In a Budget lacking in big bang announcements but still having something for everyone, Finance Minister Arun Jaitley unveiled a broad roadmap of reform for the future.
Describing his maiden Budget as a “directional” exercise, he suggested it be seen as a journey towards sustained growth and maintained “it is not wise to expect that everything can be done in the first Budget, presented within 45 days of the formation of the Government.”
Jaitley estimated a sustained growth of 7 to 8 per cent or above within the next three to four years along with macro-economic stabilisation, including a lower level of inflation, a reduced fiscal deficit and a manageable current account deficit.
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Playing the role of a cautious reformist, he indicated that the next Budget, to be presented in February next, will present a much clearer picture of the policy direction of the Government.
For individuals Belying expectations of a radical decrease in personal tax, Jaitley made a modest cut, leaving individual taxpayers with a little more money in the pocket. He kept income-tax rates unchanged but raised the basic tax exemption limit from ₹2.0 lakh to ₹2.5 lakh. The corresponding exemption for senior citizens was raised from ₹2.5 lakh to ₹3 lakh.
Taxpayers can avail themselves of Section 80C tax deduction on investments up to ₹1.5 lakh, as against ₹1 lakh earlier. These include investments in the Public Provident Fund (PPF).
Jaitley also said that the National Savings Certificate (NSC) will be launched with insurance cover to provide greater benefits for small savers.
Those planning to buy a residential house or having an existing home loan for a self-occupied property can now get a tax benefit on annual interest payments of ₹2 lakh as against ₹1.5 lakh earlier.
Footwear below ₹1,000 will become cheaper, so will smaller LCD and conventional TV sets. As always, the Budget has raised the prices of cigarettes, tobacco and paan masala through a sharp increase in excise duty. Aerated cold drinks with sugar in them will also become more expensive.
For industries But Jaitley did not offer much relief to industry, with corporate tax rate unchanged at 30 per cent.
In an attempt to make starting a business easier, Jaitley announced the setting up of an eBiz platform, where all business- and investment-related clearances and compliances are available in one window. All the Central Government Ministries and Departments will integrate their services on this platform by December 31.
For manufacturing companies, there will be an investment allowance at the rate of 15 per cent for investments of more than ₹25 crore a year in new plant and machinery. This scheme will run along with the existing threshold of ₹100 crore or more, thus, opening it up for more players.
For foreign investors Although the Budget sets the roadmap for higher Foreign Direct Investment of 49 per cent in the defence and insurance sectors, the market was disappointed that there would be no rollback of the retrospective tax amendment. Jaitley defended the country’s sovereign right to have such a tax, but promised that it would not be used arbitrarily. He also said that any fresh case of indirect taxation would be taken up only after a go-ahead from a high-level committee.
For fiscal consolidation Jaitley signalled a commitment to fiscal consolidation by announcing the setting up of an Expenditure Management Commission to study government expenditure, particularly subsidies. The committee will submit an interim report by the end of the calendar year. The Minister stuck by the previous government’s fiscal deficit target of 4.1 per cent.
For social welfare schemes The Government has not lowered the provision for the previous Government’s pet populist schemes, such as the Rural Employment Guarantee Scheme. But Jaitley promised more targeted subsidies and that such schemes would be used for the creation of productive assets.