1. Let the Rich Pay
Income tax rate on those earning between Rs 2.5 lakh and Rs 5 lakh cut from 10 percent to 5 percent, but additional 10 percent surcharge levied on those earning between Rs 50 lakh and Rs 1 crore per year.
Individual taxpayers will save Rs 12,500 a year. Those in the high-income bracket will feel the pinch.
“The additional surcharge for people with income of more than Rs 50 lakh is very disappointing. I would have also hoped for some reduction in the general corporate tax rate, even if 1 percent, or removing of some surcharges, but that was not to be.”Aliff Fazelbhoy, Senior Partner, ALMT Legal.
2. Bye Bye Bureaucracy
The government proposes to abolish the Foreign Investment Promotion Board.
Haigreve Khaitan, Partner, Khaitan & Co, called it an administrative clean-up. “The process of approval was a little repetitive – you filed with the FIPB, the policy was set by the Department of Industrial Policy & Promotion (DIPP), on foreign exchange there was RBI rules – this clean-up would mean investors will now have to go to only a single authority.”
3. Say No to Cash
No transactions in cash above Rs 3 lakh permitted.
Kalpesh Mehta, partner at Deloitte India, told BloombergQuint that as of now there’s no legal banking to disallow cash transactions, but the intent is to curb high-value transactions, which might lead to a parallel economy. Implementation of such a directive is going to be onerous, he said.
4. Repeat, Say No to Cash
Political funding reforms include no cash donations from one person above Rs 2,000 and issue of electoral bonds.
Economist Ajit Ranade, who has studied political funding, said it’s a great first step, but there’s a “long way to go”. “What you want is complete transparency in donations as well as income and expenditures of a political outfit, but this (move) will also help cut down unreported flows,” Ranade told BloombergQuint.
5. Maintain Discipline
Fiscal deficit target for FY18 set at 3.2 percent, just a wee bit higher than the earlier targeted 3 percent.
Rating agency Moody’s Investors Service acknowledged the government’s “continued commitment to gradual fiscal consolidation” and said the “targets are not materially different from the previous roadmap and our projections”.
6. The Housing Boost
Affordable housing given infrastructure status and allocated higher government spend.
HDFC Ltd. Chairman Deepak Parekh said housing has a multiplier effect on a number of industries, particularly steel and cement. Infrastructure status gives housing companies an increased borrowing limit for single parties and group companies, besides access to funds that insurance companies and EPFO have to invest in infrastructure, Parekh said.
The tag could also result in an increased participation of private players in housing, said Abhishek Goenka, Partner-Real Estate Tax, PwC.
7. On the IPO Track
Government to list railway companies IRCTC, IRFC and IRCON in FY18.
Apart from unlocking value, listing will help these companies meet capital requirements from sources other than the government, bringing in greater transparency and enhanced governance standards, said Sai Venkateshwaran, partner and head, accounting advisory services, KPMG India.
8. Slick
The finance minister said the consolidation would enable government-owned oil companies to take high risk, avail economies of scale, invest more in infrastructure and create more value for shareholders. They will be able to compete with global and local private peers, he said.
Jal Irani, Senior Vice-President, Edelweiss Financial Services, called the move a positive, but said its success will “depend on how it is executed”.
9. Don’t Bank on Us
The government maintains PSU bank recapitalisation at Rs 10,000 crore in FY18.
The government has committed to provide additional allocation when required. Abhishek Bhattacharya, Director and Co-head, banks at India Ratings & Research, said "this is good because good money should not chase bad”.
10. Finally Some Relief
Some foreign investors exempted from indirect tax provisions (Section 9).
Well-regulated FPIs had voiced concerns over tax liability arising out of sale of assets or shares in a foreign company due to redemption of an investment within India. Pranay Bhatia, partner, direct tax at auditing and accounting firm BDO India, said the proposed amendment would put to rest apprehensions of foreign investors.
11. Third Time Lucky?
The government sets aggressive divestment target at Rs 72,500 crore for FY18.
The number looks ambitious, given that the government has failed to meet its budgeted disinvestment target for six straight years. Volatile market conditions have affected plans to offload stakes in public sector companies.
12. Promises Promises
No change in headline corporate tax rate for large companies. Tax rate reduced to 25 percent for small companies.
“Retaining the headline tax rates is a major disappointment for companies as there was a consensus that the Budget 2017 will reduce corporate tax rates,” PTI quoted Milind Kothari of auditing and accounting firm BDO India as saying.
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