Union Budget 2015-16: Making Dreams Come True

The most ancipitated budget has been presented by Mr. Arun Jaitley, Honourable Finance Minister of India at the Parliament today (the 28th day of February 2015).

Undoubtedly expectations were huge as the media and the Government channels wanted people to believe the budget of 2015-16 at the #Superbudget and Budget for Acche Din. This was the first full-fledged budget of the Modi Government after the innovative and path-breaking concepts ‘Make in India’, ‘Swachh Bharat Abhiyan’ and ‘Jan Dhan Yojana’ gained sufficient popularity.

Immediately after the Budget presentation session, here is what Mr. Narendra Modi, Honourable Prime Minister of India has tweeted @Narendra_modi:

Union Budget 2015 is a Budget with a clear vision. It is a Budget that is progressive, positive, practical, pragmatic & prudent. Budget 2015 has a distinct focus on farmers, youth, poor, neo-middle class & the Aam Nagrik. It delivers on growth, equity & job creation. It delivers on growth, equity & job creation. Budget is investment friendly & removes all doubts on tax issues. It assures investors that we have a stable, predictable & fair tax system. Details of the Black Money law being introduced demonstrates our firm commitment to bring back every Rupee of Black Money stashed abroad. FM laid down goals to be achieved by 2022, India’s Amrut Mahotsav.

Highlights of Mr. Jaitley’s speech while presenting the Union Budget 2015-16:

  • The rupee has become stronger by 6.4 %
  • Objective is to improve quality of life and to pass benefits to common man
  • Incremental change is not going to take us anywhere we have to think in terms of quantum jumps
  • Increase in agriculture productivity is essential for welfare for rural population
  • Providing medical facilities to each one of village and city is essential
  • Aim to make the country a prosperous and meaningful global power by 75th year of Independence
  • Need a well-targeted system of subsidies rather than to cut subsidies
  • Dramatically established Macro Economic Stability (Employment of youth, Women Education, Welfare of Agriculture, Skilling of youth, etc.)

Few interesting facts on Union Budget 2015-16:

  • NIFTY is in the border of touching 9,000 while SENSEX is almost about to touch 30,000.
  • As per an open voting system in NDTV portal, this budget is currently being rated at 7.4 out of 10 – the highest ever in the free India
  • 46% of common Indian population feel this budget is focused towards boosting economic growth and stability, while 31% of us feel the budget is aimed towards building infrastructure. The rest 23% of the population feels the budget is prepared for controlling prices and lays a more stable economy.

How do you get benefitted as a Salaried Person?:

  • Personal income tax exemption limit is raised from INR 2 lakh to INR 2.50 Lacs
  • 80C exemption limit is raised to INR 1.5 Lacs – presently the investments and expenditures up to a combined limit of Rs 1 lakh get exemptions under Sections 80C, 80CC and 80CCC of the Income-Tax Act
  • Tax exemption limit increased to Rs 3 lakh for senior citizens
  • Exemption on payment of income tax on interest paid on loans for self-occupied houses (including rented houses) was also raised to INR 2 lakh from INR 1.5 lakh
  • No changes were made to surcharge rates for direct tax and education cess for all tax payers including corporates remains at 3%

During his Budget speech, Finance Minister Arun Jaitley said an individual tax payer can claim tax benefits for up to INR 4, 44,200 in addition to the tax exemption.

Here is the break-up:

Deductions under 80C INR 1,50,000
Deductions under 80CCD for contribution to NPS INR 50,000
Interest on house property loan (or rent) INR 2,00,000
Exemption with new transportation allowance of Rs. 1,600 per month INR 19,200
New deductible health insurance premium INR 25,000
Total INR 4,44,200

Government of India has reduced Corporate Tax from 30% to 25%: Finance minister Arun Jaitley today announced a 5 per cent reduction in corporate tax over next 4 years.

A senior CII (Confederation of Indian Industry) spokesperson appreciated this budget because it lays a definite plan towards fiscal consolidation. He feels public sector banking will become stronger and stable hereafter, which is a major need for economic reform. However, he also feels that this budget may be a disappointment for few since one clear expectation on increasing Tax exemption on Housing Loan was not addressed.

Major Amendments in Service Tax as declared in Union Budget 2015-16:

  • Swachh Bharat Cess on all or certain taxable services at a rate of 2% on the value of such taxable services
  • Service provided by a Common Effluent Treatment Plant operator for treatment of effluent is being exempted
  • The service tax rate is being increased from 12% plus Education Cesses to 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be subsumed in the new service tax rate. The revised rate shall come into effect from a date to be notified
  • Service tax to be levied on the service provided by way of access to amusement facility such as rides, bowling alleys, amusement arcades, water parks, theme parks, etc.
  • Service tax to be levied on service by way of carrying out any processes as job work for production or manufacture of alcoholic liquor for human consumption
  • Read More

Major Amendments in Excise Duty as declared in Union Budget 2015-16:

  • Education Cess and Secondary & Higher Education Cess leviable on excisable goods are being subsumed in Basic Excise duty. Consequently, Education Cess and Secondary & Higher Education Cess leviable on excisable goods are being fully exempted
  • The standard ad valorem rate of Basic Excise Duty is being increased from 12% to 12.5% and specific rates of Basic Excise Duty on petrol, diesel, cement, cigarettes & other tobacco products (other than biris) are being suitably changed
  • The total incidence of various duties of excise on petrol and diesel remains unchanged
  • Other Basic Excise Duty rates (ad valorem as well as specific) with a few exceptions are not being changed
  • Customs Education Cesses will continue to be levied on imported goods
  • Read More

Major Amendments in Customs Duty as declared in Union Budget 2015-16:

  • Reduction in SAD to address the problem of CENVAT credit accumulation
  • Reduction in Basic Customs Duty to reduce the cost of raw materials; e.g. basic customs duty on both Black Light Unit Module (BLUM) for use in the manufacture of LCD/LED TV panels and Organic LED (OLED) TV panels is reduced from 10% to 0%
  • Reduction in Customs duty on certain inputs to address the problem of duty inversion; e.g. ‘Metal parts’ used in manufacture of electrical insulators
    1. Metallurgical coke;
    2. Iron & steel and articles of iron or steel, falling under Chapters 72 and 73 of the Customs Tariff; and
    3. Commercial Vehicles excluding Completely Knocked Down (CKD) kits and electrically operated vehicles including those in CKD condition
  • The Scheduled rates of Additional Duty of Customs / Excise levied on Petrol and High Speed Diesel Oil (commonly known as Road Cess) are being increased from INR 2 per litre to INR 8 per litre
  • Read More

Major Amendments in Direct Taxes as declared in Union Budget 2015-16:

  • Proposal for Amendments to:
    1. Income-tax Act, 1961;
    2. Wealth-tax Act, 1957;
    3. Finance Act, 1994;and
    4. Finance (No.2) Act, 2004
  • It is proposed that there will be no change in the rate of personal income-tax and the rate of tax for companies in respect of income earned in the financial year 2015-16, assessable in the assessment year 2016-17
  • With a view to curbing the generation of black money in real estate, it is proposed to amend the provisions of section 269SS and 269T of the Income-tax Act so as to prohibit acceptance or re-payment of advance in cash of INR 20,000 or more for any transaction in immovable property
  • It is also proposed to provide a penalty of an equal amount in case of contravention of such provisions.
  • Job creation through revival of growth and investment and promotion of domestic ‘manufacturing’ and ‘Make in India’
  • Read More

Major targets taken up by the Government of India:

  • Bring Inflation below 6% by 2016
  • Increase GDP from 7.4% to 8.5% 2016
  • Achieve fiscal deficit of 3% in 3 years from now
  • Increase in investment in Infrastructure by INR 70,000 Crs By 2016
  • INR 25,000 Crs to be allocated for Rural Development fund in order to support the agricultural sector

Top 10 declared allocations in this fiscal year:

  • INR 246727 Crs for Defense related expenditures
  • INR 79258Crs for on-going Women Welfare Scheme
  • INR 34699 Crs under MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), 2005
  • INR 33150 Crs towards Health Sector
  • INR 10351 Crs for Women & Child Development
  • INR 5300 Crs for Micro irrigation & PM’s irrigation scheme
  • INR 4173 Crs towards improving Water Resources
  • INR 1000 Crs more for the Nirbhaya fund
  • INR 1000 Crs for enabling more IT Starts-ups
  • INR 75 Crs for faster adoption and manufacturing of electric vehicle program

The Government of India plans – Few major pointers:

  • Government of India to set up public debt management companies
  • Transport Allowance exemption increased from INR 800 to INR 1600 per month
  • 6 Crs new toilets to be built under Swach Bharat initiative
  • India’s largest reformation in taxation – GST to put in place state of art indirect tax system by April 1, 2016
  • Government of India to introduce Indian gold coins with the Ashoka Chakra symbol embossed on the coin
  • Labor Law has been reformed
  • 12.5 Crs Indian families to come under the “Jan Dhan Yojna” initiative
  • Government of India has kept aside a fund of 1212200 Crs for non-planned expenditure
  • Government of India has kept aside a fund of 465277 Crs for planned expenditure
  • Government of India to impose 300% penalty on concealing income
  • Government of India to build 5 ultra-mega power projects, each of 4000MW – this initiative is inspired by PM’s objective of bringing electricity to remaining 20,000 villages in India by 2020
  • Government of India introduces maximum imprisonment of up to 7 years for non-filing of return on foreign asset
  • Government of India introduces maximum imprisonment of up to 10 years for Black Money laundering
  • Government of India promises job for at least 1 member of each family to by 2022
  • Government of India announces establishing Centres for film production in Arunachal Pradesh
  • Government of India to develop sovereign gold bond with fixed rate of interest
  • Employee Contribution towards Provident Fund (PF) to become an option
  • Foreign Exchange Management Act to allow for seizure of foreign properties and assets
  • GAAR to be deferred by 2 years
  • Government of India rises Visa-on-Arrival facility to 150 countries; currently available in 43 countries
  • Exemption limit on Medical expenditures increased to INR 25,000; current upper limit is INR 15,000
  • Government of India to integrate education and livelihood scheme for minorities
  • Government of India to introduce Gold Monetization Scheme in order to reduce demand for overseas gold
  • Government of India to launch National Skill Development Mission in 2015
  • Government of India to establish a national unified market for farm produce
  • Government of India will introduce a new scheme named “Nayi Manzil” in order to enable minority youth
  • Online Registrations for Excise and Service Tax will be made possible within 2 days
  • Employee Contribution towards Provident Fund (PF) to become an option
  • Mudra Bank under Mudhra Pradana Mantri Yojna scheme will have a capital of INR 20000 Crs so that required money can be given on loan to small entrepreneurs, SC/ST/OBC
  • Government of India to launch National Skill Development Mission in 2015
  • Government of India to establish a national unified market for farm produce
  • Government of India will introduce a new scheme named “Nayi Manzil” in order to enable minority youth
  • Online Registrations for Excise and Service Tax will be made possible within 2 days
  • Prime Minister PM Insurance Scheme to cover accidental Death coverage for up to INR 2 Lacs>
  • Public Sector ports to be made companies under COS Act.
  • Government of India will amend laws under FEMA on capital account transactions
  • Government of India to create a Senior Citizen’s Welfare Fund
  • Government of India introduces 100% Tax exemption under section 80G of the Income-tax Act for any donations made towards Swatch Bharat and Clan Ganga initiatives
  • Government of India extends Service Tax exemption to Pre-cold Storage Warehousing

Overall, the Union Budget 2015-16 has been highly appreciated by everyone – the common man to the super rich. This is a budget which has set a positive tone within every Indians who are compelled to remain negative or neutral.

Further, following pointers are suggested/ explained by Industry leaders at the CII, New Delhi immediately after the budget while being interviewed by Dr. Pranoy Roy, NDTV and Ms. Shweta Rajpal Kohli, NDTV:

  • This budget promotes ease of doing business in India; this also encourages entrepreneurship
  • The abolition of Wealth Tax which contributed INR 1008 Crs and instead bringing in additional 2% surcharge on the super-rich Indians (any individual with taxable income of over INR 1 Cr.) is a strategic and intelligent move
  • Clear statements are framed by the FM on reformations like GST and GAAR
  • This budget does not have any “bang-bang” element (much hyped by the economic survey conducted a day before the budget by a major media house), instead this is a slow, steady and sustainable budget
  • This budget will help in reducing the tax burden for a common Indian
  • This budget promoted new schemes for assisted living devices for BPL senior citizens
  • This is a driven by the thought of “Grow with Education” – new IIT in the state of Karnataka, new IIMs in J&K and Andhra Pradesh and new AIIMS in J&K, Punjab, Tamil Nadu, Himachal Pradesh and Assam
  • The increase of Service Tax from 12.36% to 14% was much required
  • This budget is inspired by the thought of our PM as the no other Central Government earlier has ever given so much money in the hands of the States for improving their socio-economic conditions – this promotes the “Make in India” initiative of Mr. Modi.
  • This budget will promote for generating employment potential
  • This is the first time ever that a FM has declared of putting in a modern bankruptcy law – this will encourage Foreign Companies and/or Foreign Investors towards putting in their money since getting out of the business from India will become relatively much easier
  • The Government of India will be able to absorb more risks under the new PPP model
  • This is a directional budget which has shown route map for what to do – encouraging the common Indian by laying simple reforms towards health insurance is a big leap, specifically in the situation of changing ESI laws, encouraging private insurance is good move taken by the FM.
  • Overall, this budget is quite encouraging for everyone but we all need to wait and see the fine print released by the Government of India – only then plans for the next steps can be chalked out

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Anirban Chakraborty
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