Finance minister Arun Jaitley
presented the Union Budget 2017 in Parliament on Wednesday. The biggest
highlight in the 2017 budget was the slashing of income tax by half for
individual tax payers, ban on cash transactions over Rs. 3 lakhs and
reduction in holding period to 2 years for capital gains. In this
article, we look at the highlights of the 2017 Budget with respect to an
Entrepreneur or Business Owner in India.
Related : Company formation in India
Income Tax
Income tax
rate has been slashed from 10% to 5% for individuals who earn between
Rs.2.5 lakhs to Rs.5 lakhs. Now after rebates, even a person with a Rs.3
lakhs income could enjoy zero tax liability. Since, proprietorship
firms are taxed similar to individuals, micro enterprises having income
of less than Rs.5 lakh would enjoy the benefits in tax reduction.
Tax Break for Startups
Continuing
to build on the 2016 Budget by extending special support for Startups,
the Finance Minister has increased the period of profit-linked
deductions available to Startups to 3 out of 7 years from the current 3
out of 5 years.
Budget 2016-17
kick-started the process. Several deductions were reduced and sunset
dates put for others along with reductions in tax rates for some
categories of businesses – new manufacturing companies set up after
March 2016 were given the option of being taxed at 25 percent provided
they did not claim any exemption and companies with turnover less than
Rs 5 crore got a 1 percent reduction. However, some new exemptions were
given to start-ups, with certain conditions.
This year, admittedly, Jaitley has not moved forward on withdrawing exemptions even as he reduced corporate tax rates.
But
let’s look at who has got this benefit: the small and medium
enterprises sector. Income tax for companies with an annual turnover of
up to Rs 50 crore has been brought down to 25 percent. A big chunk of
this lot was paying an effective tax rate of 30.26 percent, while the
large companies (turnover above Rs 500 crore) paid an effective tax rate
of 25.9 percent. So Jaitley has in a way done the tax equivalent of
social levelling. Large companies have not got any tax relief this year.
Stimulating Bank Credit
To stimulate bank credit to businesses, various measures have been announced as follows in the 2017 Budget:
- The allowable provision for Non-Performing Asset (NPA) of Banks has been increased from 7.5% to 8.5% to improve the risk appetite of Banks.
- In line with the ‘Indradhanush’ mission, Rs. 10,000 crores has been allocated in the 2017 Budget for recapitalisation of Banks.
- Lending target under Pradhan Mantri Mudra Yojana hase been increased to Rs. 2.44 lakh crores. Priority under the scheme will be given to borrowers from certain backgrounds like Dalits, Tribals, Backward Classes.
Source : www.ajsh.in/blog
