Key highlights of Budget 2015

Key highlights of Budget 2015

Budget for the Financial Year 2015 is out. It is announced on 28th February, 2015 on Saturday. Expectations of the public as a whole were very high. Some of the expectations were fulfilled while some are still pending. Let us have a bird eye view on the matters discussed in the budget:

  • Fiscal Deficit: Fiscal Deficit for 2015/16 expected at 3.9% of GDP. Challenging Fiscal Target of 4.1% of GDP will be met. Commitment was announced to meet medium term fiscal deficit target of 3% of GDP. Deficit in current Account is seen below 1.3% of GDP.
  • Growth: Prospective GDP Growth seen at between 8-8.5%. An objective of achieving double digit growth rate is being aimed.
  • Inflation: More monetary policy easing will be seen as consumer inflation is expected to remain close to 5% by March. It is clear that inflation will remain below 6% from the step taken of monetary policy framework agreement with the RBI. One of the most important comment in the budget was “One of the achievements of my government has been to conquer inflation. This decline in my view represents a structural shift”.
  • Revenues: Revenue Deficit is expected at 2.8% of GDP. The Non-tax revenue is expected at 2.21 Trillion Rupees. Agricultural Incomes are seen under stress by the Finance Minister with respect to current scenario. Rs. 200 Billion Rupees are expected to be fetched from Net receipts under Market Stabilization Scheme.
  • Disinvestment: Stake Sale target has been revised down to 313.5 Billion Rupees for the year 2014/15. While the stake sale target for the year 2016/17 have been expected at 550 billion rupees. Finance Ministry has seen a total stake sale at 695 billion rupees for 2015/16. Stake sales in companies for 2015 / 16 has been seen at 410 billion rupees or say $6.7 billions.
  • Market Reforms: Ministry of Finance is looking for merger of commodity regulator with SEBI. It is expected to introduce a new bankruptcy code. It is also proposed to amend RBI Act by this year. A monetary policy committee will be provided for amending the RBI Act. Setting up of public debt management agency is proposed in the budget. The budget looks forward for introduction of public contract resolution of disputes bill. Public Sector Banks require being in line with technologies so it was proposed in the budget to establish an autonomous bank board bureau which will result in improvement of banking services and regulations.
  • Policy Reforms: It is proposed to form and enact a new comprehensive law to govern black money. A universal social security system for Indians is expected to be created. Unemployment is a very important issue to be sorted out. So the bill proposes to launch a national skills mission in order to enhance employability of rural youth. Visa on arrival facility is to be raised to 150 countries as compared to 43 countries. Bill has allotted 346.99 billion rupees in favour of rural employment guarantee scheme. Recently the threshold limit for application of transfer pricing rules is rupees fifty millions and the same is proposed to be raised to 200 million rupees.
  • Borrowings: Gross and Net Market Borrowing are seen at 6 Trillion rupees and 4.56 Trillion rupees respectively.
  • General Anti – Avoidance Rules (GAAR): Application of GAAR from 1st April, 2017 is expected. Avoidance of retrospective tax provisions is announced. Anti Tax Avoidance Rules are deferred by two years.
  • Taxation: Wealth Tax has been abolished. Corporate Tax Rates to be reduced from 30% to 25% for next four years. An additional surcharge of 2% is imposed on super rich assesses. Existing exemptions available to individuals will be continued. Tough Penalties will be introduced in case of tax evasion through the new bill. Custom Duty is to be reduced on 22 items. 20% Basic Custom Duty applicable on commercial vehicle. Service Tax rate and education cess increased to 14% from 12.36%. Goods and Service Tax is expected to be implemented by April 2016. Capital Gain Tax regime will be rationalized for real estate investment trusts. Clarification will be provided with respect to indirect transfer of assets and dividend paid by foreign firms by Income Tax Department. Limit for claiming mediclaim exemption increased to Rs. 25,000 and Rs. 30,000 for senior citizens. Plans will be made for introduction of internationally competitive direct tax regimes on rates without exemptions. Norms related to permanent establishments will be modified which will require that mere presence of a fund manager in India would not constitute a permanent establishment of the offshore fund and thus the adverse tax consequences will be reduced. The above all tax proposals is expected to fetch a Net gain of rupees 150.68 billion.
  • Import Tax: Import tax increased on iron and steel as well as metallurgical coke from 15% to 10% and from 2.5 % to 5%.
  • Infrastructure: A very high investment of 700 Billion Rupees is expected in infrastructure industry in 2015/16 as compared to last year. 5 Ultra Mega Power Projects have been proposed for 4000 MW each. A need to build additional 1,00,000 KM of roads have been stated. It was also declared that Second Unit of Kudankulam nuclear power station is to be commissioned. Public Sector Ports will get encouragement for corporatisation under Companies Act. Introduction of Tax free Infrastructure Bonds for projects in roads, rail and irrigation projects is proposed. Setting up of National Investment Infrastructure fund is planned.
  • Expenditure: Plan and Non – Planned expenditure are provided at 4.65 Trillion Rupees and 13.12 Trillion Rupees respectively. While Rupees 2.6 Trillion and Rs. 331.5 Billion are allocated for Defence and health sector respectively. Rural job schemes will be allocated rupees 50 Billion if revenue improves.
  • Investment: State Run banks will be provided 79.4 billion rupees as capital infusion. Foreign investment will be allowed in alternative investment funds. Public Investment will be required to catalyze investment. A purpose was shown to replace foreign investment caps with composite caps.
  • Gold: Indian made gold coins will be introduced to reduce foreign gold coins demands. Sovereign Gold Bond will be developed. Introduction of Gold Moneterization scheme to allow depositor to earn interest.
  • Cigarettes: Excise duty has been raised by 25% for cigarettes of length less then 65mm as well as 15% for other cigarettes.
  • Subsidies: Subsidies for Food, Fertiliser and Fuel Subsidy are provided at 1.24 Trillion Rupees, 729.69 Billion Rupees and 300 Billion Rupees respectively.

Finance Minister Arun Jaitley has given various comments during the budget. Comments constituted of various aspects like macroeconomic stability, sustainable poverty elimination, job creation etc. A blink was also given about the renewed interest of domestic investors as well as international investors. We have seen the optimistic side of Finance Minister while the budget was declared. We hope that the allocation made in the budget will be helpful to each and every citizen of the country who is eligible to receive benefit of the same.

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