Union Budget 2017 An HR perspective

 

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#Budget2017

With a view to Transform, Energise and Clean India, a slew of measures were announced by Mr. Jaitley around 10 distinct themes of Farmer, Rural Population, Youth, Poor and the Underprivileged, Infrastructure, Financial Sector, Digital Economy, Public Service, Prudent Fiscal Management and Tax Administration

Further he donned the hat of Suresh Prabhu as well, clubbing the Railways Budget into the Union Budget. This was a classic case of de-layering J

Amongst another of the firsts, the distinction between Plan and Non-Plan expenditure has been abolished; focus will be on capital expenditure, which will be 25.4% higher.

We cover the ones which are directly pertinent from a People Professional standpoint

Taxation

 

 Income-Tax Rates (Individuals)

 

This would reduce the tax liability of all persons below INR 5 lakh income either to zero (with rebate) or 50% of their existing liability.

Where the total income does not exceed Rs. 2,50,000 Nil
Where the total income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000 5 per cent. of the amount by which the total income exceeds Rs. 2,50,000
Where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000 Rs. 12,500 plus 20 per cent. of the amount by which the total income exceeds Rs. 5,00,000;
Where the total income exceeds Rs. 10,00,000 Rs. 1, 12,500 plus 30 per cent. of the amount by which the total income exceeds Rs. 10,00,000

 

Sir-Charge J

 

Surcharge @ 10% of Income Tax for those having a total income greater than INR 50 lacs but less than INR 1 crore

It’s called surcharge because, in Indian companies, when you earn over INR 50 Lacs, people usually call you Sir!!

Capital Gains

 

Now you can avail the benefit of paying a lower Long Term Capital Gains tax if the you hold the immovable property for just 2 years instead of 3 years

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.

Lower Corporate Tax Rates

 

Domestic companies, which clocked turnover of INR 50 crore or lower in the previous year 2015-16, will now have to pay 25% tax instead of 30%. This will benefit 6.67 lakh of the 6.94 lakh companies

Coupled with the massive savings that are envisaged from GST, larger distributable surplus for these companies would lead to increased variable payouts J

House Property

The budget proposes to restrict the loss on house property that can be deducted from ‘other heads of income’ such as ‘salary income’ to Rs 2 lakh only. Currently there is no limit on the amount of this loss that can be set off against other heads of income.

 

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An individual receiving a rental income of Rs 35,000 per month and paying a housing loan interest of Rs 10 lakh per annum would have to pay tax on additional income of Rs 5.13 lakh. Therefore, such an individual in the 30% tax bracket would have to shell out additional tax of Rs 1.59 lakh assuming the person’s taxable income is below Rs 50 lakh

Return Filing

From this year onwards, in case tax returns are not filed within the due dates [u/s 139(1)], say 31st July in case of salaried individual, you need to pay a fine of INR 5,000 if the return is furnished after 31st July but on or before the 31st day of December and INR 10,000 in any other case. But, if However, total income does not exceed five lakh rupees, it is proposed that it will be a max of INR 1,000 only.

TDS on Rent Paid by Employees

 

Insertion of new section 194-IB. Payment of rent by certain individuals or Hindu undivided family

An individual or HUF, who pays rent INR 50,000 per month shall have to deduct TDS @ 5% on such payments. Such tax shall be deducted and deposited only once in a financial year through a challan-cum-statement. Further, the deductor shall not be required to obtain TAN or file any separate TDS return for this purpose.

A lot of employees who claim HRA exemption by using payment to relatives like father or mother, who often, do not disclose such income, will be affected

Affordable Housing

 

The profit-linked income tax exemption for promoters of affordable housing scheme under section 80-IBA has now been extended to 5 years. Further there has been replacement of “built-up-area” by “carpet area” in the provision. Thus, instead of built up area of 30 square metres (4 metropolitan cities) and 60 square metres (Rest of India), the carpet area of 30 and 60 sq.mtr. will be counted.

 

STRIVE

 

The next phase of Skill Strengthening for Industrial Value Enhancement (STRIVE) will also be launched in 2017-18 at a cost of ` 2,200 crores. STRIVE will focus on improving the quality and market relevance of vocational training provided in ITIs and strengthen the apprenticeship programmes through industry cluster approach

This could enhance the availability of talent for blue-collared jobs.

Labour Laws

 

Legislative reforms will be undertaken to simplify, rationalise and amalgamate the existing labour laws into 4 Codes on

  • Wages;
  • Industrial Relations;
  • Social Security & Welfare; and
  • Safety and Working Conditions.

 

The Model Shops and Establishment Bill 2016 has been circulated to all States for consideration and adoption. This would open up additional avenues for employment of women.

The amendment made to 16 the Payment of Wages Act, will serve the purpose of benefiting labour and ease of doing business.

 

Steps to Change the color of money

It is quite ironic that in a country

  1. Where in the last five years, more than 1.25 crore cars have been sold, and 2 crores citizens flew abroad, either for business or tourism (Year 2015), only 1.72 lakh individuals disclose income of more than INR 50 lacs p.a.
  2. Among the 3.7 crore individuals who filed the tax returns in 2015-16, 99 lakh show income below the exemption limit of INR 2.5 lakh p.a., 1.95 crore show income between INR 2.5 to 5 lakh, 52 lakh show income between INR 5 to 10 lakhs and only 24 lakh people show income above INR 10 lakhs..
  3. Of the 76 lakh individual assesses who declare income above INR 5 lakh, 56 lakh are in the salaried class

 

DeMo

 

The government has gathered a revealing picture after applying data mining techniques to the deposits in old currency post DeMo.

  1. 1.09 Crore accounts witnessed deposits in the range of INR 2 lakh to 80 lakh (Average : INR 5.03 lakh)
  2. 1.48 lac  accounts witnessed deposits in the range of 80 lakh+ (Average : INR 3.31 crores)

Now the tax defaulters would face the music J

Cash Expenditure

 

Now, you will not be able to receive payment in cash of more than INR 3 lakh from a person in a day, or in respect of a single transaction, or in respect of transactions relating to one event or occasion,

Also the maximum limit of cash expenditure allowable as deduction, both for revenue as well as capital expenditure, to INR10, 000 from 20,000 earlier

This could impact cash expenditure on HR events

Election Funding Reforms

 

Now all donations to political parties will be below INR. 2000. On paper it looks as a bold step. It could well be an eye wash if they just start using 10 times the money receipts.

Also there is a provision for issuance of electoral bonds, whereby a donor could purchase bonds from authorised banks against cheque and digital payments only. They shall be redeemable only in the designated account of a registered political party. These bonds will be redeemable within the prescribed time limit from issuance of bond.

Sectoral Allocations

 

You might also look at sectoral allocations to understand impact on your specific industry.

Sector Totals  2016-2017 2017-2018 Increase
Agriculture and Allied sectors           52,821           58,663 11%
Rural Development        114,947        128,560 12%
Infrastructure        358,634        396,135 10%
of which Transport        216,903        241,387 11%
Social sectors        176,225        195,473 11%
Education and Health        114,806        130,215 13%
Social sectors with welfare orientation           61,419           65,258 6%
Employment Generation, Skill and Livelihood           14,870           17,273 16%
Scientific Ministries           34,359           37,435 9%

 

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