India Finance Budget 2015 Highlights

Key announcements/ changes of Budget 2015:
 
·         CAD likely to be below 1.3% of GDP in FY 15
·         GST to be in place from 1 April 2016
·         CPI to remain 5% by the end of year
·         12.5cr bank accounts opened in Jan Dhan Yojana
·         Growth in 15-16 seen b/w 8 and 8.5%
·         Make in India to be the thrust of creating jobs in mfg sector
·         Total trf to states would be 62% of total receipts
·         Not rushing in for fiscal consolidation as this would not be pro-growth
·         Fiscal deficit – 3.9% for 15-16, 3.5% - 16-17, 3% for 17-18 against prev target of 2 yrs
·         1.25 lk cr of public investments
·         Aiming for well targeted system of subsidy delivery, rationalizing subsidies
·         25k cr for rural infra devp fund of NABARD
·         34,699 cr for MNREGA, if tax buoyancy permits another 5k cr
·         Electronic trade receivable discounting to be introduced for MSMEs
·         Comprehensive bankruptcy code in 15-16 as BIFR and CECA has failed
·         Creating a universal social security system
·         PM suraksha bima yojana to cover accident risk of 2 lakhs @ Rs 12/ per year
·         Atal pension yojana – govt to contribute 50% of premium subject to 1k per yr for 5 yrs
·         PM Jeevan Jyoti Bima Yojana – 2lac insu for Rs 330/ year
·         New scheme for physical aids and assisted living devices for sr citizens below poverty line
·         Infra – increased outlays on roads and railways – to prioritize completion of 1lc km roads
·         Capex of PSUs to be 3.18lk cr
·         Invest in infra up by 70kcr
·         National investment and infra fund trust to be set up
·         Tax free infra bonds for railways, roads and infra
·         1k cr for start-up support
·         Expert committee to prepare a draft legislation to replace multiple prior permissions for ease of doing business
·         5 4k MW power projects – all clearance to be in place before awarding projects
·         Fwd mks commission to be merged with SEBI
·         Task force to establish sector neutral financial grievances agency for addressing fin sector related grievances
·         Direct tax regime in line with international standards (w/o exemption and deductions) along with GST to be introduced
·         Gold monetization scheme – allow depositors earn interest in metal a/c
·         Develop alternate to gold metal – bond
·         Work on Indian gold coin to reduce demands of coins minted outside India
·         1k cr for Nirbhaya Fund
·         VISA on arrival to be increased from 43 countries to 150
·         2,46,727 cr for defence
 
Tax
 
·         Moving on various fronts for GST next year
·         Corporate tax rate to be reduced to 25% over next 4 yrs – to be accompanied with phased elimination and rationalization of exemptions
·         Exemptions to individuals to continue
·         Bill to be introduced to deal black money and to deal with the undisclosed foreign assets, key - 300% penalty, prosecution, 10 yrs imprisonment, no exemptions, tax max marginal rate
·         To encourage off shore fund mgrs – mere presence in India not to constitute PE
·         GAAR deferred by 2 years – to apply prospectively for investments on or after 1 April 2017
·         Royalty for FTS reduced to 10%
·         BCD reduced for certain imp RMs – 22 items
·         SAD exempted on certain IT products
·         Abolish wealth tax – addl 2% surcharge on income above 1cr
·         Information of assets of wealth tax return to be incl in income tax return
·         Concerns on taxability indirect transfers being addressed
·         Increase from 5cr to 20cr for TP
·         TARC recommendation in advanced stage
·         Edu cess and SHE cess would be subsumed in ED – ED rate rounded off to 12.5%
·         ED on footwear reduced
·         ED and ST reg in 2 working days, electronic
·         Time limit of 6m increased to 1 year for CCR availment
·         ST increased to 14% - Cesses subsumed in this rate
·         100% ded to Swach Bharat kosh contribution
·         Increase clean energy cess from 100 to 200 per MT of coal
·         ED on non industrial poly ethylene bags from 12 to 15
·         ST exempt on common affluent treatment plants
·         Exmption on hybrid vehicles extended up to 31 Mar 16
·         80D increased from 15k to 25k (health insurance), 30k for sr citizen, above 80 years – 30k deduction w/o health insurance
·         Exp on serious disease exp ded inc to 80k for sr citizen
·         NPS deduction – inc from 1L to 1.5L
·         Addl ded of Rs 50k for contribution under NPS u/s 80 CCD
·         Sukanya Smriti Scheme – ded u/s 80C, int on deposit exempt from tax
·         Transport Allowance exemption from 800 to 1600 p.m
·         ST exemption of varisht bima yojana
·         ST exmption to cold storages
·         Negative list to be pruned
·         2(15) to incl yoga for charitable purposes
·         DT proposals – loss of revenue of 8k cr

BUDGET HIGHLIGHTS 2013

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

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