Madam
Speaker, India ’s tax to GDP ratio is very
low, and the proportion of direct tax to indirect tax is not optimal from the viewpoint of social justice. I
place before you certain data to indicate that our direct tax collection is not
commensurate with the income and consumption pattern of Indian economy. As against estimated 4.2 crore persons
engaged in organized sector employment, the number of individuals filing
return for salary income are only 1.74 crore.
As against 5.6 crore informal sector individual enterprises and
firms doing small business in India , the number of returns filed by this
category are only 1.81 crore. Out of the
13.94 lakh companies registered in India upto 31st March,
2014 , 5.97 lakh
companies have filed their returns for Assessment Year 2016-17. Of the 5.97
lakh companies which have filed their returns for140
Assessment Year 2016-17 so far, as many as 2.76 lakh companies have shown
losses or zero income. About 2.85 lakh
companies160 have shown profit before tax of less than Rs. 1
crore, 28,667 companies have shown
profit between Rs. 1 crore to Rs. 10 crore, and only 7781 companies have profit
before tax of more than Rs. 10 crores.
Among the 3.7 crore
individuals who filed the tax returns in 2015-16, 99 lakh show income below the exemption limit of Rs. 2.5 lakh p.a.,
1.95 crore show income between Rs. 2.5 to Rs. 5 lakh, 52 lakh show income
between Rs. 5 to Rs. 10 lakhs and only 24 lakh people show income above Rs. 10
lakhs. Of the 76 lakh individual
assesses who declare income above Rs. 5 lakh, 56 lakh are in the salaried
class. The number of people280 showing income more than Rs.
50 lakh in the entire country is only 1.72 lakh. We can contrast this with the fact that in
the last five years, more than 1.25 crore cars have been sold, and number of
Indian320 citizens who flew abroad, either for business or
tourism, is 2 crore in the year 2015.
From all these figures we can conclude that we are largely a tax
non-compliant society. The predominance
of cash in the economy makes it possible for the people to evade their
taxes. When too many people evade taxes,
the burden of their share falls on those who are honest and compliant.
After the demonetization, the
preliminary analysis of data received in respect of deposits made by people in
old currency presents a revealing picture.
During the period 8th November to 30th
December 2016, deposits420 between Rs. 2 lakh and Rs. 80 lakh
were made in about 1.09 crore accounts with an average deposit size of Rs.
5.03 lakh. Deposits of more than 80 lakh
were made in 1.48 lakh accounts with average deposit size of Rs. 3.31
crores. This data mining will help us
immensely in expanding the tax net as well as increasing480
the revenues, which was one of the objectives of demonetization.
Madam Speaker, one of the main
priorities of our Government is to eliminate the black money component
from the economy. We are committed to
make our taxation rates more reasonable, our tax administration more fair and
expand the tax base in the country. This
approach will change the colour of money. The net tax revenue of 2013-14 was Rs. 11.38 lakh crores. This grew by 9.4% in 2014-15 and 17% in
2015-16.560 As per the
RE of 2016-17, we will end the year with a high growth rate of 17% for the
second year in a row. Because of the
serious efforts made by the Government, the rate of growth of advance
tax in personal income tax in the first three quarters of the current financial
is 34.8%.
Madam Speaker, the thrust of my tax proposals in this Budget is
stimulating growth, relief to middle class, affordable housing, curbing black640
money, promoting digital economy, transparency of political funding and
simplification of tax administration.
In my budget
proposals last year, I had announced a scheme for profit-linked income tax
exemption for promoters of affordable housing scheme which has received a very
good response. However, in order to
make this scheme more attractive, I propose certain changes in the scheme. First of all, instead700 of
built up area of 30 and 60 square metres, the carpet area of 30 and 60 square metres will be counted. Also, the 30 square metres limit will
apply only in case of municipal limits of 4 metropolitan cities while for the
rest of the country including in the peripheral areas of metros, limit of 60 square
metres will apply. In order to be eligible, the scheme was to be
completed in 3 years after commencement.
I propose to extend this period to 5 years.
At present, the
houses which are unoccupied after getting completion certificates are800
subjected to tax on notional rental income.
For builders for whom constructed buildings are stock-in-trade, I
propose to apply this rule only after one year of the end of the year in which
completion certificate is received so that they get some breathing time840
for liquidating their inventory.
We also propose to
make a number of changes in the capital gain taxation provisions in respect of
land and building. The holding period for considering gain from immovable
property to be long term is 3 years now.
This is proposed to be reduced to 2 years. Also, the base
year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001
for all classes of assets including immovable property. This move will significantly reduce the
capital gain tax liability while encouraging the mobility of assets. We also
plan to extend the basket of financial instruments in which the
capital gains can be invested without payment of tax. For Joint Development
Agreement960 signed for development of property, the
liability to pay capital gain tax will arise in the year the project is
completed.
The new capital980
for State of Andhra Pradesh is being constructed by innovative land-pooling mechanism without use
of the Land Acquisition Act. I propose to exempt from capital gain tax, persons
holding land on 2.6.2014, the date on which the State of Andhra Pradesh was reorganized, and whose land is being
pooled for creation of capital city under the Government scheme.
A concessional withholding
rate of 5% is being charged on interest earned by foreign entities in external
commercial borrowings or in bonds and Government securities. This concession is available till
30.6.2017. I propose to extend it to
30.6.2020. This benefit is also extended
to Rupee Denominated (Masala) Bonds.
. The Government gave
income tax exemptions to start-ups with certain conditions last year. For
the purpose of carry-forward of losses in respect of such start-ups, the
condition of continuous holding of1120 51% of voting rights has been relaxed
subject to the condition that the holding of the original promoter
continues. Also the profit linked
deduction available to the start-ups for 3 years out of 5 years is being
changed to 3 years out of 7 years.
Minimum Alternate Tax
is at present levied as an advance tax.
There is a strong demand for abolition of MAT. Although the plan for phasing out of
exemptions will kick in from 1.4.2017, the full benefit of revenue out of
phase-out will be available to Government only after 7 to 10 years when all
those who are already availing exemptions at present complete their period
of availment. Therefore, it is not
practical to remove or reduce MAT at present.
However, in order to allow companies to use MAT credit in future years,
I propose to1260 allow carry-forward of MAT upto a period of
15 years instead of 10 years at present.1280
In my Budget
proposals in 2015, I had announced that I would be bringing the
corporate income tax rate down to 25% gradually. In 2016 Budget, I had announced a reduction
by 1% in case of those companies whose turnover is less than Rs. 5
crore. In the same Budget, I had also
announced that new manufacturing companies who do not avail of any exemption
would be charged only 25% income tax.
Medium and Small
Enterprises occupy bulk of economic activities and are also instrumental
in providing maximum employment to people.
However, since they do not get many exemptions, they end up paying more
taxes as compared to large companies.
As per data of financial year 2015-16, 2.85 lakh companies making profit
of1400 less than Rs. 1 crore pay effective tax rate of 30.26%
while 298 companies making profit above Rs. 500 crores pay effective tax rate
of 25.90%.
In order to make MSME
companies more viable and also to1440 encourage firms to
migrate to company format, I propose to reduce the income tax for smaller
companies with annual turnover upto Rs. 50 crore to 25%. As per data of Assessment Year 2015-16, there
are 6.94 lakh companies filing returns, of which 6.67 lakh companies fall in
this category and, therefore, percentage-wise 96% of companies will get this
benefit of lower taxation. This will make our MSME sector more competitive as
compared to large companies. The revenue
forgone estimate for this measure is expected to be Rs. 7,200 crore per annum.
In order to give a
boost to banking sector, I propose to increase1540 allowable
provision for Non-Performing Asset from 7.5% to 8.5%. This will reduce the tax liability of
banks. I also propose to tax interest
receivable on actual receipt instead of accrual basis in respect of NPA
accounts of all non-scheduled cooperative banks also at par with scheduled
banks. This will remove hardship of having to pay tax1600
even when interest income is not realized.
