“JUST AS WE ARE BANKING THE UNBANKED, WE ARE FUNDING THE
UNFUNDED.”
- Arun Jaitley
(Finance Minister)
Hours after presenting his Budget, finance minister Arun
Jaitley was praised by PM Narender Modi and other party candidates for his
vision and mission whereas criticized by the opposition due to his negligence
towards poor. Budget was directed towards making world’s largest democracy-
India, a self sufficient nation by 2022.
According to KM Birla (chairman of Aditya Birla Group), Budget
2015 is an innovative, growth focused and inclusive vision which aims at
eliminating red tapism and severely punishes corruption.
The government has allocated major chunks of funds towards
banking and infrastructure sectors with a view to increase employment and per
capita income in the long run.
FM Arun Jaitley, planned a strategic betterment of the nation
with few crucial decisions. Some of the highlights of budget 2015 are:
· Wealth tax abolished and replaced by 2% additional
surcharge in the case of super rich.
·
Service tax hiked to 14% severely affecting the life
of a common man.
·
No change in tax slab rates. However, there is an
increase in exemption limits for health insurance and transport allowance.
·Support to senior citizens by providing tax breaks on
medical costs, pension and insurance.
·
Corporate tax to be cut from 30% to 25% over four
years starting at 2016-17. But MAT and DDT increased.
·
Gold monetization scheme to replace existing gold
deposits and loan schemes. Gold coins will be minted in India.
·
NBFCs having a worth of more than Rs.500Cr. will now
become financial institutions.
·
Granted a chance to pay tax on black money, else if
anyone will found having black money or any information regarding the same will
be penalized and imprisoned for 10 years.
·
Government will strategically disinvest the loss
making PSUs.
·
Huge funds were allocated towards building
infrastructure and government introduced tax exempted infra- bonds.
·
Budget focused on promoting investments rather than
spending by providing tax exemption on various investment schemes.
The budget has many attractive features. Several measures
have been introduced to stimulate investments. There is an emphasis on
increased social spending and creating additional social safety nets. While the
finance minister stuck to his commitment to contain fiscal deficit at 4.1% of
the GDP in the current year, he has extended the period over which it will be
brought down to mandated 3% of the GDP. For the year 2015-16 the fiscal deficit
is set at 3.9%as against the earlier announced target of 3.6%.the budgeted
deficit for the next year will only be 0.2% less than the current year.
Significantly, the reduction in revenue deficit is only 0.1%. Revenue deficit
for the coming year continues to remain high at 2.8% of GDP.
If we look at the budget from point of view of various
stakeholders, how their life can be affected by this budget, we will get to
know the effect of this budget at micro level. A glimpse of this assistance and
nuisance bond for various stakeholders can be seen as follows;
For Taxpayers
Assistance
·
Wealth tax abolished with effect from 2015-16.
·
One can invest up to Rs. 1.5 lakh in New Pension
Scheme against Rs. 1 lakh earlier. If a person invests an additional Rs.
50,000, he will get a deduction u/s 80CCD.
·
Exemption limit for transport allowance doubled from
Rs.800 to Rs.1600 a month.
·
Deduction limit for health insurance premium up to Rs.
25,000 from Rs. 15,000; for senior citizens from Rs.20,000 to Rs.30,000/ year.
·
Investments in Sukanya Samriddhi Scheme (for education
of girl child) and swatch Bharat Abhiyan made eligible for the deduction u/s
80C, plus the income accrued is tax exempted.
Nuisance
·
Surcharge on income of super rich individuals (with
income exceeding Rs.1Cr) increased from 10% to 12%. The effective rate now
34.6% against 33.9% earlier.
For Investors
Assistance
·
Tax free infra bonds in roads, rails and irrigation.
·
More choices for gold investors such as coins and new
gold bond schemes.
·
Employees have an option to choose between EPF and New
Pension Schemes.
·
Mutual fund scheme mergers will now be exempt from
capital gains tax.
Nuisance
· Lower
dividend for shareholders, as surcharge on DDT up from 10% to 12%. Taxman can confiscate Indian assets equivalent to
value of foreign exchange assets held in contravention of FEMA.
For Businessmen
Assistance
·
New bankruptcy code announced; will make it easier to
shut down the unviable business.
·
MAT exempted on income of FIIs against which STT has
been paid (eg income on sale of securities on stock exchange).
·
GAAR deferred by 2 years.
·
Penalties on customs, excise and service tax is
reduced to encourage timely compliance.
·
Corporate tax proposed to reduce from 30% to 25% over
next 4 years.
Nuisance
·
Increase in corporate surcharge from 10% to 12% for
the companies with taxable income of more than Rs.10 Cr., resulting in
corporate tax rate of 34.6% (33.9% earlier).
For Consumers
Assistance
·
Basic custom duty on raw material for consumer durable
goods reduced.
·
Visa on arrival facilities for individuals from 150
countries in phased manner.
Nuisance
·
Standard effective service tax specific rate proposed
to increase from 12.36% to 14%. But with ‘Swatch Bharat Cess’ at 2% on all or
any taxable service, effective service tax rate could rise to 16%.
·
Standard effective excise duty rate increased from
12.3% to 12.5%.
·
Service tax proposed on admission to concerts,
pageants, award functions, musical performances and certain sporting events
where admission charge is more than Rs. 500.
For Students
Assistance
·
Proposed a fund worth Rs.1000 Cr to start up
incubators so as to promote entrepreneurship.
·
Establishing various IITs and IIMs with other similar institutes
in various parts of country including Karnataka and Bihar.
Nuisance
·
Hike in service tax will now lead to increased fees of
Private Coaching.
·
No provision has been made for startups so as to
compete with already established big corporate giant.
Despite of all the appraisal and criticism, the budget has
been remarked as a balanced budget by experts. Although a hike in service tax
will pinch the pockets of common man, but government aim to nullify its effect
by targeting an increase in income and standard of living of people.
The budget has attempted to realize multiple goals such as
higher growth, increase in investments and higher scale of safety nets. To
realize all these goals the economy must grow at 8% and tax revenues must rise
as budgeted. But one goal that has been missed is containment of fiscal
deficit. It is important to recognize the important role played by the fiscal
deficit. A high level of fiscal deficit leads to growing debt and interest
payment burden. Interest payments constitute almost 45% of the net tax revenues
of the centre. Also, a high level of borrowing by the government reduces the
space available for the private sector. Fiscal consolidation must remain an
important party of the government agenda.
On balance, the budget has many positive features, of which
clarity is most important. It is not the BIG BANG budget many were expecting, but judging by the standards of preceding budgets, it’s a solid one. Thus, the world has accepted the fact that, Finance minister Arun Jaitley’s second
budget has a coherent, purposeful and proactive approach which will move the
economy forward.
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