The key direct tax proposals include increasing the surcharge on individuals earning over Rs. 1 crore to 15%, taxing dividend income over Rs. 10 lakhs at 10%, and introducing an equalization levy of 6% on non-resident companies for digital transactions. Notable corporate tax proposals include a concessional 10% tax rate for income from patents developed in India, 100% deduction of profits for 3 years for eligible startups, and phasing out of certain tax exemptions by 2020. The budget also introduced an income declaration scheme and a direct tax dispute resolution scheme.

1. Union Budget - 2016
Navigating global turbulences

2. ‘Every dark cloud has a silver lining’, and for the dark cloud of the current global economic condition,
Indian economy appears to be the silver lining. In these looming times, when the world-wide
economies are fighting recession and slow down fears, India is shining with a promise of stable and
growing economy for the investors. Coupled with key initiatives like Make in India, Digital India, Start-
up India and the ray of certainty on the taxation front has brought in global confidence and changed
the way how world looked at Indian business environment. Being the fastest growing economy in the
world, it is now the time for this country to prove and showcase its true potential, the tone for which
has been set right by this Budget 2016. A clear indication on priority areas and growth path, along with
transparency in implementation and results is the way to go.
A Union budget is often looked from a taxation perspective that could provide us an insight in to the
impact that such tax proposals may have on an individual or body corporate. However, such tax
proposals are an outcome of the state of economy which needs detailed analysis of past performance
and implementation of future strategies for development of sustainable economy.
Through this document we have analyzed the economic results and decoded the impact of budget
proposals on sectors as well as summarized the direct and indirect tax proposal implications on you
and your business.
Trust you will find the publication useful. Happy reading!!
In case you need any further clarification please feel free to e-mail me at akshaykenkre@transprice.in.
Thanks a lot.
Best Regards,
Akshay Kenkre
Director
TransPrice
Preface
2

3. 3
Table of Content
Indian Economic Highlights 4
- Economy Overview
- The Growth Story
- Fiscal Overview
Taxation Proposals 9
Budget Allocations 14
- Agriculture and Farmer’s Welfare
- Railways
- Infrastructure & Investment
- BFSI
- Service Sector
- Indirect Tax Proposals
- Direct Tax Proposals
- Reforms and Measures
- Inflation
- Introduction
Sectoral Analysis 16
Key Initiatives and Reforms 22
- Key Initiatives
Glossary 26
About TransPrice 27 3

4. 4
Economic Highlights

5. Economic Indicators
Performance
FY 2015-16
Targets
FY 2016-17
% %
GDP Growth 7.60 8.00
Fiscal Deficit to GDP 3.90 3.50
Inflation CPI terms 4.90 4.75
0
2
4
6
8
10
12
Growth rate Inflation (CPI) Fiscal Deficit
Interplay - Economic Indicators
Economy Overview
With unusual volatility in the international economic environment, the global markets have begun
to swing on fears that global recovery might not be on cards soon, while the risks of extreme
events are intensifying. Despite this global slowdown, India stands out as a haven of stability and
land of opportunities. Such a stability is reflected in the growth of 7.6% in GDP, reduction of
inflation and commitment to stick to the patch of fiscal consolidation target of 3% by FY 2017-18.
With India hailed as a ‘bright spot’ by IMF amidst a slowing global economy, foreign investments
are eyeing India for its next move. It has therefore become imperative to provide road-map to
various initiatives announced earlier, bring down the litigation environment with stable and certain
environment in taxes for the investors and the businesses. These pathways have to be backed
with a push to the finance and insurance sector, which is considered as a backbone for every
successful economy. The Budget 2016 has attempted to address the above with various
innovative proposals.
A snapshot of current performance and targets for the Indian economy is as follows:
%
FY
5

6. While the global economic ocean is facing turbulent times, the Indian economy is sailing smooth
with a 7.6% GDP growth pace, thus climbing to the top of charts as the fastest growing major
economy in the world. While the growth in advanced economies has improved modestly the
emerging economies have witnessed a consistently declining trend in growth rate since year 2010.
As a result, the global growth is averaged at 3.1% in 2015, declining from 3.4% in 2014.
The decline in the global growth could be aggravated by:
i. Decline in crude prices
ii. Turbulent equity markets
iii. Volatility in exchange rates
The weak growth in the advanced and emerging economies have reduced the global demand for
products and services, thereby negatively affecting the Indian exports. Simultaneously, the imports
have also seen a decline due to reduction of crude oil prices, thereby maintaining the current
account deficit at moderate levels. The global economy – in particular the global powerhouse,
China- is rebalancing, leading to an increasing role for India.
The rupee has seen volatility in last few months, that has resulted in to depreciation against USD
in line with most other currencies of the world, however, it has appreciated against number of
other major currencies. The impact could be due to global developments including contraction in
exports portfolio outflows on concerns about outlook, deterioration of Chinese currency and
growth, gradual process of normalization of monetary policy in the US and global bond market
sell-off.
The government being optimistic on the reforms undertaken, aided by macroeconomic stability, it
would be realistic to expect an 8% or higher growth in the coming years. At the same time the
growth in FY 2016-17 may not pick up drastically from the previous years, as the cloud of slow
down on global front would hover around the Indian economy.
India’s BoP position remained comfortable due to (i) lower CAD (ii) increase in FDIs and NRI
deposits (iii) net outflow on portfolio investment ; with a CAD of USD 14.4 billion (Apr-Sep 15),
approx. 20% lower than the similar period for the last year.
Among the major economies with CAD, India ranks second after Brazil with respect to foreign
exchange reserves at USD 351.5 billion with foreign currency assets of about 93.4% of such
reserves.
The risks of further global slowdown and turbulence are mounting. It is therefore important to
manage the economics of India in the most efficient ways. The three pillars of ideology to be
followed are:
1. Ensuring macro-economic stability and prudent fiscal management
2. Boosting domestic demands
3. Continuing with the pace of economic reforms and policy initiatives
With this background the budget has set a tone of growth and development for future years to
come.
The growth story
6

7. Fiscal consolidation continues to be vital, and will be needed to maintain credibility and reduce
debt, in an uncertain global environment, while sustaining growth. This measure was planned to be
achieved through control of expenditure (subsidies and leakages), investment in public projects
and increase in tax revenues.
From a revenue perspective, such a consolidation required a 15.8 % growth in gross tax revenue.
The collection on account of indirect taxes played an important role in achieving the same, with
measures like increase in excise duty on petrol and diesel in lieu of falling international crude oil
prices. Further, the expenditure registered a growth of 33.5% in capital projects, mainly leady by
planned expenditure. Given this fact the fiscal deficit target of 3.9% of GDP seems achievable for
FY 2015-16.
Further, the commitment to achieve the fiscal roadmap is one of the priorities, with the fiscal deficit
targeted to be at 3.5% of the GDP for FY 2016-17. It would be important to note how the
development agenda would balance with this backdrop. The total expenditure for FY 2016-17 has
been pegged at Rs. 19.78 lakh crore, out of which Rs. 5.50 lakh crore is under planned and Rs.
14.28 lakh crore is considered under unplanned. Taking recommendations from the finance
committees, the bifurcation of plan and non plan expenditure would be done away with effect from
FY 2017-18 and a greater focus would be placed on capital and revenue expenditure.
Fiscal Overview
0
2
4
6
8
10
12
14
Direct Tax Indirect Tax Total Tax
Tax to GDP Ratio
%
FY
7

8. Inflation
 The year 2015-16 experienced moderate level of general prices. The substantial decline of
global crude prices along with government measures to improve supply and storage of food
products, helped to keep prices under control
 WPI inflation moved to a negative territory to -2.8% during Apr 15 –Jan16 as compared to 2 %
during FY 2014-15. This was mainly due to reduction of crude prices globally , while the WPI
food inflation remained moderate at 2.2% despite of below average monsoon
 Unlike sharp dip in WPI inflation , the CPI inflation moderated at 4.8 % (Apr 15- Jan 16) as
against 5.9% in FY 2014-15. Although fall in crude prices has impacted WPI inflation
significantly, the impact on CPI is minimal. This is mainly due to difference in the commodities
and their weights included in the CPI and WPI baskets. Diesel and petrol whose prices are
directly liked to global crude prices constitute around 40% of the WPI fuel and power basket.
Petroleum products have negligible weight in CPI basket
 Continued uncertainty over the outlook for China, expected spurt in Iranian crude supply and
moderation in demand from the rest of the world are likely to keep crude prices subdued in the
near future. Prospects of lower oil prices over the medium term are likely to dampen the
inflation expectations
 Although no specific derivatives have been mentioned in the budget regarding inflation, certain
features such as improvement in supply chain management and new reforms for the APMC
markets will help curb inflation in agro-products. Similarly, the benefits extended to low-cost
housing will lure developers to venture into low-cost housing space which in turn will
rationalize the housing sector & create investment opportunities
7.4
6
2
-3
10.2
9.5
5.9
4.8
-4
-2
0
2
4
6
8
10
12
2012-13 2013-14 2014-15 2015-16
Headline inflation – WPI and CPI
WPI CPI (Combined)
%
8

9. Taxation Proposals

10. Direct Tax proposals
International taxation:
 Commitment to implement GAAR by FY 2017-18, as a part of comprehensive regime to deal
with Base Erosion and Profit Shifting and aggressive tax avoidance
 Determination of residency of foreign company on ‘Place of Effective Management’ (POEM) to
be applicable for FY 2016-17 (earlier applicable from FY 2015-16) along with detailed
notification of transitional provision
 Proposed to insert ‘Equalization Levy’ at 6% for the payment made by a resident to a non-
resident (other than those having Permanent Establishment) for transactions in digital space or
economy. Detailed administrative mechanism and procedure to be notified. Applicable for B2B
transactions and not for retail transactions
 Mandatory furnishing of PAN under Section 206AA to be relaxed for non-residents other than
company or a foreign company, for income other than interest on bonds
 The position on non –applicability of MAT for non-residents/ foreign companies, not having a PE
in India is clarified and amended retrospectively with effect from 1 April 2001
 Exemption of income of foreign company from storage and sale of crude oil as a part of
strategic reserve, by not including such activity of a foreign company to create a business
connection under Section 9 of the Act.
 Transfer Pricing: Going by the recommendations of the BEPS Action plan 13, a three tiered
structure for transfer pricing documentation has been mandated, consisting of :
I. A Masterfile, containing standard information about MNE group
II. A local file specifically relating to transactions with associated enterprises
III. A Country by Country (CbC) report, providing global allocation of income and taxes along
with other economic indicators
Heavy penalties for non maintenance and furnishing of documentation in above –mentioned
form. The CbC reporting requirement apply if the consolidated revenues of the preceding year
of the entire MNE group, exceeds Euro 750 million ( approx. Rs. 5,300 crores)
Individual taxation:
 Surcharge increased to 15% for individuals, HUF, AOP, BOI for income above Rs. 1 crore
 To eliminate vertical inequality amongst the taxpayers as those who have high dividend income,
subjected to tax @ 15% under DDT, it is proposed to tax dividend income in excess of Rs. 10
lakhs for an individual, HUF or a firm at a rate of 10%
 Increased deduction of rent paid under Section 80GG of the Act from Rs. 24,000 p.a. to Rs.
60,000 p.a. for those who stay in rented houses
 Shares received by individual and HUF in consequence of demerger or amalgamation to be
excluded from the ‘gift tax’ provision of Section 56(viii) and considered exempt
 Redemption of Sovereign Gold Bond under the scheme not treated as transfer for CG 10

11. Direct Tax proposals
Corporate tax proposals:
A. Rate of taxes:
 New companies incorporated after 1 April 2016, to be taxed @ 25% ( plus surcharge and
education cess), if such company is in manufacturing or production of any article and is not
claiming any investment linked exemption or profit based deductions
 Small taxpayers with turnover lesser than Rs. 5 crores in FY 2014-15 to be taxed at 29% (plus
surcharge and education cess)
B. Initiatives:
 Patent box: With an aim to promote research & development and make India R&D hub, a
concessional tax at 10% of royalty income through exploitation of patents developed and
registered in India. No expenditure or allowance in respect of such income to be allowed. Such
a benefit would be allowed to a resident who is a first inventor of the invention and whose name
is entered on the patent register as the patentee
 Start-up profits: Deduction of 100 percent of profits and gains for 3 out of 5 years to an eligible
start-up from a business involving innovation development, deployment or commercialization of
new products, processes, services driven by technology or IP. MAT to apply.
 Start-up CG: Exemption from CG under Section 54GB of the Act, if a house property is sold
and CG arising from such sale of residential property are invested in subscription of shares of a
company which qualifies as eligible start-up, where such individual or HUF holds more than 50
percent of such company
 CG on rupee denominated bond due to appreciation of rupee to be exempt for a non resident
investor
C. Audits and presumptive taxes
 Limit for applicability of tax audits under Section 44AB of the Act to the professionals increased
from Rs. 25 Lakhs to Rs. 50 Lakhs
 Limit for eligible business for presumptive taxation under Section 44AD increased to Rs. 2
crores from Rs. 1 crore
 Introduction of presumptive taxation scheme for professionals with a gross receipts up to Rs. 50
lakhs, where a sum equal to 50% of such receipts would be considered as presumptive profits
D. Taxation of REITs and Invits
 In order to further rationalize taxation regime for business trust (REITs and Invits) and their
investors, it is proposed to provide a special dispensation and exemption from levy of dividend
distribution tax
11

12. Corporate tax proposals:
E. Phasing out of exemptions:
 The following exemptions and deductions are proposed to be phased out:
F. The Income Declaration Scheme, 2016
 Opportunity provided to persons who have not paid full taxes in past to pay tax @ 30% on the
declared income (plus surcharge @ 25% and penalty @ 25% of taxes)- i.e. Total tax 45%
G. The Direct Tax Dispute Resolution Scheme, 2016
 Pending cases against assessment order or penalty order have an option to settle by paying tax
and interest up to date of assessment.
 No penalty in case of disputed tax up to Rs. 10 lakhs; cases with disputed tax exceeding 10 lakhs
are subject to 25% penalty
H. Other Proposals
 Providing a legal framework for automation of various processes and paperless assessments
 TCS provisions @ 1% on purchase of luxury cars exceeding Rs. 10 lakhs and purchase of goods
in cash and services exceeding Rs. 2 lakhs
 STT in case of ‘Options’ proposed to be increased from 0.017% to 0.05%
 Penalty provisions rationalized and certainty provided
Direct Tax proposals
Section Manner of phase out
10AA- Profits on export for SEZ No deduction available for units
commencing operation on after 1 April 2020
35AC- Expenditure on eligible
projects
No deduction w.e.f 1 April 2017
35CCD- Expenditure on skill
development
Deduction restricted to 100% from 1 April
2020
80IA,IAB,IB – development, operation
and maintenance of infrastructure
facility, SEZ and production of mineral
oil & mineral
No deduction available if the specified
activity commences on or after 1 April 2017
Accelerated Depreciation – Sec 32 Depreciation would be restricted to 40%
w.e.f 1 April 2017
Sec 35- Expenditure on scientific
research
Weighted deduction in various sub-sections
reduced since FY 2017-18
12

13. Indirect Tax proposals
Make in India
 Changes in customs and excise duty rates on certain inputs to reduce costs and improve
competitiveness of domestic industry in sectors like Information technology hardware, capital
goods, defense production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals,
paper, paperboard & newsprint, Maintenance repair and overhauling of aircrafts and ship
repair.
Service Tax:
 Exemption of Service tax on general insurance services provided under ‘Niramaya’ Health
Insurance Scheme or the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation
and Multiple Disability
 Service tax reduced on Single Premium Annuity (Insurance) Policies from 3.5% to 1.4% of the
premium paid in certain cases
 Exemption from service tax on construction of affordable houses up to 60 sq.m under any
scheme of the Central or State Government including PPP Schemes
 Krishi Kalyan Cess @ 0.5% on all taxable services, w.e.f. 1 June 2016 and proceeds would be
exclusively used for financing initiatives for improvement of agriculture and welfare of farmers
Custom and Excise:
 Basic custom and excise duty on refrigerated containers reduced to 5% and 6%
 Extend excise duty exemption, presently available to Concrete Mix manufactured at site for
use in construction work to Ready Mix Concrete
 Excise duty of 1% without input tax credit or 12.5% with input tax credit on articles of jewelry
(excluding silver jewelry, other than studded with diamonds and some other precious stones),
with a higher exemption and eligibility limits of Rs. 6 crores and Rs. 12 crores respectively
 Excise on readymade garments with retail price of Rs.1000 or more raised to 2% without input
tax credit or 12.5% with input tax credit
 Excise duties on various tobacco products other than beedi raised by about 10 to 15%
 ‘Clean Energy Cess’ levied on coal, lignite and peat renamed to ‘Clean Environment Cess’ and
rate increased from Rs. 200 per ton to Rs. 400 per ton
 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT)
13

14. Budget allocations

15. Introduction
The FYs 2015-16 and 2016-17 have been and will be extremely challenging for the government
expenditure. With a priority on fiscal consolidation, it is important to emphasis on quality of
expenditure than the quantity. The 14th Finance Commission has reduced the Central share of
taxes to 58% from 68%. The next FY will cast an additional burden on account of the
recommendations of the 7th Central Pay Commission and the implementation of Defense OROP.
Therefore, it is important to prioritize the expenditure. Enhancement of expenditure in the farm &
rural sector, the social sector, the infrastructure sector and provide for recapitalization of the banks
would be at utmost priority. Once these are addressed, other areas could be focused.
The focus is clearly to provide additional resources for vulnerable sections, rural areas and social
and physical infrastructure creation. It would be an endeavor to continue with the ongoing reform
program and ensure the passage of constitutional amendments to enable the implementation of
the GST, the passage of Insolvency and Bankruptcy law and other important reforms.
Further, significant reforms such as enactment of a law to ensure that all government benefits are
conferred upon persons who deserve it, by giving a statutory backing to the AADHAR platform;
bringing significant changes in the legislative framework relating to the transport sector so as to
free it from constraints and restrictions; incentivizing gas discovery and exploration by providing
calibrated market freedom; enactment of comprehensive to deal with resolution of financial firms;
providing legal framework with respect to PPP projects and public utility contracts; undertaking
important banking sector reforms and public listing of general insurance companies and
undertaking significant changes in FDI policies.
Therefor the agenda to transform India has 9 distinct pillars:
1. Agriculture and farmer’s welfare: With focus on doubling farmer’s income in 5 years;
2. Rural sector: With emphasis on rural employment and infrastructure;
3. Social sector including healthcare: To cover under all welfare and healthcare services;
4. Educational, skills and job creation: To make India a knowledge based and productive
society;
5. Infrastructure and investment: To enhance efficiency and quality of life;
6. Financial sector reforms: To bring transparency and stability;
7. Governance and ease of doing business: To enable the people to realize their full potential;
8. Fiscal discipline: Prudent management of government finances and delivery of benefits to the
needy; and
9. Tax reforms: To deduce compliance burden with faith in the citizenry (discussed above)
With these 9 points in consideration, accordingly the next sections are created and analyzed upon
15

16. Sectoral Analysis

17. Agriculture and farmer’s welfare
 Agricultural sector comprises 17.4% share in GDP in FY 2014-15. The twelfth five year plan (
2012-2017) envisaged a growth target of 4% for agriculture and allied sectors necessary for 8%
growth rate for Indian economy. As per February 2016 stats, growth in the agriculture, forestry
and fishing sector is estimated at 1.1% in 2015-16
 It is important to scale up investment to expand water efficient irrigation to achieve ‘more crop
per drop’
 Effective use of fertilizers, quality seeds and pesticides. There is a need to rationalize fertilizer
subsidy, as excessive use of fertilizer is not resulting in to productivity but depletion of soil,
fertility and salination of soil in many areas
 Tremendous potential to increase production by reducing wastage in the post-harvest value
chain through investment in storage facilities and drying facilities
Budget Highlights:
 Allocation for Agriculture and Farmers’ welfare is Rs. 35,984 crore
 Bring 28.5 lakh hectare to be brought under irrigation and implementation of 89 irrigation
projects under AIBP
 A provision of Rs. 12,517 crore has been made through budgetary support and market
borrowings to achieve a dedicated Long Term Irrigation Fund , to be created in NABARD with
an initial corpus of about Rs. 20,000 crore
 Promotion of organic farming schemes
 Sustainable ground water management program with an estimated cost of Rs. 6,000 to be
implemented through multilateral funding
 2,000 model retail outlets of Fertilizer companies to provide soil and seed testing facilities
 Provision of Rs. 15,000 crore made towards interest subvention
 Allocation for rural sectors – Rs 87,765 crore
 Grants to Gram Panchayats and Municipalities amounting to Rs 2.87 lakh crore to be provided
 A sum of Rs. 38,500 crore allocated for MGNREGS
 100% village electrification by 1st May 2018
 A new digital literacy mission scheme for rural India to cover around 6 crore additional
household within next 3 years
 Allocation for social sector including education and healthcare Rs. 1.51 crore
 Rs. 2,000 crore allocated for initial cost of providing LPG connections to below poverty line
families
 New health protection scheme would provide health cover up to Rs. 1 lakh per family and
additional Rs. 30,000 for senior citizens
17

18. Railways
The budget focused on improving rail infrastructure, safety and upgrading the current rolling stock.
Some of the key thrust areas are:
 Railway and economic growth: For FY 2016-17, the capital plan has been pegged at Rs.
1.21 lakh cr, which is close to double of the average of previous years - a feat never achieved
earlier
 Freight corridor - Key to development: Three new freight corridors have been announced in
Budget 2016 to link key metro cities to improve freight traffic. One of the policy initiatives
introduced in the budget is to increase East-West freight corridor which may be extended by 5
kms
 Innovation fund: Government to set up Rs. 50 cr innovation fund for startups, SMBs for
working on technologies that could benefit the Railways
 Make in India: Finalized bids for two loco factories to be set up with order book of Rs 40,000
cr; proposed to increase the current procurement of train sets by 30%. LIC has agreed to
invest Rs 1.5 lakh cr to fund railway projects
 Digital India: Indian Railways to shift to paperless contact management system. IRCTC
website to consider e-commerce initiatives because of huge number of hits
 Electrification: In the next financial year, the outlay for railway electrification has been
increased by almost 50% and it has been proposed to electrify 2,000 kms
 Broad Gauge lines: The commissioning of Broad Gauge lines at over 7 kms per day against
an average of about 4.3 kms per day in the last 6 years. It is expected to surpass the ambitious
target of commissioning 2,500 km Broad Gauge lines which will be almost 30% higher than last
year. In the next year, the plan is to commission 2,800 kms of track
 Port connectivity: For the year 2016-17, it is proposed to undertake implementation of rail
connectivity for the ports of Nargol and Hazira under PPP. Considering the urgent need to
provide connectivity to ports on India’s 7,517 km coastline, the Budget positively considers
undertaking of any offer of partnership
 Station redevelopment to tap additional revenues: Station redevelopment, monetizing land
along tracks, monetizing soft assets such as website, data, etc. was highlighting factors of
railway budget. Advertising in 2016-17 targets 4 times the revenue of 2015-16
18

19. Infrastructure & Investment
Budget Highlights:
 Total outlay on infrastructure – Rs. 2.21 lakh crores in FY 2016-17
 Out of 70 pending road projects at beginning of the year, 85% projects have been put back on
track which involved investment of more than Rs. 1 lakh crore
 Budget has allotted Rs. 55,000 crores for roads and Rs. 15,000 crores through NHAI bonds
 Opening up of road transport sector in passenger segment through amendment in Motor
Vehicles Act
 Acceleration of work carried out on National Waterways and continuation of Sagarmala
project for delivering best quality cargo through developed greenfield ports in eastern and
western coasts of India
 Action plan for reviving about 160 unserved and underserved airports at Rs. 50 crores to Rs.
100 crores each
 Three initiatives announced to strengthen PPPs:
 Introduction of Public Utility (Resolution of Disputes) Bill with focus on arbitration in
construction contracts, PPP and public utility contracts
 Mechanism for renegotiation of PPP Concession Agreements
 New credit rating system for infrastructure projects to be introduced
 Boost to food processing industry through 100% FDI enabled through FIPB mode
 100% FDI now permitted in ARCs through automatic route
 Prior approval of Government no longer needed for increasing FPI investment in CPSEs with
investment limit increased from 24% to 49%
 Focus is to make investments in new projects by releasing value of assets like land,
manufacturing units divested by CPSEs
Job Creation and other initiative:
 GOI will pay the Employee Pension Scheme contribution of 8.33% for all new employees
enrolling in EPFO for the first three years of their employment
 Propose to make 100 Model Career Centres operational by the end of 2016-17
 Model Shops and establishments bill can be adopted by the State governments on voluntary
basis
 Introduce of Bill of Targeted Delivery of Financial and Other Subsidies, Benefits and Services by
using the AADHAR framework
 Introduction of Direct Benefits Transfer on pilot basis for fertilizer in few districts
 Amendment to the Companies Act, 2013 to improve the enabling environment for start-ups 19

20. BFSI
 Bank credit is an important indicator of economic activity. Since year 2003-08, the bank credits
growth usually exceeded the 20 % mark year on year, which came down to 5% till year 2014,
and in the current fiscal year the growth has declined to 10%
 Such a sluggish growth could be attributed to
i. Non passing of benefit of reduction in interest rates to the borrowers
ii. Rising non-performing assets
iii. Worsening of corporate balance sheets
iv. Attractive interest rates in bond markets
 The performance of SCBs during FY 2015-16 remained subdued. The asset quality of SCBs
have come under stress in recent times. Gross NPAs has as a proportion of gross advances
have increased to 5.1% from 4.6% between Mar-Sep 15. PSBs had highest level of stressed
assets at 14% of total advances
 PMJDY : The number of new basic saving bank deposit accounts rose considerably to 441
million till September 2015, which was 398 million till March 2015
 The life insurance premium registered a growth of 4.4% whereas general insurance business
grew by 9%. Three schemes for insurance and pension sectors for promoting social security to
poor and underprivileged were established
Budget Highlights:
 Code on Resolution of Financial Firms - Specialized resolution mechanism to be set up for
bankruptcy conditions in banks, insurance companies and financial sector entities
 Amendment in RBI Act 1934 to add value and transparency to monetary policy decisions
 Facilitation of integrated data and analysis through arrangement of Financial Data
Management Centre
 RBI to improve and facilitate retail participation in Government securities
 Creation of new derivative instruments by SEBI in Commodity Derivatives market
 Solution to the problem of stressed assets in banking sector:
 SARFAESI Act 2002 amended to allow a sponsor to hold 100% stake in ARC and non-
institutional investors to invest in Securitization receipts
 De-stressing PSBs through continued efforts on INDRADHANUSH without interfering
bank’s operational activities
 Debt Recovery Tribunals to incorporate computerized processing for arbitration of
stressed assets
 Recapitalize PSBs with proposal of Rs. 25,000 crores in FY 16-17 to support credit growth
 Protection for poor and financially illiterate people from illicit deposit taking schemes through
proposal of comprehensive Central Legislation in FY 2016-17
 Provision for more members and benches of the Securities Appellate Tribunal
20

21. Service Sector
 India’s service sector accounts for 61.50% of India’s GDP growing at approx. 9% over the last
year to maintain the growth level
 High growth of FDI inflows due higher growth of three major categories i.e. R&D sector, Software
& Hardware and Trading sector
 FDI related liberalization has taken place in number of sectors like constructions, broadcasting,
civil aviation, wholesale trading, single brand trading and private sector banking
 India constitutes 3.2% share of exports in global services which makes it 8th largest service
exporter in the world
Share and Growth of India Service Sector (Provisional Estimate for FY 2015-16)
Budget Highlights:
A. Education
 62 new Navodaya Vidyalayas will be opened with increased focus on quality of education
 Higher Education Financing Agency to be set-up with initial capital base of Rs. 1,000 crores
 It is proposed to establish a Digital Depository for School Leaving Certificate, College Degrees,
Academic Awards and Mark Sheet to be set up
B. Skill Development
 National Skill Development Mission to bring entrepreneurship through PMKVY
 National Board for Skill Development Certification to be set up in Partnership with the industry
and academia
Top Sectors % Share
Trade, hotels & restaurants 18.60
Financing, insurance, real estate & business services 20.60
Public administration and defence 14.10
Constructions 8.2
Total Services GDP 61.50
Total GDP 100.00
Services
Others
India GDP composition FY 2014-15
21

22. 8
Key Initiatives and Reforms

23. Key initiatives
Make in India:
 Initiative to boost entrepreneurship in manufacturing sector, infrastructure and service sectors
 ‘Make in India’ and ‘Making One India’- To initiate the first step towards discovering a single
market price for power around the country
 Investment Facilitation Cell has been set up under Invest India as a national investment
promotion and facilitation agency
SME Sector
 India Aspiration Fund has been set up for venture capital financing under Small Industries
Development Bank of India (SIDBI)
 Special focus on Micro Units Development Refinance Agency (MUDRA) Bank for giving loans
to micro-units via refinancing activities and spreading financial literacy skills
Smart cities
 Targets core infrastructure of cities and harnesses technology using ‘smart solutions’ leading
to smart outcomes
 Premised on an area-based planning for city improvement, city renewal and city extension
through greenfield development for cities with large populations
 The Mission plans to cover 100 cities on an equitable basis through a Centrally Sponsored
Scheme with an aim to deploy smart solutions and reforms
Green Finance
 Green finance is slowly gaining traction with focus on green development through green
economic policies for banking sector, bond market and institutional investment
 Such finance is needed on fulfilling various solar energy targets, development of solar cities,
smart cities projects, wind power projects, green infrastructure activities and ‘Clean India’ or
‘Swach Bharath Abhiyan’
23

24. Shipping
 Government has implemented several measures which include making fuel tax free for all Indian
flag coastal vessels in container trade
 The shipping sector recognizes need to encourage growth of Indian tonnage and higher
participation of Indian ships in Indian EXIM trade
 Smooth implementation of India Controlled Tonnage (ICT) scheme which have allowed Indian
companies to directly own ships in foreign flags
 Compliance of ship registration made simple and payment of charter fees made online
Prime Minister’s Krishi Sinchai Yojana (PMKSY) [agriculture]
 The initiative looks to enhance on-farm Water-Use-Efficiency (WUE) to reduce wastage by
promoting precision irrigation like sprinkler, dip
Pradhan Mantri Jan Dhan Yojana
 Considerable increase in opening of basic savings bank deposit accounts to create a universal
social security system
 Financial inclusion is increasingly progressively
New Gold Investment Schemes
 Gold Monetisation Scheme: Gold Saving Account can be opened where banks have a tripartite
agreement with refiners and CPTCs
 Tax exemption are same as those available under GDS 1999
Key initiatives
24

25. Reforms and measures – FY 16
Hits:
 Transparency brought in the functioning of government decision making and auction of public
assets
 Reforms in FDI reflecting a paradigm shift in approach and philosophy
 Efforts to ease the cost of doing business, thereby encouraging multifarious start ups and e-
commerce businesses in the interest of large employment- generating companies
 Bringing in tax certainty and stability by clarifying tax established tax positions (MAT)
 Major impetus to public investment programs to strengthen the country’s infrastructure and
bridge the deficiency in private investment
 Introducing crop insurance programs for protection of farmers and limiting far intervention
thereby moderating overall inflation
 Giving a major flip to the financial inclusion agenda via the Jan Dhan Youjna and further
licensing of 11 payment banks and 10 small banks
 Advancing the game-changing JAM trinity agenda, thereby extending the benefit under various
government programs and subsidies
Misses and challenges:
 Approval for the game changing GST bills has proved illusive so far
 Disinvestment program fell short of targets
 Promotion of entrepreneurship has to be complimented with end of exemption-raj and
corporate subsidies to helps competitive business environment
 Important to address exit problems in Indian economy with new bankruptcy law, rehabilitation
of stalled projects and promoting public, private partnerships
 Important to invest in the health of people, especially the mother and child development
 Impetus to agriculture sector by increasing productivity and better irrigation facilities
25

26. Glossary
Act – Income-Tax, 1961 MAT – Minimum Alternate Tax
AIBP - Accelerated Irrigation Benefits
Programme
MGNREGA - Mahatma Gandhi National Rural
Employment Guarantee Act, 2005
AOP – Association Of Persons MNE – Multinational Enterprise
APMC - Agricultural Produce Marketing
Corporation
NABARD - National Bank for Agriculture and
Rural Development
ARCs – Asset Reconstruction Companies NHAI - National Highway Authority of India
BEPS – Base Erosion And Profit Shifting NPA - Non-Performing Assets
BFSI - Banking Financial Service Insurance NRI - Non-Resident Indian
BOI – Body Of Individuals OROP – One Rank, One Pension
BOP - Balance of Payments PAN – Permanent Account Number
CAD - Current Account Deficit PMJDY - Pradhan Mantri Jan Dhan Yojna
CG - Capital Gains
PMKVY – Pradhan Mantra Kaushal Vikas
Yojana
CPI - Consumer Price Index PPP – public private partnership
CPSE – Central Public Sector Enterprise PSB - Public Sector Bank
CPTC - Collection, Purity Testing Centres REIT - Real Estate Investment Trust
DDT – Dividend distribution Tax
SARFAESI – Securitization And Reconstruction
Of Financial Assets And Enforcement Of
Security Interest
EPFO – Employees’ provident fund SCBs - Scheduled Commercial Banks
FDI - Foreign Direct Investment SEBI – Securities And Exchange Board Of India
FIPB - Foreign Investment Promotion Board SEZ – Special Economic Zone
FY – Financial Year SMB - Small Medium Business
GAAR – General Anti Avoidance Rules SPV - Special Purpose Vehicle
GDP - Gross Domestic Product ST/SC- Scheduled Tribes and Scheduled Caste
GDS - Gold Deposit Scheme STT - Securities Transaction Tax
GST - Goods and Service Tax TCS – Tax Collected At Source
HUF – Hindu Undivided Family US – United States
IMF- International Monetary Fund USD - U.S Dollar
INVITs - Infrastructure investment Trust W.E.F - With Effect From
IP- Intellectual Property WPI - Wholesale Price Index
IRCTC – India Railway Catering And Tourism
Corporation
JAM – Jan Dhan Aadhar Mobile
LIC – Life Insurance Corporation
LPG- Liquid Petroleum Gas
26

27. About TransPrice:
TransPrice is specialist professional service firm offering expert Transfer Pricing and international
taxation solutions to ever dynamic India businesses. The firm's vision is 'to provide high quality
Transfer Pricing solutions and be an advisor of choice for the Indian businesses'. TransPrice is a
member firm of Quantera Global, a leading transfer pricing and valuation specialist firm
worldwide.
As much as an MNE would like to optimize its tax results, it equally would like to be compliant
with laws of the land for a smooth business operation. We understand that tax planning and
compliance are one of the key drivers for any Multinational Corporation in India and we provide
expert tax solutions to balance the two.
We add value with plethora of tax planning and structuring activities that helps you build effective
tax structures. We are aware that documentation is the heart of any Transfer Pricing solutions
and we believe in elaborate, extensive and contemporaneous documentation for our clients.
We advocate specialization and believe that focus is vital for expert advice, especially in the field
of Transfer Pricing , where every issue is unique. As Transfer Pricing deals with different and
dynamic business scenarios, we tailor make every solution for you.
We at TransPrice are strong advocates of research and knowledge base. Our continuous
learnings and updates in the field of Transfer Pricing help us and our clients to stay up to date on
various key issues in an around Transfer Pricing fraternity.
TransPrice releases a weekly dossier 'TransPrice Weekly', which provides weekly updates to our
clients, members and associates.
27

28. 28