Category: Investment Management

Budget 2016


  1. Growth of the Indian Economy accelerated to 7.6% in 2015-16 despite unfavourable global conditions and two consecutive years of shortfall in monsoon by 13%.
  2. The government continues with fiscal prudence by retaining fiscal deficit at 3.9% in 2015-16. It aims to achieve 3.5% in 2016-17 and 3% in 2017-18. Revenue deficit improved from 2.8% to 2.5% in 2015-16
  3. On the expenditure side, it will do away with the classification of plan / non-plan from 2017-18, since the category heads were not meaningful to capital expenditure growth.
  4. AADHAR will get a statutory backing to ensure that all government benefits reach the deserving people
  5. Reforms for foreign investment- Upto 49% in insurance and pension under automatic route.
  6. Financial sector reforms – Allocation of Rs. 25,000 crore towards recapitalisation of Public Sector Banks.
  7. Tax proposals No change in rate of personal income tax. Additional tax at the rate of 10% of gross amount of dividend declared by companies will be payable by the recipients (individuals, HUFs and firms) receiving dividend in excess of Rs. 10 lakh per annumSurcharge to be raised from 12% to 15% on persons, other than companies, firms and cooperative societies having income above Rs. 1crore.  Securities Transaction tax in case of ‘Options’ is proposed to be increased from 0.017% to 0.050%.  Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016. Proceeds would be exclusively used for financing initiatives for improvement of agriculture and welfare of farmers. This would make Service tax  @ 15% effective June 2016.
  8. Dividend Distribution tax on REITs removed– Distribution made out of income of SPV to REITs and INVITs having specified shareholding will not be subjected to Dividend Distribution Tax, in respect of dividend distributed after the specified date.
  9. Moving towards a Pension friendly Society -Withdrawal up to 40% of corpus on retirement to be tax exempt for NPS and EPF Contributions made effective 1 April 2016. This is certainly a dampener for those creating their retirement kitty through EPF, NPS and Super annuation. Those contributing to Voluntary Provident Fund scheme in their organisation should go easy on the same! The annuity fund, if availed by the legal heir will also be tax exempt.
  10. Deduction u/s 80GG raised from Rs. 24,000 to Rs. 60,000 – People who do not own a home and also cannot claim HRA deduction (those who are self employed) can claim a tax deduction of Rs 60,000 now from their income.

Equity Markets

The equity markets which were trading flat in the beginning of the day, reacted negatively post the budget speech as the finance minister adopted a cautious approach, against expectation of big bang reforms.

Though the broader indices recovered the fall, they closed marginally negative. PSU banks ended lower as recapitalization at Rs. 250bn for FY17 is below market expectation.

 – Dilshad Billimoria

Director- Dilzer Consultants Pvt Ltd

1 March 2016