The King’s Speech
Hinting towards global economic
slowdown of growth rate of 3.2%; the FM cited towards a tough Budget. On the
contrary he also mentioned that currently India is the only country behind
China and Indonesia when it comes to growth rate throughout the world. And if
continued to grow at projected rate, only China will grow faster than India.
The FM brought up
his biggest concern of Current Account Deficit i.e. the difference between the
income and expenditure of the country. This is mainly because of heavy imports
of oil, coal and love for gold. And the only way to counter this deficit is to
attract foreign investment via FII, FDI or ECB (External Commercial
Borrowings). Thus he highlighted on the
aspect of good governance stating that “Doing
business in India must be seen as easy, friendly and mutually beneficial.”
Investment is done only when there is lack of doubt and ambiguity. Thus, the FM
maintained and repetitively insisted on stable tax rates, clear communication
of policies and laws and avoiding hurdles of regulatory and administrative
burdens.
FM
during the allocation of budgets touched on 3 main areas which in his opinion
require very high attention, and thus touching the hearts of many viz. Woman
empowerment, Youth empowerment and Poor empowerment.
Direct Taxes
·
Currently the tax to GDP ratio is 5.5% which was once
11.9% in 2007-08. Thus tax collection needs to be increased.
Corporate
Taxes
Basic tax rate and education cess
rate remain unchanged.
·
Surcharge
§ Domestic
Companies : Surcharge at the rate of 5%
whose income is more than ` 1 crore (` 10 million)
-
Surcharge at the rate of 10% whose income is more than ` 10 crore
§ Foreign
Companies : Surcharge increased from 2% to 5%
§ Increase in
surcharge from 5% to 10% on Dividend Distribution Tax
·
Investment
Allowance
Manufacturers
are encouraged to invest in Plant and
Machinery. Additional 15% depreciation to company which
invests more than 100 crore in P&M between 01.04.2013 to 31.03.2015
·
Loophole of avoiding dividend distribution tax by way
of buy back of share blocked. TDS proposed at the rate of 20% for buy back of
shares by unlisted companies
·
TDS rate on payments by way of Royalty and fees for
technical services to non-residents increased from 10% to 25%.
·
The ‘eligible date’ for power sector projects
increased from 31.3.13 to 31.3.14
·
Securitisation Trust exempted from tax. Tax to be levied
only at the time of distribution of income. Tax @30% for companies and @25% for
Individuals/HUF
Personal Taxes
·
No changes in personal tax slabs; because even small
increase in basic exemption limit will result in escape of lakhs of taxpayers
from the tax net
·
Still, bare benefit is given to taxpayers who are
within the tax bracket of `2 lacs to `5 lacs. These taxpayers will get a ‘tax credit’ i.e. direct reduction in
tax of `2,000. The
tax credit is estimated to benefit 1.8 crore taxpayers
·
Home Loan
benefit :
-
First home buyers who avail home loan in FY 2013-14 up
to `25 lacs
will get an additional deduction of
interest of `1,00,000
-
This is over and above the existing limit of `1.5 lacs
-
If the limit is not fully utilized, the balance may be
carried forward in FY 2014-15
·
Surcharge
is back for super rich:
Citing only
42,800 persons have reported per year income more than `1 crore
recently, Surcharge to be levied at the rate of 10% on income above `1 crore.
Indirect Taxes
·
The indirect
tax to GDP ratio has fallen down to 4.4% which is reason for concern for the
FM. In none of the large developing countries the ratio is so low
·
Basic rates
remain the same, i.e. Excise duty at 12%, Service tax at 12% and Customs duty
at 10%
Custom Duty
·
Period of
concession to specified parts of electric
and hybrid vehicles extended to 31.3.15 to boost environment friendly
vehicle manufacturing
·
Duty
reduced from 7.5% to 5% on machinery used in manufacture of leather and leather goods
·
Reduced
from 10% to 2% on pre-forms of precious and semi-precious stones
·
Duty on
de-oiled rice bran oil cake totally withdrawn
·
Duty on set top boxes increased from 5% to 10%
to boost domestic production
·
On raw silk imports, increased from 5% to
15%
·
Motor Vehicles from 75% to 100%, Motor cycles of engine capacity of
800cc or more from 60% to 75% and Yachts
and similar vessels from 10% to 25%
·
Duty-free
limit of import of jewellery like
Gold increased to `50,000 for male passenger and `100,000 in case of female passenger
Excise Duty
·
Ships and vessels, handmade carpets, cotton fabric exempted from excise duty
·
Duty
increased by 18% on cigarettes, cigars,
cheroots and cigarillos
·
SUVs other than
registered as taxis will now bear excise duty of 30% instead of 27%
·
Duty on Marble doubled from `30/sq.mtr to `60/sq.mtr.
·
Mobile phones pricing more than 2,000/- will now bear 6% duty
Service Tax
·
Like stated
earlier in his speech the importance of stable tax regime the negative list
introduced last year has not been tampered much. Only 2 services are added to
the negative list viz. Vocational
courses offered by institutes affiliated to State Council of Vocational
Training and Testing activities
relating to agri produce.
·
Service tax
to be levied on all Air conditioned restaurants unlike before
·
FM mentioned that around 17 lacs Service tax
payers are registered with the Government, but only 7 lacs of them file their
Returns and thus it is important to motivate such service tax payers as it is
administratively not feasible to identify and collect taxes from such
defaulters. Thus, the Service tax
Voluntary Compliance Encouragement Scheme has been introduced where from
01.10.2007 defaulters can file their returns and pay due taxes. Interest, penalty and
other consequences will be waived
·
Abatement reduced from 75% to 70% for
homes/flats having carpet area of more than 2,000sqft
Other Highlights of the Budget
·
TDS at the rate of 1% on sale of immovable
property above 50 lacs. Agricultural land excluded.
·
India’s first
of women, by women, for women Public Sector Bank to be opened
·
Nirbhaya Fund
to be setup for women safety and empowerment
·
Small and Micro Enterprises (SMEs) to get
extended benefit for 3 years even after reaching at higher category
·
Commodity Transaction Tax (CTT) introduced on
non-agri products at the rate of 0.01%
·
Transfer Pricing safe harbor rules to be
declared in near future
·
General Anti Avoidance Rule (GAAR) postponed to
April 2016 in modified version assured of preserving its basic purpose
·
Direct Tax Code (DTC) based on Best International Practice to be
introduced soon
·
Goods and Service Tax (GST) to be implemented
soon hoping for unanimous consent of State Governments
Quotable Quotes
·
“Hope
inspires courage.” In light of
convergence to GST with support of State Finance Ministers
·
“Any
economist will tell us what India can become. We are the tenth largest economy
in the world. We can become the eighth, or perhaps the seventh largest by 2017.
By 2025, we could become a $ 5 trillion economy, and among the top five in the
world. What we will become depends on us
and on the choices that we make. Swami Vivekananda, whose 150th birth
anniversary we celebrate this year, told the people: “All the strength and
succour you want is within yourself. Therefore, make your own future.”
·
What
clearly eye discerns as right, with steadfast will And mind unslumbering, that
should man fulfill
Contact Us
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Pune
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Paud Road, Kothrud, Pune 411 038
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