ü 10 Key Recommendations for Budget 2016-17: Rationalizing Direct Taxes, Sops for Start Ups, Focus on Farm Sector and key structural reforms in Real Estate, Labour and MSMEs
ü Financial savings to be promoted through Tax Incentives
New Delhi, January 12, 2016: With GDP growth of 7.3%, in 2014-15, India’s economy is firmly on the path of economic revival. India is the brightest spot on the global map, with GDP Growth expected to rise to 7.9% in 2017-18. India is well positioned to withstand near-term global headwinds and the high volatility in global financial markets due to reduced external vulnerabilities, a strengthening domestic business and investment cycle, and a supportive policy environment. This economic resilience, in the wake of the financial turmoil in China, is a sense of immense confidence and conviction for Indian businesses.
Speaking during the Hon’ble Finance Minister’s Pre Budget Consultation with Bankers, Mr. Rana Kapoor, MD & CEO, YES BANK said, “For 2016, I believe India’s top priorities should include passage of GST, rationalizing direct taxes further, tax sops for Start Ups and introducing key structural reforms in terms of real estate, labor and MSMEs. The farm sector too needs significant focus on irrigation and technological support. While micro measures will help, the Banking & Finance sector also needs the next generation of reforms. I am hopeful that economic clairvoyance will triumph over political myopia in 2016 and GST will see the light of the day. The Bankruptcy Bill will also turn out to be a game changer for spurring economic activity and confidence. This Budget presents a Golden Chance to usher in Fiscal Measures to make 2016 India’s Year”
Following is the Summary of 10 Key Recommendations made by Mr. Rana Kapoor, MD & CEO, YES BANK, to the Finance Minister for consideration in the Union Budget 2016-17:
1. Enhance SAVINGS: Adopt structural GEAR (Growth, Efficiency, Attractiveness, Reach) approach, recommended by YES Institute, as elaborated below, to augment savings rate in the economy:
ü Enhance economic GROWTH to increase per capita incomes: Increase disposable incomes by relaxing personal income tax slabs (to INR 5 lakh Vs. INR 2.5 lakh ONE TIME CORRECTION and thereafter inflation-linked indexation every three years)
ü Focus on EFFICIENCY in financial transactions: Use of plastic currency and e-transactions (via internet/mobile) to improve ease of transactions and enhance saving propensity
ü Make financial savings ATTRACTIVE: Financial savings must be promoted by improving tax incentives (enhancing 80C limits to INR 3,00,000 from current level of INR 1,50,000), increasing their inflation adjusted post tax returns (reduce lock in period eligible for tax rebate to 1 year from 5 years & enhancing threshold for mandatory TDS on interest income to INR 50,000 a year from INR 10,000 currently) & also by introducing innovative products & diversification (level tax treatment for NPS & EPF)
ü Expand financial REACH: Converting India Post into Postal Bank of India, a full-fledged Payments and SAVINGS bank, to leverage its rural penetration & reach.
2. Investment Revival: It is mission critical to ensure significant investment pick up in 2016, by prioritizing project clearances and providingtargeted measures to revive Farm and Infra sectors.
ü IPO Indian Railways star eCommerce entity IRCTC which will be valued at least USD 5-6 billion today, to free up funds for significant Govt. Spending.
ü Revitalize PSU banks on priority basis by providing capital and sustainable short-medium term solutions to asset quality by addressing underlying issues.
ü Large cash-rich PSEs should be allowed to buy out projects via transparent auctioning
ü Explore Land Pooling model for PPP & SEZ projects
ü Incentivize takeout financing for infra projects & float Smart City Municipal Bonds
ü Grant infrastructure status to hotels with capital investment of INR 25 Crores (presently very high at INR 200 Crores), also for Education institutions and Hospitals for boosting these sectors as well as for Smart City acceleration
3. Specific Measures to Revive Farm Sector: The Farm and allied sectors have borne the brunt of consequent droughts and there is an urgent need for short-medium term measures:
ü There must be significant enhancement to existing schemes such as Pradhan Mantri Krishi Sinchai Yojana, Rashtriya Krishi Vikas Yojana & Pradhan Mantri Gram Sadak Yojana to boost the overall rural economy.
ü The micro-irrigation sector should be given infrastructure lending status.
ü Payments made by banks to all service providers working for Financial Inclusion initiatives (under PMJDY and/or other FI services) should be exempt from service tax liability irrespective of location and/or area of operation of the service provider and customer served.
4. Export Promotion: Extend the GIFT City concept to MUMBAI and possibly NOIDA
ü Encourage States to form Export Promotion Centers with focussed PRODUCT appellation
ü Exempt SEZs from application of MAT and DDT (pending for very long)
5. IBU Tax Treatment: Exempt IBU from Withholding Tax; Grant clarity over exemption from TDS for any income booked in IBUs in the wake of 5-year tax holiday granted, extend the 5-year tax holiday to 10 years
6. Affordable Housing (AH) requires thrust for Growth: Given the Government’s aim to provide housing to all citizens by year 2022, following efforts are required to eliminate the estimated deficit of 11 Crore housing units:
ü Grant infrastructure status to the housing sector, especially Affordable Housing (AH) to open additional funding avenues, in addition to direct tax benefits and easy finance availability
ü Place AH under PSL classification, not to be bunched up with real estate for overall credit cap bulk limits
ü Create a Zoning Process: Demarcate land for AH development, designate areas where housing-friendly zone rules apply with higher FAR/FSI, relax density norms/TDR for effective use of land
7. Road Sector: Removing impediments
ü Reduce time for 100% exit after COD for road developers from 2 years to 1 year, in order to facilitate unlocking of value of road projects by developers, without imposing any condition or reinvestment requirement
ü Lay out a clear policy for premium re-schedulement: At present, while NHAI has already decided on deferment of premium for projects which are under stress, the selection of such projects is discretionary and therefore warrants a standardized approach for expedient clearances
ü Adopt a different mechanism to acquire land for road projects: Set up a separate wing within NHAI to work on land acquisition in consultation with States. NHAI should award projects only when substantial land parcels have been acquired.
8. Specific Measures to Boost Start Up India: To complement the Govt’s emphasis on Entrepreneurship, there is a need to reduce direct and indirect taxes on all Start Ups to improve their cashflows. Additionally, there is a need to formalize and streamline the processing of crowd-funding to boost Indian Start Ups.
ü The Govt. should also establish an Innovation District in Lower Parel-Mahalakshmi area in Mumbai to nurture and boost Design & Innovation; and India’s equivalent of Silicon Valley in MUMBAI/MMR, PUNE and NASIK triangular belt
9. Sops for Renewable & Green Energy Sector: To actualize India’s ambition of mainstreaming solar and wind energy, there is an urgent need for tax sops for the sector to go up. Further, there must be a thrust on Rooftop Solar projects via tax incentives and raw material subsidies.
10. Serviced from India: Adopt a two-pronged strategy to leverage India’s strength in services by a) reducing tax distortions, b) allowing extensive foreign investment and optimizing India the Services hub of the world
ü Remove customs duty for all equipment and spare parts for hospitals to promote Medical Tourism & consider sales tax exemption on MRO operations (maintenance, repair & overhaul) for airlines to avoid cascading tax impact. (MRO operations in India are ~50% more expensive than Dubai or Singapore.)
ü Develop Mumbai as an International Financial Centre with expediency