Budget 2017-18 Moderators CA. T .V. Mohandas Pai and CA. H. - - PowerPoint PPT Presentation

Analysis of Union Budget 2017-18

Moderators

• CA. T

.V. Mohandas Pai and

• CA. H. Padamchand Khincha

India at a glance

Population 1.31 bn Jan 2017 estimates Population Growth Rate 1.3% Census 2011 Life Expectancy: Male 67.3 yrs 2016 Life Expectancy: Female 69.8 yrs 2016 Literacy 79% 2016-17(E) GDP (at current prices) US$ 2,251 bn 2016-17 (E) Real GDP growth 6.5% to 6.75% 2016-17 (E) GDP (in PPP) 3rd Largest Economy US $8,721 bn 2016 Per capita Income (nominal) US $1,724 2016 -17 Exports US $ 200 bn 2016-17 (till Dec) Imports US $ 275 bn 2016-17 (till Dec) Foreign Exchange Reserves US $ 361 bn At Jan 2017 Government External Borrowings US $ 93 bn At Dec 2016 External Debt (Govt & Non-Govt) US $ 484 bn At Sept 2016 Interest to Gross Revenue 23.7% 2016-17 RE Gross Debt / GDP ratio 69.0% 2016-17(E)

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India – Key Economic Indicators 2017 vs. 1991 ….. 26 years’ snapshot post liberalisation

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2017 1991 CAGR

Population (Bn) 1.31 0.89 1.5% Life expectancy (Years) 68.5 58.8 0.6% Literacy rate 79% 52% 2.1% GDP Growth Rate 6.5% to 6.75% 5.3% GDP (at current prices) - INR cr 15,133,473 531,814 13.7% GDP (at current prices) - US $ Bn 2,251 275 8.4% Per capita income (nominal) - US $ 1,724 310 6.8% Exports - US $ Bn 2016-17 (till Dec 16) 200 18 9.7% Imports - US $ Bn 2016-17 (till Dec 16) 275 24 9.8% Share in world trade (exports + imports) 4.2% 1.0% 5.7% Foreign Currency Reserves - US $ Bn 361 5.8 17.2% Exchange Rate (US $) 67.23 17.9 5.2% Savings Rate 31.0% 22.9% 1.2% Investment Rate 34.2% 22.5% 1.6%

India’s GDP Growth % - Last 11 Years

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GDP expected to grow approximately @ 6.75 % - 7.5 % in 2017-18

9.6 9.3 6.7 8.6 8.9 6.7 5.6 6.6 7.2 7.6 6.8 0.0 2.0 4.0 6.0 8.0 10.0 12.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

India – GDP Projection

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To be a $ 10 trillion economy in 2035, India needs to grow at a CAGR of 8.3% p.a. China’s GDP grew at an average of 9.9% p.a. from 1979 to 2011

The World is Changing …

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Regions GDP 2016(E) $ Trilliion GDP 2021 $ Trilliion GDP 2031 $ Trilliion CAGR 2016-2031 US 18.6 19.0 25.0 2.0% EU 17.1 20.0 23.0 2.0% Japan 4.7 7.0 7.0 2.7% Total OECD 40.4 46.0 55.0 2.08% China 11.4 13.0 23.5 5.0% India 2.3 3.5 7.1 8.0% Others 21.2 39.5 70.4 8.3% Total: RoW 34.8 56.0 101.0 7.4% Total Global 75.2 102.0 156.0 5.0%

Trends in Inflation (CPI)

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2 4 6 8 10 12 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 10.4 8.4 10.2 9.5 5.9 4.9 4.9

India & China – at a glance ……………..China has grown faster

India China

Population 2017 (E) 1.31 bn 1.38 bn Population Growth Rate Census 2011 1.30% 0.43% Life Expectancy: Male 2016 67.3 yrs 74.6 yrs Life Expectancy: Female 2016 69.8 yrs 77.6 yrs Literacy 2016-17(E) 79.0% 96.4% GDP (at current prices) Oct 2016 US$ 2,251 bn US $ 12,263 bn Real GDP growth 2016 6.5% to 6.75% 6.6% GDP (in PPP) 2016 US $ 8,721 bn US $ 21,270 bn Per capita Income (nominal) 2017 US $ 1,724 US $ 8,886 Exports 2016-17 (till Dec 16) US $ 200 bn US $ 2,011 bn (CY) Imports 2016-17 (till Dec 16) US $ 275 bn US $ 1,437 bn (CY) Foreign Currency Reserves At Jan 2017 US $ 361 bn US $3,092 bn External Debt At Sept 2016 US $ 484 bn US $ 984 bn Gross Debt / GDP ratio 2017 (E) 69% 260%

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Trends in Fiscal Deficit

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(Rs. cr)

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SIRC of ICAI

336,992 418,482 373,592 515,990 490,190 524,539 510,725 532,791 534,274 546,532

• 100,000

200,000 300,000 400,000 500,000 600,000 2008-9 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 (RE) 2017-18 (BE)

Trends in Revenue and Fiscal Deficit

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(% of GDP)

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SIRC of ICAI

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2007-8 2008-9 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 (RE) 2017-18 (BE) 1.1 4.5 5.2 3.2 4.4 3.6 3.3 2.9 2.5 2.1 1.9 2.5 6.0 6.5 4.8 5.7 4.8 4.6 4.1 3.9 3.2 3.2 Revenue Deficit Fiscal Deficit

Video 1

• Transformative Shift
• FM Speech – Para 3
• “In the last two and half years, it has been our mission to bring a Transformative

Shift in the way our country is governed. We have moved from a discretionary administration to a policy and system based administration; from favouritism to transparency and objectivity in decision making; from blanket and loose entitlements to targeted delivery; and from informal economy to formal economy. Inflation, which was in double digits, has been controlled; sluggish growth has been replaced by high growth; and a massive war against black money has been

• launched. We have worked tirelessly on all these fronts and feel encouraged by

the unstinted support of the people to our initiatives. The Government is now seen as a trusted custodian of public money. I take this opportunity to express

• ur gratitude to the people of India for their strong support”

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• Transformative shift in administration in the last 2.5 years
• - discretionary administration to a policy and system based administration
• - favoritism to transparency and objectivity in decision making
• - blanket and loose entitlements to targeted delivery
• - informal economy to formal economy
• CPI-based inflation declined from 6% in Jul’16 to 3.4% in Dec’16. Inflation was 4.9%

in H1 2016-17

• Economy moved on a high growth path

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Performance in 2016-17

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• India’s Current Account Deficit declined from about 1% of GDP last year to 0.3% of

GDP in the H1 2016-17

• FDI grew 36% in H1 2016-17 over H1 2015-16 to Rs.1.45 lakh cr, despite 5%

reduction in global FDI inflows

• Foreign exchange reserves have reached $361 billion, cover for about 12 months of

imports

• War against black money launched
• Fiscal consolidation continued without compromising on public investment
• India to be one of the fastest growing major economies in 2017

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Performance in 2016-17

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• Agenda for 2016-17 was to “Transform India”, with 9 distinct

pillars

• Has the FM met the Agenda?
• Your rating of Govt. performance during 2016-17?

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Performance in 2016-17

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Is the Budget Credible?

The RE continues to be higher than the BE for the 2nd year…….

02-02-2017 Rs cr 2012-13 2013-14 2014-15 2015-16 2016-17 BE Actual BE Actual BE Actual BE Actual BE RE Receipts 12,42,226 11,73,590 14,08,122 13,37,604 15,77,029 14,42,742 16,71,223 17,06,908 19,53,809 20,38,013 Tax Receipt 10,77,612 10,36,235 12,35,870 11,38,734 13,64,524 12,44,885 14,49,490 14,55,648 16,30,888 17,03,243

Non Tax Revenue 1,64,614 1,37,355 1,72,252 1,98,870 2,12,505 1,97,857 2,21,733 2,51,260 3,22,921 3,34,770 Expenditure 14,90,925 14,10,367 16,65,297 15,59,447 17,94,892 16,63,673 17,77,477 17,90,783 19.78,060 20,14,407 Subsidies 1,90,015 2,57,079 2,31,084 2,54,632 2,60,658 2,58,258 2,43,811 2,41,833 2,33,835 2,32,705 GDP growth rate % 13.9 13.3 10.8 8.6 7.9

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Is the Budget Credible?

Two consecutive years of actual growth @ 17%

02-02-2017

2013-14 2014-15 2015-16 2016-17 RE 2017-18 (BE

• ver RE)

Budgeted Tax Revenue growth % 15% 10% 6% 18% 12% Actual Tax Revenue Growth % 10% 9% 17% 17% Actual Total Receipts % of BE 95% 91% 102% 104% Actual Subsidy % of BE 110% 99% 99% 100%

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Video 2

Roadmap and priorities

• FM Speech – Para 19
• “we are aware that we need to do more for our people. Continuing with the task
• f fulfilling the people’s expectations, our agenda for the next year is : “Transform,

Energise and Clean India”, that is, TEC India. This agenda of TEC India seeks to:

• Transform the quality of governance and quality of life of our people;
• Energise various sections of society, especially the youth and the vulnerable, and

enable them to unleash their true potential; and

• Clean the country from the evils of corruption, black money and non-transparent

political funding

• I propose to present my Budget proposals under ten distinct themes to foster this

broad agenda.”

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• Agenda for 2017-18 is TEC India -- “Transform, Energise and Clean India”. Seeks to:
• a. Transform the quality of governance and life of our people
• b. Energise various sections of society, especially the youth and the

vulnerable

• c. Enable them to unleash their true potential
• d. Clean the country from the evils of corruption, black money and non

transparent political funding

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Roadmap and priorities

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• Ten distinct themes to foster this broad agenda:

– Farmers: committed to double income in 5 years – Rural Population: providing employment & basic infrastructure – Youth: energizing them through education, skills and jobs – The Poor and the Underprivileged: strengthening the systems of social security, health-care and affordable housing – Infrastructure: for efficiency, productivity and quality of life – Financial Sector: for growth & stability by stronger institutions – Digital Economy: for speed, accountability and transparency – Public Service: effective governance and efficient service delivery through people’s participation – Prudent Fiscal Management: to ensure optimal deployment of resources and preserve fiscal stability – Tax Administration: honoring the honest

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Roadmap and priorities

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• The FM has managed to keep the Revised Estimates is higher

than Budget Estimates for receipts & expenditure for the 2nd year in a row.

• Is the budget credible?
• Has the FM under budgeted in FY 2017-18?

Has the FM done enough to transform, energize and clean India?

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Roadmap and priorities

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Video 3 Agriculture

• FM Speech – Para 22
• “For a good crop, adequate credit should be available to farmers in time.

The target for agricultural credit in 2017-18 has been fixed at a record level of ` 10 lakh crores. We will take special efforts to ensure adequate flow of credit to the under serviced areas, the Eastern States and Jammu & Kashmir. The farmers will also benefit from 60 days’ interest waiver announced by Honourable Prime Minister in respect of their loans from the cooperative credit structure”.

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• Over Rs. 3 lakh cr spent in rural areas every year for rural poor from Central Budget,

State Budgets, Bank linkage for self-help groups, etc

• Total allocation for Rural, Agriculture and Allied sectors is Rs.1.87 lakh cr, 24% YOY

increase

• Target for agricultural credit in 2017-18 fixed at Rs. 10 lakh cr. To focus on under-serviced

areas, the Eastern States and J&K

• 60 days’ interest waiver announced on 31 Dec 2016
• MGNREGA allocation to be the highest ever at Rs. 48,000 cr in 2017-18. To reorient

MGNREGA to double farmers' income. Using space technology to plan MGNREGA works

• Mission Antyodaya to bring 1 cr households out of poverty and to make 50,000 Gram

Panchayats poverty free by 2019

• Coverage of cropped area under Fasal Bima Yojana scheme to be increased to 40% in

2017-18 and 50% in 2018-19. Sum insured doubled to Rs.1.41 lakh cr in Kharif 2016. Budget provision of Rs. 9,000 cr in 2017-18

• Corpus of Long Term Irrigation Fund to be doubled to Rs. 40,000 cr

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SIRC of ICAI

Agriculture, Rural & Allied sectors

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• A model law on contract farming to be prepared and circulated among the States

for adoption

• Pace of construction of Pradhan Mantri Gram Sadak Yojana (PMGSY) roads

accelerated to 133 km roads per day in 2016-17, against an avg. of 73 km during 2011-2014. Allocation for PMGSY, including the State's Share is Rs. 27,000 cr in 2017-18

• Allocation for Pradhan Mantri Awaas Yojana – Gramin increased from Rs. 15,000 cr

in BE 2016-17 to Rs. 23,000 cr in 2017-18 with a target to complete 1 cr houses by 2019 for the houseless and those living in kutcha houses

• To achieve 100% village electrification by 1st May 2018
• Allocation for Prime Minister's Employment Generation Program and Credit Support

Schemes increased 3-fold. To increase the allocations for Deendayal Antyodaya Yojana- National Rural Livelihood Mission for promotion of skill development and livelihood opportunities for people in rural areas to Rs.4,500 cr in 2017-18

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SIRC of ICAI

Agriculture, Rural & Allied sectors

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• Has the FM done enough this year to enable the farmers to

double their income in 5 years?

• Are the measures comprehensive to improve agriculture

productivity?

• Will the situation in the rural sector improve?
• Does it mark a trend of the Government to address the

bottom of the pyramid?

• Are any other measures required to improve the rural sector?

02-02-2017

Agriculture, Rural & Allied sectors

SIRC of ICAI

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Video 4 Youth

• FM Speech – Para 55 & 56
• “In 2017-18, we also propose to launch the Skill Acquisition and

Knowledge Awareness for Livelihood Promotion programme (SANKALP) at a cost of Rs. 4,000 crores. SANKALP will provide market relevant training to 3.5 crore youth.

• The next phase of Skill Strengthening for Industrial Value Enhancement

(STRIVE) will also be launched in 2017-18 at a cost of Rs. 2,200 crores. STRIVE will focus on improving the quality and market relevance of vocational training provided in ITIs and strengthen the apprenticeship programmes through industry cluster approach.”

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• National Testing Agency to be set-up as an autonomous and self-sustained premier

testing organisation to conduct all entrance examinations for higher education institutions

• SWAYAM platform, leveraging IT, to be launched with at least 350 online courses.

This would enable students to virtually attend courses taught by the best faculty

• Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme

(SANKALP) to be launched at a cost of Rs. 4,000 cr. SANKALP will provide market relevant training to 3.5 cr youth

• Next phase of Skill Strengthening for Industrial Value Enhancement (STRIVE) will

also be launched in 2017-18 at a cost of Rs. 2,200 cr

• A scheme for creating employment in the leather and footwear industries along the

lines in Textiles Sector to be launched

• Good quality higher education institutions to have greater administrative and

academic autonomy

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SIRC of ICAI

Youth & employment

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• Pradhan Mantri Kaushal Kendras to be extended to more than 600 districts across

the country. 100 India International Skills Centres will be established across the country.

• Incredible India 2.0 Campaign will be launched across the world to promote

tourism and employment

• Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme

(SANKALP) to be launched at a cost of Rs. 4,000 cr. SANKALP will provide market relevant training to 3.5 cr youth

• National Testing Agency to be set-up as an autonomous and self-sustained premier

testing organisation to conduct all entrance examinations for higher education institutions

• Next phase of Skill Strengthening for Industrial Value Enhancement (STRIVE) will

also be launched in 2017-18 at a cost of Rs. 2,200 cr

• A scheme for creating employment in the leather and footwear industries along the

lines in Textiles Sector to be launched

• 100 India International Skills Centres will be established across the country

02-02-2017

SIRC of ICAI

Youth & employment

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• Are these measures adequate to meet the challenges of

education, skill development & jobs in the urban areas?

• Has the FM done enough to generate employment in the

urban sector?

02-02-2017

SIRC of ICAI

Youth & employment

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Video 5

• Infrastructure
• FM Speech – Para 87 & 94
• “For transportation sector as a whole, including rail, roads, shipping, I have

provided Rs. 2,41,387 crores in 2017-18. This magnitude of investment will spur a huge amount of economic activity across the country and create more job opportunities.

• The total allocation for infrastructure development in 2017-18 stands at
• Rs. 3,96,135 crores.”

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Infrastructure Investment

… India is spending much below its need and China, way above

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Infrastructure Investment

China’s spend is over twice the rate of India, on a much higher GDP base in the last 20 years

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• Rs. 2,41,387 cr has been provided in 2017-18 for transportation sector as a whole,

including rail, roads, shipping

• For 2017-18, the total capital and development expenditure of Railways has been

pegged at Rs. 1,31,000 cr. This includes Rs. 55,000 cr provided by the Govt

• For passenger safety, a Rashtriya Rail Sanraksha Kosh will be created with a corpus
• f Rs. 1 lakh cr over a period of 5 years
• Tariffs of Railways would be fixed, taking into consideration costs, quality of service

and competition from other forms of transport

• A new Metro Rail Act will be enacted by rationalising the existing laws. This will

facilitate greater private participation and investment in construction and operation

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Infrastructure

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• In the road sector, budget allocation for highways increased from Rs. 57,976 cr in

2016-17 to Rs. 64,900 cr in 2017-18

• 2,000 kms of coastal connectivity roads have been identified for construction and

development

• Total length of roads, including those under PMGSY, built from 2014-15 till the

current year is about 1,40,000 kms which is significantly higher than previous three years

• Select airports in Tier 2 cities will be taken up for operation and maintenance in the

PPP mode

• A new and restructured Central scheme with a focus on export infrastructure,

namely, Trade Infrastructure for Export Scheme (TIES) will be launched in 2017-18

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SIRC of ICAI

Infrastructure

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• Is the allocation of funds towards infrastructure lopsided?
• Has enough resources been allocated towards urban

infrastructure?

• Is the allocation sufficient for building smart cities?

Will this address the infrastructure backlog?

02-02-2017

Infrastructure

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Video 6

Financial sector

• FM Speech – Para 103 to 105
• “Listing of Public Sector enterprises will foster greater public accountability and

unlock the true value of these companies. The Government will put in place a revised mechanism and procedure to ensure time bound listing of identified CPSEs

• n stock exchanges. The disinvestment policy announced by me in the last budget

will continue.

• The shares of Railway PSEs like IRCTC, IRFC and IRCON will be listed in stock

exchanges.

• We see opportunities to strengthen our CPSEs through consolidation, mergers and
• acquisitions. By these methods, the CPSEs can be integrated across the value

chain of an industry. It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders. Possibilities of such restructuring are visible in the oil and gas

• sector. We propose to create an integrated public sector ‘oil major’ which will be

able to match the performance of international and domestic private sector oil and gas companies.”

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• Foreign Investment Promotion Board (FIPB) to be abolished in 2017-18
• Further liberalisation of FDI policy is under consideration
• Rs. 10,000 cr for recapitalisation of Banks provided in 2017-18
• Revised mechanism and procedure to ensure time bound listing of identified CPSEs on

stock exchanges. Shares of Railway PSEs like IRCTC, IRFC and IRCON to be listed in stock exchanges

• An expert committee to study integration of spot and derivatives market in the agri

sector, for commodities trading

• To create an integrated public sector “oil major” to match the performance of

international and domestic private sector oil and gas companies

• A new ETF with diversified CPSE stocks and other Government holdings will be

launched in 2017-18

• To streamline institutional arrangements for resolution of disputes in infrastructure

related construction contracts, PPP and public utility contracts through Arbitration and Conciliation Act 1996

• Lending target under Pradhan Mantri Mudra Yojana to be set at Rs. 2.44 lakh cr.

Priority to be given to Dalits, Tribals, Backward Classes and Women

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SIRC of ICAI

Financial sector

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• Will India be able to attract more foreign exchange through

liberalization?

• Will these measures enable the CPSEs to unlock their value?
• Is the allocation towards recapitalization of banks adequate?

02-02-2017

Financial Sector

SIRC of ICAI

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Video 7 Digital Economy

• FM Speech – Para 111
• “Promotion of a digital economy is an integral part of Government’s

strategy to clean the system and weed out corruption and black money. It has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system. This, in turn, is expected to energise private investment in the country through lower cost of credit. India is now on the cusp of a massive digital

• revolution. ”

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• Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be

launched shortly

• A Mission will be set up with a target of 2,500 cr digital transactions for 2017-18

through UPI, USSD, Aadhar Pay, IMPS and debit cards

• Proposal to mandate all Govt receipts through digital means, beyond a prescribed

limit

• Banks to introduce additional 10 lakh new POS terminals by March 2017. To

introduce 20 lakh Aadhar based POS by September 2017

• To create a Payments Regulatory Board in the RBI by replacing the existing Board

for Regulation and Supervision of Payment and Settlement Systems

02-02-2017

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Digital Economy

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• Do these measures enable India to move towards a less-cash

economy?

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Digital Economy

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Video 8

• Public Service
• FM Speech – Para 129
• “In the recent past, there have been instances of big time offenders, including

economic offenders, fleeing the country to escape the reach of law. We have to ensure that the law is allowed to take its own course. Government is therefore considering introduction of legislative changes, or even a new law, to confiscate the assets of such persons located within the country, till they submit to the jurisdiction of the appropriate legal forum. Needless to say that all necessary constitutional safeguards will be followed in such cases.”

02-02-2017 41

• To introduce legislative changes or new law to enable confiscation of assets of big

time & economic offenders like Vijay Mallya fleeing the country to escape the reach

• f law
• To rationalise the number of tribunals and merge tribunals wherever appropriate
• Use the Head Post Offices as front offices for rendering passport services
• A Centralised Defence Travel System through which travel tickets can be booked
• nline by defence employees
• Web based interactive Pension Disbursement System for Defence Pensioners to be

established

02-02-2017

SIRC of ICAI

Public Service

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• Will the new legislation enable the government to recover the

tax dues of economic offenders, considering long time taken to resolve judicial cases?

02-02-2017

SIRC of ICAI

Public Service

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Video 9

• PRUDENT FISCAL MANAGEMENT
• FM Speech – Para 131 & 132
• “I now turn to the fiscal situation in the context of the Budget for 2017-18.
• The total expenditure in Budget for 2017-18 has been placed at
• Rs. 21.47 lakh crores. With the abolition of Plan-Non Plan classification of

expenditure, the focus is now on Revenue and Capital expenditure. I have stepped up the allocation for Capital expenditure by 25.4% over the previous year. This will have multiplier effects and lead to higher growth. The total resources being transferred to the States and the Union Territories with Legislatures is Rs. 4.11 lakh crores, against Rs. 3.60 lakh crores in BE 2016-17. Details of allocations for important sectors and schemes and transfer of resources to States are given in Annex II of my Speech.”

02-02-2017 44

• FRBM Committee recommended 3% fiscal deficit for the next three years,

considering sustainable debt target and need for public investment

• Though fiscal deficit for 2017-18 is targeted at 3.2% of GDP, Govt to achieve 3% in

2017-18

• Revenue deficit of 2.3% in BE 2016-17 stands reduced to 2.1% in the RE
• Revenue deficit for 2017-18 is pegged at 1.9% against 2% mandated by the FRBM

Act

• Allocation for Capital expenditure increased by 25.4% over the previous year
• Total resources being transferred to the States and the UT with Legislatures is Rs.

4.11 lakh cr, against Rs. 3.60 lakh cr in BE 2016-17

• Net market borrowing of Government restricted to Rs. 3.48 lakh cr after buyback in

2017-18, much lower than Rs. 4.25 lakh cr of the previous year

• For the first time, a consolidated Outcome Budget, covering all Ministries and

Departments, is being laid along with the other Budget documents

02-02-2017

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Prudent Fiscal management

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• Has the FM managed the Fisc efficiently?

02-02-2017

SIRC of ICAI

Prudent Fiscal management

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2015-2016 Actuals 2016-17 Budget Estimates 2016-17 Revised Estimates 2017-18 Budget Estimates Total Receipts 17,90,783 19,78,060 20,14,407 21,46,735 Non-Scheme Expenditure 10,65,669 11,76,094 11,44,560 12,01,657 Scheme Expenditure 7,25,114 8,01,966 8,69,847 9,45,078 Total Expenditure 17,90,783 19,78,060 20,14,407 21,46,735 Revenue Deficit 3,42,736 3,54,015 3,10,998 3,21,163 Fiscal Deficit 5,32,791 5,33,904 5,34,274 5,46,532 Primary Deficit 91,123 41,234 51,205 23,454

Source: Budget 2017-18

INR cr

02-02-2017

Budget at a glance

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2015-16 Actuals 2016-2017 Budget Estimates 2016-2017 Revised Estimates 2017-18 Budget Estimates Gross Tax revenue 14,55,648 16,30,888 17,03,243 19,11,579 Revenue Receipts – A 11,95,025 13,77,022 14,23,562 15,15,771 Tax Revenue (net to Centre) 9,43,765 10,54,101 10,88,792 12,27,014 Non-tax revenue 2,51,260 3,22,921 3,34,770 2,88,757 Capital Receipts - B 5,95,748 6,01,038 5,90,845 6,30,964 Recoveries of Loans 20,835 10,634 11,071 11,932 Other Receipts 42,132 56,500 45,500 72,500 Borrowings and other Liabilities * 5,32,791 5,33,904 5,34,274 5,46,532 Total Receipts (A + B) 17,90,773 19,78,060 20,14,407 21,46,735 Gross Tax to GDP ratio 10.7% 10.8% 11.3% 11.4%**

Source: Budget 2017-18 *Includes draw-down of cash balance **Based on projected GDP for BE 2017-18 at INR 1,68,47,455

INR cr

02-02-2017

Budget at a glance

SIRC of ICAI

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2013-2014 2014-2015 2015-2016 2016-2017 Revised Estimates Gross Tax revenue 11,38,734 12,44,885 14,55,648 17,03,243 Growth in gross tax revenue (%) 9.89% 9.32% 16.93% 17.01% Revenue Receipts 10,14,724 11,01,472 11,95,025 14,23,562 Tax Revenue (net to Centre) 8,15,854 9,03,615 9,43,765 10,88,792 Non-tax revenue 1,98,870 1,97,857 2,51,260 3,34,770 Capital Receipts 5,44,723 5,62,201 5,95,748 5,90,845 Recoveries of Loans 12,497 13,738 20,835 11,071 Other Receipts 29,368 37,737 42,132 45,500 Borrowings and other Liabilities * 5,02,858 5,10,725 5,32,791 5,34,274 Total Receipts 15,59,447 16,63,673 17,90,773 20,14,407

*Includes draw-down of cash balance

Source: Budget 2017-18

INR cr

02-02-2017

Tax revenues for the past four years

SIRC of ICAI

The gross tax revenue for 2017-18BE is estimated to increase by 12.23%

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Tax revenue

TAX REVENUE RECEIPTS 2015-16 Actuals 2016-17 Budget Estimates 2016-17 Revised Estimates 2017-18 Budget Estimates

Gross Tax Revenue * 14,55,648 16,30,888 17,03,243 19,11,579 Corporation tax 4,53,228 4,93,924 4,93,924 5,38,745 Income tax 2,87,637 3,53,174 3,53,174 4,41,255 Wealth tax 1,079 Customs 2,10,338 2,30,000 2,17,000 2,45,000 Excise 2,88,073 3,18,670 3,87,369 4,06,900 Service tax 2,11,414 2,31,000 2,47,500 2,75,000 Taxes on Union Territories 3,878 4,121 4,277 4,679 Direct Tax 7,41,945 8,47,097 8,47,097 9,80,000 Indirect Tax 7,13,703 7,83,791 8,56,146 9,31,579 Direct tax to GDP ratio 5.5% 5.6% 5.6% 5.8% Indirect tax to GDP ratio 5.3% 5.2% 5.7% 5.5%

INR cr

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Video 10

• Taxes
• FM Speech – Para 140 & 141
• “India’s tax to GDP ratio is very low, and the proportion of direct tax to indirect

tax is not optimal from the view point of social justice. I place before you certain data to indicate that our direct tax collection is not commensurate with the income and consumption pattern of Indian economy. As against estimated 4.2 crore persons engaged in organised sector employment, the number of individuals filing return for salary income are only 1.74 crore. As against 5.6 crore informal sector individual enterprises and firms doing small business in India, the number of returns filed by this category are only 1.81 crore. Out of the 13.94 lakh companies registered in India upto 31st March, 2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17. Of the 5.97 lakh companies which have filed their returns for Assessment Year 2016-17 so far, as many as 2.76 lakh companies have shown losses or zero income. 2.85 lakh companies have shown profit before tax of less than ` 1 crore. 28,667 companies have shown profit between ` 1 crore to ` 10 crore, and only 7781 companies have profit before tax of more than ` 10 crores.”

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Corporate taxation

• Income tax for companies with annual turnover up to Rs. 50 cr is reduced to 25%
• Holding period for computing LTCG from transfer of immovable property reduced

from 3 years to 2 years

• Base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all

classes of assets including immovable property

• For carry forward of losses of start-up companies, continuous holding of 51% of

voting rights replaced with holding of the original promoters

• Profit (linked deduction) exemption available to start-ups for 3 years out of 7 years

now

• For Joint Development Agreement signed for development of property, the liability

to pay CG tax will arise in the year the project is completed

• WHT rate of 5% on interest earned by foreign entities in ECB or in bonds and

Government securities is extended to 30.6.2020

• MAT credit is allowed to be carried forward up to a period of 15 years

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• Under presumptive taxation of small and medium taxpayers with turnover up to Rs.

2 cr, the presumptive income is reduced to 6% of non-cash turnover

• Threshold limit for audit of entities opting for presumptive taxation increased from
• Rs. 1 cr to Rs. 2 cr. Threshold for maintenance of books for individuals and HUF

increased from turnover of Rs. 10 lakhs to Rs. 25 lakhs or income from Rs. 1.2 lakhs to Rs.2.5 lakhs

• Domestic transfer pricing applicable only if one of the entities involved in related

party transaction enjoys specified profit-linked deduction

• Foreign Portfolio Investor (FPI) Category I & II exempted from indirect transfer
• provision. Indirect transfer provision shall not apply in case of redemption of shares
• r interests outside India consequent to redemption or sale of investment in India

which is chargeable to tax in India

• LTCG on sale of listed shares will not be exempted if STT is not paid at the time of

acquisition of listed shares after 1.10.2004

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Personal income tax

• Tax rate for individual assesses between income of Rs. 2.5 lakhs to Rs. 5 lakhs reduced to

5% from the present rate of 10%

• Surcharge of 10% payable by individuals whose annual taxable income is between Rs. 50

lakhs and Rs. 1 cr

• Simple one-page form to be filed as Income Tax Return for the category of individuals

having taxable income upto Rs. 5 lakhs other than business income Tax administration reforms

• Maximise efforts for e-assessment in the coming year
• Enforcing greater accountability of officers of Tax Department for specific act of

commission and omission

• Authorised officer can provisionally attach a property for a period of 6 months to protect

the interest of revenue. He can make a reference to the valuation officer for the purpose

• f estimation of FMV of a property
• The Joint Director, Deputy Director or the Assistant Director to call for information for

the purpose of any enquiry without seeking approval of the higher authority

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Direct taxes

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Country Name

• Corp. Tax Rate/(ETR)

US 35.00% (47.00%) France 34.43% Germany 33.00% Australia 30.00% Netherlands 25.00% China 25.00% Japan 23.90% (50.00%) UK 20.00% Singapore 17.00%

Corporate tax rates across the world

• There is nothing for the middle class except for small relief
• No real tax incentive provided to start up companies
• Is this budget disappointing as the FM has not cut the

corporate tax rate for all companies as per the road map given in the 2015 Budget?

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Direct Taxes

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Effective Tax Rate of Companies in India

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Profit Before Taxes Number of Companies Share in PBT Share in Total Income Share in Total Corporate Tax Liability Total Income to PBT Effective Tax Rate Less than Zero 2,58,096 1.36 1.37 Zero 18,018 7.30 2.55 Rs 0-1 cr 2,85,322 2.78 3.26 2.98 91.47 30.26 Rs 1-10 cr 28,667 6.84 7.29 7.13 83.25 29.44 Rs 10-50 cr 5,497 9.31 9.39 9.56 78.75 29.00 Rs 50-100 cr 1,002 5.52 5.40 5.57 76.40 28.47 Rs 100-500 cr 984 16.58 15.87 16.77 74.78 28.57 Greater Than 500 cr 298 58.97 50.13 54.08 66.41 25.90 All Companies 5,97,884 100.00 100.00 100.00 78.11 28.24 In %

Effective Tax Rate of Companies in India

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Effective Tax Rate Number of Companies Share in Total Profits Share in Total Income Share in Total Tax Liability Less Than Zero and Zero 2,73,176 2.92 1.51 1.4 0-20 66,078 9.85 14.95 3.84 20-25 21,241 33.89 8.81 26.87 25-30 27,306 10.23 11.1 10.28 30-33 1,45,633 36.6 50.34 45.63 >33 46,432 6.51 13.29 11.98 Indeterminate (PBT = 0) 18,018 TOTAL 5,97,884 100 100 100 In %

Video 11

• Rapid
• FM Speech – Para 180
• “In the Annual Conclave of Tax officers called ‘Rajaswa Gyan Sangam’ held

in June 2016, the Prime Minister had expressed his desire to bring reforms in tax administration in the form of an approach of RAPID which stands for Revenue, Accountability, Probity, Information and Digitisation. This approach precisely reflects the strategy of Tax Department which is now

• formulated. While revenue considerations always remain the focus of

Revenue Department, we are trying to bring in maximum use of Information Technology to remove human contact with assesses as well as to plug tax avoidance. We will try to maximise our efforts for e- assessment in the coming year. We are also using a lot of data mining capability, both in-house and outsourced. We plan to enforce greater accountability of officers of Tax Department for specific act of commission and omission. I would like to assure everyone that honest, tax-compliant person would be treated with dignity and courtesy..

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• Do these measures reduction of tax harassment from tax
• fficers at the field level?

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Video 12

• Political funding
• FM Speech – Para 165
• “An effort, therefore, requires to be made to cleanse the system of political funding in India.

Donors have also expressed reluctance in donating by cheque or other transparent methods as it would disclose their identity and entail adverse consequences. I, therefore, propose the following scheme as an effort to cleanse the system of funding of political parties:

• In accordance with the suggestion made by the Election Commission, the maximum amount of cash

donation that a political party can receive will be `2000/- from one person.

• Political parties will be entitled to receive donations by cheque or digital mode from their donors.
• As an additional step, an amendment is being proposed to the Reserve Bank of India Act to enable

the issuance of electoral bonds in accordance with a scheme that the Government of India would frame in this regard. Under this scheme, a donor could purchase bonds from authorised banks against cheque and digital payments only. They shall be redeemable only in the designated account

• f a registered political party. These bonds will be redeemable within the prescribed time limit

from issuance of bond.

• Every political party would have to file its return within the time prescribed in accordance with the

provision of the Income-tax Act.

• Needless to say that the existing exemption to the political parties from payment of income-tax

would be available only subject to the fulfilment of these conditions. This reform will bring about greater transparency and accountability in political funding, while preventing future generation of black money.”

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• Will these measures eliminate the cash funding of political

parties?

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Video 13

• Conclusion
• FM Speech – Para 182
• “Madam Speaker, I have outlined the Budget proposals under
• ur overarching agenda: “Transform, Energise and Clean

India”. Our emphasis will now be on implementing all these proposals for the benefit of the farmers, the poor and the underprivileged sections of our society”.

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• Is it a transformative budget as claimed by the FM?

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THANK YOU