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The Union Budget 2016 needs to provide a clear mandate on the status of Dividend Distribution Tax (DDT), a key imperative for the registration of Real Estate Investment Trusts (REITS) facilitating the release of additional liquidity in the housing sector. Accordance of infrastructure status to affordable housing finance will incenticize the construction of more affordable homes through long-term flow of cheaper loans. This, in turn, will provide much-needed impetus for the government’s ‘Housing for All’ program.
Full tax benefits should start for prospective home buyers from the time they start paying interest on their housing loan rather than after possession. This would lead to reduction in rent and ease in EMI burden to some extent. Assessment of property titles and deeds in rural areas should be made easy through initiation of paralegal assessment norms. (Also Read- Union Budget 2016 Live News Updates of Arun Jaitley’s Speech in Parliament: Finance Ministry reaches Lok Sabha)
The coverage of loans should be enhanced from the present value of Rs 12 lakhs under the Credit Risk Guarantee Scheme. The tax exemption limit for interest paid on home loans should be raised from Rs 2 lakhs to Rs 3 lakhs. (Also Read- Budget 2016: What to expect when Arun Jaitley opens Pandora’s Box on Energy sector!)
Approval norms for affordable housing projects are likely to be simplified through a single window mechanism.
There should be clarity on passage of the Real Estate bill in a time bound fashion. This will result in timely construction of housing projects, discourage fund diversion and encourage the flow of organized finance into the real estate sector on the basis of stipulated criteria.
Service tax rate is likely to be hiked from 14.5% to 16% which will make real estate transactions costlier. This should be avoided as it will depress investor sentiments
The ‘Digital India’ initiative should be realized by providing a high bandwidth network across India through the creation of a digital highway framework. Implementing high-speed internet connectivity in Indian cities and villages and digitizing all government services to end red tape and corruption needs to be undertaken on an urgent basis. Creation of new start-up incubation centers should be encouraged by the government by roping in the private sector. Universities and colleges also need to be incentivized through measures like MUDRA benefits to start incubation centers.
Tier 2 and Tier 3 cities should be made the epicenters of entrepreneurial activities by extending tax and excise duty benefits to young start-up entrepreneurs. India Inc needs to engage increasingly in the creation of new-age start-up ventures with an emphasis on vocational training and skill-based development. Incentives in the form of tax sops and infrastructure support should be extended to young, upcoming women entrepreneurs. (Also Read-Union Budget 2016: Here’s what Arun Jailey should do to boost power sector)
Agriculture and allied activities must be encouraged through provision of improved financial and intellectual support. Extra incentives need to be provided to entrepreneurs engaged in the commercial aspects of agricultural research.
The potential of the ‘Make in India’ campaign cannot be converted into tangible gain unless there is a genuine improvement in infrastructural amenities. Fast track efforts need to be put into place by the government towards increased investment in roads, railways, irrigation and power.
Emphasis should be placed on formulation of credible action for helping banks clean their balance sheets of bad loans. This in turn would help them in reworking their credit cycles and help more businesses, especially SMEs, to get credit.
The concerns of the below poverty line (BPL) population needs to be given top priority in the budget. The subsidy regime needs to be streamlined and rationalized for avoiding leakages and ensuring that intended benefits reach targeted beneficiaries.
We expect the government to outline a clear implementation timeline for the passage of the GST. This will help in standardizing VAT on gold in India especially Kerala and will ease movement of businesses, including start-ups across India. Implementation of GST will help in streamlining multiple taxes like Service Tax, VAT, Stamp Duty and various cess payable on purchase of property, into a single/simplified tax. The overall tax burden also needs to be rationalized which can contribute 25%-30% of the property cost.
The budget also needs to make provisions to broaden the tax net. Steps need to be taken to increase PAN registrations which will result in substantial reduction in black money transactions. This will also make the proposed requirement of PAN card for purchases above Rs 1 lakh easy to implement.
Additional tax sops for the middle class should be facilitated to provide them with more disposable income and accentuate their savings. This, in turn, will allow for more inflows into gold savings-the only time tested asset class for Indians.
The gold mining sector needs to be opened up on a priority basis. This will help in reducing the over dependence on gold imports.
No adverse changes should be initiated in Priority Sector Lending guidelines.
80C provision in Income Tax should be extended to Rs 2 lakh from the present Rs 1.5 lakh. The corporate tax should be reduced in the current year. No tax should be levied on income till Rs 3 lakhs per annum. For incomes between Rs 3 Lakh to 10 lakh per annum, the tax rate should be 10%. For those earning between Rs 10 lakh to Rs 20 lakh, the tax rate should be 20%. For earnings exceeding Rs 20 lakh per annum, the tax rate should be 30%.
The National Pension Scheme should be made more investment –friendly by making the encashable corpus tax-free.
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