USD 7.516 million) reduced to 25% (earlier 30%).
Allowable provision for Non-Performing Asset to be increased to 8.5% (earlier 7.5%).
Basic customs duty on Liquefied Natural Gas to be reduced to 2.5% (earlier 5%).
Interest paid by an Indian company or a permanent establishment of a foreign company in excess of 30% of earnings before interest, taxes, depreciation, amortization, or to associated enterprises, whichever is less, shall NOT be allowed as deduction in computing its taxable profit. Such interest may be set off or carried forward for 8 assessment years.
Foreign companies having strategic petroleum reserves selling leftover stock of crude oil after expiry of agreement or the arrangement, shall not be liable to tax in India.
Foreign missions and State Public Sector Undertakings engaged in business of transportation of passengers to be exempted from Tax Collection at Source provisions relating to purchase of vehicles.
If Amount of Foreign Tax Credit (FTC) allowed against the tax paid in terms of the Income Tax Act exceeds the amount of FTC admissible against the tax payable by the assessee on his income, such excess credit shall be ignored while computing the amount of credit.
Cost of acquisition of share of an Indian company belonging to a demerged foreign company (tax neutral demerger), shall be taken as the cost of acquisition in the resulting foreign company.
3. Ease of Doing Business
Scope of domestic transfer pricing to be restricted to only one of the entities involved in related party transaction enjoying specified profit-linked deduction.
Increase in limit for audit requirement from Rs.1 crore (USD 150000) to Rs.2 crores (USD 298441) for business entities opting for Presumptive Income Scheme.
Foreign Portfolio InvestorsCategory I & II exempted from Indirect Transfer Provision (ITP).
ITP shall also not apply in cases where redemption of shares or interests outside India as a result of redemption or sale of investment in India which is chargeable to tax in India.
Time period for revising a tax return reduced to 12 months (earlier: completion of financial year).
Time period for completion of scrutiny assessment compressed to 18 months for Assessment Years 2018-19 and 12 months for AY 2019-20.
Rationalization and Amalgamation of existing labour laws into 4 Codes on:
Social Security and Welfare;
Safety and Working Conditions.
Amendments to Payment of Wages Act to benefit labour and ease business.
4. Rural Development
Rs.48,000 crores (USD 7215 million) allocated to Mahatma Gandhi National Rural Employment Guarantee Act.
Rs.1,87,223 crores (USD 28142 million) total allocation for the rural, agriculture and allied sectors.