Operation Clean Money: I-T dept scans 1 crore accounts, 18 lakh people to be questioned

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In a bid to clamp down on unaccounted money funnelled into bank accounts post demonetization, the tax department has scrutinised and matched as many as 1-crore accounts and asked 18 lakh people to explain the source of fund.

The tax department has run big data analytics through more than 1-crore accounts in its data bank and done matching with the taxpayer profile of the holder, a top source said.

As per I-T records, there are 3.65 crore individuals who filed income tax returns. Besides, there are over 7 lakh companies, 9.40 lakh Hindu Undivided Families (HUFs) and 9.18 lakh firms who filed ITRs during Assessment Year 2014-15.

Also, over 25 crore zero-balance Jan Dhan accounts were opened as part of the financial inclusion drive.

Sources said I-T department is scrutinising all categories of accounts and will send out more SMS/emails for suspicious deposits under ‘Operation Clean Money’.

“We have initially matched 1-crore accounts with the profile in our database and identified 18 lakh people with suspicious deposits of over Rs 5 lakh. We will expand the scope of data analytics further and match the profiles with our data base,” the source told.

In order to reduce harassment of taxpayers, the revenue department has mandated only officers in the rank of Assistant Commissioners and above to issue notices in case of unsatisfactory response received about bank deposits post demonetisation.

Under Operation Clean Money launched by the Income Tax department on January 31, the department has sent SMS and emails to 18 lakh people who have made suspicious deposits of Rs 5 lakh and above between November 10 and December 30.

“If the department is convinced with the reply of the assessee, the case will be closed and that will be communicated by SMS and email. But, in case of unsatisfactory reply, the decision to issue notice will be taken by Assistant Commissioner and Commissioner rank officers,” the source said.

The department has used data analytics for comparison of deposits made after the November 8 decision to scrap high-value banknotes with information in its database to identify tax-payers whose cash transactions do not appear to be in line with the tax-paying profile.

It has also asked taxpayers to e-verify the deposits they made in their accounts post demonetisation and respond to queries of any mismatch on the tax e-filing portal.

The source further said people who have received queries from the tax department about their deposits while replying in the e-filing website can also offer their remarks if it was their cash in hand.

“If the cash in hand is as per the balance sheet, no questions will be asked and the case would be closed. We have put enough safeguard to ensure that there is no harassment to tax-payers,” the source added.

The govt has revised 40 tax treaties for information

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India has revised 40 treaties for avoidance of double taxation so that the information exchanged with partner nations on tax matters can also be utilised for other purposes including criminal proceedings, Parliament was informed today.

“Treaty partner countries have been requested to modify the tax treaties, so as to explicitly include provisions that will enable information exchanged for tax purposes to be utilised for other purposes, including criminal proceedings in non-tax matters,” Minister of State for Finance Santosh Kumar Gangwar said in a written reply to Rajya Sabha.

“40 treaties for avoidance of double taxation have been revised accordingly,” he said.

In addition, Gangwar said, India has signed “the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which also similarly facilitates exchange of information”.

These developments enable use of such information by non-tax agencies, subject to agreement by the Competent Authorities of the Requested Contracting State, he said.

Replying to a separate question, Gangwar said the Enforcement Directorate has provisionally attached assets of worth Rs 9,298 crore in 2016.

The minister said that as per estimate over 2,000 tonnes of gold is held by household, trusts and various institutions in India.

Source: http://www.freepressjournal.in//the-govt-has-revised-40-tax-treaties-for-information/1012899

All I-T returns must be filed by March-end of assessment year

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If the income exceeds Rs 5 lakh, a fee of Rs 5,000 shall be payable

With a view to expedite tax assessments, the income tax department proposes to make it mandatory for tax payers to file I-T returns as well as revised returns by March end of the assessment year (AY).

The department, in the memorandum to Finance Bill 2017, has also proposed a fee for delayed filing of income tax returns. In case of people whose total income does not exceed Rs 5 lakh, Rs 1,000 fee would be charged.

If the income exceeds Rs 5 lakh, a fee of Rs 5,000 shall be payable, if the return is filed after July but on or before December 31 of the Assessment Year (AY). A fee of Rs 10,000 shall be payable if ITR is filed after December.

“In order to expedite assessments of the Department, it is critical that the returns for an assessment year also freeze by the end of the assessment year. It is hence proposed to amend the provisions of sub-section (5) of section 139 to provide that the time for the furnishing of revised return shall be available up to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier,” said the memorandum to the Finance Bill 2017.

This effectively means that people filing Income Tax returns have to file it with the department by March end of the assessment year i.E return for fiscal 2017-18 has to be filed by March 2019.

CBDT Chairperson Sushil Chandra said: “Today we have 1 crore people below Rs 2.5 lakh income filing tax returns. So if they are filing ITR, we want them to file returns on time. So now timely filing of ITR is mandatory.”

So far assesses were permitted to file delayed income tax returns one year after the completion of the assessment year.

Source: http://www.business-standard.com/article/economy-policy/all-i-t-returns-must-be-filed-by-march-end-of-assessment-year-117020201119_1.html

US Inc faces uneasy test of doing business

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President Donald Trump vowed to end business as usual in Washington. Global companies are now learning just what that means.

 

What began before his inauguration, with attempts to cajole corporations like Toyota Motor into keeping jobs in the US with critical tweets, is now escalating into a crucial test for business leaders trying to maintain cross-border flows of people and goods that underpin commerce in the 21st century.

 

Trump’s Friday signing of an executive order barring the citizens of seven Muslim-majority countries from entering the US, on the heels of his war of words with Mexico over trade, alarmed executives from big employers including General Electric (GE), Google and Microsoft.

 

GE Chief Executive Officer  (CEO) Jeff Immelt’s response underscored the delicate balance business will have to strike. “We have many employees from the named countries and we do business all over the region,” he said in an internal e-mail. While he called his staff “critical to our success,” he avoided direct criticism of Trump’s policy. GE “will continue to make our voice heard with the new administration and congress and reiterate the importance of this issue,” he said.

 

Trump’s order shut the door to nationals of Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen — including refugees, visiting scholars and even permanent American residents who happened to be abroad for work or holidays.

 

“We would never think this would become any kind of an issue,” Ludwig Willisch, chief executive officer of North American operations at Bayerische Motoren Werke, said at an automotive conference on Saturday. “This country is a melting pot, freedom of speech, everybody gets together and creates this great country. So, we were not prepared for this kind of thing.”

 

In a sharply worded message to staff, Lloyd Blankfein, Goldman Sachs’s long-time head, broke with the Trump administration over its controversial attempt to crack down on immigration. The voicemail, sent on Sunday to the firm’s 34,400 employees, pits Blankfein against an administration stocked with Goldman Sachs Group veterans, including his former No. 2, Gary Cohn, and key Trump advisor Steven Bannon. Blankfein told employees that President Donald Trump’s executive order, parts of which were blocked by federal courts, is at odds with the firm’s long-held policies on workforce diversity and could disrupt Goldman Sachs’s business. “This is not a policy we support,” the chief executive officer said. Other Wall Street firms took a softer approach. JPMorgan Chase & Co’s operating committee, led by CEO Jamie Dimon, said in a memo to staff on Sunday that it’s “grateful for the hard work and sacrifices made to keep our country safe,” and that the country was “strengthened by the rich diversity of the world around us.” It didn’t express an opinion on the policy.

 

Wells Fargo & Co and Morgan Stanley said they were monitoring the ban’s impact on employees.

 

Steve Schwarzman, CEO of the world’s largest private equity firm, Blackstone Group, took a pass when asked about the immigrant order’s effect on his business. “I’m not going to comment on that,” he said at a Catholic Charities luncheon on Sunday, where Governor Andrew Cuomo and Senator Charles Schumer, both New York Democrats, used their remarks to about 150 guests to oppose the order.

 

Optimists suggested he would quietly drop pledges to tear up trade deals and reconsider defense commitments to allies.

 

The about-face was epitomized by Tesla Motors Inc. founder Elon Musk; earlier this week he praised Trump’s nominee for secretary of state, former Exxon Mobil Corp. CEO Rex Tillerson, as a potentially “excellent” pick. On Sunday, Musk asked his 6.89 million Twitter followers to read the immigration order and suggest amendments, which he will then take to Trump’s CEO advisory council to develop a consensus and present to the president.

 

On the other hand, US auto companies, whose home state of Michigan has a large Arab community, have yet to make their views known.

 

Wall Street has also largely stayed out of the fray. At some of its biggest banks, executives said they were struggling to understand whether the order will ultimately apply to employees who work in the US with green cards or legal work permits. If it doesn’t hit visa holders, few major companies’ employees will be affected, according to one executive who asked not to be identified because he wasn’t authorized to comment. On Sunday, JPMorgan said it was working to assist affected employees.

 

Starbucks Corp. CEO Howard Schultz said the executive order left him with “deep concern, a heavy heart and a resolute promise.” The coffee chain will redouble efforts to hire as many as 10,000 refugees over five years in 75 countries, he wrote in a note to employees Sunday.

 

Reaction to the ban was sharpest from the technology industry, with Twitter awash in reminders that Apple Inc. co-founder Steve Jobs was the son of a Syrian immigrant. Among the first to speak out was Google CEO Sundar Pichai, himself an immigrant from India, who called the policy “painful.” Another India-born CEO, Microsoft Corp.’s Satya Nadella, took to LinkedIn to highlight “the positive impact that immigration has on our company, for the country, for the world.”

 

Trump should expect sustained challenges from the tech industry in particular, said Ian Bremmer, CEO of political consultancy Eurasia Group, because it differs significantly with him on issues from net neutrality to immigration. “While most every CEO wants to just ‘get back to business’ after Trump’s election, that’s going to prove much harder” for technology leaders, he said. “There’s going to be a fight.”

 

Compounding business leaders’ unease was the order’s confused implementation, which included unclear directives on how border agents should treat lawful permanent residents, and contradictory statements about how it would affect those who hold passports from two countries — for example, a dual citizen of Iran and the UK

 

For now, lawyers are advising such individuals not to travel to the US, or to stay put if they already live there. The new rules came into force with no transition period, leaving carriers like Emirates and American Airlines Group Inc. unsure what to do with passengers booked to fly to US airports, or already in the air.

 

“We are committed to protecting our people and will provide whatever support is necessary to protect them and their families,” Michael Roth, CEO of advertising firm Interpublic Group of Cos., wrote in an e-mail.

 

The most important business stories of the day. Get Bloomberg’s daily newsletter. The move’s implications extended far beyond the business world. On Sunday the British long-distance runner Mo Farah, a four-time Olympic gold medalist who
was born in Somalia, said he may not be able to return to Oregon, where he trains and lives with his children. The Academy of Motion Picture Arts and

 

Sciences said Oscar-winning Iranian director Asghar Farhadi may be unable to attend this year’s awards, for which his film “The Salesman” has been nominated.

 

Trump’s order has “significant commercial implications,” said Allyson Stewart-Allen, CEO of International Marketing Partners in London, who advises European companies on doing business in the US “What do you do with an employee on an executive salary who’s sitting in an airport lounge kind of like Tom Hanks in ‘The Terminal’?”

 

Source: http://www.business-standard.com/article/international/us-inc-faces-uneasy-test-of-doing-business-117013100003_1.html

Benami Act comes into play: I-T issues 87 notices; attaches assets worth crores

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The Income Tax department said it has issued 87 notices and attached bank deposits worth crores in 42 cases nationwide.
Initiating a stringent action against black money holders post notes ban, the Income Tax department on Monday said it has issued 87 notices and attached bank deposits worth crores in 42 cases nationwide under the newly enforced Benami Transactions Act which attracts a heavy penalty and rigorous jail term of a maximum 7 years.Post the demonetisation order of the government on November 8 last year, the department had carried out public advertisements and had warned people against depositing their unaccounted old currency in someone else’s bank account saying such an act would attract criminal charges under the Benami Property Transactions Act, 1988, applicable on both movable and immovable property, that has been enforced from November 1, 2016.“After in-depth investigations, the I-T department has issued 87 notices under section 24 of the said Act (notice and attachment of property involved in benami transaction). A total of 42 properties, largely monies worth crores in bank accounts and an immovable property, of benamidars have been attached,” officials said citing an analysis report, also accessed by PTI.The I-T department is the nodal department to enforce the said Act in the country.They said the taxman has issued numerous summons under the Benami Transactions Act and is in the process of issuing more.

The decision, they said, to slap the stringent provisions of the Benami Transactions Act was taken after analysing serious cases where the illegalities were blatant and suspect cash was deposited in either benami accounts or Jan Dhan or dormant accounts.

The taxman had initiated a nationwide operation to identify suspect bank accounts where huge cash deposits have been made post November 8 when the government demonetised the Rs 500 and Rs 1000 currency notes.

Officials said the Act empowers the taxman to confiscate and prosecute both the depositor and the person whose illegal money he or she has “adjusted” in their account.

“Such an arrangement where a person deposits old currency of Rs 500 and Rs 1000 in the bank account of another person with an understanding that the account holder shall return his money in new currency, the transaction shall be regarded as benami transaction under the said Act.

“The person who deposits old currency in the bank account shall be treated as beneficial owner and the person in whose bank account the old currency has been deposited shall be categorised under this law as a benamidar,” a senior official had explained earlier.

Source: http://www.hindustantimes.com/india-news/benami-act-comes-into-play-i-t-issues-87-notices-attaches-assets-worth-crores/story-d5idzriuNZtuuRQ0xyghQP.html

Here are the highlights of Union Budget 2017

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Finance Minister Arun Jaitley presented the Union Budget 2017, his fourth annual budget, today. Here are the highlights of this year’s budget:

►Income Tax rate cut to 5 pc for individuals having income between Rs 2.5 lakh to Rs 5 lakh

►10 pc surcharge on individual income above Rs 50 lakh and upto Rs 1 cr to make up for Rs 15,000 cr loss of due to cut in personal I-T rate

►15 pc surcharge on income above Rs 1 cr to continue

►Of 3.7 cr individuals who filed tax returns in 2015-16, 99 lakh showed income below exemption limit

►Direct tax collection not commensurate with income and expenditure pattern

►Revenue deficit reduced to 2.1 pc from 2.3 pc for 2016-17

►Govt pegs fiscal deficit target at 3.2 per cent for 2017-18 and 3 per cent for next year.

► Monetary policy to be expansionary in major economies

► More steps will be taken to benefit farmers and the weaker sections; budget being presented during weak global economy

►Pace of remonetisation has picked up; demonetisation effects will not spill over to next year

►Functional autonomy of the railways to be maintained

►Demonetisation will help in transfer of resources from tax evaders to government:

►Merger of Railways Budget with General Budget brings focus on a multi-modal approach for development of railways, highways and inland water transport

►Only transient impact on economy due to demonetisation; long term benefit include higher GDP growth and tax revenue

►GDP will be bigger, cleaner after demonetisation

►Effects of demonetisation not expected to spill over to the next year, says Finance Minister

►Govt took two tectonic policy initiatives – passage of GST Bill and demonetisation

►Demonetisation was a continuation of series of measures taken by govt in 2 yrs; it is bold and decisive measure

►We are seen as engine of global growth; IMF sees India to grow fastest in major economies

►36 pc increase in FDI flow; forex reserves at USD 361 billion in January enough to cover 12 months needs

►CAD declined from 1 pc last year to 0.3 pc in first half of current fiscal: FM

►India has emerged as bright spot in the world: FM

►Uncertainty around commodity prices especially oil to have impact on emerging economies: FM

►Double digit inflation has been controlled; sluggish growth replaced by high growth; war on blackmoney launched: FM

►We have moved from discretionary based administration to policy based administration: FM Jaitley

► Agricultural sector is expected to grow at 4.1 per cent this fiscal, says Jaitley

►Demonetisation was a bold and decisive strike in a series of measures to arrive at a new norm of bigger, cleaner and real GDP

►Committed to double farm income in 5 years

►Plan, non-plan classification of expenditure done away with in the Budget for 2017-18 to give a holistic picture

►Mini labs by qualified local entrepreneurs to be set up for soil testing in all 648 krishi vigyan kendras in the country

►Budget presentation advanced to help begin implementation of schemes before onset of monsoon

►We will continue the process of economic reform for the benfit of poor.

►Spend more in rural areas, infra, poverty alleviation, while maintaining fiscal prudence as guiding principle of Budget

►Our agenda for next year is to transform, energise and clean India

►World Bank expects GDP growth rate at 7.6 pc in FY18 and 7.8 pc in FY19

►Allocation under MNREGA increased to 48,000 crore from Rs 38,500 crore. This is highest ever allocation

►Rs 9,000 cr higher allocation for payment of sugarcane arrears

►Target of agriculture credit fixed at Rs 10 lakh cr in 2017-18

►Tax administration honouring the honest is one of the 10 pillars of Budget 2017-18

►National Testing agency to conduct all examinations in higher education, freeing CBSE and other agencies

►133-km road per day constructred under Pradhan Mantri Gram Sadak Yojana as against 73-km in 2011-14

►Govt to set up dairy processing fund of Rs 8,000 crore over three years with initial corpus of Rs 2,000 crore

►1 cr households to be brought out of poverty under Antodya Scheme

►Participation of women in MNREGA increased to 55 pc from 45 pc in past

►Modern law on contract farming will be drafted and circulated to states

►Dedicated micro-irrigation fund to be created with a corpus of Rs 5000 crore

►Market reforms will be undertaken, states will be asked to denotify perishables from Essential Commodities Act

►Space technology to be used for monitoring MNREGA implementation

►Sanitation coverage in villages has increased from 42 pc in Oct 2016 to 60 pc, a rise of 18 pc, says FM

►We propose to provide safe drinking water to 28,000 arsenic and fluoride affected habitations

►To construct one crore houses by 2019 for homeless. PM Awas Yojana allocation raised from Rs 15,000 cr to Rs 23,000 cr

►100 pc electrification of villages to be completed by May 2018

►27,000 cr on to be spend on PMGSY; 1 cr houses to be completed by 2017-18 for houseless

►PM Kaushal Kendras will be extended to 600 districts; 100 international skill centres to be opened to help people get jobs abroad

►The allocation for rural agri and allied sector in 2017-18 is record Rs 1,81,223 crore

►In higher education, we will undertake reforms in UGC, give autonomy to colleges and institutions

►A system of annual learning outcome in schools to be introduced; innovation fund for secondary education to be set up

►Two new AIIMS to be set up Jharkhand and Gujarat

►New rules regarding medical devices will be devised to reduce their cost

► 1.5 lakh health sub centres to be converted to Health Wellness Centres

►National Housing Bank will refinance indiviual loans worth Rs 20,000 crore in 2017-18

►Rs 500 cr allocated to set up Mahila Shakti Kendras; Allocation raised from Rs 1.56 lakh cr to Rs 1.84 lakh cr for women & child welfare.

►Capital and development expenditure pegged at Rs 1.31 lakh cr for railways in 2017-18 from Budget

►Allocation for SCs increased from Rs 38,833 cr to Rs 52,393 cr, a rise of 35 per cent

►35 pc increase in allocation for SC to Rs 52,393 cr

►For senior citizens, Aadhaar based health cards will be issued

►Model Shops and Establishment Bill to open up additional opportunities for employment of women

► Select airports in tier-II cities to be taken up for operations, development on PPP mode

►New metro rail policy to be unveiled

►Railway tariffs to be fixed on the basis of cost, social obligation and competition

►Service charge on e-tickets booked through IRCTC will be withdrawn

►Delhi and Jaipur to have solid waste management plants and five more to be set up later

►Government proposes Coach Mitra facility to redress grievances related to rail coaches

►500 stations will be differently abled by providing lifts and escalators

►Unmanned railway level crossings to be eliminated by 2020

►Railway line of 3,500 km will be commissioned in 2017-18 as against 2,800 km in 2016-17

►Total allocation for rural, agri and allied sectors for 2017-18 is a record Rs 1,87,223 cr, up 24 per cent from last year

►Rs 1 lakh cr corpus for railway safety fund over five years

►A scheme for senior citizens to ensure 8 per cent guaranteed returns

►Dedicated micro-irrigation fund to be set up by NABARD to achieve mission of Per Drop, More Crop

►Digi Gaon will be launched to promote tele-medicine and education

►Crude oil strategic reserves to be set up in Odisha and Rajasthan apart from 3 already constructed

►Coverage of Fasal Bima Yojana to go up from 30 pc of cropped area to 40 pc in 2017-18 and 50 per cent next year

►For transport sector, including railways, road and shipping, government provides Rs 2.41 lakh crore

►Allocation of Rs 10,000 cr for Bharat Net project for providing high-speed broadband in FY18

►Allocation for national highways stepped up to Rs 64,000 cr from Rs 57,676 cr

►Budget allocation for highways stepped up to Rs 64,000 crore in FY18 from Rs 57,676 crore

►Dispute resolution in infrastructure projects in PPP mode will be institutionalised

►Rs 2,74,114 crore allocated for defence expenditure, excluding pension; This includes Rs 86,000 crore for defence capital

►Govt to further liberalise FDI policy

►Over 90 per cent of FDI proposls are now through automatic route

►FIPB will be abolished

►Trade Infrastructure Export Scheme to be launched in 2017-18; total allocation for infra at record Rs 3.96 lakh cr

►Second phase of solar power development to be taken up with an aim of generating 20,000 MW

►After demonetisation on Nov 8 last year, deposit of between Rs 2 lakh and Rs 80 lakh made in 1.09 cr bank accounts at an average of Rs 5.03 lakh till Dec 30

►More funds beyond Rs 10,000 cr for recapitalisation of banks will be provided if needed

►The shares of railway CPSCs like IRCTC and IRFC to be listed on various stock exchanges

►We are largely a tax non-compliant society

►New ETF with diverse stocks will be launched in 2017-18

►Of 76 lakh individuals who reported income of over Rs 5 lakh, 56 lakh are salaried

►Integrated public sector oil major to be created to match global giants

►Govt will amend the Multi-state Cooperative Act to protect the poor and gullible investors

►Urgent need to protect poor from chit fund schemes, draft bill placed in public domain

►Computer emergency response team to be set for cyber security of financial sector

► Govt to introduce two new schemes to promote BHIM App – referal bonus for users and cash back for traders

►Govt doubles distribution target under Mudra Yojana to Rs 2.44 lakh crore for 2017-18

►Over Rs 80 lakh deposits in 1.48 lakh cr at an average of Rs 3.31 cr per account

►Customs duty on LNG halved to 2.5 pc

►FPI to be exempt from indirect transfer provisions

►Political parties can receive donations in cheque, electronic mode; electoral bonds to be issued by RBI

►Maximum amount of cash donation a political party can receive will be Rs 2000 from any one source as part of effort to clean political funding

►Capital expenditure stepped up by 25.4 pc in FY18 over previous year

►Total expenditure in FY18 at Rs 21.47 lakh cr

►Duty exempted on various POS machines and iris readers to encourage digital payments

►Rs 7,200 cr revenue loss due to reduction in tax on smaller companies

►Govt mulling introduction of legal changes to confiscate assets of offenders, including economic offenders, who flee the country

►Govt to set up a web-based interactive platform for defence pensioners

►Head post offices to issue passports

►Govt considering option to amend Negotiable Instruments Act to ensure that holders of dishonoured cheques get payment

►FRBM review committee has recommended 60 pc debt to GDP ratio; 0.5 pc of GDP deviation from stipulated fiscal deficit targets

►Payment regulatory board to be set up in RBI to regulate electronic payments, replacing Board for Regulation and Supervision in Payments and Settlements System

►3 yr period for long-term capital gains tax on immovable property reduced to 2 years; base year indexation shifted from 1.4.1981 to 1.4.2001

►A proposal to receive all government receipts beyond a certain threshold through e-modes under consideration

►GST implementation to bring more taxes to Centre and states

►No transaction above Rs 3 lakh in cash will be allowed as suggested by SIT

►Customs duty on LNG to be reduced from 5 pc to 2.5 pc

►To make MSME companies more viable, govt proposes to reduce IT tax with annual turn over of Rs 50 core up to 25 per cent

►I-T for smaller cos with turnover of upto Rs 50 cr up to 25 per cent

►Not possible to remove MAT levied on advance tax for now; carry forward allowed for 15 yrs instead of 10 yrs

►Relaxation in norms for Start Ups for getting tax exemption

►Capital gains tax exempted for the land pooled to build new capital of Andhra Pradesh effective from 2.6.2014

►Increase in personal tax collections is 34.8 per cent in last three quarters. Demonetisation has played a role

►17 pc growth in direct tax revenue for the second year in a row in 2016-17

►As against 4.2 crore people working in organised sector, only 1.74 crore individuals filed income tax returns

►Solar tempered glass used for manufacture of solar cells/panels exempted from customs duty

►Import duty on aluminium ores and concentrates raised to 30 pc from nil presently

►Actual revenue loss on tax proposals Rs 22,700 cr; gain from additional resource mobilisation is Rs 2,700 cr

►Net revenue loss from direct tax proposals to be about Rs 20,000 cr

►Excise duty on pan masala containing tobacco (Gutkha) raised to 12 pc from 10 pc

►Excise duty on non-filter cigarettes of length not exceeding 65 mm raised to Rs 311 per thousand from Rs 215 per thousand

 

Source:http://economictimes.indiatimes.com/articleshow/56907865.cms

Union Budget 2017: Economic Survey says reforms to power India potential growth

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India’s economy could grow at 6.5-6.75% in the current financial year and might not gather significant momentum next year but that doesn’t warrant a fiscal/monetary easing, according to Economic Survey 2016-17 tabled in Parliament on Monday. Projecting a 0.25-0.5% demonetisation-induced reduction in the FY17 gross domestic product (GDP) growth relative to the 7% annual expansion the country would have otherwise reported, the survey cautiously estimated FY18 growth within a broad low-equilibrium range of 6.75-7.5%.

A clutch of states in India have suffered from an “aid curse” — that is, a negative effect on redistributive resource transfers on fiscal effort and governance quality — the survey noted and invited a debate on universal basic income (UBI) for households in these states.

Direct UBI transfers to the households could be a more efficient way to reduce poverty, cementing the recent gains in redistributive efficiency through the JAM (Jan Dhan, Aadhaar and mobile) platform, the authors of the survey felt, but they cautioned against UBI implementation until the tax-GDP ratio showed tangible rise.

“There is a big potential to improve the weak targeting of current (anti-poverty) schemes,” chief economic adviser Arvind Subramanian said, amid rumours that Wednesday’s Union Budget might launch a pilot UBI.

According to the survey, the short-term effect of the note ban on the economy will be less adverse than many others predicted: The International Monetary Fund (IMF), for instance, saw a 1 percentage point growth reduction in FY17; the Reserve Bank of India had pegged a 0.5% loss in growth. The IMF, Subramanian said, relied on an “over-optimistic baseline”.

Given that growth was 7.2% in the first half of this fiscal and the survey assumption is against the baseline scenario of around 7% FY17 growth, the forecast is that second-half growth, at worst, could be around 6%.

This is still a bit more optimistic than what many independent analysts prognosticated — Morgan Stanley Research, for instance, put H2 FY17 growth at 5.5%.

However, the survey appreciated the limitation of capturing informal activity in the national income data, suggesting the pain of note recall might have been more severe. A set of structural reforms could take the economy towards the potential real GDP growth of 8-10%.

As for FY18, exports, which are “recovering”, based on an uptick in the global economy — the IMF has projected global growth to rise to 3.4% in 2017 from 3.1% in 2016 — would be a significant growth driver, the survey said, but admitted that the outlook for private consumption was less clear (oil prices are a potential drag while low interest rates might help a smart recovery in spending on housing and consumer durables). It also said candidly that given the sticky TBS or twin balance sheet problem, private investment was unlikely to recover from the FY17 level (fixed investment, according to the central statistics office, declined 0.2% this fiscal and investment as a share of GDP is now seen at 29%, down 5 percentage points from FY12). Demand-driven remonetisation, a push to digital payments using incentives, bringing land and real estate into the goods and services tax (GST) net, lowering tax rates and stamp duties and improving the tax system would help take growth back to trend in FY18, it said. However, the threat of trade tensions among major countries prevailed, especially given the Trump administration’s proclivity to step into a protectionist groove.

Giving the fiscal outlook for the Centre, the survey warned that the increase in tax-GDP ratio of about 0.5 percentage point each in the last two years owing to the oil windfall would disappear in FY18: “Excise-related taxes will decline by about 0.1 percentage point of GDP, a swing of about 0.6 percentage points relative to FY17,” it said. According to Crisil Research, about a third of the likely excise revenue of Rs 2.3 lakh crore in FY17 could be ascribed to excise duty increases on petroleum products. There would be windfalls from cessation of the RBI’s liability with respect to demonetised banknotes not returned to banks and the new income disclosure scheme PMGKY. Revenue potential from GST could, however, take some some time to be fully exploited.

While a committee on fiscal consolidation is believed to have recommended some well-defined escape clauses to provide the fiscal support to consumption and investment in the near term, the survey noted that primary balance (obtained after netting interest payments from the fiscal deficit) needed more attention. “The vulnerability is the country’s primary deficit… Put simply, India’s government is not collecting enough revenue to cover its running costs, let alone the interest on its debt obligations.” Although the survey noted that there was nothing extraordinary about this (other emerging market economies too run primary deficits), given India’s rapid rates of growth, its primary deficit should have been much lower than others.

This is still a bit more optimistic than what many independent analysts prognosticated — Morgan Stanley Research, for instance, put H2 FY17 growth at 5.5%.

However, the survey appreciated the limitation of capturing informal activity in the national income data, suggesting the pain of note recall might have been more severe. A set of structural reforms could take the economy towards the potential real GDP growth of 8-10%.

As for FY18, exports, which are “recovering”, based on an uptick in the global economy — the IMF has projected global growth to rise to 3.4% in 2017 from 3.1% in 2016 — would be a significant growth driver, the survey said, but admitted that the outlook for private consumption was less clear (oil prices are a potential drag while low interest rates might help a smart recovery in spending on housing and consumer durables). It also said candidly that given the sticky TBS or twin balance sheet problem, private investment was unlikely to recover from the FY17 level (fixed investment, according to the central statistics office, declined 0.2% this fiscal and investment as a share of GDP is now seen at 29%, down 5 percentage points from FY12). Demand-driven remonetisation, a push to digital payments using incentives, bringing land and real estate into the goods and services tax (GST) net, lowering tax rates and stamp duties and improving the tax system would help take growth back to trend in FY18, it said. However, the threat of trade tensions among major countries prevailed, especially given the Trump administration’s proclivity to step into a protectionist groove.

Giving the fiscal outlook for the Centre, the survey warned that the increase in tax-GDP ratio of about 0.5 percentage point each in the last two years owing to the oil windfall would disappear in FY18: “Excise-related taxes will decline by about 0.1 percentage point of GDP, a swing of about 0.6 percentage points relative to FY17,” it said. According to Crisil Research, about a third of the likely excise revenue of Rs 2.3 lakh crore in FY17 could be ascribed to excise duty increases on petroleum products. There would be windfalls from cessation of the RBI’s liability with respect to demonetised banknotes not returned to banks and the new income disclosure scheme PMGKY. Revenue potential from GST could, however, take some some time to be fully exploited.

While a committee on fiscal consolidation is believed to have recommended some well-defined escape clauses to provide the fiscal support to consumption and investment in the near term, the survey noted that primary balance (obtained after netting interest payments from the fiscal deficit) needed more attention. “The vulnerability is the country’s primary deficit… Put simply, India’s government is not collecting enough revenue to cover its running costs, let alone the interest on its debt obligations.” Although the survey noted that there was nothing extraordinary about this (other emerging market economies too run primary deficits), given India’s rapid rates of growth, its primary deficit should have been much lower than others.

Source: http://www.financialexpress.com/budget/economic-survey-2017/union-budget-2017-economic-survey-says-reforms-to-power-india-potential-growth/531664/