The Union Budget 2014-15 presented by the Finance Minister Mr. Arun Jaitley states that the present condition of the economy signifies that the direction given is positive one and the call for fiscal prudence is surely a welcome move. The proposals and announcements made in the budget if implemented effectively should have the impact on industry and the economy as a whole. The challenge will now be the implementation of these proposals.
The Union Budget is growth oriented and presents a progressive roadmap to explore investments and infrastructure development. The budget also showed quite clearly that the new government prefers something for every kind of approach.
There was a lot of excitement for this Union Budget and the priorities are quite nicely laid out. The Finance Minister covered a very wide variety spectrum of issues which have been raised by the industry, agriculture and the civil society.
HIGHLIGHTS OF UNION BUDGET 2014-15
- Relief for Tax Payers- The Ministry of Finance has lived up the promise for the middle class and the consumers who are reeling under inflation.
- The basic exemption limit for the ordinary tax payers has been raised from Rs 2 lakh to Rs.2.5 lakh and the exemption limit for senior citizen has also been raised from Rs.2.5 lakh to Rs.3 lakh. The exemption limit for very senior citizen remains the same Rs.5lakh.
Individual resident aged below 60 years (i.e. born on or after 1st April 1955)
|INCOME SLAB||TAX RATE|
|Where total income does not exceed 2,50,000||NIL|
Individual resident aged above 60 years (i.e. born on or after 1st April 1934 but before 1st April 1954)
|INCOME SLAB||TAX RATE|
|Where the total income does not exceed Rs. 3,00,000/-.||NIL|
- Exemption limit for investment in financial instruments under Section 80C raised to Rs 1.5 lakh from Rs 1 lakh.
- Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh.
- Investment limit in PPF raised to Rs 1.5 lakh from Rs 1 lakh.
- Mandatory wage ceiling of subscription to EPS (Employee Pension Scheme) raised from Rs 6,500 to Rs 15,000
- Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh.
- Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover to be launched.
- Minimum pension increased to Rs 1,000 per month.
All the three hikes of Rs 50,000 each will help individuals save anywhere between Rs 5,000 (in the lowest tax bracket of 10 per cent) and Rs 15,000 (in the highest tax bracket of 30 per cent) on each of the benefits.
- FDI – India’s defence budget went up 12 per cent in 2014-15 over the previous year, to Rs 2,29,000 crore, and further opened the sector to foreign direct investment (FDI), though only to the extent of 49 % from the earlier 26%. India today is the largest buyer of defence equipment in the world. The composite cap of foreign exchange is being raised to 49% with full Indian management and control through the FIPB route.
It is a progressive and pragmatic step in this strategically important sector and will serve as a booster for indigenous manufacturers. This kick off play with defence is to scale up India’s domestic defence industrial manufacturing base and is also aimed at curbing the current account deficit. Requirement of the built up area and capital conditions for FDI to be reduced from 50,000 square metres to 20,000 square metres and from USD 10 million to USD 5
Million respectively for development of smart cities. The manufacturing units to be allowed to sell its products through retail including E-Commerce platforms.
- Deficit and Inflation-Decline in fiscal deficit from 5.7% in 2011-12 to 4.5% in 2013-14 mainly achieved by reduction in expenditure rather than by way of realization of higher revenue. The Improvement in current account deficit from 4.7 % in 2012-13 to year end level of 1.7% mainly achieved through restriction on non-essential import and slow-down in overall aggregate demand. The budget clearly emphasised the need to keep watch on CAD. 4.1 per cent fiscal deficit a daunting task in the backdrop of two years of low GDP growth, static industrial growth, moderate increase in indirect taxes, subsidy burden and not so encouraging tax buoyancy. The government is committed to achieve this target. Road map for fiscal consolidation outlines fiscal deficit of 3.6 % for 2015-16 and 3 % for 2016-17.Inflation has remain at elevated level with gradual moderation in WPI recently. The problem of black money must be fully addressed. Further few bold steps will be required to enhance economic activities and spur growth in the economy.
- Bank Capitalization – Requirement to infuse Rs. 2,40,000 crore as equity by 2018 in the banks to be in line with Basel-III norms. Capital of banks to be raised by increasing the shareholding of the people in a phased manner. PSUs will invest through capital investment a total sum of Rs. 2,47,941 crores in the current financial year.
- Smart Cities-A sum of Rs.7060 crore is provided in the current fiscal for the project of developing “one hundred smart cities.”
- KYC –The budget signifies the government commitment to the concept of single operating demat account as well as uniform KYC norms in order to encourage wider participation in Indian financial markets. The government proposes KYC norms with inter usability of the KYC records across the financial sector. In a move aimed to encourage foreign fund managers to shift to India, the government further proposed to provide foreign portfolio investors’ income arising from transaction in securities to be treated as capital gains.
- Indirect Taxation-The budget proposes the following for the Indirect taxation:
- To boost domestic manufacture and to address the issue of inverted duties, basic customs duty (BCD) is reduced on certain items.
- To encourage new investment and capacity addition in the chemicals and petrochemicals sector, basic customs duty reduced on certain items.
- Steps taken to boost domestic production of electronic items and reduce our dependence on imports. These include imposition of basic customs duty on certain items falling outside the purview of IT Agreement, exemption from SAD on inputs/components for PC manufacturing, imposition of education cess on imported electronic products for parity etc.
- Colour picture tubes exempted from basic customs duty to make cathode ray TVscheaper and more affordable to weaker sections.
- To encourage production of LCD and LED TVs below 19 inches in India, basic customs duty on LCD and LED TV panels of below 19 inches reduced from 10 percent to Nil.
- To give an impetus to the stainless steel industry, increase in basic customs duty on imported flat-rolled products of stainless steel from 5 percent to 7.5 percent.
- Concessional basic customs duty of 5 percent extended to machinery and equipment required for setting up of a project for solar energy production.
- Specified inputs for use in the manufacture of EVA sheets and back sheets and flat copper wire for the manufacture of PV ribbons exempted from basic customs duty.
- Reduction in basic customs duty from 10 percent to 5 percent on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Exemption from SAD of 4 percent on parts and raw materials required for the manufacture of wind operated generators.
- Concessional basic customs duty of 5 percent on machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).
- Anthracite coal, bituminous coal, coking coal, steam coal and other coal to attract 2.5 per cent basic customs duty and 2 per cent CVD to eliminate all assessment disputes and transaction costs associated with testing of various parameters of coal.
- Basic customs duty on metallurgical coke increased from Nil to 2.5 percent in line with the duty on coking coal.
- Duty on ship breaking scrap and melting scrap of iron or steel rationalized by reducing the basic customs duty on ships imported for breaking up from 5 percent to 2.5 percent.
- Reduction in the excise duty from 12 percent to 6 percent on footwear of retail price exceeding `Rs.500 per pair but not exceeding Rs. 1,000 per pair.
- For passenger facilitation, free baggage allowance increased from Rs. 35,000 to Rs. 45,000.
- Export duty on bauxite increased from 10 percent to 20 percent
- Withdraw concessional excise duty (2 percent without Cenvat benefit and 6 percent with Cenvat benefit) on smart cards and a uniform excise duty at 12 percent.
- To develop renewable energy, various items exempted from excise duty.
- Specific rates of excise duty increased on cigrettes in the range of 11 per cent to 72 per cent.
- Excise duty increased from 12 percent to 16 percent on pan masala, from 50 percent to 55 percent on unmanufactured tobacco and from 60 percent to 70 percent on gutkha and chewing tobacco.
- Levy of an additional duty of excise at 5 percent on aerated waters containing added sugar.
- To finance Clean Environment initiatives, Clean Energy Cess increased from Rs. 50 per tonne to Rs. 100 per tonne
- Government would strive to provide toilets and drinking water in all the girls school in first phase. An amount of Rs. 28635 crore is being funded for Sarv Shiksha Abhiyan(SSA) and Rs. 4966 crore for Rashtriya madhyamic Shiksha Abhiyan (RMSA).
- A School Assessment Programme is being initiated at a cost of Rs. 30 crore.
- Rs. 500 crore provided for “Pandit Madan Mohan Malviya New Teachers Training Programme” to infuse new training tools and motivate teachers.
- 100 crore provided for setting up virtual classrooms as Communication Linked Interface for Cultivating Knowledge (CLICK) and online courses.
- Jai Prakash Narayan National Centre for Excellence in Humanities to be set up in MP.
- Rs. 500 crore provided for setting up 5 more IITs in the Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala.
- 5 IIMs in the States of HP, Punjab, Bihar, Odisha and Rajasthan.
- Simplification of norms to facilitate education loans for higher studies.
- Pan India programme “Digital India” to with an outlay of Rs. 500 crore to be launched.
- Programme for promoting “Good Governance” to be launched .A sum of Rs. 100 crore provided.
Information and Broadcasting
- Rs. 100 crore allocated for 600 new and existing Community Radio Stations.
- Film & Television Institute, Pune and Satyajit Ray Film & Television Institute, Kolkata are proposed to be accorded status of Institutes of national importance and a “National
Centre for Excellence in Animation, Gaming and Special Effects to be set up.
- Rs. 100 crore is provided for Kisan TV, to disseminate real time information to the
farmers on issues such as new farming techniques, water conservation, organic farming etc.
9. Agriculture-Finance Minister, while presenting the Union Budget said that agriculture sector will be strongly supported by banks.
- To provide institutional finance to landless farmers, it is proposed to provide finance to 5 lakh joint farming groups of “Bhoomi Heen Kisan” through NABARD.
- A target of Rs.8 lakh crore has been set for agriculture credit during 2014-15.
- Corpus of Rural Infrastructure Development Fund (RIDF) raised by an additional Rs.5000 crores from the target given in the Interim Budget to Rs. 25000 crores .
- Allocation of Rs. 5,000 crore provided for the Warehouse Infrastructure Fund.
- “Long Term Rural Credit Fund” to set up for the purpose of providing refinance support to Cooperative Banks and Regional Rural Banks with an initial corpus of Rs500 crore.
10. Entrepreneurship-Union Finance Minister in his Budget speech announced the setting up of a Rs 10,000 crore fund to boost capital flow to start ups and small and medium enterprises (SMEs) in the country. Budget 2014 announced few self-employment schemes. The government aims to focus on creating more jobs for the youth by increasing local entrepreneurship. Skill India programme has been introduced to train youths for jobs. The government has announced that Rs.10,000 crore funds have been allocated for startup companies. As per official reports, 20 new industrial clusters will be set up soon.
Private sectors should be encouraged to recruit more employees thus contributing to the job creation sector. Increase in incentives by 3% to farmers will also contribute towards bringing economic stability of the farmers in India.