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UNION BUDGET 2017
Economic Growth to Continue
Adequate liquidityGovernment Capex
Low Fiscal Deficit Low Inflation
Low Interest Rates
Indian Economy
Major Changes in Budget Presentation
3
• Provides for Integrated Planning and development of Infrastructure• Undoes the Colonial Legacy & political interference in Railway plans
Railways Merged with Union Budget
• This allows for timely approval and allocation of resources for the Fiscal• Government Expenditures and Plans can kick start from the beginning of
the financial year
• Expense categorization to be under Capital & Revenue Heads• Reduces Policy complexity in implementation and monitoring
Budget Announcement Date Preponed to 1st
Feb
Plan & Non Plan Categorization Done
away with
Some Facts & Figures
Fiscal Deficit for FY18 at 3.2% of GDP,
Increased in Capital Expenditure by 11%
YOY,
100% Village Electrification by May
2018,
1 Crore new Houses under PMAY by 2019 for the houseless and those living in kutcha
houses,
Foreign Exchange Reserve reached 361
Billions USD,
FDI grew 36% in H1 2016-17 over H1
2015-16 despite 5% reduction in global
FDI inflows
Structural Reform in Financing BudgetsSource: FY18 Union Budget. As % of GDP
Government by disciplining its Fiscal Deficit is looking to:• Improve India’s International Credit Rating,• Creates Headroom for RBI to reduce key policy rates and• Makes investment/ borrowings for private sector cheap
Transform, Energise and Clean India
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;
CLEAN the country from the evils of corruption, black money and non-transparent political funding
Themes to foster agendaFarmers : committed to double the income in 5 years;
Rural Population : providing employment & basic infrastructure;
Youth : energising 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 : 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: honouring the honest.
Farmers and Agriculture
Agricultural credit in 2017-18 at a record level of Rs. 10 lakh crores
60 days interest waiver
Support NABARD for computerisation and integration of all Primary Agriculture Credit Societies with the Core Banking System of District Central Cooperative Banks in 3 years.
Coverage under Fasal Bima Yojana scheme will be increased from 30% of cropped area in 2016-17 to 40% in 2017-18 and 50% in 2018-19.
New mini labs in Krishi Vigyan Kendras (KVKs)
Rural Population
Aim to bring one crore households out of poverty and to make 50,000 Gram
Panchayats poverty free by 2019.
Women participation in MGNREGA has increased
to 55% from less than 48%
MGNREGA allocation the highest ever at `Rs. 48,000
crores in 2017-18.
Pace of construction of PMGSY roads accelerated to 133 km roads per day in 2016-17, against an avg.
of 73 km during 2011-2014.
100% village electrification by 1st May 2018
Total allocation for Rural, Agriculture and Allied sectors is Rs. 1.87 Lacs
crores
Infrastructure
TOTAL BUDGET for Rail, Road and
Shipping – 2.41 Lacs Crores
Capital and Development Exp. In railways -1.31 Lacs
Crores
Unmanned Level Crossing (Broad gauge) will be
eliminated by 2020,
New Railways Lines – 3500 kms.,
500 Stations – with Lifts and Escalators
SMS Based – Clean my Coach
All Coaches with bio toilets – 2019
New Metro Rail Act - greater private
participation and investment.
2,000 kms of coastal connectivity roads
Airports in Tier 2 cities for operation and maintenance in
PPP model
Optical Fiber Broadband to 1.5
Lacs gram panchayats.
Second phase of Solar Park with
capacity of 20,000 MW.
Other MeasuresAadhar based Smart
Cards for Senior Citizens containing their health details
FIPB (Foreign Investment
Promotion Board) to be abolished
IRCTC, IRFC and IRCON will be listed in stock exchanges.
create an integrated public sector ‘oil
major’
A new ETF with diversified CPSE stocks and other
Government holdings
Rs. 10,000 crores for recapitalisation of
Banks
Head Post Offices as front offices for
Passport services
10 lakh new POS terminals
2,500 crore digital transactions
through UPI, USSD, Aadhar Pay, IMPS
and debit cards
Aadhar Enabled Payment System, will be launched
shortly
Personal Income TaxTax Rate for individual
assesses between income of Rs. 2.5 lakhs to
5 lakhs reduced to 5% from the present rate of
10%
Surcharge of 10% of tax payable on categories of individuals whose annual
taxable income is between Rs. 50 lakhs and Rs. 1
crore.
Simple one-page Form for individuals having taxable income upto Rs. 5 lakhs
other than business income
Tax rebate of Rs. 2,500 if Income is upto Rs. 3.5Lacs.
Personal Income Tax
Annual Taxable Income Existing Tax New Tax GainRs 2.5 Lakhs - - -Rs 3.5 Lakhs 5,150 2,575 2,575Rs 5 Lakhs 20,600 12,875 7,725
Rs. 10 Lakhs 128,750 115,875 12,875Rs. 50 Lakhs 1,364,750 1,351,875 12,875Rs. 75 Lakhs 1,673,750 1,826,963 (153,213)
Rs. 100 Lakhs 2,909,750 3,186,563 (276,813)
Tax to GDP – Big improvement required
Source: Budget Speech
1.742.46
No. of Persons employed inorganised sector in 'cr
People not filing taxPeople filing tax
3.79
1.81
No. of Persons employed inUnorganised sector in 'cr
People not filing taxPeople filing tax
No. of companies registered in India in 'lacs
5.977.97
Companies who filed tax
Tough roads for Non Compliance
Penalty of Rs. 5,000/-if return is filed after due dates before 31st Dec.
Penalty of Rs.10,000/- if filed after 31st Dec.
However, if the income is less then 5 lacs then the penalty will be lower at Rs. 1000.
Time period for revising a tax return is being reduced to 12 months.
Now Tax Authorities can open cases upto 10 years ( earlier 7 years) if search and seizure operation reveals undisclosed income and assets worth over Rs. 50 Lacs.
Ease of Doing Business
The profit (linked deduction) exemption
available to the start-ups for 3 years out of 5 years
is changed to 3 years out of 7 years.
MAT credit is allowed to be carried forward up to
a period of 15 years instead of 10 years at
present
Income tax for companies with annual
turnover upto Rs. 50 crore is reduced to 25%
Threshold limit for audit of business entities who
opt for presumptive income scheme increased from Rs. 1 crore to Rs. 2
crores.
Threshold for maintenance of books
for individuals and HUF increased from turnover of 10 lakhs to 25 lakhs or income from 1.2 lakhs to
2.5 lakhs
Under scheme for presumptive taxation for professionals with receipt
upto Rs. 50 lakhs p.a. Advance tax can be paid in one instalment instead
of four.
Go Digital…
Under scheme of presumptive income for small and
medium tax payers whose turnover is upto 2 crores,
the present, 8% of their turnover which is counted as
presumptive income is reduced to 6% in respect of
turnover which is by non-cash means.
No transaction above Rs. 3 lakh would be permitted
in cash subject to certain exceptions.
Road Ahead…
US fed raising
interest rates
India Quarterly Earnings
UP Election
Outcome
European Banking
Crisis
China Slow down
GST Roll Out
Answer your queries on the Go…
Download our MINTY App. from Google play store.
Sector Budget Proposal Nature of Impact CommentsTelecom
Proceeds from License fee and spectrum charges from telecom service providers at INR 443 bn against INR 787 bn in FY17 RE Neutral
As per expectation government is not planning forspectrum auction in FY18. INR 443 bn comprises only recurring charges and deffered payments from earlier spectrum auctions
Budgeting of INR 6.9 bn as extra budgetary resourse for Hemisphere properties Positive Progress in Tata comm excess land monetisation
Impact of Budget on Key Sectors
Sector Budget Proposal Nature of Impact CommentsCapital goods
Defence capital acquisition outlay of INR865 bn against INR 717 bn for FY17 RE Positive Growth of about 20% over FY17REBudgetary support towards Railwayscapital expenditure at INR 550 bn against INR 463 bn in FY17 RE Neutral Inline with expectationOverall outlay for infrastructuredevelopment at INR 3961 bn against INR 3586 bn in FY17 RE Positive
Increase of 10.5% over last year provides scope for EPC and equipment companies to grow
Outlay for IPDS and DDUGJY forimprovement in urban and rural, transmission and distribution improvement increased to INR 106 bn from INR 79 bn in FY17 RE
PositiveIncreases the pie for EPC contractors and equipment manufacturers
Section 80-IA sunset clause is not extended Negative
Sector Budget Proposal Nature of Impact Comments
Power Lower BCD on LNG from 5% to 2.5% No impactUnder Power Sector Development Fund, government was alreadysupplying LNG without any duties, taxes.
Sec 80-IA exemption not extended beyondFY17E Negative
Largely in continuation with earlier stance, construction companiesclaiming the benefit will have full tax in FY18E.
Infrastructure Roads sector outlay up 11% to INR1.24t Positive Positive for both developer and construction companies.Railways Capex up 9% YoY to INR1.3t Positive Positive for contractors like L&T, KEC and Kalpataru
Infrastructure status to Affordable housing PositiveRE sector focus contractors like Alhuwalia contractors, BL Kashyap,etc could be beneficiary.
Real EstateHolding period reduced to 2 years, vs 3 yearsfor eligibility of LTCG exemption Positive
Inventory churn would help better price discovery. Partly negativefor primary developer / new launches.
Setoff lossses under Housing propertyrestricted to INR2lac Negative
Lower setoff vs unlimited setoff earlier will lower investordemand, positive in long term though.
Infrastructure status to Affordable housing PositiveLT funding will help improve RE sector /developer outlook withfocus on low/mid income housing.
Units area at 30sq.mtr (municipal limit of 4metro)/60sq.mtr on carpet basis, vs build up area; 100% PAT dedn for developer, time increased to 5 years vs 3 years. Positive
Developers with focus on low/mid income housing project would benefit immensely. These could also entice developers to reinvent business model to cater to this large market pie.
Developer can have 1 year stock in trade for completed building Negative
While positive given earlier stance of zero holding allowance, thedeveloper holding high inventory in completed project will be negatively impacted (higher tax burden, on no/deemed cash flows). This could lead to higher inventory sell-off.
Impact of Budget on Key Sectors
Sector FY18 Budget Proposals Nature of Impact CommentsOil & Gas
Customs duty on LNG cut from 5% to 2.5% Positive Minor savings of US$ 0.2/mmbtu (Rs 0.4/sc m) at currentspot price. Beneficial for cos. across the value chain viz. Petronet LNG (savings in internal consumption & higher R-LNG vols.), GAIL (lower input cost for petchem segment), IGL, MGL, Gujarat Gas (spread improvement to the extent benefit is retained or pass on to customers to make CNG/PNG/natural gas slightly more competitive against alternate fuel)
Petroleum subsidy allocation of INR 275 bnfor FY17E and INR 250 bn for FY18E
Neutral Subsidy allocation for FY17 is adequate. For FY18,allocation is adequate assuming current oil price at USD 55/bbl. If oil price is higher, then monthly price hike on kerosene and LPG has to continue or allocation to be increased by INR 70-80 bn to keep oil cos. out of subsidy net at USD 60/bbl oil price
No reduction in cess on crude oil Negative Expectation was it will reduce to 10% which would haveincreased ONGC's and Oil India's EPS by INR 2.5/sh and INR 5.5/sh respectively.
Proposal to create mega oil company Neutral Too early to determine impac t and will be determined bythrough merging some cos. how merger is structured. However, it is a difficult to
proposition to implement due to opposition fromemployees union.
FY18 Budget Proposals Nature of ImpactMetals & Mining
Customs duty on HRC for welded tubes andpipes reduced from 12.5% to 10%
Positive Mildly positive for pipe cos. such as Welspun Gujarat,Jindal Saw and Maharashtra Seamless (ERW)
Customs duty on nickel reduced from 2.5%to Nil
Positive Beneficial for stainless steel producers
Aluminium ore export duty at 15% Neutral Bauxite already had export duty and now extended toother ores including laterite.
Impact of Budget on Key Sectors
Sector Budget Proposal Nature of Impact CommentsConsumer Reduction in personal income tax Positive Will boost low ticket consumption
Increased spending on MNREGA Positive Will boost FMCG consumption
6% excise hike on cigarette PositiveThis is a moderate hike in tax againsta steep hike expected.
Impact of Budget on Key Sectors
Sector Budget Proposal Nature of Impact Comments
Agriculture Fertilizer subsidy - Total fertilizer subsidy allocated is INR700bn(INR498bn for urea + INR202bn for complex fertilizers). Requirement for FY18 is estimated currently to be INR550bn. Hence incremental subsidy allocated (INR150bn)will benefit fertilizer companies as portion of their prior period receivables get paid.
Positive
Positive for fertilizer companies. This will decrease their working capital requirements and improve the RoCE for the business.
Agricultural Credit - target for FY18 has been fixed at a recordlevel of INR1,000bn. To support flow of credit to farmers, government to support NABARD for computerisation and integration over 3 years at a cost of INR19bn Positive
Can help improve demand for agricultural inputs
Crop Insurance - Pradhan Mantri Fasal Bima Yojna (PMFBY)coverage to be increased from 30% of cropped area in FY17 to 40% in FY18 and 50% in FY19. Budget provision of INR90bn in FY18 vs budget provision of INR55bn in FY17 Positive
Can help improve demand for agricultural inputs
Irrigation - Pradhan Mantri Krishi Sinchai Yojana (PMKSY)- Per Drop More Crop, allocation has been increased to INR74bn from earlier budget of INR58bn. In addition, a Long Term Irrigation Fund has already been set up in NABARD. Prime Minister has announced an addition of INR200bn to its corpus. This will take the total corpus of this Fund to INR400bn. A dedicated Micro Irrigation Fund will be set up in NABARD to achieve the goal, ‘per drop more crop’. The Fund will have an initial corpus of INR50bn.
PositiveCan help improve demand for agricultural inputs
Sector Budget ProposalNature of Impact
(Positive/Negative/Neutral) CommentsCement andBuilding Materials
Infrastructure status to affordable Housing Positive Housing accounts for 60-65% of overallcement consumption in India and this will increase the overall cement demand.
Housing demand will have spillover effect on building materials demand.
It will be partially offset by slowdown in investment led housing demand.
For affordable housing instead of built up area, 30 sqmand 60 sqm of carpet area will be considered. 30 sqm in municipal limits and 60 sqm for rest of country will be considered
Positive
Allocated Rs 290 bn under Pradhan Mantri Awas Yojanain rural and urban v/s allocation of Rs 209 bn in previous year. Net increase of Rs 81 bn. Proposes to complete 10 mn houses by 2019 for the houseless and those living in kutcha houses
Positive
In a negative move for landlords (those who buy andrent), the set-off loss against income from house property has been limited to Rs200k/annum against no prior limit
Negative
Increase in budget allocation for highways from aroundRs 580 bn to Rs 650 bn. Addition of 200 bn to dedicated long term irrigation fund in Nabard
Mildly Positive Roads have a lesser contribution tooverall cement demand and irrigation is more driven by state budgets.
Person whose land has got pooled under land poolingscheme of AP government for creation of new capital will be exempt from capital gains tax provided they were holding it as on 2/6/2014
Positive Exemption of capital gains tax willincentivise people to sell land and improve land acquisition for the upcoming capital finally driving cement demand from the capital
Cut in import duty on LNG from 5% to 2.5% Positive Tile players have around 20% of costs aspower and fuel and they will benefit to the extent of the price cuts which will be passed on by LNG players
Impact of Budget on Key Sectors
