Highlights of Union Budget 2015

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Highlights of Union Budget-2015 of 17

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Indian Union Budget - 2015



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Table of ContentTable of ContentTable of ContentTable of Contentssss

• Introduction

……………………………………………………………………………………………………………………3…

• Economic Indicators

……………………………………………………………………………………………………………………4…

• Budget Highlights- Direct Taxes

……………………………………………………………………………………………………………………10…

• Budget Highlights-Indirect Taxes

……………………………………………………………………………………………………………………12…

• Budget Proposals & Key policy Announcements

……………………………………………………………………………………………………………………14…


Highlights of Union Budget-2015

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IntroductionIntroductionIntroductionIntroduction

The Narendra Modi led NDA Government presented its full-time

budget for the Fiscal Year 2015-16,after getting a thumping victory in

the general elections held last year.

As it has the impetus of having the strongest mandate in the house for

the past three decades, expectations from the Budget were sky-high.

The Economic Survey presented by the Chief Economic Advisor

Arvind Subramanium on the eve of budget, presented a broad

framework for tackling soaring inflation and optimizing the leverage

provided by the international markets. Growth rate is projected to be

between 8 and 8.5 per cent for this fiscal, indicating scope for big bang

reforms. The Fiscal deficit target has been kept unchanged at 4.1 per

cent of GDP. Current Account Deficit has been estimated to fall at 1.3

per cent of GDP.

The Finance Minister in this budget has used his dexterity in balancing

the tight fiscal situation which the economy is currently facing. The

Budget has presented a broad road map of the economic policy of the

new Government and outlined its plan for reviving the growth spirit of

the Indian Economy. In his budget speech, the Finance Minister (FM)

has placed emphasis on fiscal consolidation, tackling inflation, creating

infrastructure, increasing investments in manufacturing, improving

investor sentiment and agriculture and the social sectors. Being

positive about inflation he mentioned that they have been successful in

keeping CPI to below 5 per cent, opening room for more monetary

policy easing.

In line with Government’s goal of reducing subsidy burden, the

Finance Minister emphasized on need to cut subsidy leakages while

placing stimulus on broadening the base of Direct Benefit Transfer

scheme. In its initiative to boost investment in infrastructure, tax-free

infrastructure bonds for projects in roads, rail and irrigation projects

have been introduced. Also a national investment infrastructure fund

shall be set up.

In a major footstep for tax reforms, Finance Minister has announced

that Goods and Services Tax is expected to be rolled out from April

2016. Wealth tax has been abolished and additional 2% surcharge has

been introduced instead. Introduction of GAAR has been postponed to

April 1, 2017. Service Tax rates have been increased to 14%.

In order to savour its tax friendly image the Finance Minister has

further clarified on retrospective tax amendment, and has assured such

instances shall be avoided in future.

Detailed insights into the proposals introduced will follow



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Economic IndicatorsEconomic IndicatorsEconomic IndicatorsEconomic Indicators

GDP Trends

The Central Statistics Office (CSO), Ministry of Statistics &

Programme Implementation revised the base year from 2004-05 to

2011-12 for measuring the real growth. With the base year revision, as

recommended by the international guidelines, in the new series Gross

Domestic Product (GDP) at factor cost would no longer be discussed.

As is the practice internationally, industry-wise estimates is presented

as Gross Value Added (GVA) at basic prices, while ‘GDP at market

prices’ will henceforth be referred to as GDP. GDP growth rates in Q3

(Oct-Dec) of 2014-15 at constant (market price, new base, 2011-12)

prices was placed at 7.2 per cent as compared with growth of 8.2 per

cent in Q2 (Jul-Sep, new base) of 2014-15 and 6.5 per cent in Q1 (Apr-

Jun, new base) of 2014-15 respectively. GDP growth in earlier method

(at factor cost at old base 2004-05) for the Q2 (July-September) of

financial year 2014-15 (FY15) was estimated at 5.3 per cent per annum

as compared with 5.7 per cent in Q1 FY15 and 5.2 per cent per annum

in the previous year’s same quarter (Q2 of FY14) and GVA at basic

prices at constant (2011-12) prices in Q3 of 2014-15 is estimated at

`24.97 lakh crore, as against 23.24 lakh crore in Q3 of 2013-14,

showing a growth rate of 7.5 per cent. Growth rates in various sectors

are ‘agriculture, forestry and fishing’ (-0.4 per cent), ‘mining and

quarrying’ (2.9 per cent), ‘manufacturing’ (4.2 per cent), ‘electricity,

gas and water supply and other utility services’ (10.1 per cent)

‘construction’ (1.7 per cent), Trade, hotels, transport, communication

and services related to broadcasting ' (7.2 per cent), 'financial, real

estate and professional services ' (15.9 per cent), and Public

administration, defence and Other Services' (20.0 per cent). The first

revised statistics of GDP estimate (at base 2011-12 constant prices) for

2013-14 and advance estimates for 2014-15, placed the growth at 6.9

per cent and 7.4 per cent for full year, respectively

Source: Ministry of Finance




Inflationary Trends The declining trend in inflation rate was halted when WPI inflation

marginally edged up in December 2014 to 0.11 per cent (provisional)

from -0.17 per cent in November 2014 and 6.40 per cent during the

corresponding month of the previous year Average WPI inflation rate

during the Q3 of FY15 was, however, much lower at 0.54 per cent as

compared with 3.88 per cent in the previous quarter. Food inflation

rose to 5.2 per cent during December 2014 (y-o-y) as compared with

0.66 per cent in November 2014, but was much lower as compared

with Dec 2013 inflation (13.7 per cent). Inflation of ‘fuel & power’

group continue to be negative and stood at - 7.82 per cent in December

2014 as against positive fuel inflation of 10.87 per cent in December

2013. ‘Manufactured products’ too showed a lower inflation rate of

1.57 per cent in December 2014 (1.90 per cent in Nov 2014 and 3.04

per cent during December 2013). Build up inflation rate in the

financial year so far was -0.28 per cent as compared to a build up rate

of 5.58 per cent in the corresponding period of the previous year.

Retail inflation, measured by change in CPI (y-o-y, on base 2010=100)

edged up in December 2014 to 5.0 per cent. A slight softening of

cereal prices and a sharp seasonal fall in vegetables prices moderated

the trajectory of headline inflation, despite persistent firmness in the

prices of protein-rich items such as milk, meat and pulses. Inflation

excluding food and fuel, however declined for the second consecutive

month in December 2014. This was largely on account of the declining

prices of transport and communication since August, reflecting the

impact of plummeting international crude oil prices; and softer

commodity prices more generally. Average CPI inflation rate during

Q3 of FY 15 also moderated to 4.97 per cent as compared with 7.38

per cent in previous quarter and 10.40 per cent in previous year’s Q3.

Near-term as well as longer-term inflation expectations of households

dropped to single digits for the first time in 21 quarters.

Source: Ministry of Statistics and Programme Implementatio




Foreign Investments Net capital inflows remained strong during Oct-Dec 2014, not only in

the form of buoyant portfolio investment flows but also supported by

foreign direct investment inflows as well as external commercial

borrowings and the CAD was comfortably financed .Global crude oil

prices also followed its declining trend since June 2014 during the

quarter. Despite these positives, the rupee continued its depreciating

trend since late May 2014 when it touched a high of about ` 58.35 a

USD, after trading in a narrow range during October and November

2014, and ended the quarter at ` 63.03 a USD mark on December 31,

2014 as against at ` 61.74 a USD mark on September 30, 2014. The

average rupee exchange rate was ` 61.34 a USD in October 2014 and

` 61.70 a USD in November 2014, respectively. The rupee opened the

month of December 2014 on a considerably bearish note tracking

announcement by the Government to lift the curbs on gold imports and

tracking a tepid domestic GDP growth (y-o-y) estimate (at base 2004-

05 prices) of 5.3 per cent for Q2. The fall was sharp in Mid- December

in light of global developments such as the currency crisis in Russia,

weak macroeconomic data in China and Europe, tapering of global risk

sentiment due to continued crude price fall (to about five and half year

lows), etc., raising global growth concern and impacting markets

across the asset classes. This caused significant pressure on currencies

across the emerging markets and rupee touched an eleven month low

of ` 63.88 a USD on December 17, 2014. Further, lowering of global

inflationary expectations also put pressure on rupee. However, the

rupee recovered over the next few days as global currency market

stabilised and performed better vis-a-vis many other currencies. Rupee

intermittently got boost from the softer reading on CPI as well as the

WPI inflation during the quarter.

Source : SEBI and Oanda Corporation




Liquidity Situation Liquidity conditions in the economy remained generally comfortable

during the quarter, barring quarter-end when liquidity in market

tightened on account of advance tax outflows. The liquidity deficit, as

reflected by net borrowings from RBI under Liquidity Adjustment

Facility (LAF) including MSF, remained comfortably below the

Reserve Bank’s stated comfort zone of about one per cent of net

demand and time liabilities (NDTL) of banking system during most of

the quarter. The net amount provided under LAF operations during the

quarter further moderated with average amount provided at ` 52,701

crore in October and ` 42,836 crore in November, however, increased

to ` 83,141 crore in December 2014. The quarter began with surplus

liquidity in the system and after continuing easy liquidity conditions

for most of the quarter till mid- December 2014, borrowings under

LAF peaked at ` 1,23,110 crore on December 22, 2014. However, the

average net borrowings under LAF during Q3 of FY 14-15 at ` 59,968

crore was lower than ` 74,503 crore in the previous quarter (Q2 of FY

14-15). On policy front, RBI in its fifth bi-monthly monetary policy

review on December 2, 2014 maintained status quo on the statutory

liquidity ratio (SLR) of scheduled commercial banks (22.0 percent of

their NDTL) and key policy rates (LAF repo rate unchanged at 8.0

percent). There was also status quo on providing liquidity through

overnight repos at 0.25 per cent of bank-wise NDTL, and providing

liquidity under 7-day and 14-day term repos up to 0.75 per cent of

NDTL of the banking system. RBI stated that the daily one-day term

repos and reverse repos would continue to ensure smooth liquidity in

the system.





Import Export Trends

India’s merchandised exports during Q3 of 2014-15 (Oct-Dec 2014)

shrank by 1.0 per cent (y-o-y) after two consecutive quarters of

growth, with the slump in international crude prices taking its toll on

exports of petroleum products, and non-oil export growth also

decelerating sharply. Export performance has been impacted by weak

global demand conditions and the real appreciation of the rupee. The

fall in international crude prices translated into a sizable saving on

account of petroleum oil lubricants (POL) imports, despite a pick-up in

import volumes in Q3. Gold imports also moderated, coming off from

the seasonal cum pent-up demand spurt in September-November 2014.

Although overall merchandise imports declined in December, they

recorded an expansion for Q3 as a whole on the back of the earlier rise

in gold and non-oil non-gold items. Imports rose by 7.5 per cent (y-o-

y) during Q3 of 2014-15 as compared with a growth of 10.1 per cent

(y-o-y) in Q2 of 2014-15. As a consequence, the trade deficit widened

in Q3 (increased to USD 39.303 bn) relative to the preceding quarter

(USD 39.112 bn in Q2 of 2014-15). On a y-o-y basis, however, trade

deficit increased lower by 29.5 per cent during Q 3FY 15 (Oct-Dec) as

compared with a rise of 33.5 per cent in Q 2 of 2014-15. The average

monthly trade deficit during Oct-Dec 2014 increased marginally to

USD 13.101 bn as against USD 13.037 bn in Q2 of 2014-15 . The

estimate of the current account deficit (CAD) for 2014-15 is placed at

1.3 per cent of GDP, significantly lower than earlier projections.





Secondary Market Transactions

Chart on secondary market transactions depicts the movement in

Goverment bond yields (10-year yield as benchmark) during the

quarter. 10-year benchmark paper opened at 8.49% on October 1, 2014

and after trading between 8.51% (on October 1, 2014) and 7.78% (on

December 15, 2014) during the quarter, closed at 7.90% on December

31, 2014. G-Secs marched upward during the quarter, following its

upward trend since mid-August 2014. Overcoming disappointment on

RBI’s status quo on key policy rates in its fourth bi-monthly monetary

policy review on September 30, 2014, the G-Sec market opened on

positive sentiment on expectations of low inflation number for

September as crude continued its downward fall. The momentum was

bolstered by continually declining oil prices, which has salutary impact

on both fiscal and current account deficit situation. This softening in

yields was sustained after the release of CPI and WPI data, which

posted better than expected number. Market also welcomed

announcement of diesel price deregulation by the government. The

sentiment further supported in November as domestic fuel price saw

first cut by Oil marketing companies after deregulation, release of

weaker than expected NFP data in US and expectations of low

inflation numbers for October 2014 as well. In the meantime, US Fed

concluded its last tranche of USD 15 Bn bond buying program in last

week of October, however, reiterated its guidance to keep federal fund

rates at near zero level for a considerable time. Market saw

intermeeting corrections on profit taking on long rallies, OMO sales

from RBI, etc., during mid-November and traded in a range for rest of

the month.

Source: SEBI

In its fifth Bi-monthly monetary policy statement on December 2

2014, RBI maintained status quo as regards the policy rates, however,

it acknowledged faster pace of decline in inflation and revised down its

forecast for CPI inflation to 6% by March-2015. With RBI indicating

that it is likely to act even outside policy day, if the incoming

information is strong, and crude touching fresh five year lows, the ten

year yields slid below repo rate post RBI policy.




DirecDirecDirecDirectttt TaxesTaxesTaxesTaxes

The proposed schemes are effective for FY 2015-16, unless otherwise specified.

• Tax rate, surcharge and education cess remain

unchanged.

• Section 80D – Mediclaim / Health Insurance

deductions increased from Rs.15,000 to Rs.25,000 and

Rs.30,000 for senior citizen and Rs.80,000 for serious

diseases for senior citizens.

• Transport allowance exemption increased from

Rs.800 p. m to Rs.1,600 p. m.

• Quoting of PAN no. is mandatory for any purchase

above Rs.1 Lakh.

• Wealth tax to be abolished and replaced by 2%

surcharge on Super rich having income above

Rs.1Crore

• All contributions to Sukanya Samridhi Scheme to be

Tax Free.

• Additional investment of Rs. 50,000 p.a. allowed for

deposition under new pension scheme under section

80CCD.

• The limit of deduction on account of contribution to a

Pension Scheme is proposed to be increased from Rs.

1 Lakh to Rs. 1.5 Lakh.

• Contribution in EPF by employee is optional for an

employee earning salary below threshold limit.

• Corporate Tax Rate will be reduced to 25% from 30%

in coming next four years.

• Retrospective tax provision to be avoided.

• 100% deduction for contribution to swacchh Bharat

and clean Ganga schemes.




• Non filing of Income Tax Return is proposed to make

punishable with imprisonment.

• Specified Domestic Transfer Pricing transaction limit

is proposed to increase to 20 crore from 5 crore to

tighten the reporting of Cast Transactions.

• Additional deduction of Rs.25,000 for differently

abled persons.

• Tax benefits on Income upto Rs.4.42 Lakh.

• Acceptance or re payment of an advance of Rs.20,000

or more in cash for purchase of immovable property to

be prohibited.

• Splitting of transaction not to be permitted.

• Concealment of income will attract 10 years of

rigorous imprisonment.

• Implementation of GAAR postponed by 2 years

• Announcement of Tax free bonds for Railways and

Roads

• In a major relief in genuine charitable institutions,

ceiling limit for such institutions engaged in trade,

business has been fixed at 20% of total receipts

instead of existing Rs.25 lakhs

• Direct Tax Regime will be internationally competitive

on rates

• Yoga included in the ambit of Charitable Purposes

under the Income Tax Act.

• Income Tax on Royalty fees for technical services to

be reduced to 10% from 25%

• All investments made in favour of girl child to be

exempted under SuKanya Samridhi Scheme.

• In order to curb benami transaction in property deals,

Finance Minister has proposed to rationalize capital

gains tax regime for real estate investment trusts.

• Penalty for concealment of income and asset will be at

the rate of 300% of tax evaded.

• In order to rationalize the MAT provisions for FIIs,

profits corresponding to their income from capital

gains on transactions in securities which are liable to

tax at a lower rate, shall not be subject to MAT.




InInInInddddirecirecirecirect t t t TaxesTaxesTaxesTaxes

GOODS AND SERVICE TAX (GST)

• One of the key expectations of the industry from the

Budget was regarding the implementation of GST And

the Finance Minister lay down the roadmap of it and

will be put in place by April 1, 2016

• Service tax exemption to Construction, Erection,

Commissioning or Installation of original works

pertaining to an Airport or Port Withdrawn.

SERVICE TAX

• The Finance Minister has amended the Service Tax

Rate from 12.36% to 14% with NO Education Cess

and Secondary Higher Education Cess.

• Time limit for taking CENVAT credit on inputs and

input services increased from 6 Months to One year.

• The Pre-cold Storage Warehouse Service will be

exempted from Service Tax.

• Service Tax Exemption to Varishta Bima Yojana

• Central Excise and Service Tax assessee to be allowed

to use digitally signed invoices and maintain record

electronically

• Enabling provisions made to exclude all services

provided by the Government and Local Authority to a

Business Entity from the negative list.




CUSTOM DUTY

EXCISE DUTY

• The government has proposed to reduce the Custom Duty on

22 items.

• FM Proposes to exempt SAD on all items

• Custom duty on commercial vehicle hiked to 40% from 10%.

• Phone bill may be reduced a bit as customs duty on

telecommunication grade optical fiber cables has been

exempted completely (as against a duty of 7.5 per cent).

Similarly, customs duty has been removed for LCD/LED

television panels as opposed to a duty of 10 per cent earlier.

• Custom duty on tobacco increased to Rs.70 per Kg. from the

current Rs.60 per Kg.

• Similarly, basic customs duty is being reduced on certain raw

materials used in lathe machines to 2.5 per cent from 7.5 per

cent, medical video endoscopes to 2.5 percent from 5 per cent

• Artificial heart has been exempted from basic custom duty of 5

percent and counter vailing duty (CVD)

• Service Tax and Central Excise Certificates to be issued in 2

working days.

• Standard ad valorem rate of duty of excise (i.e. CENVAT) is

being increased from 12% to 12.5%.

• Education Cess and Secondary & Higher Education Cess

leviable on all excisable goods are being fully exempted.

Effective from 1st March, 2015.

• Excise duty has been reduced to six per cent from 12 per cent

for footwear industry, on footwear of retail price exceeding Rs

500 per pair but not exceeding Rs 1,000.




Budget ProposalBudget ProposalBudget ProposalBudget Proposals s s s

Agricultural Sector:

• Government has proposed Rs. 8.5 Cr credit for Rural

Development.

• Rs.5300 Cr for Micro Irrigation Watershed Project.

• Soil Health Card scheme has been launched to improve soil

fertility.

• MNREGA allocation to go up by Rs 5000 crore. This is the

highest ever allocation to the scheme.

• FM proposes Rs. 25000 Crore for Rural Infrastructure

Development Bank.

• “Per Drop More Crop” scheme for better irrigation.

Educational Sector:

• Nayi Manzil – A new proposal for youth where they can get

School Leaving Certificate and get employment.

• The Government Proposes Higher Education loan scheme

• New 80,000 Secondary Schools to be started

• New AIIMS to be set up in J&K, Punjab, Tamilnadu,

Himachal Pradesh and Assam.

• New IIT to be set up in Karnataka and Dhanbad

• New Horticulture University in Amritser

• New IIM in J&K and Andhra Pradesh

• New Pharmaceutical Research Institute in Maharashtra and

Rajasthan.

• New Film production centres in North East

• Fully IT based student help facility for needy students

• Integrated education and livelihood scheme to be launched

• Total Allocation to education sector is Rs.68,968 crores




Travel and Tourism Sector:

• FM proposes to develop 8 Heritage Sites like Elephanta Caves,

Jalianwala Baug, Churches and Convents of old Goa, Hampi,

Rani ki Vav, Leh Palace, Varanasi Temple Town, Qutub Shahi

Toms

• Visa on arrival increased from 43 to 150 countries in different

stages.

Banking Sector:

• New structure to be put in place in banking sector gor seamless

integration of data.

• Debit card transaction to be encouraged and cash transaction to

be disincentives.

• Government to set up Mudra banks for SMEs and Lower

income Group.

• FDI and FII will be no more diffentiated

• NBFC registered with RBI with Rs.500 Crore and above will

be considered as Financial Institutions.

• Public Debt management agency to be created to strengthen

the bond market

Infrastructure Sector:

• Government proposes new 2 crore house in Rural Area and 5

crore house in Urban area.

• Every family in India would have roof over their head by 2022.

• Each house in the country should have basic facilities of 24

hours power supply, clean drinking water and other amenities.

• FM proposes to merge Forward Markets with SEBI to avoid

speculation

• FEMA Act to be amended to incorporate Black Money

Provisions

• Indian Gold Coin with Ashok Chakra on its face. Sovreign

Gold Bond Alternative to Gold

• Gold Monetization Scheme to replace deposit and Metal loans

and to allow depositors to earn interest

• Good progress in DMIC corridor and other infra projects

• Rs.1200 crore earmarked and additional funds if pace of work

picks up on ongoing projects.

• Ports in public sector will be encouraged to corporatize &

become companies under companies act

• National Investment in infrastructure Funds to be launched

with corpus of Rs.20000 Crore to generate more funds.

• Postal network across the country to be used for increasing

access to formal financial syatem.

• Gamechanging Reforms: GST and JAM Trinity (Jan Dhan

Yojana, Mobile Number and Aadhar)

• Five ultra –mega power projects each of 4000 MW to be set

up. Second unit of Kudankulam Nuclear Power Station will be

commissioned in 2015-16

• Self Employment and Talent Utilization (SETU) to be utilized

• Subsidy Rationalisation based on Cutting Leakages

• Electronic Vehicles are encouraged and allocated Rs.75 crore

towards it.




Health Sector:

• Physical Aids and Assisting devices for physically challenged

senior citizens.

• Providing Medical services in each village and city.

General Sector:

• In order to support programmes for women security, advocacy

and awareness, Finance Minister has decided to provide 1,000

crore to the Nirbhaya Fund

• 1,500 crore Rs has been allocated to Deen Dayal Upadhyay

Gramin Kaushal Yojana for enhancing the employability of

rural youth. Disbursement will be through a digital voucher

directly into qualified student’s bank account

• With a view to facilitate relocation of fund managers of

offshore funds in India, it is proposed to modify the permanent

establishment (PE) norms.

• Provisions of the Income-tax Act have been proposed in order

to provide tax neutrality on transfer of units of a scheme of a

Mutual Fund under the process of consolidation of schemes of

Mutual Funds as per SEBI Regulations, 1996

• Universal social security system for all Indians, specially the

poor and the underprivileged has been proposed by FM

• In its initiative to boost entrepreneurs government plans to

launch a E- Business Portal which regulates 14 regulatory

permissions at one Source.




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Highlights of Union Budget 2015

Economy & Finance

Transcript of Highlights of Union Budget 2015