Union Budget 2014-15bo.sbicapsec.com/pdflink/imagestorage/Union Budget_2014... · 2014-07-11 ·...

Union Budget 2014-15

SBICAP Securities Limited / 1



The Union Budget 2014-15 was largely in line with the expectations, it was both dynamic and reform oriented with due

focus accorded on reviving the low growth trajectory, seen over the last decade. The government tried to take cautious

steps amidst weak finances by attracting more funds, liberalizing FDI norms, reconsidering retro-tax amendments,

simplifying KYC norms, focusing on manufacturing and early implementation of GST. The government is looking to curtail

fiscal deficit without reducing the expenditure, which is estimated at INR 17.94 trillion. The budget also brings about

much awaited aid to salaried class through hike in basic exemption limit to INR 2.5 lakh as well as additional deduction of

INR 50,000 each in 80C and home loan interest expenses whereas the no changes were proposed in tax rates.

The government also touched upon rural employment and development through MNREGA and higher allocation of

agricultural credit. Due focus was given on financing, by allowing banks to raise long term finances with relaxation in

reserve requirements in order to bridge funding requirements.

Overall we believe that the budget was well balanced and has looked to address the concerns of industry, economy,

general public and investors who were expecting reforms and a clear roadmap to fiscal consolidation. The stock market

has given its feedback through huge intraday swings, however we feel perhaps time is needed to understand and obtain

clarity on proposals to reflect the true picture. We hereby bring to you, the key highlights and industry wise proposals of

the Union Budget 2014-15

Executive Summary



• Personal income-tax exemption limit raised by INR 50,000 to INR 2.5 Lakh and for senior citizen same isenhanced to INR 3.0 Lakh from INR 2.5 Lakh

• No change in tax rates for individuals, HUF and corporates. Education cess to continue at 3%

• Exemption under section 80C is raised to INR 1.5 Lakh from INR 1 Lakh and deduction for interest expenseson housing loans is also raised to INR 2 Lakh from INR 1.5 Lakh

• 15% investment allowances for manufacturing companies investing up to INR 25 crore in new plant andmachinery

• Long term capital gain tax on transfer of mutual fund other than equity is raised to 20% from current 10%,tenure of long term is also increased to 36 months from current 12 months

• Income and dividend distribution tax to be levied on gross amount instead of amount paid net of taxes

• To review the DTC in its present shape

Direct Tax Proposals



• Services tax is extended on sale of space or time for advertisements in broadcast media, extended to coversuch sales on other segments like online and mobile advertising. Print media on the other hand remain outof services tax bracket

• Services provided by radio-taxis brought under service tax

• Services by air-conditioned contract carriages and technical testing of newly developed drugs on humanparticipants brought under service tax

• For safe disposal of medical and clinical wastes, services provided by common biomedical waste treatmentfacilities are exempted

Indirect tax proposals



• Proposed to allow banks to raise long term funds with relaxation in reserve requirements for funding of longterm infrastructure projects

• Government to provide INR 2.4 lakh crore capital infusion till 2018 to meet Basel-III norms

• Banks to provide INR 8 lakh crore agriculture credit for FY15

• Proposed to set up 6 new Debt Recovery Tribunal (DRT)

• To encourage banking consolidation and may sell stake in some banks but continue to remain majoritystakeholder

• Proposed to increase FDI limit in insurance to 49% from current 26%

• To provide budgetary support of INR 12000 crore to NHB to fund housing market, INR 4000 crore for low costhousing INR 8000 crore for Rural Housing Fund

Positive for: All Private and Public banks, Reliance Capital, Max India, Bajaj Finance, Exide Industries, Repco Home, DHFL, Can Fin Homes and Gruh Finance

BFSI



• INR 11,635 crore allocated for development of 16 new outer harbor projects and to develop SEZ at JNPT andKandla

• Aim to build 8500 Kms of highways in FY15

• Budgetary support of INR 37,880 crore to NHAI for funding of road projects of which INR 3,000 crore for NEsates

• Allocated INR 4,200 crore for national waterways for commercial navigation of 1500 MT vessels

• Allocated INR 2,250 crore for border infrastructure projects. INR 14389 crore towards PMGSY for year FY15

• Allocated INR 28,635 crore for Sarv Shiksha Abhiyan (SSA) and INR 4966 crore for Rashtriya madhyamicShiksha Abhiyan (RMSA).

• To set up 5 more IITs and IIMs

• INR 100 crore provided for setting up virtual classrooms

Positive for: Dredging Corporation, Adani Port and Sez, Gujarat Pipava Port, IRB Infrastructure, ITNL, Sadbhav Engineering, Navneet Publication and NIIT

Infrastructure



• Tax pass through status to REITs

• To raise the interest expenses deduction limit from INR 1.5 Lakh to INR 2.0 lakh for housing loan

• Allocated INR 7060 crore to build 100 smart cities

• Budgetary support of INR 4000 crore for low cost housing and INR 8000 crore for rural housing

• Slum development to be treated a CSR activities

• Reduced the FDI criteria in housing projects from 50K Square meter to 20K square meter at the sameminimum investment limit is also reduced from USD 10 million to USD 5 million subject to 3 years postcompletion lock in

Positive for: DLF, Unitech, Parsvanath Developers, Oberoi Realty, HDIL, Purvankara Projects, Sobha Developers

Real Estate



• Investment allowance of 15% in plant and machinery above INR 25 crore (earlier INR 100 crore) for theperiod of three years.

• Concessional excise duty (of 10% vs 12%) for consumer durables and capital goods equipment extended by aperiod of 6 months

• Cut in excise duty (to 6%) on food processing equipment and packaged machinery equipment suppliers

• Composite cap on FDI in defence sector increased to 49% vs 24% earlier under FIPB route. Ownership controlto be retained with Indian entity

• Proposed to cut customs duty on LCD, LED panels sub-19 inch to nil

• Development of 6 new textile clusters

• Defence allocation to INR 2.29 lakh crore

• Capital outlay for Defence by INR 5,000 crore, over the amount provided for in the interim Budget formodernization

• Exemption from excise duty for machinery and equipment required for setting up of compressed biogasplants.

Positive for: Voltas, Blue star, Laxmi machine works, BEML, Astra Microwave, Havells India, Kalpataru Power and MIRC electronics

Capital Goods



• Custom duty on imported coal is raised from 2% to 2.5% (Negative for power plants based on imported coal)

• Extended the 80IA income tax exemption for another 3 years till 2017

• Allocated an initial sum of INR 100 crore for a new scheme Ultra-Modern Super Critical Coal Based ThermalPower Technology.

• INR 500 crore provided for Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, AndhraPradesh and Laddakh.

• For the development of one MW Solar Parks on the banks of canals, INR 100 crore has been provided.

• Exemption from excise duty on machinery and equipment required for setting up of a project for solarenergy production.

Positive for: NTPC, CESC, Tata power and Moser Baer

Power



• For solar power driven agricultural pump sets and water pumping stations, INR 400 crore is provided.

• Agriculture credit for FY15 is pegged at INR 8 Lakh crore

• The farmers would get a further incentive of 3% on interest for timely repayment

• INR 5,000 crore allocated for the warehouse Infrastructure Fund

Positive for: KSB pumps, Jain irrigation and Finolex Industries

Agriculture

Positive for: ONGC, Cairn India, Aban Offshore, Ratnamani Metals, Welspun corp and Maharashtra Seamless

Oil and Gas

• Production and exploitation of Coal Bed Methane (CBD) reserves have been proposed to accelerate.

• Proposal to expand gas pipeline infrastructure by 15,000 kms in the country by using appropriate PPPmodels

• Proposed to reduce basic customs duty on crude naphthalene from 10% to 5%



• Proposed to raise the basic customs duty on imported flat-rolled products of stainless steel from 5 % to 7.5%

• Proposed to increase the export duty on bauxite from 10 percent to 20 percent.

• Proposed to rationalise customs duty on all grades of coal to 2.5%

Metals and Mining

Positive for: TATA steel, Hindalco, NMDC and SAIL



• Proposed to reduce the excise duty from 12% to 6% on footwear of retail price exceeding INR 500 per pairbut not exceeding INR 1,000 per pair.

Others

Positive for: Bata India, Relaxo footwears and Liberty Shoes

• The facility of e-visa would be introduced in a phased manner at nine airports.

Positive for: Cox and Kings and Thomas cook

• Proposed to cut custom duty on methyl alcohol and denatured ethyl alcohol from 7.5% to 5%.

Positive for: Tilaknagar Industries and Radico Khaitan

• Proposed to reduce custom duty on ethane, propane, ethylene, propylene, butadiene and ortho-xylene from5 percent to 2.5 percent

Positive for: Paper products, BASF and Essel propack



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Union Budget 2014-15bo.sbicapsec.com/pdflink/imagestorage/Union Budget_2014... · 2014-07-11 ·...

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