AN ET EDGE INITIATIVE

�he budget of a nation is the most significanteconomic policy tool at its disposal, with itsunfurling a major talking point for all. It

aligns the government's political commitments,policies and goals with the inflow of revenuesand plans of generating additional funds to meetthe country's requirements in a competitiveframework. India's UnionBudget for 2016-17, pre-sented on 29th February2016, has created wide-spread speculation fromthe various stakeholders even as they look to seea significant impact through the anticipated taxreforms and policy initiatives of the Government.

With a view to demystifying the budget, TheEconomic Times Budget Analysis Summit 2016shone a light on the various aspects of the 2016-17 Budget, consequential policy changes and itsimpact on the economy. The summit brought to-

gether the best minds from the industry to dis-cuss as well as outlined the highlights of thebudget and related issues impacting the Indianeconomy through focused panel discussions.With several talking points, this Union Budgetthrew up some great discussions that offered upfood for thought.

� From left to right: Vikas Khemani (President & CEO, Edelweiss Securities), Sushil Muhnot (CMD, Bank of Maharashtra), Moderator: Tarun Ghia (Central Council

Member, ICAI), Nirmal Jain (Chairman, IIFL Holdings) and Gagan Banga (Vice Chairman & Managing Director, Indiabulls Housing Finance)

� From left to right: Dhinal Ashvinbhai Shah (Chairman-Corporate Laws and Corporate Governance Committee, ICAI), D SSaksena (Principal Chief Commissioner of Income Tax, Mumbai),Moderator: Saumil Shah (Partner and Head of Private Equity Tax,

KPMG in India), Manish Vora (CFO, Johnson & Johnson) andRamesh Khaitan (Global Head & VP - Taxation, Lupin) after thepanel discussion on Tax Reforms & Changes in the corporate &personal income tax and the subsequent impact on Investors

LEADERS’ CORNER

One of the reforms that isvery important to under-stand in this finance billis about the availabilityof CENVAT credit to theindustry. Earlier, only aproportion of the overallcredit was available toyou, but now there arethree parts to this and all

credit that is attributable to your taxable servicewill be fully available to you.

ATUL GUPTA, Central Council Member, ICAI

The BFSI sector is affect-ed by what is happeningin several other sectors.All of these sectors willimpact the economythrough the BFSI sector.One of the importantthings which has hap-pened in this budget isthat the economy moves

by having more demand, this budget has givena big fillip to the creation of rural demand.

SUSHIL MUHNOT,CMD, Bank of Maharashtra

In order to revitalize andrecapitalize PSU's andmeet Basel III norms,they need almost Rs.3,20,000 crore of addi-tional capital by 2018-19.The government doesn'twant to put taxpayermoney into this, but islooking at out of the box

solutions, and there are strong indications thatthey are willing to consolidate and even priva-tize PSU banks.

NIRMAL JAIN, Chairman, IIFL Holdings

What the Budget has es-sentially done is makesure that there is noshortage of supply.Historically, the issue inaffordable housing hasbeen that the real estatedevelopers looking tomake affordable homesare small and unorgan-

ized players. Buyers are always uncertain if thehouse will ever be completed. With tax sops be-ing given, there is a very high possibility largedevelopers will all come in, which will bring inreal supply.

GAGAN BANGA, Vice Chairman &Managing Director, Indiabulls Housing Finance

OECD has singled out theIndian economy as thefastest growing economy,the only one projected togrow at no less than 7%amidst a gloomy globalpicture. This has hap-pened on the back ofstrong consumer spend-ing and the improved

economic climate. Thisbudget has inter alia focused on the rural econ-omy, Make in India, agriculture and ease of do-ing business.

TARUN GHIA,Central Council Member, ICAI

The Economic Times Budget Analysis Summit sought to cut through thecomplexity of the Union Budget and help demystify it

�nfrastructure and agriculture. In anutshell, these were the two bigfocus areas for the third budget

unveiled by Finance Minister ArunJaitley as he continued down hisavowed path of fiscal prudence andfocus on growth.

Corporate sops didn't rank high onthe Union Budget's agenda, and iteven laid out a roadmap for rollingthem back in a systemic manner.Instead, its focus on infrastructurehighlighted the forward-looking ap-proach of the government. However,this is not without its own challengesas improved infrastructure will de-mand increased spends, no meanask since it means treading atightrope in order to meetprojected

fiscal targets. Indeed, it is laudable tosee the Finance Minister shun pop-ulist measures and look to shrewdlybalance the troika of key priority ar-eas of investment, growth and jobs.

On the whole, the government isastutely looking to build the plinthon which robust economic growthcan take place. With it, the investor,the consumer, the businessman andthe job-seeking youth can certainlyremain optimistic about their re-spective futures. And that is critical,for it is optimism that keeps theworld going around. It fuels growthand provides a raison d'être, and per-haps more critically,optimism in-evitably ends up being a self-fulfill-ing prophecy of the right kind.

The Union Budget SimplifiedCORE SECTORS': Expectation v/s Reality &Roadmap to Reforms

�he backdrop of the Budget is thefollowing; that we have after 30years a government where the

ruling party has a clear majority. Theway the Budget is present-ed is a proposal of howthere will be spending andhow that spending will befinanced in the next 1 year.Unlike the previous govern-ments, the government canpresent a plan and have itapproved with ease even ifeveryone else in parliamentopposes it. However, theBudget still needs to reflect the con-sensus thinking of the economy andeconomic reforms.

One of the big stories are the ones inagriculture and the rural economy. Thedrought situation has caused rural dis-tress, commodity prices have dropped,and rural purchasing power was not

doing so well. That was one of the bigstories. The other was the one with thebanking sector. NPAs have reached5.1% and will perhaps go higher even

though it is confined to 5-6sectors. Thus, the budgetwas always expected to ad-dress these two issues.

The biggest headlinenews from the Budget wasthat the proposal has kepttwo fiscal promises. One isthat we are going to target afiscal deficit level of 3.9% of

the GDP. We managed tokeep this promise, and secondly, wetargeted this would come down to3.5%. This too was met. These are twogreat headline achievements and thisis a very big message from the budgetthat whatever be the other compul-sions, we are going to take cognizanceof the fiscal deficit situation.

SSuummmmiinngg uupp tthhee BBuuddggeettAjit Ranade (President & Chief Economist, Aditya BirlaGroup) summed up the Union Budget in a nutshell inhis Keynote Address

�eveloped world marketsand emergingmarkets such as

India are grappling withunusual volatility in theinternational economicenvironment, raisingquestions we need toponder upon. However,the fact remains thatIndia stands out thanksto a strong and robust structuralframework and its governance

mechanism. But we need to bemore careful with our re-forms arrangement asthe pressure of thisvolatility may impact ourexternal factors of growthand it may be a hin-drance to the rationalefor implementing thesereforms.

Robust macro-levelpolicies have seen growth acrossall sectors of the economy, and the

need for value-added services byaccountants has taken prime im-portance in the economy. While therole of the accountancy professionis that of watching and ensuring fi-nancial proprietary is well estab-lished, I'm happy to inform that ourprofession in its own way has beencontributing to the upcoming areasof reforms in urban and local bod-ies and even government run enti-ties, thereby reinforcing an elementof accountability.

TThhee iimmppoorrttaannccee ooff tthhee aaccccoouunnttiinngg pprrooffeessssiioonnM Devaraja Reddy (President, ICAI) speaks about the state of the Indianeconomy and the evergreen importance of the accounting profession

�s it always is at thistime of the year,much was expected

of the Union Budget 2016-17, and the BFSI sector inparticular looked on with ea-ger anticipation. However,the Budget has been a bit ofa mixed bag.

During his previousbudget, the HonorableFinance Minister had set out

a number of reforms that areyet to see the light of day,such as the India FinancialCode, Bank Board Bureau,setting up of Public DebtManagement agency, etc.More importantly, it was alsoimportant that the taxregime didn't spring any sur-prises and was fair to taxpayers and big business,thus supporting the govern-

ment's intent of "ease of do-ing business in India".

In this regard, the govern-ment should have imple-mented some of the meas-ures suggested by theIncome Tax SimplificationCommittee such as clarifica-tion on characterisation ofincome on sale of sharesand securities, deferment ofICDS, rationalising the disal-

lowance of expenses in re-lation to the exempt in-come, avoidance of unde-sirable delay in issue ofrefunds, etc.

Thus, it would be fair tosay that the proposals of theFinance Minister has giventhe financial sector a little tocheer, but it is clearly a caseof it being only a step in theright direction.

The impact of the Union Budget on the BFSI SectorThe BFSI sector is connected with everything in the economy, making it imperativeto understand what the budget has in store for this bulwark sector

As some jocularly say,there are only threecertainties known to

humankind; life, death andtaxes. It was thus no sur-prise to see the eyes ofIndia Inc. and the aam jun-ta left riveted by the UnionBudget 2016 as they sought

to understand the impact ofthe budget on their way oflife.

In what came as a reliefto individual tax payers, thetax deduction limit onhousing rent was raisedfrom the erstwhile Rs.24,000 to Rs. 60,000 per

annum under Section 80GG. This will doubtlesslyprovide relief to those wholive in rented houses. Therewas also some succor forthose that have taken outhome loans, with an addi-tional tax relief of Rs 50,000per annum announced on

a loan of Rs. 35 lakh for first-time home buyers. Therewas a proviso though; thehouse cost should not ex-ceed Rs. 50 lakh, and this isclearly a move meant tohelp those that need thistax relief the most.

This Union Budget cer-tainly provides the platformneeded for the economy togrow still further and con-tinue to be a beacon of op-timism in a gloomy globaleconomy.

Change for the greater goodThe experts offered their take on the proposed tax reforms &itssubsequent impact on individualsand businesses

��This year's budget has laid down the roadmapfor taking India to the next level of growth. Wenot only see a clear direction in which the econ-omy is going to be steered, but also milestonesthat we need to cross along the way. The Eco-nomic Times Budget Analysis Summit laid all ofthis threadbare as industry experts shed light onthe transformative factors that will impact the fu-ture economic growth of the nation.

������� ���������������, PRESIDENT, TIMES CONFERENCES LIMITED

One of the things whichcould be improved from apolicy perspective is thatall startups need an ap-proval from the inter-min-isterial committee ofChamber of Commerce.The overall approachshould be to reduce thereasons to approach the

government. Certain broadparameters and guidelines should be laid downto help streamline this process.

Demystifying nuances of the budget

DHINAL ASHVINBHAI SHAH,Chairman- Corporate Laws and CorporateGovernance Committee, ICAI

�he last few years has seen the NarendraModi Government roll out several initia-tives that hold the potential of transform-

ing the Indian economic landscape, such asSkill India', 'Digital India', 'Startup India' and ofcourse, the motherlode of them all, 'Make inIndia'. While many looked towards this budgetas being a major step to transform India, it canbe said that this is a more prudent budget thatsets the stage for bigger, greater things.

Steady progressThe steps taken by Finance Minister Arun

Jaitley are progressive if not overly bold. Takethe tax reforms proposed. In an effort to betransparent and not spook business, the Gov-ernment is moving towards a lower tax regimethat is completely predictable in nature. It thusfollows to reason that while compliant taxpay-ers can expect the full support of the Govern-ment machinery, those evading tax will have toface the brunt of the law.

As hinted earlier by the Finance Minister, theneed to do away with corporate exemptions/deductions being doled out was pursued.However, at the same time he looked to ensurethat businesses, especially those in their mostnascent, formative phase, remain incentivizedand receive a further injection of investments.

A boost for entrepreneursStart-up India is the very personification of

this and the focused approach to liberalisingrules and procedures governing small busi-nesses will surely bear fruit in the long-term.The proposed, easy to understand taxationscheme for businesses with a turnover up toINR 20 million does away with the need toconduct in-depth, needlessly complex tax as-sessments. This hugely streamlines and simpli-

fies the business of taxation, allowing busi-nesses to focus on whatever they do best.

In a nutshell then, Startup India sees theGovernment celebrate India's entrepreneuriallegacy and spirit in no unabashed terms. Withit, the Government will build a strong ecosys-tem for business, foster innovation and givestartups the fillip it needs. Initiatives such asthe announcement that profits for three out ofthe first 5 years for startups set up betweenApril 2016 to March 2019 would be eligible for100% deduction will give much needed cheerfor those beginning their entrepreneurial jour-ney. However, minimum alternate tax wouldapply in such cases.

Balancing multiple challengesEven as India's growth rate gallops along

and shows much cause for optimism, there isstill caution to be headed. India's economicprogress has been achieved despite the globaleconomy being lacklustre, and there was thusthe considerable challenge of tackling the fac-tors that gave rise to global and domesticheadwinds stymieing India's economy. Thebudget had to thus walk a tightrope of pleas-ing those looking on from within and beyondour borders. There was also the not so smallmatter of guiding a capital hungry banking sys-tem loaded with stressed assets through chal-lenging times.

The odds seemed quite insurmountable, thehurdles too many. However, it must be saidthat the Budget has managed to juggle allthese balls in the air without letting the balldrop, in a manner of speaking. It has an-nounced significant steps to revive public in-vestment in roads, railways, agriculture, and in-frastructure. By providing a push to consump-tion-led growth, the

Government hopes to revive private sectorinvestments. To top it all, the significant en-hancement of tax incentives for the housingsector is expected to act as a force multiplierfor downstream sectors. The ripple effect ofthis will be felt in the farthest outreaches of theeconomy.

Making Ease of Business happenA major talking point for corporates the

world over is that an economy growing atmore than 7% consistently should always beable to attract more investments, especiallywhen the global outlook is so dreary. Howev-er, the reason for this lack of optimism is theperceived lack of ease when it comes to con-ducti business in India. Too many hurdles, reg-ulations and bottlenecks served as a deterrentto those looking in from the outside, and theGovernment has set about demonstratingtheir intent and appetite for changing this per-ception.

The Government is pushing through bettergovernance by focusing on making changesand reforms to the processes that turn thegears of business and Government. Putting inplace IT enabled Government processes is amassive plus, for it will remove the impedi-ments that existed in liaising and interfacingwith Government agencies. More to the point,multiple tax reforms have been introducedthat simplify the law and reduce litigation,which will again give businesses much tosmile about.

Initiatives such as these would go a longway towards walking the talk on achieving"ease of doing business" in India. Simplifica-tion and rationalisation are the overarchingthemes that are underlying this restructuring ofthe underlying framework that makes it all

happen and once done it will create a morepositive perception of India's tax and legal en-vironment. Long viewed by businesses as be-ing adversarial, these initiatives hold the po-tential to kickstart India's approach towardsenabling business.

Simplifying the tax rulesIndia's tax regime can, no pun intended, be

quite taxing at times. There are many propos-als put forward by the Tax Administration Re-form Committee that have been approved andimplemented. However, the Finance Ministerhas proposed to accept several recommenda-tions put forth by the Justice Easwar Commit-tee. These proposals were aimed squarely atcutting through the complexity of the Income-tax Act. The Budget puts forth that if non-resi-dents provide alternative documents to a PANCard, a higher withholding tax would

not apply. Additional options have also beenmade available to banking companies and fi-nancial institutions, including non-banking fi-nancial companies, for reversal of input taxcredits on non-taxable services.

This budget also aims to provide somemuch needed relief to the salaried class whilelevying more taxes on the richest of India'spopulation. Those whose income exceeds Rs 1crore will have to pay a higher surcharge of15%, an increase from the previous levels of12%, while an additional 10% tax on grossamount of dividend will be levied on individu-als receiving over Rs 10 lakh by way of divi-dend per annum.

This isn't all as there's also a proposed TDS of1% on purchase of luxury cars over Rs 10 lakhand goods and services exceeding Rs 2 lakh.On the other hand, the limit of deduction onhouse rent paid under section 86GG has beenraised from Rs 24,000 per annum to Rs 60,000per annum, and the ceiling of tax rebate undersection 87 A has been raised to Rs 5000 fromRs 2000. A bit Robin Hood in its approach,these rules will earn the Government more taxfrom those that can make the payment withoutit pinching their pockets too much while givingrelief to the poorer sections of society.

Key facets of the Union BudgetThe Union Budget had within it several interesting provisions worth ruminating upon, andwe round up some of the most interesting talking points from it

� From left to right: Atul Gupta (Central CouncilMember, ICAI), Samir Kanabar (Tax Partner, EY India)

and Ashish Singh (Managing Director & Head of India -Principal Finance Real Estate, Standard Chartered Bank)

during the panel discussion on ‘CORE SECTORS':Expectation v/s Reality & Roadmap to Reforms