HYDERABAD FRIDAY 3 FEBRUARY 2017 NEWS ANALYSIS 9

SETBACK TO SALARIED CLASS

Budget hikes for rural
major rationalisation has been Overall, it appears that
done in terms of the income tax
increasing farmers

Tax rationalisation laws as promised by the finance

minister in his first Budget such
as reduction in MAT and divi-
incomes as well as area
under irrigation got

dend distribution tax rates and
remains a far cry other amendments in complex
issues which have been the cen-
tre point of litigation between
the Income Tax Department
and the tax payers.
The government has laid em-
phasis on the digital payments
and payments through the
banking channels and proposals
such as reducing the threshold
for permitted cash transactions
to Rs 3 lakhs, provision for dis-
allowance of business and capi-
tal expenditure above Rs 10,000
and reduction of rate of pre-
India inadequate
priority but not enough
funds. It is important to
implement these
programmes effectively if
required with private ing e-NAM by providing Rs 75 lakh
sector participation under each mandi is also a good step.
CSR to reach benefits to However, the assaying systems
small and marginal should have been given priority for
farmers and other e-NAM to be fully-functional, but
there is no provision in this regard.
vulnerable sections of Allocation to agricultural research
rural India and development was increased
marginally, which is too little to
A AMARENDER REDDY meet increasing cost of high-tech
research.

ABHISHEK ANEJA change has been provided leav-
ing the salaried class empty
sumptive taxation to 6 percent
from 8 percent to smaller busi-
ness are steps towards the same.
The finance minister also pro-
posed an Aadhaar based pay-
ment structure and several
other initiatives of the govern-
ment to promote e-payments
but the same is difficult to
achieve without any parallel in-
S
till about 95% of the rural
economy is informal both in
agriculture and non-agricul-
ture. Even though agriculture
contributes only 13% of Indias
GDP, it is a source of livelihoods
for about 50% of the population.
Agricultural sector growth was ro-
bust at 4.1% in 2016-17, but it was
at the back of only 1.2% growth in
tor through innovative schemes
like balanced use of fertilisers by
promoting soil health cards, en-
Little emphasis on poor
Rural electrication and
poverty elimination reduce dis-
parities among regions and peo-
ple, but increase in allocation is
marginal. Allocation of only Rs
Sadak Yojana (PMGSY) at Rs 4,814 crore is not sucient to
19,000 crore. make villages 100% electried un-
der Gram Jyoti Yojana. Rs 4,500

T he salaried middle class

gained some recognition by
Finance Minister Arun Jaitley
regarding the compliance re-
lated to filing of returns and ex-
pectations arose that finance
minister will take some steps to
reward the honest tax payers
and may rationalise the per-
sonal income tax structure.
However, as he moved ahead
with his Budget speech, no ma-
jor change was proposed except
that to reduce the rate of tax
from 10 percent to 5 percent in
the slab of Rs. 2.5 lakhs to Rs 5
lakhs with some changes in re-
bate under Section 87A thereby
resulting in the tax free income
of upto Rs 3 lakhs. Besides, 10
percent surcharge has been im-
posed on the individuals having
income between Rs 50 lakh and
Rs 1 crore.
The hopes of the salaried mid-
dle class was quite high prior to
the Budget and there were
hopes of tax benefits such as in-
crease in tax free allowances,
reintroduction of standard de-
duction, increase in limits of de-
ductions under Section 80C and
the increase in allowability of in-
terest on self occupied house
property. However, no major
handed at the end of the Budget
despite the finance minister
himself recognising the fact that
the major tax compliance is be-
ing done by salaried tax payers.
In my view, rationalisation in
the higher tax slabs could have
been a major boost to the
salaried middle class as well as
other tax payers and would have
further increased the tax com-
pliance.
Though some relief has been
provided to the people having
investment in immovable prop-
erty by reducing the holding pe-
riod from three years to two
years for the computation of
long-term capital gains having
lower tax rate of 20 percent and
the shift of year for indexation
from 1981 to 2001. This will im-
pact the real estate sector in
positive manner and people will
be keen to invest in immovable
property or liquidate their hold-
ings.
The MSME sector gained
some attention from the finance
minister and has been lucky for
getting the lower 25 percent cor-
porate tax rate. This is likely to
favour entrepreneurs and will
also boost foreign investment in
the MSME sector. However, no
frastructure and regulations to
safeguard the people by moni-
toring the risks and frauds in-
volving digital transactions in
India and a lot needs to be done
in this connection.
The good thing is that no
changes have been proposed
during the Budget speech in the
indirect taxes such as excise and
service tax, which have a direct
impact on the prices of various
commodities, due to the intro-
duction of GST in the coming
year.
Overall the focus of Budget
has been towards expenditure
side leaving the revenue side
without much changes. The
Budget, in my view seems to be
on track, but a lot needs to be
delivered by the finance minis-
ter. The rationalisation of in-
come tax laws is the need of the
hour and will only complement
the expenditure side by increas-
ing the tax compliance and rais-
ing the tax collection in the long
run.
(The writer is a Chartered
Accountant; This article was
first published at
http://www.firstpost.com.
Reprinted with their
permission)
2015-16 and negative growth (-
0.2%) in 2014-15. Figures indicate
that the rural non-farm sector
growth was adversely aected by
demonetisation. Hence, farmers
organisations and villagers had big
hopes on the budget 2017-18 to re-
vive rural economy and aim to-
wards doubling their incomes, but
it followed a minimalist approach
with no big-bang initiatives.
Fund increase marginal
The total allocation for the ru-
ral, agriculture and allied sectors
in 2017-18 is Rs 1.87 lakh crore,
which was only 11.6% higher than
the 2016-17(Revised estimates).
Out of this, allocation to agricul-
ture was Rs 58,663 crore which
was 11.1% higher and for rural de-
velopment was Rs 1,28,560 crore
which was again 11.8% higher than
the 2016-17 (RE). This marginal
increase of about 11% in both the
sectors indicates little emphasis
on rural sector, despite lofty goals.
Rural credit
The Budget has, however, given
big thrust to credit availability to
the farm sector with a target of Rs
10 lakh crore. It can only work if
we are able to reduce costs and in-
crease protability in farming sec-
suring remunerative prices. Oth-
erwise, farmers end up with in-
debtedness without welfare gain.
Rural housing got
priority
Budget allocation to Pradhan
Mantri Awaas Yojana-Grameen
was 23,000 crore, 53% higher than
last year. Allocation to MGNREGA
was Rs 48,000 crore, marginally
higher compared to 2015-16 (RE)
but focus on creating productivity
enhancing assets like farm ponds
and compost pits is a welcome
step. There was no change in funds
allocated to Prime Minister Gram
Budget allocation for agship programmes of
agriculture and rural development (Rs. cr)
Component
Mahatma Gandhi National Rural Employment
Guarantee Act (MGNREGA)
Pradhan Mantri Awas Yojna (PMAY)-grameen
Pradhan Mantri Gram Sadak Yojna (PMGSY)
Green Revolution (including NFSM, RKVY)
Pradhan Mantri Fasal Bima Yojana (PMFBY)
Pradhan Mantri Krishi Sinchai Yojana (PMKSY)
National Rural Drinking Water Mission
National Livelihood Mission - Ajeevika
Price Stabilisation Fund for pulses
Agricultural
development schemes
Fund allocation to green revo-
crore allocation to Deendayal An-
tyodaya Yojana to bring one crore
households out of poverty and to
lution heading ( National Food Se- make 50,000 gram panchayats
curity Mission with Rs 1,720 crore poverty free by 2019, the 150th
and Rastriya Krishi Vikas Yojana birth anniversary of Gandhiji is a
with Rs 4,750 crore and others) welcome step, but needs more fo-
was increased by 32.6% to 13,741 cused eorts by bringing private
crore. However, provision for funds and expertise if required. In-
PMFBY was decreased from Rs crease in allocations to National
13,240 crore in 2016-17(RE) to Rs Livelihood Mission Ajeevika,
9,000 crore. Projection of increase white revolution (dairy sector)
in coverage from 30% to 40% of and blue revolution (sheries) is
the cropped area needs explana- marginal.
tion. Strengthening of soil health
card scheme by involving 648 Policy Reforms
KVKs is a good step. Strengthen- Budget also talked about market
reforms like introduction of new
model law on contract farming to
open up agricultural markets and
create competitive market struc-
2016-17 2017-18 % change over tures. However there was no men-
(RE) (BE) 2016-17(RE)
tion of implementation of Model
Agricultural Land Leasing Act,
47499 48000 1.1
2016. Overall, it appears that in-
15,000 23,000 53.3 creasing farmers incomes as well
19000 19000 0.0
as area under irrigation got prior-
ity but not enough funds. Private
10360 13741 32.6
sector help may be taken under
13240 9000 -32.0 CSR to reach the benets to small
5189 7377 42.2 and marginal farmers and other
6000 6050 0.8 vulnerable sections of rural India.
(Writer is Director, National
3334 4849 45.4
Institute of Agricultural Exten-
3400 3500 2.9 sion Management, Hyderabad)

AJAY SINGH There is little doubt that However, the decision to make it

I f Union Finance Minister Arun

Jaitley thinks that his move to re-
duce individual contribution to po-
litical parties from Rs 20,000 to Rs
2,000 would check inux of corrupt
money into the political system, he
may nd himself pursuing a chimera.
Long before such provision came
into existence, political parties have
devised mechanism to bypass any
scrutiny of their account by creating
list of ctitious donations. For in-
stance in Uttar Pradesh, regional par-
ties are believed to have developed a
skill in creating a ctitious list of con-
tributors.
Insiders admit that most of these
parties which have collected ill-got-
ten money through various commer-
cial deals have created an army of
people who create the list of their
contributors in lakhs to turn their
black money into white. Since politi-
cal parties have any army of cadre,
they can create this list to show as
donors in large numbers.
There are several instances of
Mayawati claiming to build proper-
ties and creating wealth with the help
of contribution from her countless
supporters. And it would be next to
impossible to check the antecedents
and nancial condition of each con-
tributor. Similarly in West Bengal,
Tamil Nadu and Bihar, there are ex-
with Rs 2,000 limitation,
the capacity to raise
money would be reduced
ten times. But it can be
compensated by increas-
ing the list of supporters
by ten times. It is a simple
mathematical calculation
which may not be difficult
for political ingenuity to
overcome
amples of regional parties claiming
huge collections from their support-
ers.
There is little doubt that with Rs
2,000 limitation, the capacity to raise
money would be reduced ten times.
But it can be compensated by in-
creasing the list of supporters by ten
times. It is a simple mathematical cal-
culation which may not be dicult
for political ingenuity to overcome.
mandatory for parties to le I-T re-
turn and allow scrutiny of their ac-
count may act as deterrent for parties
initially. In Jaitley's speech, he made
it clear that the non-compliance of
the process would rob political par-
ties of their exemption from the In-
come Tax. Obviously the regular
scrutiny of the account would entail
a lot of ground work to cover up ill-
gotten wealth by political leaders.
The scheme of allowing the RBI to
issue bonds for political funding is
quite innovative and would ensure
secrecy of the donors. Those who
want to contribute to political parties
above board can opt for these bonds
that can be cashed by registered par-
ties. Apparently these scheme sounds
too good for those who believe in
transparent political conduct. Given
a history of opaque behaviour of par-
ties and their contributors, it seems
quite unlikely that the scheme would
get the traction it truly deserves.
Core issues neglected
T he Association for Democratic Reforms
(ADR) on Thursday said the union
budget failed to address the issues of
transparency, disclosure and penalties of
political parties.
It also claimed the proposals on political
funding reforms fell short of the recom-
mendations by the Election Commission
and the Law Commission. "While this is
the first union budget to raise the issue of
transparency in political funding, it is un-
fortunate to note that complete trans-
parency in the finances of political parties
has still not been adopted in the budget of
2017-18 and the proposed reforms are in-
consequential as the political funding will
continue to remain opaque," ADR said.
"Unless scrutiny of accounts of political
parties is taken up by a body approved by
Comptroller and Auditor General or the
Election Commission, the parties' de-
clared income is unlikely to reflect their
true income," the ADR said, pointing to
the budget not promising scrutiny of in-
come declared by political parties from
various sources.
"The budget does not propose that the
details of all donors who donate above Rs
2,000 be made available to the Income Tax
department and/or an external body au-
diting the accounts of political parties," it
said. "Unless complete information is
available for audit scrutiny, the sources of
donations below Rs 20,000 to political par-
ties will continue to stay hidden," it con-
tended.
The ADR also said the ruling Bharatiya
Janata Party (BJP) topped the chart in de-
faulting in submitting its audit reports to
the poll panel. Between 2010-11 and 2014-
15, BJP defaulted in the submission of its
audit report with the Election Commission
by an average of 182 days while the Con-
gress defaulted by 166 days on average.

Corporate Tax Will govt meet disease eradication targets?

T he
startup com-
munity has unani-
mously welcomed
lower corporate tax
for enterprises with
a turnover of up to
Rs 50 crore as well
as the move to ex-
tend the three-year
tax exemption for
startups in its first seven years from pre-
viously five years. The move to reduce the
corporate tax to 25 per cent for compa-
nies with a turnover of under Rs 50 crore
was the biggest highlight of the budget as
it covers over 96 per cent of the (startup)
landscape currently, they said. But the
same benefit was not offered to larger
companies which strongly demanded cut-
ting tax rate as it would help them be-
come competitive in the global market.
Corporate tax is a form of tax levied on
profits earned by businessmen in a partic-
ular period of time. Also, while the indus-
try expected exemption from Minimum
Alternate Tax (MAT), it has accepted the
provision to allow MAT credit to be car-
ried forward from 10 years to 15 years as
a positive step forward. As per the Sec-
tion 115JA introduced from assessment
year 1997-98, all companies having book
profits under the Companies Act shall
have to pay a mini-
mum alternate tax at
18.5% ((excluding
surcharge, education
cess, and secondary
and higher educa-
tion cess). MAT is a
way of making com-
panies pay mini-
mum amount of tax,
according to India Infoline. Corporate tax
in India is levied on both domestic as well
as foreign companies. Like all individuals
earning income are supposed to pay a tax
on their income, business houses too are
supposed to pay as tax a certain portion
of their income earned. This tax is known
as corporate tax, corporation tax or com-
pany tax. PwC says a resident company is
taxed on its worldwide income. A non-res-
ident company is taxed only on income
that is received in India, or that accrues
or arises, or is deemed to accrue or arise,
in India. The basic corporate income tax
for Indian companies is 30 per cent (25%
for MSMEs) and it is 40 per cent for for-
eign companies. Surcharge, education
cess and secondary and higher education
cess (effective tax rate) vary from 0.9 per
cent to 4.6 per cent for Indian companies
depending on the income of the company.
For foreign companies, it is between 1.2
per cent and 3.26 per cent.
DTE STAFF
T he Finance Minister announced
that the government has action
plans to eliminate kala-azar by 2017
and tuberculosis by 2025, among oth-
ers.
Outlining ambitious healthcare
plans for the country, Finance Minister
Arun Jaitley, in his budget speech, set
targets for elimination of crucial com-
municable diseases. While addressing
the Parliament on February 1, he said
that the government has prepared an
action plan to eliminate kala-azar and
lariasis by 2017, leprosy by 2018 and
measles by 2020. Elimination of tuber-
culosis by 2025 is also targeted.
Similarly, action plan has been pre-
pared to reduce infant mortality rate
from 39 in 2014 to 28 by 2019 and ma-
ternal mortality rate from 167 in 2011-
13 to 100 by 2018-2020. 1.5 lakh Health
Sub Centres will be transformed into
Health and Wellness Centres.
While it is not clear what the gov-
ernments action plan will look like, the
government has, time and again given
targets it nds unable to meet. In Sep-
tember 2014, months after the NDA
government took over, the then Health
Minister Harsh Vardhan claimed that
kala-azar would be eliminated by 2015.
He said that AmBisome (amphotericin
quarter of the worlds tuberculosis
Previous targets have gone unmet cases. The organisation increased its
Other major targets achieved in 2005, PM Narendra Modi
said on January 30. A total of 86,000
estimate of the number of new TB pa-
tients in India, from 2.2 million in 2014
to 2.8 million in 2015. India has been
cases are on record as on April 1, 2014, funding public health programmes to
giving a prevalence rate of 0.68 per control the incidences of TB since the
10,000 populations, as per data from 1990s, but eradication seems distant.
The Leprosy Mission Trust of India. Many cases of TB remain undetected
A World Health Organization making it dicult to cure patients. In-
(WHO) report from 2016 says that In- creasing drug resistance is causing
dia, along with Brazil and Indonesia, complications and adding to the chal-
B) injection, with an ecacy rate of 98 account for 81 per cent of the newly di- lenge of TB control.
per cent, would be provided free of cost agnosed and reported patients globally.
to kala-azar patients. In its pathway to eradicate the stig- Filariasis
Athough there has been a decline in matised disease, the government India also laid down the target to
the number of cases from 25,222 in launched programmes to screen and eliminate lariasis by the year 2015 in
2011 to 6,280 in 2015 hurdles remain detect cases under National Health its National Health Policy of 2002a
in attaining complete eradication. New Mission in 2016. As a result, more than target that was not met. The govern-
cases associated with kala-azar com- 32,000 cases were conrmed and put ment has now claimed to achieve it by
plications are emerging. In January on treatment. In August 2016, India 2017.
2016, about 340 primary kala-azar also developed and launched its own Currently, annual mass drug admin-
cases were reported in Bihar, a state leprosy vaccine, piloting it in ve dis- istration (MDA) is carried out to inter-
which accounts for nearly 76 per cent tricts across Bihar and Gujarat. The rupt transmission of the disease. In
of all cases in the country, Down To rst-of-its-kind leprosy vaccine was de- 2015, the coverage of MDA was 88.96
Earth earlier reported. veloped as patients were showing signs per cent in the eligible population, as
of resistance against the conventional per government data. Micro aria rate
Leprosy multi-drug therapy. has fallen from 1.2 in 2004 to 0.3 in
The programme to eradicate leprosy 2015, claims the Ministry of Health and
was launched way back in 1955. The Tuberculosis Family Welfare.
goal of leprosy elimination as a public Tuberculosis (TB) continues to (Courtesy: Down To Earth;
health problem that its prevalence rate claim many thousands of lives in India http://www.downtoearth.org.in/news
of less than one case per 10,000 popu- each year. A recent estimate by WHO /disease-eradication-targets-will-
lation at the national level, was suggests that India accounts for over a they-be-met--56933)