Union Budget 2017-18 February 2017
Table of Content Page No. Summary 3 Key proposals - Individual 4-5 Sector Impact 6-9 Disclaimer 10 2
Summary FY18 budget is focused on improving spending & liquidity needs of rural India. It emphasizes on fiscal prudence, improving the farmers income, stresses on affordable housing for all, providing infrastructure boost and enhancing digitalization. The government has set FY18 & FY19 fiscal deficit target at 3.2% & 3 % of GDP respectively. This will reduce the government borrowings and hence would result in reduction in interest rates. FM s intent to list Railway PSUs like IRCTC, IRCON and IRFC on stock exchanges will help in improving fiscal health of the government. In addition, government intends to create an integrated public sector oil company which will be able to scale to large international players. For 2017-18, the total outlay for Rural, Agriculture and Allied sector is ~Rs1.87 lakh crore (24% yoy). Given the shift to GST in FY18, estimates of indirect tax collections, although conservative, are largely irrelevant. Foreign portfolio investors (category I & II) exempted from capital gains arising from taxation of indirect transfers. Category I FPIs include sovereign wealth funds and central banks while category II includes mutual funds and banks. Tax rate reduced to 5% from 10% for the income bracket of Rs 2.5-5 lakh. Thus, tax payers of all categories will get a uniform benefit of Rs. 12,500 per person per fiscal year, which will increase the savings and consumption. 3
Key Proposals Additionally, to recoup the losses by rationalizing the tax structure for salaried people the government has levied 10% surcharge on individuals, whose taxable income is between Rs 50 lakh to Rs 1 crore. Government in order to promote cashless transactions, it restricted cash transaction above Rs 3 lakh. The holding period for computing long term capital gain tax on immovable assets is reduced to 2 years from 3 years in order to encourage mobility of assets. The base year for indexation has been shifted to April 1, 2001 from April 1, 1984 for all asset classes including immovable property, which would reduce the capital gain tax liability. New Metro Rail Policy will be announced with focus on innovative models of implementation and financing as well as standardization and indigenization of hardware and software. Government has reduced the tax rate for MSME with sales of less than Rs. 50 cr in FY16 by 5% to 25% to withstand competition from large corporate. The government has increased excise duties on cigarettes across all lengths by ~6.2%. This is lower than the average increase in last five years. This bodes well for cigarettes companies like ITC. 4
Key Proposals Budget gave some relief to banks, especially to PSU banks, by increasing permitted provisioningfor Non-Performing Asset to 8.5% from 7.5%. In addition, Budget also proposed interest taxable on actual receipt instead of accrual basis in respect of NPA accounts of all non-scheduled cooperative banks also to be treated at par with scheduled banks. To promote the affordable housing and real estate sector, government will consider carpet area instead of build up of 30 sq.mtr. and 60 sq.mtr. under the scheme for profit-linked income tax deduction. 2016-17E (Rs in Crore) 2017-18E (Rs in Crore) Growth yoy (%) Revenue Receipts 1,423,562 1,515,771 6.5% Capital Receipts 590,845 630,964 6.8% Total Receipts 2,014,407 2,146,735 6.6% Scheme Expenditure 869,847 945,078 8.6% Other Expenditure 1,144,560 1,201,657 5.0% Total Expenditure 2,014,407 2,146,735 6.6% Fiscal Deficit 534,274 546,532 Fiscal Deficit (% of GDP) 3.5 3.2 Source: indiabudget.nic.in 5
Sector Impact Sector Agriculture Key Measures Agriculture credit target increased to Rs 10 lakh crore for FY17-18 from Rs 9 lakh crore in FY16-17. Increased coverage under Fasal Bima Yojana scheme to 40% in FY17-18 and 50% in FY18-19 as compared to 30% in FY16-17, with provision of Rs 9,000 crore for the same. NABARD's Long Term Irrigation Fund, with a corpus of Rs 20,000 crore in F16-17 will be raised to Rs 40,000 crore in FY17-18. Dairy Processing and Infrastructure Development Fund to be setup under NABARD with initial corpus of Rs 2,000 crore, to be increased to 8,000 crore over 3 years. Positively Jain Irrigation, UPL, Rallis India and PI Industries. Hatsun Agro, Heritage Foods, Prabhat Dairy Stocks affected Negatively Chambal Fertilizers, RCF, NFL Oil & Gas Basic customs duty on LNG reduced from 5% to 2.5% Petronet LNG, IGl, GAIL, Mahanagar gas 6
Sector Impact Sector Key Measures Under the scheme for profit-linked income tax deduction for promotion of affordable housing, now carpet area to be considered for low-cost housing instead of built-up area. Long term capital gain tax holding period from transfer of immovable property reduced from 3 to 2 years. The base year for indexation is proposed to be shifted from 1 st April 1981 to 1 st April 2001 for all classes of assets including immovable property. Positively Prestige estate, Pruvankara Projects, Poddar Developers Stocks affected Negatively Real estate Pradhan Mantri Awaas Yojana Gramin allocation increased from Rs. 15,000 crore in FY17 to Rs. 23,000 crore in FY18 with a target to complete 1 crore houses by 2019. Everest Industries, HIL, Visaka Industries For builders for whom constructed buildings are stock-in-trade, tax on notional rental income will only apply after one year of the end of the year in which completion certificate is received. DLF Ltd, Oberoi Realty, Godrej Properties 7
Sector Impact Sector Key Measures Positively Stocks affected Negatively Allocation of Rs 10,000 crore in FY18 under Indradhanush roadmap for recapitalisation of PSU banks, against Rs 25,000 crore allocated in FY16-17. PSU banks Provision for Non-Performing Asset of banks increased from 7.5% to 8.5%, which will reduce banks liability. Banking stocks Banks & NBFC National Housing Bank will refinance individual housing loans of ~Rs 20,000 crore in FY18. All banks, NBFC's & specially MFI's Affordable housing to be given infrastructure status, which will increase credit demand but may reduce margins. All banks 8
Sector Impact Sector Key Measures Positively Stocks affected Negatively Infrastructure Budget allocation for highways increased from Rs. 57,976 crore in FY17 to Rs. 64,900 crore in FY18. It is proposed to feed about 7,000 stations with solar power in the medium term. Second phase of Solar Park development is accounted for additional 20,000 MW capacity. Ashoka Buildcon, IRB Infra, Sadbhav Engineering Swelect Energy, Adani Power, Suzlon Consumer Durable Existing rate of taxation for individual assesses between income of Rs 2.5 lakh to 5 lakh reduced to 5% from the present rate of 10%. Tax saving of Rs 12,500 per annum. Hero Motor, Bajaj Auto, TVS Motors, Titan, TTK Prestige Whirpool 9
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