Taxes and more: Here’s how Union Budget 2016 will impact your wallet
Focusing on rural India and infrastructure with minor rebate for small taxpayers but amnesty for defaulters, finance minister Arun Jaitley on Monday unveiled a Rs 19.78-lakh crore budget for 2016-17, earmarking more money for health, literacy and roads.india Updated: Feb 29, 2016 23:09 IST
Focusing on rural India and infrastructure with minor rebate for small taxpayers but amnesty for defaulters, finance minister Arun Jaitley on Monday unveiled a Rs 19.78-lakh crore budget for 2016-17, earmarking more money for health, literacy and roads.
The focus on rural economy and the promise to double the income of farmers in five years came against the backdrop of a distressed agrarian economy, fewer jobs and assembly elections in five states this and next year.
Here is what the budget has in store for the common man:
Small relief to individual tax payers
Jaitley gave a small relief of Rs 3,000 to individuals having an annual income of less than Rs.500,000.
He said the ceiling of tax rebate under Section 87A of the Income Tax Act has been proposed to be increased to Rs 5,000 from Rs 2,000. This will be applicable for individuals with an income less than Rs 500,000.
According to Jaitley, the move would benefit over two crore tax payers.
The limit of deduction of house rent paid under section 80GG has also been raised to Rs 60,000 from the existing Rs 24,000 per annum to give relief to employees who live in rented houses.
Good news for home-buyers
Aiming to boost demand in realty sector, the government proposed an additional Rs 50,000 deduction on interest on loans for first home buyers and tax incentives on development of affordable housing.
The government also exempted from service tax construction of affordable houses up to 60 sq metres under any scheme of the central or state government including PPP schemes.
60% of EPF deposits to be taxed on withdrawal after April 1
Breaking from the long-held practice of exemption at all stages, the Budget for 2016-17 seeks to impose a retirement tax at the time of final withdrawal on 60% of contributions made after April 1, 2016, to EPF and other schemes.
At present, social security schemes run by retirement fund body EPFO are tax free ‘Exempt-Exempt-Exempt (EEE)’ scheme under which deposits, accrual of interest and withdrawals are tax free.
In order to bring greater parity in tax treatment of different types of pension plans, it is proposed that the contributions made on or after April 1, 2016 by an employee participating in a recognised provident fund and superannuation fund, up to 40% of the accumulated balance attributable to such contributions on withdrawal shall be exempt from tax.
Have a start-up idea? Read on
Jaitley announced a slew of initiatives in the Budget for start-ups, including 100% tax exemption for three years and allocation of Rs 500 crore for SC/ST and women entrepreneurs, aimed at facilitating growth for these new businesses.
This benefit will be available to an eligible start-up which is setup before April 1, 2019, he added.
Because health is wealth
The government will set up 3,000 new generic medicine stores across the country to tackle the shortage of drugs in rural areas. Jaitley also announced the launch of a National Dialysis Programme to address the high costs involved in the renal dialysis processes.
Under the programme every district hospital will have the facilities of renal dialysis, so that people do not have to travel to the expensive hospitals of metro cities, he said.
At least 2,000 new dialysis centres will be started in the country under the programme.
Government wants you to say no to tobacco
Excise duty on cigarettes was hiked for the fifth year in a row, as government continued the crack down on consumption of tobacco and allied products.
Popular cigarettes brands such as Gold Flake Kings and Wills Classic will cost up to Rs 125, dearer by nearly Rs 15 per pack of 10 sticks, while those of premium brands like Marlboro and Benson & Hedges will cost about Rs 250 pack of 20 cigarettes, up by more than Rs 30.
Branded garments will cost more
Prices of branded garments are set to go up by “2 to 5% “ with the government levying excise duty on ready-made products of Rs 1,000 or more.
Jaitley said: “I propose to change the excise duty on branded readymade garments and made up articles of textiles with a retail sale price of Rs 1,000 and above from ‘Nil without input tax credit or 6% /12.5% with input tax credit’ to ‘2% without input tax credit or 12.5% with input tax credit’.”
Watch what you are driving
Jaitley announced that an additional 1% tax will be imposed on cars valued at above Rs 10 lakh.
“I propose to levy an infrastructure cess, of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs,” Jaitle said while expressing the government’s concern over pollution and traffic situation in cities.
These prices, too, will sting
Locally made mobiles, aerated drinks and smart watches are among the other items that will be costlier while footwear, solar lamps and routers are slated to cost less.
As a result of a new levy, Krishi Kalyan cess, on all services, activities including eating out, watching movies in theaters and payment of bills, will also become more expensive.
Customs duty on imported imitation jewellery has gone up from 10% to 15% while customs duty on industrial solar water heater has increased from 7.5% to 10% which will make these items costlier.
Mobile phones and tablets will become dearer with the government proposing a hike in levies on components like printed circuit boards and peripherals like batteries and chargers.
Air fares to take flight
Fliers will have to shell out more with the government proposing a hike of 6% in excise duty on jet fuel but it would not be applicable to the proposed Scheduled Commuter Airlines under the regional connectivity scheme.
The excise duty on ATF is to be hiked to 14% from 8 per cent, according to a proposal in Union Budget 2016-17.
The increase would be virtually applicable to airlines operating from all airports since the proposal for SCAs and the regional connectivity scheme are yet to be implemented.
The civil aviation ministry has mooted the idea of SCAs and regional connectivity in the draft aviation policy which has not been finalised yet.
Also, passengers flying into India will not have to file the baggage declaration form if they are not carrying dutiable or prohibited goods.
Soon, travel smoother
Focusing on infrastructure creation, Jaitley announced building of 10,000km of national highways. He also announced up-gradation of 50,000km of state highways as national highways in 2016-17.
All villages to have electricity by May 2018
The government will work to ensure all the country’s villages have electricity within two years, the finance minister said. “The government is committed to achieve 100 percent village electrification by 1st May, 2018.”
Jaitley moots allowing small, medium shops to open on all days
Jaitley proposed allowing small and medium shops to open all through the week on voluntary basis as part of simplification of rules for the sector to create more jobs, a move hailed by retail players.
He said the government plans to circulate Model Shops and Establishments Bill which the state governments can adopt on voluntary basis in order to boost the retail sector, which is the largest service sector employer in the country.