Pertinent Features of Budget for Realty
The Indian economy has been robust to mild shocks and IMF forecasts, India to be one of the fastest growing major economies in 2017
CPI-based inflation declined from 6% inJuly 2016 to 3.4% in December, 2016. Economy has moved on a high growth path. India’s Current Account Deficitdeclined from about 1% of GDP last year to 0.3% of GDP in the first half of2016-17. FDI grew 36% in H1 2016-17 over H1 2015-16, despite 5%reduction in global FDI inflows. Foreign exchange reserves have reached361 billion US Dollars as on 20th January, 2017
Challenges in 2017-18
World economy faces considerable uncertainty, in the aftermath of majoreconomic and political developments during the last year. The US Federal Reserve’s intention to increase policy rates in 2017 maylead to lower capital inflows and higher outflows from the emergingeconomies. Also, uncertainty around commodity prices especially that of crude oil hasimplications for the fiscal situation of emerging economies. There are signs of retreat from globalisation of goods, services and people aspressures for protectionism are building up.
Transformational reforms last year
Apart from passage of the Constitution Amendment Bill for GST, demonetisation of high denomination bank notes, enactment of the Insolvency and Bankruptcy Code and enactment of the Aadhar bill for disbursementof financial subsidies and benefits, the Budget 2017-18 contains three major reforms.
First, presentation of Budget advanced to 1st February to enable the Ministries to operationalize all activities from the commencement of the financial year. Second, merger of Railways Budget with General Budget to bring Railways to the centre stage of Government’s Fiscal Policy and Third, removal of plan and non-plan classification of expenditure to facilitate a holistic view of allocations for sectors and ministries.
Government agenda for 2017-18 is: “Transform, Energise and Clean India” – TEC India. It seeks to transform the quality of governance and quality of life of our people; energise various sections of society, especially the youth and thevulnerable and clean corruption, black money andnon-transparent political funding.Ten distinct themes to foster this broad agenda are:
- Farmers: 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 socialsecurity, 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 deliverythrough people’s participation;
- Prudent Fiscal Management: to ensure optimal deployment ofresources and preserve fiscal stability;
- Tax Administration: honouring the honest
Pace of construction of PMGSY roads accelerated to 133 km roads per dayin 2016-17, against an avg. of 73 km during 2011-2014. The government has taken up the task of connecting habitations with morethan 100 persons in left wing extremism affected Blocks under PMGSY. Allsuch habitations are expected to be covered by 2019 and the allocation forPMGSY, including the State’s Share is ` 27,000 crores in 2017-18.
Allocation for PradhanMantriAwaasYojana – Gramin increased from15,000crores in BE 2016-17 to ` 23,000 crores in 2017-18 with a target to complete onecrore houses by 2019 for the houseless and those living inkutcha houses.Affordable housing to be given infrastructure status and National Housing Bank will refinance individual housing loans of about Rs. 20,000 crore in 2017-18.
In the next three years, the throughput is proposed to be enhanced by 10%.This will be done through modernisation and upgradation of identifiedcorridors.Budget allocation for highways increased from` 57,976 crores in BE 2016-17 to ` 64,900 crores in 2017-18. About 2,000 km of coastal connectivity roads have been identified forconstruction and development. Total length of roads, including those under PMGSY, built from 2014-15till the current year is about 1,40,000kms which is significantly higherthan previous three years. Select airports in Tier 2 cities will be taken up for operation andmaintenance in the PPP mode.
Foreign Investment Promotion Board to be abolished in 2017-18 andfurther liberalisation of FDI policy is under consideration. A mechanism to streamline institutional arrangements for resolution ofdisputes in infrastructure related construction contracts, PPP and publicutility contracts will be introduced as an amendment to the Arbitration andConciliation Act 1996. A Computer Emergency Response Team for our Financial Sector (CERT-Fin)will be established.
Goods & Service Tax
The GST Council has finalised its recommendations on almost all the issuesbased on consensus on the basis of nine meetings held. Preparation of IT system for GST is also on schedule.The extensive reach-out efforts to trade and industry for GST will startfrom 1st April, 2017 to make them aware of the new taxation system.
Promoting Real-estate Sector
Under the scheme for profit-linked income tax deduction for promotion ofaffordable housing, carpet area instead of built up area of 30 and 60sqm will be counted.The 30sqm limit will apply only in case of municipal limits of 4metropolitan cities while for the rest of the country including in theperipheral areas of metros, limit of 60sqm will apply.
For builders for whom constructed buildings are stock-in-trade, tax onnotional rental income will only apply after one year of the end of the yearin which completion certificate is received. Reduction in the holding period for computing long term capital gainsfrom transfer of immovable property from three years to two years. Also, thebase year for indexation is proposed to be shifted from 1.4.1981 to1.4.2001 for all classes of assets including immovable property
For Joint Development Agreement signed for development of property, theliability to pay capital gain tax will arise in the year the project is completed. Exemption from capital gain tax for persons holding land on 2.6.2014, thedate on which the State of Andhra Pradesh was reorganised, and whoseland is being pooled for creation of capital city of Andhra Pradesh underthe Government scheme
Promoting Digital Economy
Under scheme of presumptive income for small and medium tax payerswhose turnover is upto twocrores, the present, 8% of their turnover which iscounted as presumptive income is reduced to 6% in respect of turnoverwhich is by non-cash means.Aadhar Pay, a merchant version of Aadhar Enabled Payment System, willbe launched shortly. A Mission will be set up with a target of 2,500 crore digital transactions for2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards. A proposal to mandate all Government receipts through digital means,beyond a prescribed limit, is under consideration
- No transaction above Rs. Three lakh would be permitted in cash subject tocertain exceptions
- Miniaturised POS card reader for m-POS (other than mobile phones ortablet computers), micro ATM standards version 1.5.1, Finger Print Readers/ Scanners and Iris Scanners and on their parts and components formanufacture of such devices to be exempt from BCD, Excise/CV duty andSAD.
- Banks have targeted to introduce additional 10 lakh new POS terminals byMarch 2017. They will be encouraged to introduce 20 lakh Aadhar basedPOS by September 2017
- Proposed to create a Payments Regulatory Board in the Reserve Bank ofIndia by replacing the existing Board for Regulation and Supervision ofPayment and Settlement Systems
For the first time, a consolidated Outcome Budget, covering all Ministriesand Departments, is being laid along with the other Budget documents. FRBM Committee has recommended 3% fiscal deficit for the next threeyears, keeping in mind the sustainable debt target and need for publicinvestment, fiscal deficit for 2017-18 is targeted at 3.2% of GDP. Net market borrowing of Government restricted to Rs. 3.48 lakh crores afterbuyback in 2017-18, much lower than ` 4.25 lakh crores of the previousyear.Revenue Deficit of 2.3% in BE 2016-17 stands reduced to 2.1% in theRevised Estimates. The Revenue Deficit for next year is pegged at 1.9% against 2% mandated by the FRBM Act