The Hindu : Welcome to The Hindu 's live chat on understanding the Union Budget 2016-17. With an eye on supporting the small tax-payer and the small investor, the Finance Minister announced a slew of schemes, and income tax exemptions.
With us today are Dr. Suresh Surana, founder, RSM Astute Consulting Group, a tax, audit and consulting firm, Pankaj Mathpal, MD, Optima Money Managers.
From The Hindu , we have Ashish Rukhaiyar, our Markets Editor, Sriram Srinivasan, our Digital and Strategy Editor and Bharat Kumar, our Deputy Business Editor.
Sriram Srinivasan : Dear all, I would like to set the ball rolling by first asking the panelists about what they thought about Mr Jaitley's third Budget today.
Comment From Guest Is there more of a push towards start-ups in this Budget as opposed to big industry sops we see every year?
Comment From Aaravind What's change in PF withdrawal? Any tax on it?
K Bharat Kumar : The Budget seems to go beyond addressing concerns of the middle class to those of the lower economic strata. That the FM has also held to the target of 3.5 % Fiscal Deficit shows that he has done a balancing act.
Suresh Surana : Hi Sriram - I feel this is a good budget. The greatest thrust is on thrust to agriculture, infra and reducing litigation. There is no reduction in period for long term capital gain for listed shares. The continued high corporate tax rate and 10% additional tax on dividends have been a bit of disappointment. there is a great thrust on reducing litigation.
Comment From Deepa We have an economic survey released a day before budget. Has this got any significance to Union Budget? Are they mutually independent?
Comment From Guest How do we the ambitious budget of the NDA govt in the wake of declining oil prices, declining global markets & demands?
Suresh Surana : Under the existing provisions of the Income-tax Act, tax treatment for the National Pension System (NPS) referred to in section 80CCD is Exempt, Exempt and Tax (EET). It is proposed that withdrawal up to 40% of the corpus at the time of retirement shall be tax exempt in the case of National Pension Scheme. In case of superannuation funds and recognized provident funds, including employees provident Fund, 40% of corpus created out of contributions made on or from 1.4.2016 shall be tax exempt upon withdrawal. It may be pointed out that presently withdrawals from recognized Provident Funds are generally exempt from tax altogether whereas withdrawals from NPs are taxable entirely. It may be pointed out that the Public Provident Fund (PPF) withdrawals shall continue to be exempt.
Comment From deepak the budget is aimed to woo farmers, laborers and bpl voters in upcoming elections 2016-17 in several important states
Comment From Guest Any change in Short term or Long term capital gains tax?
Comment From Harshith Does this budget had any emphasis on healthcare sector and pharmaceuticals
Pankaj Mathpal : @Aaravind PF withdrawal to the extent of 40% of corpus to be tax free. At present the total withdrawal after 5 years of membership is exempt from tax.
Comment From BrushUrTeeth_03 Overall, I think it's a good idea to focus on agriculture and infrastructure. But don't you think it was a bit unfair for the middle class?
Comment From Aaravind 8.75%EPF contribution by government for first three yrs.will it not lead to retrenchment of employees above 4 yrs experience
K Bharat Kumar : hello BrushUrTeeth - how do you feel that it is unfair to the middle class?
Sriram Srinivasan : Mr Surana, do you feel the working class will feel happy with this Budget?
Suresh Surana : In case of long term capital gains tax exemption period for shares sold on the stock exchange continues at 1 year and has not been increased to 3 years. For unlisted securities or off market transactions, the period of holding for long term capital gain has announced reduction from 3 years to 2 years.
Pankaj Mathpal : Unlisted shares with holding period of 2 years will qualify for long term.
Comment From Meenakshi Dhankar Hi, I want to know about how the Provident fund will be affected in this Budget?
Comment From deepak the budget is aimed to woo farmers, laborers and bpl voters in upcoming elections 2016-17 in several important states
Suresh Surana : Hi Sriram - The working class may not feel very excited since there is no increase in basis exemption limit of Rs. 2.50 lacs although the rebate for taxpayers having income up to Rs. 5 lacs has been increased from Rs.2,000 to Rs. 5,000. There is no increase in section 80C limit of Rs.1.50 lacs for investments in savings instruments. there are marginal benefits for first time house buyers and for house rent payment under section 80GG. Further, the service tax increase from 14.5% to 15% will impact common man.
Pankaj Mathpal : @ Meenakshi- Withdrawal exceeding 40% of the corpus will be taxable in the hands of subscriber.
K Bharat Kumar : Government's contribution to is meant to encourage more companies to participate in the scheme. If an employee is valuable, retrenchment is not even an option, EPF or no EPF...
Comment From Srini EPF is still EEE. Yes or No?
Comment From Guest This Budget has the highest ever allocation to MNREGA. This seems odd given this government's stand on the scheme.
Pankaj Mathpal : @Srini- No, as only 40% of the corpus will be tax free.
Suresh Surana : For start ups, there is a 3 year tax holiday during the first 5 years of operation (subject to MAT). It is also proposed that the Companies Act will expedite the process of registration to 1 day and other aspects to improve ease of doing business. there is also capital gains exemption for investors in such start ups subject to fulfilment of specified conditions.
Sriram Srinivasan : Bharat, can you explain this EPF move a bit more?
K Bharat Kumar : Sriram - Earlier, contributions to EPF was NOT taxed at the time of contribution, during the tenure, as well as at the time of withdrawal. The National Pension Scheme had no such benefit. Now, both these schemes tax upto 60 % of withdrawals. FOr EPF specifically, this is applicable for all contributions made from Apr 1, 2016 onwards...
Comment From Asr Murthy Has the Unit for Crop Insurance been changed from Village to Survey No. ? Village as a unit is an almost criminal assumption.
Comment From syed i dont think this budget is going to ease commodity prices for common man.
Comment From Guest Do you really believe there will be a big impact in rural india?
Comment From Guest This Budget has the highest ever allocation to MNREGA. This seems odd given this government's stand on the scheme.
Comment From Guest The budget mentions 50000 limit increase for Housing Loan,can you please elaborate on it?
Comment From Aby Thomas What are the benefits for first time home buyer?
Comment From Guest As per Mr. Modi MNREGA was biggest failure for UPA government.. why have they allocated such a big amount for it
Suresh Surana : Deduction for additional interest of Rs. 50,000 per annum for loans up to Rs. 35 lakhs sanctioned in 2016-17 for first time home buyers, where the house cost does not exceed Rs. 50 lakhs. In overall context, first home buyer can get maximum deduction of interest on housing loan up to Rs. 250,000 in aggregate comprising of Rs.2 lakhs under Section 24(b) of the IT Act and Rs.50,000 under section 80EE of the IT Act.
Comment From Joseph Alex what are the elements in this budget for "ease of doing business"???
K Bharat Kumar : There are several. One is introduction of a bill to amend the Companies Act, 2013 in the current Budget Session of the Parliament. the FM says the Bill would also improve the enabling environment for start-ups. The registration of companies will also be done in one day...
Comment From Asr Murthy The budget has still not dealt with those having other income along with Agri Income. the possibility of tax slabs change still exists for such individuals. Agri Income must qualify for exemption at the Highest taxable slab instead of absolute tax exemption from base slab.
Comment From Santhosh Menon this budget is only made keeping in view of the upcoming polls. Nothing has been done for the salaried employees. Nothing has been taken out from the "super rich"....
Ashish Rukhaiyar : The tax slabs for the salaried class has not been tweaked. But, the super-rich investors will have to pay 10% on dividends received in excess of Rs10 lakh. There was no such tax earlier
Comment From Guest As per Mr. Modi MNREGA was biggest failure for UPA government.. why have they allocated such a big amount for it
Sriram Srinivasan : Agree with your point. The irony of it is already being pointed out by the Congress.
Pankaj Mathpal : Additional deduction of Rs. 50000 is proposed for first time house buyers with condition that the cost of house should not exceed Rs. 50 lakh and loan should not exceed 35 lakh. This benefit is over and above the deduction of Rs. 2 lakh u/s 24(b).
Pankaj Mathpal : Super rich surcharge has been increased to 15% from existing 12%.
Suresh Surana : The ease of doing business is the focus of government. The increase in limit of businesses eligible for presumptive tax from Rs. 1 crore to Rs. 2 crores of annual turnover and bringing professionals with receipts up to Rs. 50 lacs are steps in this direction. There are several measures to reduce litigation and the payment of disputed tax demands as well as reduced and more objective penal provisions.
Comment From nayeem The budget is revenue generation oriented budget and ultimately it will lead to inflation. No relief for common man.
Comment From Mukund I have a home loan for Rs 30 Lakhs. I took it two years back. Am I eligible for Rs 50000 tax exmeption?
K Bharat Kumar : I understand that the benefit is applicable to loans sanctioned in the next financial year.
Comment From Dan Can one of you elaborate on the banking sector reforms mentioned in the Budget?
Suresh Surana : About MGNREGA, I feel that there is a qualitative change in the delivery of the benefit with more transparent and targeted payments. It is difficult to withdraw populist schemes once announced but only the efficiency can be improved.
Comment From Tejinder The middle class is still waiting for its 'Acchhe din'. Jaitly ji had stressed upon to increase IT Slab to 5 lakh! why in his budget it not increased from 250000? no relief to middle class in fact it is more burdened with bundle of taxes.
Pankaj Mathpal : @ Mukund No, it will applicable only to the tax payers who buy their house in FY 2016-17. No retrospective benefit.
Suresh Surana : Mukund - No. The benefit of Rs.50,000 additional deduction is for new loans under section 80EE for first time home buyers.
Comment From Mayank Porwal Finally govt wakes up to welfare mechanism of UPA and understood significance of first empowering poor to get growth engine going.
Sriram Srinivasan : Ashish, what is your view regarding additional taxation for dividend in excess of Rs. 10 lakh per annum? It's being criticized for going back to the days of taxing dividends twice.
Ashish Rukhaiyar : The government is definitely looking at enhancing its revenues without taxing the common man. A retail investor would not have a portfolio that would net him dividends in excess of Rs10 lakh. So, it is like taxing the super-rich. The market will not have an adverse impact. We saw a knee-jerk reaction and then the markets recovered.
Suresh Surana : Tejinder - I agree with you that there should have been some increase in the basic exemption limit and section 87A additional rebate of Rs.3,000 is not really adequate.
Comment From Yasser Was there a particular reason Jaitley left out defence and education from his speech this year?
Sriram Srinivasan : Interesting one, Yasser. True, except for the mention of OROP.
Comment From Sudhanshu Badola This budget doesnt have anything for middle class. No change in income tax slab, no change in 80C/80D. No change in medical expense/tution fees, no change in home loan interest. But there is an increase in service tax. I never thought NDA will present such a anti middle class budget. Lost all hopes with Mr Jaitley.
Suresh Surana : Yasser - Interesting observation. While there is discussion on the education sector and skill India initiatives, there is not much discussion on defence.
Comment From Mayank Porwal Disappointed to not hear anything about GST and DTC implementation. Too Little money for PSB capitalization.
K Bharat Kumar : Good point Mayank. PSB capitalization could be increased on a need basis, as per the speech today. It is also possible that the banking sector could witness consolidation resulting in a need for lesser quantum to be allocated for recapitalization.
Comment From Joseph Alex The ease of doing business is the focus of government. The increase in limit of businesses eligible for presumptive tax from Rs. 1 crore to Rs. 2 crores of annual turnover and bringing professionals with receipts up to Rs. 50 lacs are steps in this direction. There are several measures to reduce litigation and the payment of disputed tax demands as well as reduced and more objective penal provisions.
Pankaj Mathpal : 62 new Navodaya Vidyalayas will be opened Sarva Shiksha Abhiyan to increasing focus on quality of education Regulatory architecture to be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions Higher Education Financing Agency to be set-up with initial capital base of 1000 Crores
Suresh Surana : DTC has already been buried as announced last year. GST is struck in political logjam although a central GST could have been considered.
Comment From Radhika What is your view on the compliance window for defaulters?
K Bharat Kumar : Radhika - this is welcome, as a move to get defaulters in line. However, whether the 45 % rate would be seen as a tad high, remains to be seen.
Comment From Joseph Alex Do you think that neglecting the issue for a lower corporate tax will affect the ease of doing business?
K Bharat Kumar : Joseph - while lower taxes would encourage more businesses to be incorporated here, ease of doing business is all about lesser red tape and how quickly a new company can get going.
Comment From Deepak Education should have been given more priority as it is fundamental to the concept of skilling the youth and job creation!
Pankaj Mathpal : Ease of doing business doesn't mean lowering corporate tax. You pay tax on profit.
Suresh Surana : Hi Radhika - I feel that the compliance window is a good move but the tax rate should have been kept a bit lower than 45%. We have seen in case of Black Money Compliance scheme window, a rate of 60% did not generate much response.
Comment From Sanjeev How about infrastructure? and cess thereon
Sriram Srinivasan : Ashish, can you take this opportunity to give our readers a short take on what happened at the markets today. And what's the overall sentiment?
Ashish Rukhaiyar : There was huge volatility in the market today and the Sensex traded in a range of 900 points. As the Budget speech progressed, the markets lost ground. But much of the lost ground was recovered as there was no negative announcement related to long-term capital gains tax and also the 10% DDT was not levied across the board. So the Sensex ended the day down only 152 points at 23,002
Comment From Kesavan Is there a reason there was more focus on making the litigation aspect easier?
Comment From av Can you summarise the steps taken by government to reduce the prevalence of black money transactions in India ?
Comment From Deepak Ya, we would love that from Ashish!
Suresh Surana : There is a huge thrust of infra with railway and road sector alone having outlay of Rs.2.20 lac crores. The power sector has been reformed with UDAY scheme.
Comment From hajmola I think the main aim of this budget was making young people job creators from job seekers
K Bharat Kumar : Agree, Hajmola. In fact, I am convinced that the National Literacy Mission's Digital initiative will increase awareness levels. Given the highly entrepreneurial nature of the Rural Indian, digital awareness could well lead to more business ideas from Rural India, using digital technologies...
Comment From Mukund Why are Finance Ministers generally averse to smokers??? I mean every FM hikes tax on cigarettes!
Sriram Srinivasan : Isn't that good! Actually, only when bidis are taxed can it lead to a much greater good. Most of tobacco consumption in India is via bidis.
Suresh Surana : There are several measures to reduce black money such as requirement of PAN for all transactions for purchase or sale of goods or services exceeding Rs. 2 lacs just before budget. In the budget, there is a requirement of TDS on cash purchases exceeding the threshold limit.
Pankaj Mathpal : This is easy way of generating revenue as nobody opposes higher excise on tobacco.
Comment From Shriram Upadhyay Isn't this budget another step in exploiting the existing salaried class to meet the rising demands of the nation, still doing nothing about the still untapped unaccounted businesses flourishing in our contry?
Comment From Deepak Does this budget speak anything about climate change mitigation through policy interventions and other provisions?
Sriram Srinivasan : There's a doubling of cess on coal which contributes to a green fund.
Suresh Surana : Hi Kesavan - There is a huge litigation and the amount in dispute is exceeding Rs.5.50 lac crores. The taxpayers have to go through a nightmare due to multiple years and levels of litigation and recovery proceedings. This is also a huge source of corruption. This is the reason for thrust on reducing litigation.
Comment From G.Krishnan Dividend above 10 lacs to suffer tax at 10%.Is it div.from one company or total div.recd.by an individual?Will div.from mutual funds covered by the same rule?Is the 10%deduction for IT on on div.will be applicable to dividend received by mutual fund from companies?
Ashish Rukhaiyar : It is on the total dividend and not company specific.
Comment From Arjun I saw this on my Twitter timeline: "Why would you hike taxes on tobacco when you have the world's second largest population (which is growing y-oy)"? I mean jokes apart, it does make sense to tap into the mass market and leave it to an individual's choice, right? Or has the government started considering the fact that people are going to shell out money from their pockets if they want it desperately anyway?
Sriram Srinivasan : A study some years back suggested India hasn't explored its fullest as far as taxes on tobacco are concerned. There are other tools to nudge people to a healthier lifestyle - like plain packaging, which Australia follows. But the elephant in the room is the bidi market, which is how much of India consumes tobacco. That's not easily touched. And unless that's somehow dealt with, the health discourse can be far from complete.
Comment From Shriram Upadhyay This budget fails once again on providing health for all? This is important to trigger India onto the path of a welfare nation
K Bharat Kumar : Health Expenditure as a % of GDP is still low, at around 1.3 % of so. You are right, it's an area that needs to be improved upon significantly. Despite announcements on the Dialysis Scheme, the Health Insurance cover, far more needs to be done.
Comment From Joseph Alex Is there any provisions to meet our COP21 commitments?
Comment From Sanjay @Sriram this would help in funding building of green corridors and also strengthening of evacuation infrastructure, which is one of the key hurdles for the sector
Suresh Surana : Hi Krishnan - This is the total dividend income limit of Rs. 10 lacs and not from one company.
Comment From Mukund The FM didn't mention anything on creation of Smart Cities...
Comment From Deepak Yadav is any detail provided about exact day for implementation of 7t pay comission??
Suresh Surana : Hi Mukund - Good observation. The focus seems to be more on rural and agro sectors.
Comment From Lil Last year, Rs. 200 crore was allocated to the Sardar Patel statue construction. There was no mention of it this time.
Comment From Guest What percentage of GDP is going to spent on Social Sector like- Education, health etc ?
Comment From Sanjeev Overall what do you feel will(steps in budget) radically propel our economy. And how different is this budget in that respect?
Sriram Srinivasan : The struggle in recent years has been to revive private investment. And create jobs via that. That's a huge challenge and there's still a long way to go. The Economic Survey talks about the Chakravyuh problem, wherein investments are stuck and can't be revived. A lot of intent is to get this right, if you think in terms of bankruptcy law and the dispute resolution mechanism for PPP projects that the government has talked about today.
Pankaj Mathpal : Hi Shriram not much but a Health Protection Cover with sum insured of Rs 1 lakh proposed for senior citizens.
Comment From KP.Yohanan Kirshi Kalyan Cess of 0.05 % is same as the drought cess in Maharashtra. Statee & centre taxing for the same purpose with different names.
Suresh Surana : The total expenditure of education and health sectors is Rs.1,51,000 crores (US$ 22 billion) against a GDP of US$ 2 trillion.
Suresh Surana : Krishi Kalyan Cess is 0.5% and not 0.05% on services liable to service tax.
Comment From Guest tds on PF will be deducted on 60% whole corpus or just on the interest earned ?
K Bharat Kumar : Our understanding is that the whole corpus would be taxed.
Comment From Raghavendra Manoj At the moment, the government gives a standard subsidy amount regardless of whether it is for the first cylinder consumed or the twelfth. A report recommends a graded approach where the first few cylinders used receive a high subsidy amount while the 10, 11 and 12 cylinders receive no subsidy at all. Using this method, the overall subsidy received by the families for cylinders used would still remain the same. your comments on such a reform?
Suresh Surana : Tax on RPF will be applicable in respect of the contributions made on or after 1 April 2016. It will be applicable not only on interest but also principal to the extent of 60% of fresh contributions.
Sriram Srinivasan : I am afraid we are running out of time. Before we close, can I ask the panelists for closing comments.
Suresh Surana : The Budget is a solid step towards fiscal consolidation, reducing litigation and generating employment. It is not a populist budget.
Pankaj Mathpal : Budget is focused on Farmers and young generation. There is focus on creating jobs and supporting entrepreneurs. Overall a good budget.
K Bharat Kumar : Thanks, Sriram. I would give this budget 6 out of 10. I agree with Suresh on the employment generation initiatives. Some positives such as that, but some questions too, on topics that were expected to be touched upon.
Sriram Srinivasan : Thanks! A lot hinges on execution too. Bringing in effective bankruptcy code, the PPP dispute resolution mechanism ... in order to revive private investments. And things look more or less benign for oil prices too!
The Hindu : On that note, this live chat has come to an end. Thank you, panelists for an enlightening session.
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