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promotion of affordable housing, carpet area instead of built
up area of 30 sq m (in four metropolitan cities) and 60 sq m (in
others) will be counted.
• Period of completion of project for claiming deduction under
affordable housing increased from existing three years to five
years.
• For builders for whom constructed buildings are stock-in-trade,
tax on notional rental income will apply after one year of the
end of the year in which completion certificate is received.
• Reduction in the holding period from three years to two
years for computing long-term capital gains from transfer of
immovable property.
• The base year for indexation to be shifted from 1.4.1981
to 1.4.2001 for all classes of assets, including immovable
property.
View:
Higher allocation and infrastructure status to affordable
housing was a key highlight of the budget, which can be
viewed as a positive for the real estate sector. The reduction
in the holding period for calculating long-term capital gains is
also a key positive for the sector. The provision of increasing
the unit area for affordable housing related tax exemptions
could lead to supply of real estate units which may lead to
reduction in real estate prices.
Telecom
Budget Recommendations
• Allocation of
R
100 bn under BharatNet—to make high speed
broadband connectivity on optical fibre available in more than
1,50,000 gram panchayats
• No changes in service tax
View:
The budget was a neutral for the telecom sector. The
announcement on BharatNet was positive for optic fibre
companies.
Rural Economy
Budget Recommendations
• Total allocation of ~
R
1.87 trillion for rural, agricultural and
allied sectors.
• Total allocation of ~
R
587 bn for agricultural and allied sectors.
• Allocation of
R
480 bn for MGNREGA.
•
R
10.0 trillion of agricultural credit targeted during FY18.
• Augmentation of total capex for a dedicated Long Term
Irrigation Fund in NABARD by 100%, to about
R
400 bn with an
initial corpus.
• Dedicated micro irrigation fund to be set up in NABARD to
achieve the ‘per drop more crop’ goal, with an initial corpus of
R
50 bn
• Allocation under Pradhan Mantri Gram Sadak Yojana increased
to
R
190 bn.
• Allocation of
R
90 bn under Prime Minister Fasal Bima Yojana.
• Allocation for rural electrification increased by 25% YoY to
R
106 bn, under the Deendayal Upadhayaya Gram Jyoti Yojna
and Integrated Power Development Schemes.
• Allocation for Pradhan Mantri Awaas Yojana – Gramin increased
to
R
230 bn in FY18, with a target to complete 100 bn houses
by 2019.
• Adhering to the target of achieving ‘100% village electrification’
by May 1, 2018.
Capital Market
Budget Recommendations
• Expert committee to be constituted to study and promote
creation of an operational and legal framework for integration
of spot and derivatives markets in the agricultural sector (for
commodities trading).
• Category I & II foreign portfolio investors (FPIs) exempted from
indirect transfer provision.
• Extension proposed to FIIs and QFIs for availing lower TDS
of 5% in the case of interest payable on their investments
in government securities and rupee denominated corporate
bonds at any time on or after 1st June, 2013, but before the
1st July, 2020 (as against 1st July, 2017 earlier).
• In order to provide tax neutrality, the conversion of preference
share of a company into its equity share shall not be regarded
as transfer.
• Phasing out of deductions under the Rajiv Gandhi Equity
Savings Scheme (RGESS) by providing that no deduction
under section 80CCG shall be allowed from assessment year
2018-19. However, an assessee who has claimed deduction
under this section for assessment year 2017-18 and earlier
assessment years shall be allowed deduction under this
section till the assessment year 2019-20.
View:
We think that the markets were expecting changes in the long-
term and short-term capital gain taxes which didn’t feature in
the budget. This was a big positive from a market perspective.
Focus on a lower fiscal deficit and boosting expenditure are
expected to give a fillip to the capital markets. Phasing out
deductions under RGESS may not impact the market much
given the low benefits availed under the scheme.
T
he
U
nion
B
udget
2017-18
