Budget BOOK Final

MODI, JAITLE

Y PERFORM

MODI, JAITLE

Y PERFORM

PRESENTED BY

BUDGET 2015GET BUDGET SMART

OVERVIEW BUDGET SNAPSHOT

After a breathless build-up of hopes, nervousness and excitement on the part of large investors

and common man alike, the big day in the life of Modi sarkaar was here today.

Finance Minister Arun Jaitley presented the Union Budget in Parliament, one that experts largely

said may not qualify as big bang. But it clearly contained several key provisions that would go a

long way in boosting infrastructure and growth, bringing in investments and making doing

business easier.

There were many things for the poor and middle class as well: greater tax savings as well as

resolute push to providing more access to credit.

The markets were on a seesaw ride but closed higher, though the full market reaction will be

known on Monday when FIIs (who were largely absent today) return.

8.22%

3.23%

2.73%

1.61%

1.48%

8.01%

6.02%

4.43%

3.65%

3.25%

MARKETSNAPSHOT NIFTY

Open 8,913.05 | High 8,941.10 | Low 8,751.35 | Close 8,901.85

Rs 361.35

Rs 262.15

Rs 139.10

Rs 155.90

Rs 152.85

Rs 612.60

Rs 916.55

Rs 1,397.05

Rs 911.00

Rs 346.15

GAINERS

Axis Bank

IndusInd Bank

Kotak Mahindra

Sun Pharma

ICICI Bank

LOSERS

ITC

BHEL

NMDC

NTPC

Hindalco

MARKETSNAPSHOT SENSEX

GAINERS

Axis Bank

Sun Pharma

ICICI Bank

Tata Motors

Dr Reddys Labs

LOSERS

ITC

BHEL

NTPC

Hindalco

HDFC

Rs 613.40

Rs 911.00

Rs 345.55

Rs 593.65

Rs 3,367.00

Rs 361.25

Rs 262.15

Rs 155.75

Rs 153.05

Rs 1,336.15

8.27%

3.21%

1.64%

1.39%

0.81%

8.15%

3.62%

3.15%

3.15%

2.82%

20 KEY HIGHLIGHTS FROM THE UNION BUDGET 2015-16.

1. Goods and services tax (GST) to be rolled out on April 1, 2016:

The most ambitious tax reform in decades will eliminate most state and central taxes (service tax,

excise duties, VAT, etc) and create a national market.

2. JAM trinity:

The combination of the Jan Dhan Yojana (free bank accounts for the poor), Aadhaar and mobile is

slated to boost direct transfer of subsidies, with beneficiaries slated to be increased from 1 crore to

10.3 crore. This will create a powerful way to deal with leakages, non-delivery and corruption and help

target subsidies eectively towards those who deserve it.

3. Fiscal deficit maintained at 4.1 percent:

Targets for next few years relaxed (3.9 percent for FY16, 3.5 for FY17 and 3 for FY18).

Going easy on the deficit will allow government to pour more money into creating infrastructure.

4. Sharp increase in outlays of roads and railways:

More infrastructure to lead to more growth.

5. Disinvestment target at Rs 69,500 crore:

More funds to spend and wider shareholding for, and thereby more checks on, companies being

divested in.

6. Rural push:

Rs 25,000 crore in 2015-16 to the corpus of Rural Infrastructure Development Fund (RIDF) set up in

NABARD; Rs 15,000 crore for Long Term Rural Credit Fund; Rs 45,000 crore for Short Term

Co-operative Rural Credit Refinance Fund; and Rs 15,000 crore for Short Term RRB Refinance Fund.

7. Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of

Rs. 20,000 crores, and credit guarantee corpus of Rs. 3,000 crores to be created:

The bank will help boost lending to small businesses and traders.

8. Comprehensive bankruptcy code of global standards to be brought in fiscal

2015-16 towards ease of doing business:

To help reduce litigation, fight bad assets, help business environment.

9. Monetary Policy Framework Agreement with RBI, to keep inflation below 6%:

A formal interest-rate setting body to institutionalize the monetary-policy process. Stated inflation

targets will provide greater autonomy to central bank, help achieve price stability.

10. Forward Markets Commission to be merged with SEBI:

Previously controlled by the government, the merger of the commodity market regulator with the

independent and powerful SEBI will help reduce possibility of scams such as NSEL.


11. Visas on arrival to be increased to 150 countries in stages:

To give a boost to tourism.

12. Reforms in education:

IIT in Karnataka. Indian School of Mines, Dhanbad to be upgraded to a full-fledged IIT. New AIIMS to

be set up in J&K, Punjab, Tamil Nadu, Himachal Pradesh and Assam. A post-graduate institute of

Horticulture Research & Education to be set up in Amritsar.

More institutes = greater education = more success.

13. Stringent measures to be brought in to curb black money:

Steps such as tax evasion being punishable with rigorous imprisonment, among others, to serve as a

deterrent.

14. Tax Deductions:

Limit of deduction of health insurance premium increased from Rs 15000 to Rs 25000. Limit for

senior citizens increased from Rs 20000 to Rs 30000. Will increase insurance coverage across

country. More taxes saved mean more consumption.

15. Service tax plus education cess increased from 12.36 percent to 14 percent:

A necessary step as the country transitions to GST next year, will help augment government revenues.

But may take a toll on near-term consumption.


16. Limit on deduction on account of contribution to a pension fund and the new

pension scheme increased from Rs 1 lakh to Rs 1.5 lakh.

Will help widening the pension net. Tax saving to boost consumption.

17. Wealth tax abolished; 2 percent surcharge for the rich introduced:

Low-yield tax (Rs 1000 crore last year) made life tougher for ocials in finding evaders. Surcharge on

those earning over Rs 1 crore will lead to stricter compliance while yielding higher amount (Rs 10,000

crore).

18. Proposal to reduce corporate tax from 30 percent to 25 percent over the next

four years starting FY17; exemptions to go:

Lower tax rate to bring India in line with peers. Elimination of industry-specific exemptions to do away

with element of discretion, reduce lobbying and corruption.

19. General Anti Avoidance Rule (GAAR) to be deferred by two years:

A major worry for foreign investors, deferral of the controversial proposal to bring in more

investments.

20. Basic custom duty on 22 items reduced to minimise the impact of duty

inversion:

Inverted duty structure (imported raw materials having higher duty than finished products) was ren-

dering local manufacturers noncompetitive.


CORPORATE TAX TO FALL TO 25% IN 4 YRS

Exemptions to go In

what would come as a

boost to India Inc, Finance

Minister Arun Jaitley said

the government would cut

the base corporate tax rate

from 30 percent to 25

percent over the course of

the next four years but he

added that over the same

time, various exemptions

granted to corporates will

be phased out.

In what would come as a boost to India Inc, Finance Minister Arun Jaitley said the government would

cut the base corporate tax rate from 30 percent to 25 percent over the course of the next four years but

he added that over the same time, various exemptions granted to corporates will be phased out. The

move, he said, would facilitate a tax rate comparable to other countries, the finance minister said, while

adding that elimination of exemptions would bring down the element of discretion or lobbying. In a

further bid to India Inc, the FM further said that customs duty would be reduced on 22 items, a move

that would correct some of the inverted duty structures that exist in the economy. For overseas

investors, the FM had also said the controversial general anti-avoidance rules (GAAR) would be deferred

by two years.

BUDGETARTICLES

The government was expected to hike service tax rate this time. A two percent service tax rate hike

could have yielded over Rs 30,000 crore to the cash-starved government. A service tax rate change

would have needed amendment in the Finance Act. Finance minister Arun Jaitley has proposed to hike

service tax rate to 14 percent from 12.36 percent to be eective by April 1, 2015. The government was

expected to hike service tax rate this time. A two percent service tax rate hike could have yielded over

Rs 30,000 crore to the cash-starved government. A service tax rate change would have needed

amendment in the Finance Act. He has also proposed to exempt service tax extended to pre-cold

storage warehousing, while also proposing to withdraw service tax exemption on mutual funds agents

to AMCs. Another proposal is to extend concessional withholding tax of 5 percent on FPI debt

investments by 2 years. This is a positive for FDI in India too with government proposing to do away with

the distinction between the two. The industry also felt that the government may prune exemptions on

service tax to broaden the tax base and tweak the negative list and mega exemption list on service tax.

The government had tweaked service tax exemptions in the negative list in the July Budget as well. As

of now, 39 services are completely exempt from service tax. The industry was also hoping for clarity on

certain areas such as taxability of liquidated damages/penalties recovered under contractual

arrangements (e.g. breach of contractual terms), activities undertaken by employers for its employees

(e.g. provision of amenities such as food, cab, etc.), taxability of food and beverage supply by way of

take-away/ o the counter/ home delivery. Highlights of Budget 2014 Tax proposals on the indirect taxes

side are estimated to yield Rs 7525 crore. Indian customs single window project to facilitate trade, to be

implemented. To broaden the tax base in Service Tax, sale of space or time for advertisements in

broadcast media, extended to cover such sales on other segments like online and mobile advertising.

Sale of space for advertisements in

print media however wouldremain

excluded from service tax. Service

provided by radio-taxis brought

under service tax. Service tax

exempted on loading, unloading,

storage, warehousing and

transportation of cotton, whether

ginned or baled.

JAITLEY PROPOSES TO HIKE SERVICE TAX RATE TO 14%

BUDGETARTICLES

Individual tax payers can

reduce their tax liability by

making their employers

contribute more in new

pension scheme as the limit

has been enhanced to Rs 1.5

lakh as compared to Rs 1 lakh

previous year.

While planning your money think long term, says the finance minister. In the union budget announced

today, finance minister Arun Jaitley has chosen to hike present limit of Rs 1 lakh under section 80CCD of

Income Tax Act to Rs 1.5 lakh per year. The gift oers dual benefits to taxpayers first they can save

income tax and second they can ensure regular cash flow in the golden years of the life in the form of

monthly pension. But how easy or dicult it is? Section 80CCD allows salaried individuals to enjoy tax

shelter in addition to Rs 1.5 lakh investment limit introduced under section 80C, if their employers

contribute to the new pension scheme. The contribution by the employer should be limited to 10% of the

salary paid to the employee. This means that you have to cajole your employer to contribute more to

NPS. Salaried individuals can themselves invest in NPS and claim tax deduction under section 80C.

However self-employed individuals do benefit in this as long as the overall investmet limit of Rs 1.5 lakh

is adhered to. In case of self-employed individuals they can contribute to NPS under section 80CCD

provided the money so invested in NPS does not exceed more than 10% of their total gross income,

under various heads before claiming any deductions. Last year in his maiden budget, finance minister

opted to hike the investment limit under section 80C by Rs 50000 to Rs 1.5 lakh. This was positively

received by individual tax payers. This year it was widely expected that the finance minister will continue

with his stance and further enhance it. Reserve Bank of India Governor, Raghuram Rajan too has called

for an increase in tax saving limit. The expectation materialized. On the backdrop of falling inflation,

rising stock markets and green shoots in job market, finance minister oered one more reason to rejoice

to individual tax payers.

EXTRA BENEFIT OF RS. 50,000 ON NPS,HOW BENEFICIAL IT IS?

BUDGETARTICLES

The total major subsidies in Finance Minister Arun Jaitleys Union Budget 2015-16 fell 9.5 percent

compared to the previous year, from Rs 2.51 lakh crore to Rs 2.27 lakh crore. Within the major items,

fertilizer subsidies stood at Rs 72,968 crore, compared to Rs 72,970 crore in the last year. Subsidies for

food, disturbed through the public distribution system or ration shops, are forecast to increase from Rs

1.15 lakh crore last year. While that on fuel fell from Rs 63,000 crore this year to Rs 30,000 crore in the

next , helped by the steep fall in crude prices as well as the governments decision last year to bring

diesel to market prices. With both automotive fuels petrol and diesel out of the subsidy net, only

domestic fuels LPG and kerosene continue to remain subsidized. With fertilizer subsidies remaining at

the same level and those for food increase, the dip in overall subsidy figure has therefore largely been

driven by the fall in oil prices. But the FM did say that the government was committed to rationalizing

subsidies and that meant that while it did not intend to cut subsidies per se, there was a need to cut

subsidy leakages. Towards that end, he said the government would expand its direct benefit transfer

(DBT) scheme, in which subsidies such as on LPG cylinder will be directly transferred into consumers

bank accounts. The government provides asks state-run firm to sell domestic fuels (LPG , kerosene),

fertilizer (mainly urea) and food (through the public distribution scheme) below cost and reimburses

them later. In the last budget, the FM had appointed an Expenditure Management Commission led by

former RBI governor Bimal Jalan, which was tasked to look for ways to streamline the governments

expenses, including in the field of subsidies. The panel submitted an interim report in January this year,

in which it reportedly suggested ways to streamline expenses better cash management, greater use of

information technology and improved financial reporting systems.

FY16 SUBSIDY DIPS 9.5% YOYTO RS. 2.27L CR; PETROLEUM HALVES

BUDGETARTICLES

Finance Minister has preferred to leave income tax exemption

limit unchanged to Rs 2.5 lakh. Last year it was hiked by Rs 50,000.

Though corporate income tax rate has been reduced to 25%

from 30%, individuals saw no reduction in income tax rate. The tax

exemption limit too has been left unchanged. Rather super-rich

individuals, individuals having an income of Rs 1 core or more per

year, have to pay a surcharge of 2% on their income. It was widely

demanded that the finance minister should hike the basic income

tax exemption limit in this union budget. The demand was based on the backdrop of high inflation seen

in Indian economy in recent years. Finance minister too is seen as a supporter of high basic exemption

limit, as he was heard talking about an exemption limit of Rs 5 lakh in April 2014 when he was

campaigning for Lok Sabha elections. His logic was simple - higher tax exemption limit will lead to more

money in the hands of the individuals. As individuals spend more, government revenues grow on

account of increase in value added taxes and excise duties. More demand for goods also pushes

economic growth. Of course individual tax payers had their own reasons behind the demand for higher

tax exemption limit. Salaried individuals do not have shelter in the form of standard deduction, which

was done away since assessment year 2006-2007. The trouble for the salaried individuals further

increased due to double digit inflation for prolonged period of time. This has reduced purchasing power

in the hands of individual tax payers. In such a scenario higher tax exemption limit made more sense.

Finance Minister Arun Jaitley took maiden step in that direction last year, when he hiked basic tax

exemption limit by Rs 50000 to Rs 250,000 per year. However the hot seat of finance minister has made

finance minister change his mind from a supporter to hiking tax exemption limit to an ardent defender

of containing fiscal deficit. One must remember that a hike of Rs 50000 in basic tax exemption limit

costs government Rs 15,000 crore in revenues. Only saving grace for individual tax-payers is the 100%

increase in travel allowance to Rs 1600 per month. However in absolute terms it has very little impact on

ones finances. Though this status quo on tax exemption limit may help government to adhere to fiscal

discipline, individual tax payers now have to wait for one more year for some relief on income tax front.

SUPER RICH PAY MORE AND NO RESPITEFOR INDIVIDUALS IN TAX

BUDGETARTICLES

Finance Minister Arun Jaitley stepped up the war on black money in his Budget speech, saying that

the problems of poverty and inequity could not be eliminated unless generation of black money and its

concealment was dealt with eectively and forcefully. Following are the proposals made in the Budget

to check black money in the economy: *Evasion of tax in relation to foreign assets to have a punishment

of rigorous imprisonment upto 10 years, be non-compoundable, have a penalty rate of 300% and the

oender will not be permitted to approach the Settlement Commission. * Non-filing of return/filing of

return with inadequate disclosures to have a punishment of rigorous imprisonment upto 7 years.

*Undisclosed income from any foreign assets to be taxable at the maximum marginal rate. *Mandatory

filing of return in respect of foreign asset. *Entities, banks, financial institutions including individuals all

liable for prosecutionand penalty. *Concealment of income/evasion of income in relation to a foreign

asset to bemade a predicate oence under PML Act, 2002. *PML Act, 2002 and FEMA to be amended

to enable administration of new Act on black money. *Benami Transactions (Prohibition) Bill to curb

domestic black money to be introduced in the current session of Parliament.

FM STEPS UP WAR ON BLACK MONEY,ANTI-BENAMI BILL ON CARDS

BUDGETARTICLES

Electrification of the remaining 20,000 villages including off-grid Solar Power- by 2020

5 new Ultra Mega Power Projects, each of 4000 MW, in the Plug-and-Play mode

Positive Electrification to boost infrastructure projects

Positive Plug-and-play boost doing business in India and timely commencement of projects

ANNOUNCEMENT :

IMPACT :

POWER SECTOR

Excise duty on footwear having retail price of more than 1000 per pair

has been reduced by 6 per cent.

To have a positive impact and help garner a larger share of the global footwear industry where India is

the second largest global producer, but accounting for only 13% of global footwear production. More

importantly, this will also help boost the domestic retail demand as nearly 95% of our production goes

to meet own domestic demand.

ANNOUNCEMENT :

IMPACT :

CONSUMER SECTOR

Increase in customs duty on commercial vehicles

Policy encourages domestic production and players like Tata and Ashok Leyland are

expected to benefit.

ANNOUNCEMENT :

IMPACT :

AUTO SECTOR

Service tax imposed from 1 March 2015 on taxi service aggregator companies

Negative. Radio taxi operators and taxi aggregators are now taxed at par, creating a level playing field.

However, unlike Radio taxi operators, taxi aggregator companies who do not have a physical presence

in India would cause their representatives in India to be the person liable to pay service tax.

ANNOUNCEMENT :

IMPACT :

E-COMMERCE SECTOR

Extension of customs duty concession for electric or hybrid vehicle till March 2016

Though expected to encourage green vehicles it should have been for a longer period to have a

deeper impact

ANNOUNCEMENT :

IMPACT :

a) Basic Custom duty on certain inputs, raw materials, inter mediates and

components in 22 items reduced.

Makes domestic manufacturing competitive

ANNOUNCEMENT :

IMPACT :

MANUFACTURING SECTOR

Enhanced deduction in respect of health Insurance Premia.

Positive impact on the insurance industry and also on the individuals, and in particular, very

senior citizens. This would provide better business opportunities to insurance companies

and in particular, health insurance companies. Adequate attention has been given to the

health of the citizens of this country, which go a long way towards life longevity and

increased income for the insurance industry.

ANNOUNCEMENT :

IMPACT :

INSURANCE SECTOR

Tax neutralization for unit holders on merger of Mutual Fund Schemes.

This is a reform in the right direction as it has been a long time endeavor of SEBI to encourage

Mutual Funds to consolidate different schemes of similar features so as to ensure simpler and

fewer schemes. This reform ensures that no capital gain tax is imposed on unit holders who are

impacted on account of the merger or consolidation.

ANNOUNCEMENT :

IMPACT :

MUTUAL FUNDS SECTOR

Tax pass-through status for Domestic PE Funds structured as AIFs

Positive for industry, especially for domestic AIFs due to the pass-through status allowed

as well as limited exemption for business connection/permanent establishment exposure

for Foreign PE Funds. Further, allowing overseas investments into domestic AIFs is a game

changer allowing domestic funds to raise capital from LPs from domestic and overseas

investors on an integrated platform in India.

Source - Grant Thornton LLP

ANNOUNCEMENT :

IMPACT :

PRIVATE EQUITY SECTOR

BUDGET 2015

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Budget BOOK Final