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February 2017
 |
Budget 2017-18 (The Total Investment & Insurance
Solutions)
The Budget
2017-18 was a mix of a few path-breaking moves and a sense of relief among
segments of the population that it had not unleashed some new experimentation
on the people. In keeping with this, the market reaction has been very
positive. Finance Minister Arun Jaitley’s budget speech was more crisp and
better written than his earlier ones, but steered clear of any dramatic
announcements that may have fallen foul of election code or provided fodder to
the opposition with several elections around the corner. He has however, made
it clear that we can expect some mid-year changes as well as new legislation. The Total Investment & Insurance
Solutions
Budget 2017
is significant as this was the first to integrate the Railway Budget and look
at transport infrastructure in more holistic manner to include roads, aviation
and shipping. The abolition of Foreign Investment Promotion Board (FIPB) is
another significant announcement but since the roadmap for its abolition has
still to be announced, it remains to be seen whether it survives in another
avatar (like the Planning Commission morphed into Niti Aayog). The plan to
merge public sector undertakings (PSUs) to create an integrated oil major is an
important announcement, though it is not clear how the inefficiencies will be
addressed. The Total Investment
& Insurance Solutions
A Budget is
not the answer to everything but the government has continuously skirted the
issue of fixing accountability for the public sector has run up huge bad loans.
The exchequer will dole out another Rs10,000 crore to re-capitalise loss making
public sector banks (PSBs) but there is little actual action on defaulting
businessmen to prevent future wilful default. The Economic Survey had talked
about the “bad bank” idea, which has however, not found any favour in this
year’s budget.
From
Moneylife’s perspective, we were glad to see that the government has made a
serious attempt to plug the menace of ramping up illiquid and closely-held
listed stocks over a year and booking tax free income as long-term capital
gains. This practice is rampant, as we have
described in our cover story here, and we are pleased to see that the
FM made an effort to plug it. Under the new budget provisions, equity share
bought on or after the 1 October 2004 would attract capital gains tax if
securities transaction tax (STT) was not paid on the purchase of shares. The
budget papers have clarified that bonus shares and those purchased during
initial and follow on public offers, on which we pay no STT, would not attract
this provision. Therefore, this provision targets those who use the
preferential allotment route to acquire a large holding in illiquid scrips and
exit after the stock is ramped up.
This year’s
budget has ushered in a new regulator -- Payment Regulatory Board (PRB) –
within Reserve Bank of India (RBI) by replacing the existing Board for
Regulation and Supervision of Payment and Settlement Systems. Hopefully, this
would bring parity between physical cash and digital payment transactions,
along with 'interoperability' and access to a unified payment infrastructure
and integrating RBI’s payment systems such as Real Time Gross Settlement System
(RTGS) and National Electronic Funds Transfer (NEFT). The government is also
considering the option of amending the Negotiable Instruments Act suitably to
ensure that the payees of dishonoured cheques to be able to realise
payments.
There are a
lot of tax incentives for the middle class and small businessmen in this
Budget. The provision of holding period for immovable property for calculating
long-term capital gains (LTCG) has been reduced to two years from three years.
Those filing tax returns for non-business income below Rs5 lakh can do so in a
single-page form. Also, there is a cut in tax rate to 5% tax rate (from 10%
now) for the first slab of income. The FM has also announced that there would
be no scrutiny for first time taxpayer, unless there is some high value
transactions attached to him/her.
Interestingly,
although the FM pointed that while 1.2 crore cars get sold and some 2 crore
people travel abroad every year, but only 76 lakhs declare income above Rs5
lakhs, he did not announce any measures to widen the tax net. The Total Investment & Insurance
Solutions
All in all,
most of the measures seem friendly and growth-oriented. It was much required after
the violent disruption caused by demonetisation. The Sensex has given its
instant verdict by jumping around 500 points.The Total Investment & Insurance Solutions
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