Budget 2015 - At First Glance

Key Points of Budget 2015:

General :

• GDP growth for FY 2014-15 expected to be 7.4% and for FY 2015-16 – 8~8.5%
• For FY 2014-15, Current account deficit – 1.3% and fiscal deficit 4.1%
• Devolvement to states increased substantially to almost 62% (including grants)
• Public investment would be 1.25 lakh crores including 70,000 budgetary allocation for capital expenditure
• Fiscal deficit target to reach 3% in 2 years extended to 3 years. Hence, target for 15-16 shall be 3.9%, 16-17 3.5% and 17-18 – 3%
• Allocation increased substantially to agriculture sector and farm credit through NABARD
• Mudra bank with corpus of Rs. 20,000 crores set up for promotion of SME credit
• New bankruptcy law on the anvil
• NBFC’s with more than Rs. 500 crores would be considered as Financial Institutions for SARFASI Act
• Many new social security, medical and pension schemes launched which will be linked to Jan Dhan yogna & accounts
• A new National Investment & Infrastructure Fund set up to promote infrastructure finance with Rs. 20,000 corpus
• Tax free bonds can be issued now for roads, railways and irrigation projects
• 5 new mega power plants of 4,000 MW each to be auctioned in a plug & play mode i.e. after all clearances are in place
• Other infrastructure projects to be built in PPP mode using the same concept as above
• SEBI and FMC (Forward Markets Commission) to be merged and also a new Indian Financial Code shall be created
• A new Gold Monetization Scheme by the name of Sovereign Gold Bond to be launched in place of existing gold loan schemes
• Higher Educational Institutes like IIMs, IITs, AIMS etc. to be set up in each state
• Distinctions in regulations for FDI, FPI, FII to go

Labour Laws & Social Security:

• Employees to be given option to opt for ESIC or any other IRDA approved health insurance scheme
• Similarly, EPF shall become optional against contribution to pension schemes
• A universal social security system to be created for all people through the Jan Dhan Yogna
• Universal pension scheme with contribution of 50% from govt for contribution made by individuals

Direct Taxes:

• Wealth tax abolished
• Tax on super rich i.e. those earning more than Rs. 1 crores of income increased by 2%
• Tax on companies to be reduced from 30% to 25% over 4 years
• Disclosure of foreign assets must even if no income is received
• Non disclosure of foreign assets to be a non compoundable offense attracting penalty of 300% and imprisonment of 10 years
• Further, all such non disclosures to fall under Money Laundering laws and assets abroad or equivalent assets in India can be seized and confiscated
• For domestic black money, the Benami Properties Act to be amended to provide for confiscation, seizure etc.
• PAN to be quoted on all transactions over Rs. 1 lakh
• REITs and Infrastructure Investment Trusts to get pass through status for rentals and benefits under capital gains
• Offshore fund managers operating from India would not be considered now as permanent establishments for purpose of taxation which will facilitate a lot of India focused fund managers to move from Singapore and such places to India
• Eligibility for deduction for employment of new workmen changed from 100 employees to 50 employees
• GAAR deferred for 2 years and when it will be applied, it will be applied prospectively
• TDS/Witholding tax reduced on Royalty & Fees for Technical Services in some cases from 25% to 10%
• The threshold limit for applicability of domestic transfer pricing regulations increased from Rs. 5 crores to Rs. 20 crores
• For charitable trusts, the limit of Rs. 25 lakhs for income from commercial activities replaced by a 20% limit for tax purposes
• Proposed Direct tax code scrapped
• For Individuals, additional deduction of Rs. 50,000 for contribution to new pension scheme
• Mediclaim deduction increased from Rs. 15,000 to Rs. 25,000 p.a.
• Transport allowance for salaried individuals raised from Rs. 800 pm to Rs. 1600 pm
• Deductions increased for very senior citizens and people with disabilities

Excise & Customs:

• GST to be introduced from 1^st April 2016
• Excise rate rounded off to 12.5% from present 12.36%
• Service tax rate increased from 12.36% to 14%
• Basic customs duty reduced on a host of intermediate products & components to promote domestic manufacturing
• No major changes in other rates or incentives
• Registration, cenvat credit and other processes made online
• Negative list for service tax applicability reduced