segment who participate in the real estate market as investors or own more than one property. The
maximum marginal rate for income between `50 lakh and `1 crore will now be 33.99 per cent, and for
income above `1 crore, it will remain at 35.54 per cent.
The Budget has rewarded honest taxpayers by lowering the income tax for those earning less than `5 lakh
a year, cut the tax on companies earning less than `50 crore. The budget has offered a flat tax rebate of
`12,500. The rebate for low-income earners (section 87A) is reduced to `2,500 from the present limit of
`5,000 and will be available only where income does not exceed `3,50,000. Apparently, the finance
minister has followed a simple principle- take from the rich and super rich and give to the not-so-well-
off.
FISCAL DISCIPLINE
The first Budget after the note ban has remained committed to fiscal consolidation, targeting to reduce
the fiscal deficit from 3.5 per cent of GDP in FY17 Revised Estimates (RE) to 3.2 per cent of GDP in FY18
Budget Estimates (BE). Fiscal compression, along with the 11 per cent rise in capital expenditure, bodes
well for the quality of fiscal deficit in FY18 BE. However, the ability to meet the somewhat optimistic
disinvestment and strategic disinvestment (`72,500 Cr) target and the nominal GDP growth forecast
(11.75 per cent) would be critical to achieving the government's fiscal consolidation plan (Table 1).
Table 1: Fiscal Deficit as % of GDP
FY15 FY16 FY17 FY18 (ET) FY18(BE)
4.1 3.9 3.2 3.0 3.2
Source: Economic Survey and Budget 2017-18
Note ET: Earlier Estimation
While nominal GDP is projected to grow at 11.75 per cent in FY18, tax revenues are budgeted at a modest
12.2 percent (Table 2). Perhaps, the uncertainty in indirect tax revenues after the shift to the goods and
service tax (GST) prompted this approach.
Table 2: Gross Tax Revenue and Total Expenditure
(%, y-o-y)
2015-16 2016-17 (BE) 2016-17 (RE) 2017-18 (BE)
Gross Tax Revenue 16.9 12.0 14.0 12.2
Total Expenditure 7.6 10.2 12.2 6.6
Source: Indian Public Finance Statistics 2015-16, Budget 2017-18
As the Centre has imposed fresh surcharges, states' share of tax is projected to grow marginally lower
than that of the Centre, at 10.9 percent (Table 3)
Table 3: States' Share in Tax Revenue and Centre's Net Revenue (%, y-o-y)
2015-16 2016-17 (BE) 2016-17 (RE) 2017-18 (BE)
States’ Share in Tax Revenues 49.8 13.0 20.0 12.7
Centre’s Net Revenue 4.4 12.0 15.0 10.9
Source: Indian Public Finance Statistics 2015-16, Budget 2017-18
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Economic Challenger// ISSN 0975-1351/ April.-June, 2017