Duties raised on cigarettes, tobacco, pan-masala
NEW DELHI, July 10:Finance Minister Arun Jaitley today doled out income tax sops by raising threshold exemption and investment limits by Rs 50,000, raised duties on cigarettes, tobacco, pan-masala and aerated drinks, widened service tax base and announced measures to spur growth manufacturing and revive investor confidence.
Without tinkering with the tax rates and allowing continuing 3 per cent education cess on all tax payers, he provided encouraging signals for domestic and foreign investors offering not to “ordinarily” bring about any tax change retrospectively which creates a fresh liability.
Speaking to PTI after presenting his maiden budget in Parliament, he ruled out resorting to retrospective taxation and said “ordinarily we will not legislate to create fresh liability.”
Jaitley said he has taken important steps that were nececssary but not taken in the last 10 years to put the economy back on track.
The budget for 2014-15 raised the threshold income tax exemption limit from Rs 2 lakh to Rs 2.5 lakh and investments under 80C by Rs 50,000 to Rs 1.5 lakh, and raised interest exemption on housing loan on self-occupied property by Rs 50,000 to Rs 2 lakh.
The exemption limit for senior citizens has been raised from Rs 2.5 lakh to Rs 3 lakh. The tax sops could leave up to Rs 40,000 in the hands of assessees.
However, there is no change in rate of surcharge either for the corporates or individuals and the education cess of three per cent will also continue.
Baggage allowance for passengers returning from abroad has been raised from from Rs 35,000 to Rs 45,000.
The budget makes cigarettes, tobacco, pan-masala, gutka and cold-drinks costlier by raising excise duties while CRT TVs used by poor, LCD and LED TV panels of less than 19-inches will be cheaper through cuts in customs duties.
Direct tax proposals in the budget involve a sacrifice of Rs 22,200 crore while indirect tax proposals will yield a revenue of Rs 7,525 crore.
Assuaging sentiments of foreign investors deterred by the change brought in 2012, Jaitley announced that all fresh cases arising out of retrospective amendments of 2012 in respect of indirect transfers will be scrutinised by a high level committee to be constituted by the CBDT before any action is initiated.
“I hope the investor community both within India and abroad will repose confidence on our stated position and participate in the Indian growth story with renewed vigour,” he said, offering a stable and predictable tax regime.
He also said the Government will revive the revised Direct Taxes Code (DTC) taking into account the comments of stakeholders.
The Service Tax net has been widened by inclusion of radio-cabs and online ads to mop up additional revenue by pruning the negative list.
The Finance Minister said Government will promote FDI by raising the cap to 49 per cent in Defence and Insurance with full Indian management and control.
The budget raises defence spending by 12.5 per cent to Rs 2.29 lakh crore. Non-plan expenditure for the current year has been estimated at Rs 12,19,892 crore with additional amount for fertiliser subsidy and capital expenditure for armed forces.
The total expenditure estimates stand at Rs 17,94,892 crore. Gross tax receipts will be Rs 13,64,524 crore, of which Centre’s share will Rs 9,77,258 crore. Non-tax revenues for current financial year will be Rs 2,12,505 crore and capital receipts other than borrowings will be Rs 73,952 crore.
The budget pegs the fiscal deficit for the current fiscal at 4.1 per cent of the GDP and 3.6 and 3 per cent in 2015-16 and 2016-17 respectively.
Jaitley said he began working with constraints based on the targets set by his predecessor. In 45 days, this is the best he could do, he said.
The budget made a commitment to undertake an overhaul of the subsidy regime while promising protection to the marginalised sections.
Asked about the budget not giving a clear roadmap for subsidy reforms, Jaitley said an Expenditure Management Commission will be constituted to look in the issue.
In an apparent reference to the previous Government, he said slow decision-making had resulted in a loss of opportunity and two years of sub-5 per cent growth in the economy has resulted in challenging situation.
He said Government intends to usher in a policy regime that would bring the desired growth, lower inflation, sustained level of external sector balance and prudent policy stance.
The Finance Minister said the present situation presents a challenge of slow growth in manufacturing sector, in infrastructure and also the need to introduce fiscal prudence.
The tax to GDP ratio must be improved and non-tax revenue increased, he said while pruning the negative list for levy of service tax.
“India today needs a boost for job creation. Our manufacturing sector in particular needs a push for job creation,” he said.
Jaitley further said growth in infrastructure and construction sectors is necessary to revive the economy and generate jobs for millions of young boys and girls.
Manufacturing sector is of paramount importance for the growth of our economy and this sector has multiplier effect on creation of jobs and announced various incentives to facilitate investments in the sector, Jaitley added.
The budget contained a slew of measures to fast-track projects mostly in public-private-public partnerships, which finds renewed focus in the minister’s speech.
It also announced proposal for investment of Rs.38,000 crore for fast-tracking highways to augment the country’s arterial network.
The real estate sector and infrastructure have got a boost in the budget which has proposed tax incentives for new new investment instruments–Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (InvITs)–to help long term funds from foreign and domestic investors.
The hike in exemption limit and increase in saving ceiling will lead a maximum tax saving of Rs 39,655 where surcharge is applicable.
For people with net annual income of Rs 3 lakh, the relief today provided will result in saving of Rs 5,150 in taxes. For individual with Rs 5 lakh net income, the tax benefit will come to Rs 10,300 after considering tax deduction under 80C.
For persons with income of Rs 10 lakh, the savings in taxes would Rs 15,450, according to calculations by KPMG.
Deloitte Haskins & Sells Partner Tapati Ghose said with a maximum savings of Rs 36,050 (where surcharge not applicable) and maximum tax saving of Rs 39,655 where surcharge is applicable, the Finance Minister has done a fair bit to keep the sentiments positive.
“The proposals are broad based keeping all in mind – the young and the old, the middle class individual and the short term investor, the rural and urban India,” she said.
KPMG Partner Vikas Vasal said the increase in popular tax deduction under 80C from Rs 1 lakh to Rs 1.5 lakh will help achieve twin objectives of encouraging the households to make long term savings, and also increase the overall savings rate in the economy which has fallen considerably over the last five years.
“To address the concerns of decline in savings rate and improving returns for small savers, I propose to revitalize small savings,” Jaitley said, adding, annual ceiling for PPF investment ceiling will be enhanced to Rs 1.5 lakh from Rs 1 lakh at present.
Noting that households are main contributors to savings, he said the investment limit under 80C has been raised to Rs 1.5 lakh from the existing Rs 1 lakh to encourage savings.
“Housing continues to be an area of concern for middle and lower middle class due to high cost of financing. Therefore, to reduce this burden, I propose to increase the deduction limit on account of interest on loan in respect of self occupied house property from Rs 1.5 lakh to Rs 2 lakh,” the Finance Minister said.
With an aim of boosting its military industry, India today decided to allow up to 49 per cent FDI in defence sector and allocated Rs 2.29 lakh crore for defence, an increase of 12.5 per cent over the last year.
Announcing decision on the long-pending proposal to raise the cap of FDI in defence sector from 26 per cent, Jaitley, who also holds Defence portfolio, said there will be “full Indian management and control through the FIPB route.”
Presenting the general budget in Parliament, Jaitley said, “Currently, we permit 26 per cent FDI in defence manufacturing. The composite cap of foreign exchange is being raised to 49 per cent with full Indian management and control through the FIPB route.”
The step is in line with Prime Minister Narendra Modi’s thrust on expansion of the defence industrial base in the country and enhance self-reliance in defence sector besides venturing upon exporting military items.
“India today is a largest buyer of defence equipment in the world and domestic manufacturing capabilities in this area are still in a nascent stage.
“We are buying substantial part of our defence requirements directly from foreign players, companies controlled by foreign Governments and foreign private parties are supplying our defence requirements to us and at a considerable outflow of foreign exchange,” Jaitley said.
The proposal to raise the FDI cap has been pending for long. During the UPA Government, the Commerce Ministry had mooted the proposal a number of times but the then Defence Minister A K Antony had scuttled it, citing “national security interests”.
Jaitley, who also allocated Rs 2.29 lakh crore for the Defence, asserted, “There can be no compromise with the defence of the country.”
The defence was allocated Rs 2,03,672 crore in 2013-14 and was provided Rs 2,24,000 crore in the interim budget presented by the UPA Government in February this year.
Jaitley said the acquisition processes would be streamlined for making it speedy and more efficient.
In April, the Commerce Ministry had said that companies engaged in the defence sector were not allowed to further increase foreign portfolio investment beyond August 2013 level.
Between 2001 and August 2013, 49 per cent foreign investment (26 per cent FDI + 23 per cent FII) was allowed in this sensitive sector. During this time, India has attracted only USD 5 million investments.
India opened up the defence equipment industry to private sector in May 2001.
For the modernisation of the armed forces, the Finance Minister allocated an additional Rs 5,000 crore above the Rs 89587.95 crore provided for the acquisition of new weapon systems for the Ministry in the interim budget last year.
“I propose to increase the capital outlay for the defence by Rs 5,000 crore over the amount provided in the interim budget. This includes a sum of Rs 1,000 crore for accelerating the development of railway system in border areas,” Jaitley said
The Government has also set aside a sum of Rs 1,000 crore for this fiscal to do away with anomalies in pensions paid to ex-servicemen under the One Rank One Pension policy, which was accepted by the new Government.
“We propose to set aside a sum of Rs 1,000 crore to meet this year’s requirements,” he said.
Jaitley also announced the construction of a War Memorial and museum at the Prince’s Park near the India Gate here and allocated a sum of Rs 100 crore for it as the Government also earmarked Rs 1,000 crore for modernisation of border infrastructure.
The Government will constitute an Expenditure Management Commission to look into every aspect of expenditure reform. It will overhaul the subsidy regime while providing full protection to the marginalised.
Jaitely said the Government would like to introduce the Goods and Services Tax (GST) to streamline tax administration, avoid harassment of business and ensure higher revenue collection.
The budget proposes to infuse Rs 2.40 lakh crore in PSU banks in which citizens will be allowed direct shareholding.
The budget sets a target of Rs 8 lakh crore for agriculture credit during the current year and will continue the interest subvention scheme and raise the corpus of Rural Infrastructure Development fund (RIDF) to Rs 25,000 crore.
Towards food security, the Government commits itself to restructuring Food Corp of India (FCI), reducing transportation and distribution losses and efficacy of PDS.
Wheat and rice will be provided at reasonable prices to weaker sections.
In manufacturing, considering the need to incentivise smaller entrepreneurs, it provides investment allowance at the rate of 15 per cent to a manufacturing company that invests more than Rs 25 crore in a year in plant and machinery for three years.
Jaitely also proposed to extend the investment linked deduction to new sectors namely slurry pipelines for transportation of iron ore.
The concessional tax rate of 15 per cent on dividends received by Indian companies from foreign subsidiaries is being continued because it has resulted in enhanced repatriation of funds. There is no sunset date to ensure stability of policy.
To enhance the functioning of income tax department as facilitators, 60 more Ayaykar Seva Kendras will be opened to promote excellence in service delivery.
Taking note of the fact that power supply continues to a major area of concern in the country, the Budget proposes to extend the 10-year tax holiday to undertakings which begin generation, transmission and distribution by March 31, 2017, instead of annual extensions.
As part of financial inclusion mission, a special small savings instrument to cater to the requirement of education and marriage of the girl child will be introduced.
A National Savings Certificate with insurance cover will also be launched to provide additional benefits for small savers. In the PPF scheme, annual ceiling will be enhanced to Rs 1.5 lakh per annum from Rs 1 lakh at present.
In defence allocation, Rs 1000 crore has been set apart for implementing one-rank-one-pension policy. Capital outlay for defence has been raised by Rs 5,000 crore over the amount provided in the interim budget.
The Finance Minister also announced setting up a war memorial, war museum and a national police memorial. For modernisation of state police forces, Rs 3,000 crore has been allocated.
An integrated Ganga conservation mission, called ‘Namami Gange’ is proposed to be set up with an outlay of Rs 2,037 crore for this year.
An NRI fund for Ganga will be set up which will finance special projects. Rs 100 crore have been set aside for ghat development and beautification of river front at Kedarnath, Varnasi, Haridwar, Kanpur, Allahabad, Patna and Delhi.
A 1,620-km Ganga inland waterway development from Haridwar to Haldia is planned to be completed in 6 years at a cost of Rs 4,200 crore, Jaitley said.
Describing the general Budget as a ‘sanjeevani’ (new life) to the “moribund economy”, Prime Minister Narendra Modi today said it converts hopes and aspirations of the people into trust and is in line with his government’s endeavour to bring India out of crisis.
“This Budget is a new ray of hope for the poor and downtrodden sections of society,” he said commenting on the maiden budget of his government presented in Parliament today.
The Prime Minister stated that despite the “testing times”, his government is committed to extend every possible help to the poor, the neo-middle class and the middle class, inspired by the mantra of ‘Sabka Saath, Sabka Vikas’.
Assuring the people that the government is leaving no stone unturned in developing India and rid the nation from the challenges it faces, he said for the “moribund economy”, this budget has come as “a sanjeevani and an arunoday (sunrise) for the last man in the line”.
He said his Government is committed to and confident of bringing India out of crisis, which is due to the capabilities and strength of 125 crore Indians. “This strength would be channeled towards taking the country to new heights.”
He said the Budget is in line with making India skilled and digital, guided by the usage of the latest technology.
Congratulating Union Finance Minister Arun Jaitley, he said, “The Budget will give an impetus to Jan Bhagidari (people’s participation) and Jan Shakti (people’s power).”
Modi said development should be all-encompassing (“samaveshak, sarvadeshak, sarvasparshi”) and should also reach those parts of the country which have so far remained underdeveloped.
The Prime Minister said the Budget will give a ray of hope to the housewife who is being burdened by rising prices and place utmost importance to women empowerment and girl’s education.
Recalling that the entire world had immense expectations from India, he said, however, that the way the entire economic system crubled in the last decade, not only India but the entire world lost hope and there was an atmosphere of pessimism.
“Since we formed the government, there were discussions about whether this government can free the nation from crisis but the Railway Budget and today’s General Budget show that we are moving in the right direction,” Modi said.
He referred to the innovative provisions in the Budget for the development of tribal communities and schemes for giving an impetus to skill development for youth.
“The Budget is in line with the government’s vision to create a skilled and digital India,” he said.
He talked about the measures proposed for the farmers such as ‘Krishi Sinchai Yojana’ that would benefit farmers and achieve the guiding principle of ‘per drop, more crop’.
He also mentioned the provisions in the Budget for the cleaning of the Ganga.
He reaffirmed the government’s commitment to make India self-reliant in the defence sector. (PTI)
Budget – Highlights
* Income tax exemption limit raised by Rs 50,000 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 from Rs 1 lakh.
* Investment limit in PPF 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.
* Committee to look into all fresh tax demands for indirect transfer of assets in wake of retrospective tax amendments of 2012.
* Fiscal deficit target retained at 4.1 pc of GDP for current fiscal and 3.6 pc in FY 16.
* Rs 150 crore allocated for increasing safety of women in large cities.
* LCD, LED TV become cheaper.
* Cigarettes, pan masala, tobacco, aerated drinks become costlier.
* 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.
* 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.
* Govt expects Rs 9.77 lakh crore revenue crore from taxes.
* Govt’s plan expenditure pegged at Rs 5.75 lakh crore and non-plan at Rs 12.19 lakh crore.
* 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.
* FDI limit to be hiked at 49 pc in defence, insurance.
* Disinvestment target fixed at Rs 58,425 crore.
* Gross borrowings pegged at Rs 6 lakh crore.
* Contours of GST to be finalised this fiscal; Govt to look into DTC proposal.
* ‘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.
* 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.
* 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.
* Expenditure management commission to be setup; will look into food and fertilizer subsides.
* Impasse in coal sector will be resolved; coal will be provided to power plants already commissioned or to be commissioned by March 2015
* Long term capial gain tax for mutual funds doubled to 20 pc; lock-in period increased to 3 years
* Rs 4,000 cr set aside to increase flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.
* 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
* War memorial to be set up along with a war museum; Rs 100 crore set aside for this
* Income from foreign portfolio investors to be treated as capital gains
* Investment allowance to manufacturing companies, to incentivise small entrepreneurs
* Rs 100 crore for development of organic farming
* Indian Custom Single Window Project to be taken up for facilitating trade
* Clean Energy cess increased from Rs. 50/ tonne to Rs 100/tonne
* Excise duty on footwear reduced from 12 pc to 6 pc
* 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
* Free baggage allowance increased from Rs 35,000 to Rs 45,000
* PSUs to invest to over Rs 2.47 lakh crore this fiscal. (PTI)
Follow our WhatsApp channel