“Minimum Government Maximum Governance” is the mantra of the new Modi government and Finance Minister Arun Jaitley has presented a Union Budget treading in same direction. The budget has received a good response and has been termed as a forward looking budget.
The Union Budget is preceded by Economic Survey which states the economic performance of the country in the preceding year. Union Budget encompasses extensive account of Government Finance both revenue (short term/current) as well as Capital expenses (long term). It also estimates the next fiscal year’s outlay called budgeted estimates.
HIGHLIGHTS OF THE BUDGET 2014
PERSONAL INVESTMENT (TAXATION)
- Income tax exemption limit raised to Rs 2.5 lakh and for senior citizens to Rs 3 lakh
- Exemption limit for investment in financial instruments under 80C raised to Rs 1.5 lakh.
- Investment limit in PPF raised to Rs 1.5 lakh
- Long term capial gain tax for mutual funds doubled to 20 pc; lock-in period increased to 3 years
- Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh.
- Committee to look into tax demands made in respect of retrospective tax amendments of 2012 (Vodafone case brought bad publicity last year at present it is in International Arbitration)
- Income from foreign portfolio investors to be treated as capital gains
- EPFO to launch the ‘Uniform Account Number’ service to facilitate portability of Provident Fund accounts
- Mandatory wage ceiling of subscription to EPS (Employee Pension Scheme) raised from Rs 6,500 to Rs 15,000
- Minimum pension increased to Rs 1,000 per month
- Fiscal deficit target retained at 4.1 pc of GDP for current fiscal and 3.6 pc in FY 16 (last year it was 4.5 pc)
- Govt expects Rs 9.77 lakh crore revenue crore from taxes (last year revenue was Rs. 8.6 lakh crore)
- Govt’s plan expenditure pegged at Rs 5.75 lakh crore and non-plan at Rs 12.19 lakh crore.
- Gross borrowings pegged at Rs 6 lakh crore
- Net effect of direct tax proposals is revenue loss of Rs 22,200 cr
- Tax proposals on indirect tax front would yield Rs. 7,525 crore
- Contours of GST to be finalised this fiscal; Govt to look into DTC proposal.
- Rs 4,000 cr set aside to increase flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.
- Rs 2,037 crore set aside for Integrated Ganga Conservation Mission called ‘Namami Gange
- Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover to be launched
- Rs 150 crore allocated for increasing safety of women in large cities
- Govt proposes to launch Digital India’ programme to ensure broad band connectivity at village level
- National Rural Internet and Technology Mission for services in villages and schools, training in IT skills proposed
- Rs 100 cr scheme to support about 600 new and existing Community Radio Stations
- Rs 100 cr for metro projects in Lucknow and Ahmedabad
- Rs 7,060 crore for setting up 100 Smart Cities
- A project on the river Ganga called ‘Jal Marg Vikas’ for inland waterways between Allahabad and Haldia; Rs 4,200 crore set aside for the purpose.
- Govt proposes Ultra Modern Super Critical Coal Based Thermal Power Technology
- Impasse in coal sector will be resolved; coal will be provided to power plants already commissioned or to be commissioned by March 2015
- 5 IIMs to be opened in HP, Punjab, Bihar, Odisha and Rajasthan
- 5 more IITs in Jammu, Chattisgarh, Goa, Andhra Pradesh and Kerala.
- 4 more AIIMS like institutions to come up in AP, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP
FDI AND DISINVESTMENT
- FDI limit to be hiked at 49 pc in defence, insurance
- Disinvestment target fixed at Rs 58,425 crore
EXCISE AND CUSTOM DUTIES
- Clean Energy cess increased from Rs. 50/ tonne to Rs 100/tonne
- Excise duty on footwear reduced from 12 pc to 6 pc
- Free baggage allowance increased from Rs 35,000 to Rs 45,000
- Exempted all inputs/components used in manufacturing of personal computer & PVC Sheet & ribbon used to manufacture smart cards from 4 pc SAD
- Waived basic custom duty on LCD & LED panels used as inputs
- Custom duty on imported flat-rolled products of stainless steel has been increased from 5 pc to 7.5 pc
- Duty on steel grade limestone and steel grade has been reduced to 2.5 pc (from 5 pc earlier)
- Excise duty on specified food processing and packaging machinery has been cut to 6 pc (from 10 pc earlier)
- Expenditure management commission to be setup; will look into food and fertilizer subsides
- ‘Pandit Madan Mohan Malviya New Teachers Training Programme’ launched with initial sum of Rs 500 crore
- Govt provides Rs 500 crore for rehabilitation of displaced Kashmiri migrants
- PSUs to invest to over Rs 2.47 lakh crore this fiscal.
- War memorial to be set up along with a war museum; Rs 100 crore set aside for this
- Set aside Rs 11,200 crore for PSU banks capitalisation
- Govt in favour of consolidation of PSU banks
- Govt considering giving greater autonomy to PSU banks while making them accountable
OIL & GAS SECTOR
- Emphasised on reducing fuel subsidies but details missing
- Propose to build 15,000 km gas transportation pipelines to complete national gas pipeline grid under public-private partnership (PPP) model
- Lowering excise duty on petrol, diesel, and other fuels, branded fuels.
- Investment allowance to manufacturing companies, to incentivise small entrepreneurs
- Rs 100 crore for development of organic farming
- 10 year tax holiday given to attract investment in Power Sector
ANALYSIS OF BUDGET 2014-15
- Encourages entrepreneurship and local manufacturing
- Stable tax regime and firm commitment on looking the retrospective tax legislation objectively
- Step in right direction by having FDI in defence, aim to curb fiscal deficit, establishing Expenditure Management Commission to look into subsidies etc.
- Commitment seen to develop smart small cities
- Education seen as priority
- Oil & Gas Sector did not get much despite having heavy expectations from the budget.
- Contentious issues such as GST are avoided, could have been more specific on it.
- The fiscal deficit target of 4.1% appears as unrealistic given the volatile international situation resulting in price hike of oil and poor monsoon been predicted for the year
Article submitted by
PGPX (One Year Full Time Programme for Executives)
Class of 2015