decoding indian budget

Copyright 2012 Firstpost

Table of contents

The big picture

Roundup: Arun Jaitley does not disappoint. Union Budget 2015 is reformist 04Budget 2015 sets stage for a new economic order, gives India chance to fly 07Budget 2015: Lets leave carping for tomorrow , it is Jaitleys day today 09No big bang reforms but budget 2015 goes for growth, investment 10

The commons man budget

From gold bonds to cheap LCD, LED TVs: 10 takeaways from Budget 2015 for the aam aadmi 15Budget 2015: Tablets, shoes to get cheaper but drinks, night outs to get expensive 16Budget 2015 finds no middle class takers 18Jaitleys tax gimmick: Budget 2015 results in tax benefit of only Rs 52,221, not Rs 4.44 lakh 20More deductions but no changes in tax slabs: What Union Budget 2015 offers middle class 21Budget 2015: Why cut corporate tax but not personal tax, Mr Jaitley? 23Budget 2015 takeways: Eating out gets costlier as FM raises service tax to 14% 27Misplaced priorities? Budget 2015 doesnt allow govt to take on spread of diseases like swine flu 30Budget 2015: Super rich senior citizens to take biggest hit 32

Macroeconomics and sector impact: Breaking it down

Budget 2015: The 4 measures announced by Jaitley that will be long remembered 35Budget 2015 does nothing spectacular for the health of the economy 37Budget 2015 has two game-changers that will make India a global financial hub 39Budget 2015 low on big bang reforms; theres not much for housing 41Budget 2015: Jaitley adds sparkle to gold, encourages buying and selling of yellow metal 42Union Budget 2015: Jaitley just unleashed a war on black money like never before 43Union Budget 2015: Jaitley brings cheer for banks and NBFCs 45Budget 2015: One time deviation from fiscal target is OK, Jaitley has no excuses in 2016 46Budget 2015: One time deviation from fiscal target is OK, Jaitley has no excuses in 2016 48Union Budget 2015: Jaitley dumps Rs 1,000 crore into Nirbhaya fund, but who is going to use it? 49Arun Jaitleys Budget 2015 is lukewarm to the green energy sector 51Budget 2015: Jaitley puts focus on digital connectivity to drive rural growth 52Budget 2015: Jaitley puts focus on digital connectivity to drive rural growth 53Budget 2015: Real estate investment trusts will continue to be unattractive 54Budget 2015: Two simple graphs explain how the govt spends every rupee 56Why the FM is right in slowing the pace of fiscal consolidation 58Analysed and annotated: Full text of FM Arun Jaitleys Union Budget 2015 speech 59Budget 2015: Chidu is wrong to claim corporates are main gainers 61Budget 2015: Draconian black money law wont work without one-time amnesty 63


The big picture


Roundup: Arun Jaitley does not disappoint. Union Budget 2015 is reformist

R Jagannathan Mar 2, 2015

A run Jaitley made up for his budget washout of last year today. The Union budget for 2015-16 is a very good effort to reform, rejuvenate and revive the economy to the extent any budget can do that. It brings some fresh thinking and ideas to tax issues, proposes strong measures to curb black money, extends the social security net to the poor and vulnerable, provides fresh funds for infrastruc-ture, and above all emphasises the impor-tance of entrepreneurship for growth and jobs.

Last year the finance minister uttered all of 16,299 words in his budget speech and achieved very little. This year, brevity has ensured more content and quality in the budget speech. He spoke 30 percent less (11,247 words), and achieved more, even if a lot of what he said con-stituted only a vision and a path for the future rather than something he can deliver in the coming financial year.

Last year his speech was peppered with too many references to small allocations for schemes named after Sangh parivar icons like Deendayal Upadhyaya and Syama Prasad Mookerjee. There was little of this kind of pan-dering this time, with most schemes now bear-ing the generic Pradhan Mantri prefix.

Another hallmark of todays budget is that it

follows the Economic Surveys path of creative incrementalism. It does not set great store by big bang reforms. Many key changes have been announced to improve the ease of doing busi-ness, encourage entrepreneurship, expand tax compliance, and improve the delivery of social security benefits to the poor by reducing leak-ages, but the real impact of these changes will be felt only after a year or two. In the long run these changes may be more revolutionary than the tax proposals pertaining to one year.

So what are the prime themes of budget 2015-16? I can see at least a dozen of them.

First, the budget has cleverly balanced the need to push up public investment without stray-ing from the road to fiscal consolidation. The 2012 roadmap drawn up by Jaitleys predeces-sor called for a reduction of the fiscal deficit to 3 percent by 2016-17. Jaitley has promised to achieve this one year later. He has used a part of this fiscal leeway to increase investments in infrastructure. In 2015-16, the net increase in public investment is said to be Rs 1,25,000 crore, including Rs 70,000 crore in capital out-lays. This will boost growth when the money is spent over the year.

Second, the budget completely rebalances centre-state fiscal power in favour of the states, in line with the report of the 14th Finance Com-mission. The commission had recommended the transfer of 42 percent of gross central tax re-ceipts to states, but the real devolution is much larger Rs 1,82,000 crore more in 2015-16 compared to the year before. The finance minis-ter said: The devolution to the states would be of the order of Rs 5.24 lakh crore in 2015-16 as against the devolution of Rs 3.38 lakh crore as per the revised estimates of 2014-15." Another Rs 3.04 lakh crore would be transferred by way of grants and plan transfers. Thus, states will spend about 62 percent of the total tax receipts of the country. This rebalancing of fiscal re-


sources means that states, which have the larger burden of implementation responsibilities, will now have the money to do so. The centres fiscal role will shrink relatively.

Third, this budget shifts more of the tax revenue burden to indirect taxes and away from direct taxes. Left economists may rant about this, say-ing the budget will favour the rich and business-es, but the key to higher direct tax compliance is more reasonable rates. Moreover, companies have the option of not investing in India if they find tax rates lower elsewhere. Thus, Jaitley has offered Rs 8,315 crore of direct tax concessions, and raised Rs 23,383 crore from indirect taxes, especially excise and service taxes. The service tax rate is up to 14 percent from 12.36 percent now and the exemptions reduced. Basic excise duty is up from 12 percent to 12.5 percent. The clean energy cess on coal is up from Rs 100 to Rs 200 a tonne. The middle class gets very small direct tax benefits, including some relief in medical reimbursements and higher exemp-tions on travel allowance (Rs 1,600 per month). Clearly, the FM did not have much money to spread around.

Fourth, the budget also balances promise and delivery its promise now, deliver later. The promise to cut corporate tax rates to 25 percent (as well as the withdrawal of business exemp-tions) will happen in 2016-17, while the sur-charge on corporate and individual taxes is up this year itself by 2 percent. So gross corporate taxes will actually go up in 2015-16. The cess on income tax education and higher education will go, but only in 2016-17. Wealth tax goes in 2015-16, but this is being compensated by the surcharge of people with incomes above Rs 1 crore.

Fifth, the emphasis on additional infrastructure investment is clear. Between the centre and public sector companies, investment in infra-structure is expected to go up by Rs 70,000 crore. Coming on top of the 52 percent increase in the railway plan, this is a significant boost. Moreover, a new National Investment and Infrastructure Fund will get Rs 20,000 crore annually to support infrastructure projects. And road, rail and irrigation projects will be allowed to raise money from tax-free bonds.

Sixth, given the slow pace of job creation, the government is betting on entrepreneurship to make up the deficit. Apart from easing rules for business, new funds are being set up to promote entrepreneurship and fund micro and small en-terprises. As the FM said, there are some 5.77 crore small business units, mostly individual proprietorship, which run small manufacturing, trading or service businesses. Some 62 per-cent of these are owned by SC/ST/OBC. These bottom-of-the-pyramid, hard-working entrepre-neurs find it difficult, if not impossible, to access formal systems of credit. I, therefore, propose to create a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 20,000 crore, and a credit guarantee corpus of Rs 3,000 crore. Another fund will promote start-ups in the technology space with Rs 1,000 crore.

Seventh, the finance minister is shifting the balance of regulatory power away from the RBI and towards Sebi, in which the Forward mar-kets Commission will be merged. The centre will set up its own debt management agency, which means the RBIs only job will be the making of monetary policy and bank supervision. Even in the making of monetary policy, a new legislation will shift the power to set interest rates from the RBI Governor to a Monetary Policy Committee, which the Governor will chair, but where he will have only one vote.

Eighth, the FM has also proposed to create a new bankruptcy law that will ensure quick solu-tions to companies that go belly up. The bank-ruptcy code, possibly on the lines of Americas Chapter 11, will replace the Sick Industrial Com-panies Act (SICA) and the Board for Industrial and Financial Reconstruction. The SICA law and the institution created under it have not de-livered either the revival of sick units or ensure quick euthanasia for the terminally ill.

Ninth, another theme in the budget is giving workers choice both in choosing their retire-ment savings vehicles, and in health/recupera-tion benefits. Currently, all employees have no choice but to join the Employees State Insur-ance Scheme (ESIS) or the Employees Provi-dent Fund Organisation (EPFO), both of which perform poorly. In future, employees will have the choice of choosing a separate health insur-


ance plan instead of the ESIS, and also opt out of the EPFO in favour of the National Pension Scheme (NPS). As the FM noted, both EPFO and ESIS have hostages, rather than clients. To enable employees to invest in their own retire-ment corpus, the FM has also created a separate Rs 50,000 deduction for contributions to pen-sion funds like the NPS.

Tenth, the biggest blow the budget delivers is to black money. The penalties for black money are not only being enhanced, but an attempt is being made to strike at the very root of domestic black money by targeting big ticket cash trans-actions for monitoring and providing incentives for the use of debit and credit cards. Apart from big jail terms for concealment of income and assets abroad, which includes similar penalties for abettors to such concealment, benami prop-erties will also be targeted. The Finance Bill will prohibit the payment of more than Rs 20,000 as advance for buying property, and PAN num-bers will have to be given for all purchases above Rs 1 lakh.

Eleventh, the reform focus is being shifted from the rich to the poor. In the past, reform had come to mean doing things for business or the middle class; the NDA is taking small initiatives begun by the UPA to the next level. The Jan Dhan Yojana, the Aadhaar ID and mobile bank-ing will now be increasingly used for the trans-fer of subsidies to the poor, with LPG being the launchpad and almost more than half the con-

sumer base. The FM said that if GST will put in place a state-of-the-art indirect tax system by 1 April 2016, the JAM trinity (Jan Dhan-Aadhaar-Mobile) will allow us to transfer benefits in a leakage-proof, well-targeted and cashless man-ner. He added: We need to cut subsidy leakag-es, not subsidies themselves. We are committed to the process of rationalizing subsidies based on this approach.

Twelfth, the biggest promise the FM has com-mitted himself to is on containing inflation. He said: We have concluded a Monetary Policy Framework Agreement with the RBI, as I had promised in my Budget Speech for 2014-15. This framework clearly states the objective of keeping inflation below 6 percent. What this means is that if inflation surges above 6 percent, or threatens to, the Monetary Policy Commit-tee (MPC) will act to bring inflation down even if Jaitley wants interest rates lower. Once the MPC gets this mandate, the finance minister is effectively curtailing his own freedom of fiscal action, for the MPC will act to bring inflation down if fiscal policy is heading in the other direction.

All in all, Jaitleys budget breaks new ground. It is a commendable effort in the context of his constraints. The market has no reason to mope in gloom. This budget does nothing to ruin the party. It sets the tone for future parties, espe-cially if growth recovers.


Budget 2015 sets stage for a new economic order, gives India chance to fly

Sourav Majumdar Mar 2, 2015

I t would seem Finance Minister Arun Jait-ley was well aware of the huge burden of expectations he was carrying on his shoul-ders this time, when he rose to present the Budget for 2015-16.

Taking off from the view that the world now thinks it is Indias chance to fly, Jaitley put together a Budget which, if one joins the dots, sets the stage for a new economic order in India. Alongside, acutely aware of the need to push growth despite the new GDP calculations, the finance minister has taken the route of pushing public investment for the purpose while veering slightly away from the fiscal consolidation path for the moment.

In many ways, Jaitley has presented a Budget which does not disappoint those who had placed their faith in this being a much more substan-tive vision statement than the one he presented just after the Narendra Modi government took charge in 2014.

Budget 2015 operates on some clear themes, and Jaitley has taken pains to explain not just the challenges he faces but also the key ideas he is banking on. Declining agricultural in-come, the need for increasing investment in infrastructure, the need to remain on the fis-cal consolidation path, a perceptible decline in

manufacturing and the impact of the greater devolution of taxes to states have been high-lighted in his Budget speech as his major chal-lenges.

The balancing actIn that context, Budget 2015 is nothing short of an efficient balancing of imperatives and a road-map for reform despite pressures.

As expected by some quarters, he has eased the fiscal consolidation target a bit announcing that the 3 percent fiscal deficit target will now be met in three years, rather than two. The FY16 target is now at 3.9 percent, rather than the earlier 3.6 percent, though he has managed to stick to the 4.1 percent target for FY15, even as he reiter-ated the governments resolve of not wavering from the fiscal consolidation path. Alongside, infrastructure spends have been hiked by way of higher outlays for roads and railways and an increase in the capex spends of state-owned en-terprises. The Rs 20,000 crore corpus National Investment and Infrastructure Fund (NIIF), the proposal to have tax-free bonds for roads, rail and irrigation sectors and the accent on public-private partnerships for boosting infrastruc-ture are steps aimed at making sure that the relaxation in the fiscal deficit target is targeted towards investment in infrastructure. The dis-investment target for FY16 has been pegged at Rs 69,500 crore, which will be crucial for public spending.

Reformist thrustJaitley has not disappointed on the reforms front. A number of the broad proposals be it on creating a job-creating economy rather than a job-seeking one or in making the capital markets more efficient or even on the banking front would rank as important steps in creat-ing a new economic framework. Sample some of the steps. The Forward Markets Commission has been merged with Sebi, a Public Debt Man-agement Agency will be set up to bring external


and domestic borrowings under one roof and section 6 of FEMA will be amended. There are several steps to ensure better monetization of gold and foreign investments in alternative in-vestment funds have been allowed.A number of initiatives have been announced on the ease of doing business and the skilling side too, an aspect which has been at the centre of pre-Budget debate in connection with the governments Make in India programme. The setting up of the MUDRA Bank to refinance the microfinance institutions and the entire ini-tiative of funding the unfunded also aims at addressing a major gap which existed for micro and small enterprises which struggle to access funds.

Perhaps one of the most important elements of the Budget is the move to rein in the parallel economy. Through a series of steps, Jaitley has aimed at addressing the black economy which includes the creation of a new law on black money and tough measures to bring offenders to book.

There are some other big moves as well. The General Anti Avoidance Rules (GAAR) a bug-bear for quite some time, has been deferred by two years, the Goods and Services Tax time-table is now clear, the accent has moved from reducing subsidies to plugging subsidy leakages through what the Budget calls the Jan Dhan, Aadhaar and Mobile (JAM) trinity for direct benefits transfer and the tax structure is being sought to be simplified and made predictable. All these were key concerns expressed by India Inc and the markets ahead of the Budget.

For the corporate sector, the broad roadmap is to reduce corporate tax from 30 percent to 25 percent over the next four years beginning next year. And the Budget also has enough for the individual taxpayer as well. Predictably, de-spite the markets being choppy through the day owing to some concerns on aspects of the fine print, the overall reaction from Corporate India has been one of cheer.

Says KPMG India CEO Richard Rekhy: The Finance Minister has come out with a pragmatic Budget which is directionally focused at achiev-ing growth and keeping the fiscal prudence in mind. The focus is on ease of doing business in

India and increased infrastructure spend. Meas-ures like New Bankruptcy legislation, startup entrepreneurs funds, GST rollout by FY 2016, deferral of GAAR will definitely support the cause of ease of doing business in India.

Adds Rajiv Lall, executive chairman, IDFC: Its a development oriented budget and not a popu-list budget. A welcome shift in direction.

However, BMR Advisors chairman Mukesh Bu-tani expresses mixed reactions. From a policy standpoint, the FM has engineered the Budget around the Prime Ministers initiatives such as Make in India, Swachh Bharat, and Skill in India. The focus on black money and curing the economy of this menace seems to have taken centrestage. The impetus to infrastructure, agriculture and education sectors is laudable though the much expected big bang reforms are yet in the waiting.

Impact under watchWith the overall macro situation now benign and inflation coming under control, Jaitley real-izes this was his best chance to lay the broad reform framework in place, and execute the various elements over time. However, what will be keenly watched is how the Budget initiatives play out in the days and months ahead and whether Jaitleys gamble on growth actually pays off.

As BMRs Rajiv Dimri points out: Much of the reforms process outlined in the budget propos-als needs to be realized through tangible steps over the year. It remains to be seen how reforms unfold and take shape in terms of GST imple-mentation and TARC recommendations. Impact on prices would be interesting to watch with budget proposals withdrawing service tax ex-emptions on construction of airports and ports, government services, increase in service tax rates and higher additional duties on petrol and diesel.

While the ultimate test for Jaitley will be in how the various Budget proposals are implemented, the finance minister does deserve full marks this time round for putting forward a Budget which aims to address multiple challenges. As a state-ment of intent, it gets full marks. And that is a pretty good beginning.


Budget 2015: Lets leave carping for tomorrow , it is Jaitleys day today

Seetha Feb 28, 2015

I n the film My Fair Lady, when Prof Hig-gins returns home after successfully show-casing Eliza Doolittle at a society event, his friend Colonel Pickering breaks into song - 'to-night old man, you did it, you did, you said you would do it and indeed you did.

Many would like to sing that to finance minister Arun Jaitley after his budget speech today. Yes, it was devoid of Big Bang Reforms, but after the Economic Survey yesterday which advocated a more incremental approach, this was expected. But he has done a series of small things, which together will add up to an effect similar to what a few big ticket reforms will.

When he said the budget would provide a road-map for accelerating growth, enhancing invest-ment and passing on the benefit of the growth process to the common man, woman, youth and child: those, whose quality of life needs to be improved these were not empty words. The budget has delivered on each of these.

Jaitley has given infrastructure spending a big push without pushing up the fiscal deficit hugelyMost importantly, Jaitley has given infrastruc-ture spending a big push without pushing up the fiscal deficit hugely (though he has relaxed the fiscal consolidation roadmap).

The main problem areas have been identified and addressed. The problem of stuck projects and lack of new investments had been flagged time and again. It was well known that a lot of this was due to the problem of sovereign clear-ances, which just dont come.

Theres a planned legislation to set up a pre-existing regulatory mechanism to take care of multiple prior permissions. While this will take its time in coming (theres going to be an expert committee that will draft this), what will come sooner is setting up projects in a plug-and-play mode. Which means the government will first

get all necessary clearances and then bid out projects. This is going to be done first for five ultra-mega power projects and then later ex-tended to other large infrastructure projects.

Vinayak Chatterjee of Feedback Infrastructure will be a very pleased man. This was a sugges-tion he had made to the United Progressive Alliance government when the government was exercised about stuck projects.

The infrastructure push is not about large infra-structure projects alone. It is also about housing for the poor, sanitation facilities, drinking wa-ter, electrification of villages and village roads.

The cleaning up of the tax system is a big feath-er in Jaitleys cap. There are steps to curb black money, end the problem of exemptions (Rs 62,398 crore was the revenue foregone on cor-porate income tax in 2014-15) and bring down the corporate tax rate over four years.

Nothing has been done to put more money in peoples hands, but the incentives for various savings is what the economy needed pushing up the savings rate and channel the savings into investments.

The proposed bankruptcy law reform is also a major step this was an issue the Economic Survey also highlighted. The bankruptcy code needs to be brought in as promised.

Does the budget fall short on anything? Yes. Though one can understand the reluctance to bring about major subsidy reform, it would have been appropriate to kick start a process to exclude the better off sections from receiving subsidies even as the poor are protected. Merely appealing to people to give up subsidised cook-ing gas is not enough.

But lets leave carping for tomorrow. Today it is Jaitleys day.


No big bang reforms but budget 2015 goes for growth, investment

Reuters, Mar 1, 2015

F inance Minister Arun Jaitley on Saturday announced a budget that put boosting growth before painful reforms, slowing the pace of fiscal deficit cuts and seeking to put domestic and foreign capital to work.

In his first full-year budget since Prime Minister Narendra Modi's landslide election victory last May, Jaitley said India's economy was about to take off. Modi tweeted that the budget would "further reignite our growth engine".

Billed as a test of the nationalist premier's willingness to reform a $2 trillion economy with a bloated public sector and weak private investment, the budget was short on structural reforms and contained revenue targets some called unrealistic.

It drew a mixed reception from economists, with some calling it a path to an investor-friend-ly India, but others seeing a missed opportunity to tackle deep-seated structural problems.

"Definitely far from what some were hoping would be an event similar to the game-changing budget of 1991 which ushered in India's eco-nomic liberalisation," said Devika Mehndiratta, senior economist at ANZ research.

Apparently anticipating such barbs, Jaitley, 62,

said his government had acted "rapidly" to right the course of Asia's third-largest economy.

"People who urged us to undertake 'big bang' reforms also say the Indian economy is a super giant, which moves slowly but surely," Jaitley told parliament as he wrapped up a 90-minute speech.

Jaitley promised higher investment in India's decrepit roads and railways, offered the carrot of tax cuts to global companies and the stick of tighter rules to get Indian tycoons to invest at home rather than stash wealth abroad. Tax evaders face jail sentences of up to 10 years, he warned.

The tax changes and tougher enforcement would raise $2.5 billion next year, he said. Tax receipts overall would rise 15 percent and gov-ernment asset sales would raise $11 billion - goals that past experience shows may be hard to meet.

Although Jaitley forecast that growth would accelerate to 8-8.5 percent in the fiscal year starting in April, up from 7.4 percent this year, the budget contained little obvious support for Modi's call to "Make in India".

"It assumes a questionable growth rate, relies too heavily on divestment to meet fiscal targets, does not address the revenue deficit issue head on and leaves the good things for the future," said Arvind Sethi, CEO of Tata Asset Manage-ment.

Capitalizing on windfall savings stemming from cheaper oil imports, Jaitley was able to ramp up infrastructure investment without slashing spending on politically sensitive subsidies and welfare schemes.

ROOM FOR RATE CUTS?


Jaitley forecast inflation at 5 percent by the end of the fiscal year ending March 2016, under-shooting the Reserve Bank of India's 6 percent target and creating room to cut interest rates. Annual inflation was 5.1 percent in January.

But he pushed back by a year, to 2017/18, a deadline for cutting the fiscal deficit to 3 percent of gross domestic product. In 2015/16, the defi-cit will be 3.9 percent of GDP, above the 3.6 per-cent target inherited from the last government.

In volatile trading, the Nifty ended 0.7 percent higher after having briefly fallen into the red on his comment that the fiscal deficit would slip.

Ratings agency Moody's gave the budget a cool reception, saying it was neutral for India's credit and left stabilising government finances at the mercy of economic growth. Moody's rates India at the lowest notch of investment grade.

"We were not expecting big bang reforms," said Atsi Sheth, a Moody's sovereign ratings analyst. "The big bang reforms are also not desirable because they have a higher chance of rollback. "

CARROTS AND STICKS

India's budget concentrates a year's economic policymaking into a single speech, and the range of measures Jaitley announced included a monetary policy overhaul, a bankruptcy code and the creation of a public debt management agency.

In a key passage, Jaitley said he would cut the tax on company profits to 25 percent over four years from the current 30 percent, high by in-ternational standards.

A national goods and services tax would enter force, as planned, in April 2016 and a controver-sial set of new rules to fight tax avoidance would be delayed by two years, he said.

Jaitley scrapped a distinction between direct and portfolio investors, in a move to encour-age foreign investors to take strategic stakes in Indian firms. He also simplified regulation of financial markets.

"This clear statement of intent should bring cheer to industry," said Krupa Venkatesh, a partner at Deloitte.

The government shied away from politically sensitive cuts in its $37 billion subsidy bill, seeking instead to boost efficiency of a rural jobs scheme that is India's costliest welfare pro-gramme. It will also boost direct welfare pay-ments into bank accounts, and gradually replace benefits in kind.

"My proposals... lay down the roadmap for accelerating growth, enhancing investment, passing on the benefit of growth process to the common man, woman, youth and child," said Jaitley. "This is the path we will doggedly and relentlessly pursue."


The commons man budget


From gold bonds to cheap LCD, LED TVs: 10 takeaways from Budget 2015 for the aam aadmi

Sunainaa Chadha Mar 2, 2015

D espite no obvious mention of income tax incentives for the common man, finance minister Arun Jaitley provided certain reliefs in this years budget that will al-low the aam aadmi to save more.

1. How taxpayers can benefit

Jaitley proposed to increase the limit of de-duction on account of health insurance pre-mium from Rs.15,000 to Rs.25,000. For sen-ior citizens this limit is to be increased from Rs.20,000 to Rs.30,000.

For senior citizens above the age of 80 years -- who are not eligible to avail health insurance -- deduction will be allowed for medical ex-penses up to Rs.30,000. The deduction limit of Rs 60,000 on expenditure on account of speci-fied diseases -- like cancer -- will be enhanced to Rs.80,000 in the case of senior citizens.

The minister also proposed additional deduc-tion of Rs 25,000 for differently-abled per-sons, increasing the limit from Rs.50,000 to Rs.75,000.

He also proposed to increase the limit of tax deduction from Rs.1 lakh to Rs.1.25 lakh in case of severe disability.

Investment in Sukanya Samriddhi Scheme will

be eligible for deduction under section 80C of the income tax and any payment from the scheme shall not be liable to tax.

Limit on deduction on account of contribution to a pension fund and the new pension scheme is proposed to be increased from Rs.1 lakh to Rs.1.5 lakh. Additional deduction of Rs.50,000 will be allowed for contribution to the new pen-sion scheme under section 80 CCD of Income Tax Act -- increasing the exemption from Rs.1 lakh to Rs.1.5 lakh.

Jaitley also doubled the transport allowance exemption to Rs.1,600 per month.

Deduction u/s 80C - Rs.150,000; Deduction u/s 80CCD - Rs.50,000; Deduction on account of interest on house property loan (Self-occupied property) - Rs.200,000; Deduction u/s 80D on health insurance premium - Rs.25,000; Exemp-tion of transport allowance - Rs 19,200; Total - Rs.444,200

2. Universal security net

The finance minister has proposed to create an universal social security system for all.

A. Through its soon-to-be-launched Pradhan Mantri Suraksha Bima Yojana, it looks to pro-vide an accidental cover of Rs 2 lakh for a pre-mium of just Rs 12 per year.

B. The Centre has proposed to launch Atal Pen-sion Yojana to provide a defined pension based upon the contribution and its period. The govt will contribute 50% of the contribution limited to Rs 1,000 per year, for 5 years, in the new ac-counts opened before December 31, 2015.

C. The finance minister announced Pradhan Mantri Jeevan Jyoti Bima Yojana that will cover both natural and accidental death risk of Rs 2 lakh at a premium of Rs 330 per year for every-one in the age group of 18-50.


D. Jaitley also proposed to use the unclaimed deposits of about Rs 3,000 cr in the PPF and around Rs 6,000 cr in the EPF for a senior citi-zen fund. The corpus will be used to subsidise the premiums of pensioners, BPL card-holders, small and marginal farmers etc.

3. It's all about gold

The finance minister has allowed for a gold monetization scheme where in gold deposits will be sought from charitable trusts, temples and other such institutions or individuals who have large holdings of physical gold. These will be lent to jewellers and other users of gold who can get access to the metal without having to buy more.

Secondly, the government will issue sovereign gold bonds as an alternative to purchasing physical gold. The bond will carry a fixed rate of interest, and also be redeemable in terms of the face value of the gold at the time of redemption by the holder of the bond.

Thirdly, the centre is also coming out with an Indian gold coin with the Ashoka Chakra em-bossed on its face to help recycle gold internally in India.

4. Service tax is now 14 percent which means everything you do has gotten cost-lier

Tobacco, cigarettes, paan masala, gutka etc. got more expensive with the excise on cigarettes raised to 15% and 25% for different categories. Even mineral water, aerated drinks, mobile handsets, tablet computers, alcohol will get ex-pensive. Cars may get costlier.

On the bright side, shoes will get cheaper as excise duty on leather products, shoes, footwear etc. with retail price more than Rs. 1000 per pair has been reduced by 6%.

Also the in case you want to buy a swanky new LED or LCD TV, it's going to cost you less now.

But net-net: Even if Mumbai does offer you a an all-night party lifestyle, it is going to burn a huge hole in your pocket because everything

from your food bill to alcohol bill will get more expensive.

5. There are new IIMs and IITs, which means all those MBA and engineering aspirants have something to cheer about

The FM has proposed a new IIT in Karnataka along with IIMs in Jammu and Kashmir and Andhra Pradesh.

Even the Indian School of Mines, Dhanbad will be converted into a full-fledged IIT, while AIIMS will be set up in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh, Bihar and Assam.

"In Kerala, the existing National Institute of Speech and Hearing will become a a university of Disability Studies and Rehabilitation," he said.

Jaitley also proposed three new National In-stitutes of Pharmaceutical Education and Re-search, one each in Maharashtra, Rajasthan and Chhattisgarh.

6. Higher education too got a boost

In order to enable poor and middle class stu-dents to pursue higher education of their choice without any constraints of funds, a fully IT based Student Financial Aid Authority is pro-posed to be set up during the year 2015-16. Jaitley has even hiked the amount allocated to higher education by 13 percent and earmarked Rs.26,855 crore for the same.

"To ensure that there is a senior secondary school within five km reach of each child, we need to upgrade over 80,000 secondary schools and add or upgrade 75,000 junior/middle to the senior secondary level," Jaitley said in his speech.

With a huge focus on skill developmen , the Na-tional Skills Mission was announced for youth below 25 years of age.

7. Tourism is set to get a huge boost

Not only did the tourism ministry get a 33 percent hike in budget allocation but Jaitley


has also proposed to increase cover for Visa on Arrival (VoA) facility to 150 countries against 43. The government has already eased Indian tourism visa regime through the expansion of VoA enabled by Electronic Travel Authorisa-tion (ETA) and extended this facility to tourists from countries like the US, Israel, Palestine and Japan to boost tourism sector.

Secondly, Jaitley also proposed to make World Heritage Sites more tourist friendly and the government will provide resources to start work for the following heritage sites -- Churches & Convents of Old Goa, Hampi in Karnataka, Kumbalgarh and other Hill Forts of Rajasthan, Rani ki Vav in Patan in Gujarat, Leh Palace in Ladakh in J&K, Varanasi Temple town in UP, Jalianwala bagh Amritsar in Punjab and Qutub Shahi Tombs Hyderabad in Telangana.

8. Tax free bonds for railways and infra

Jaitley has announced the introduction of tax-free infra bonds for railways and roads to mobilise funds for projects in the infrastructure development sector. For investors these are good long-term saving toosl as interest earned on these bonds is tax-free.

9. Rich will have to shell out more money as tax

The super rich taxpayers will have to shell out more tax as the budget has raised the surcharge payable by those reporting an income of more than Rs 1 crore a year. Someone earning Rs 10 lakh a month will have to pay an additional Rs 5,800 in tax every month.

Also, the budget has proposed to remove wealth tax.

10. Jaitley is keen to stamp out black money

Not only has PAN been made mandatory for all transactions above Rs 1 lakh but not declar-ing foreign assets can lead to rigorous impris-onment of up to 10 years and a penalty of 300 percent of the income sought to be concealed.

Even non-filing of tax return or submitting incorrect information in the tax return can lead to imprisonment of up to seven years. Also, amendments have been proposed in the Income Tax Act prohibiting acceptance or repayment of advance in cash of Rs 20,000 or more for any transaction in immovable property.


Budget 2015: Tablets, shoes to get cheaper but drinks, night outs to get expensive

IANS, Mar 1, 2015

T he national budget presented by Finance Minister Arun Jaitley Saturday has the potential to increase what you pay for some commodities while also reducing it for certain categories.

Like in the past the levy on tobacco products has been hiked, making it more expensive for smokers and other tobacco product users. Ex-cise duty on cigarettes has been increased by 25 percent for cigarettes of length not exceeding 65 mm and by 15 percent for cigarettes of other lengths. This is the fourth consecutive budget which has raised excise duty on tabacco by more than 18 percent hike in duty.

Similar increases are proposed on cigars, che-roots and cigarillos. Last year, the finance min-ister had hiked duty by 22 percent. Even custom duty on tobacco haso been increased to Rs 70 per kg from the Rs 60.

The finance minister also proposed to hike serv-ice tax from 12.36 percent to 14 percent. Mak-ing air travel, eating out and mobile bills more expensive. Going out for concerts and sports events will call for shelling out extra bucks due to the service tax hike.

Even aerated sugary drinks like colas and pack-aged water are likely to piche the pocket a bit

more harder. The duty on aerated water has been proposed to increase from 17.5 percent to 18 percent. In the last budget 5 percent was increased in the excise duty on aerated sugary drinks.

Jaitley has proposed to make leather footwear, India made mobile phones, tablets, microwave, peanut butter, packaged fruits and agarbattis cheaper.

Service tax exemption has also been proposed for ambulance services, entry to zoo and cold storage facilities.

Imported medical devices like medical video endoscopes and pacemakers are set to become cheaper, as the budget has proposed reduction of custom and counter vailing duty (CVD).

Similarly imported LCD/LED television panels may also get cheaper due to reduction in cus-toms duty.

The items which are set to become cost-lier are:

* Service tax rate increased to 14 percent and new services added to the taxable list like services provided by a mutual fund agent to a mutual fund or assets management company, distributor to a mutual fund or asset manage-ment company and selling or marketing agent of lottery ticket to a distributor.

* Aerated water, iced tea, lemonade and other beverages, waters, including mineral water and aerated water, containing added sugar or other sweetening matter or flavour.

* Condensed milk in containers

* Peanut butter

* Sacks and bags (including cones) of plastics


* Cut tobacco, cigarettes

* Cement

* Imported completely built units (CBUs) of commercial vehicles

Items which are set to become cheaper are:

* Bituminous coal, ulexite ore, liquefied butane, ethylene dichloride, vinyl chloride monomer and styrene monomer, butyl acrylate, an-thraquinone

* Wind power generators, solar water heater system

* Wafers for manufacture of integrated circuit (IC) modules for smart cards LED drivers and MCPCB for LED lights, fixtures and lamps.

* Agarbattis

* Pacemakers

* Tablet computers

* Ambulances

* Leather footwear priced over Rs.1,000 per pair

* Imported LCD/LED television panels


Budget 2015 finds no middle class takersTarique Anwar Mar 1, 2015

K uch toh phool khilaye hai humne, kuch aur khilane hai. Diqqat yeh hai ki raahon mein kai kaante purane hain (I have made some flowers bloom, and many are yet to be bloomed. But I have to negotiate many old thorns that lie strewn on the path) - beginning his Budget presentation with this couplet, Finance Minister Arun Jaitley may have summed up well his challenges and pre-dicament, but the middle class seems to be tired of listening to the same things again and again. It expected a burst of good news in the Budget, but ended up a bit disappointed.

The reaction to the Budget among the middle class was mixed with some calling it forward looking which will help the economy in the long run. The dominant mood, however, was one of dismay.

It is a forward looking budget with emphasis on skill development and entrepreneurship. It will help people in the long term, said young businessman Amit Kumar Jha, who runs an online portal to sell Darjeeling tea. But he also added, Understanding the basic dynamics and constraints, it is not up to the expectations of

the middle income group.

Kamlesh Kumar, a corporate sector employee in the national capital, feels deceived. We have been deceived on every front in the Budget 2015. There is no respite in the form of in-creased tax slabs that remains unchanged from Rs 2.5 lakh. The hike in Service Tax will cause a bigger hole in the pocket of salaried persons like us, he said.

The government increased the service tax to 14 percent from the current 12.36 percent to facil-itate smooth transition to levy of tax on services by both the centre and the states. The revised rate, which will come into effect from a date to be notified, will make costlier a host of activi-ties like air travel, eating out at restaurants, paying mobile and internet bills, visiting beauty parlours, stay in hotels, dry cleaning of clothes, purchasing of branded clothes, cable and DTH services, courier service, credit and debit card related services, asset management and insur-ance, stock broking and all other things that require availing of service from another party.

However, the Finance minister spared common


people from price hikes on many commonly used day-to-day items by reducing duties.

Khayyam Khan, a businessman who deals in wholesale of mobile handsets and accessories, said, As Goods and Services Tax is expected to reduce the red tapism involved in Sales Tax, the business community was waiting for key an-nouncements on GST so that inter-state busi-ness becomes easy. We are a disappointed lot.

Although Nupur Das, a Political Science student at Delhi University, is happy that the govern-ment has tried to address the concerns of the education sector,t he is not sure how efficient the promises turn out to be. Mr Jaitley has said in his budget speech that the government will ensure no student misses on higher education due to lack of funds and promised to set up an educational loan scheme for higher education. He has also announced that more educational institution will be set up. It will be interesting to see how efficient these proposals and promises turn out to be, he said.

Jaitley has announced to set up an IIT in Kar-nataka and upgradation of Dhanbads Indian School of Mines to IIT; AIIMS in Assam, Bihar, Himachal Pradesh, Jammu and Kashmir, Pun-jab and Tamil Nadu; IIM in Andhra Pradesh and Jammu and Kashmir; University of Disabil-ity Studies in Kerala; PG institute of Horticul-ture in Amritsar and Centre of film production, animation and gaming in Arunachal Pradesh.

For Mansi Sharma, a young professional, it was a photocopy budget of the previous regime. It was a photocopy of UPA governments budgets and had nothing for poor. Why was Corporate Tax reduced and Service Tax increased? The message is clear: snatch from the poor and feed the rich, she observed.

Taking a jibe the much talked about achche

din, she said, After budget speech was made in Parliament, petrol and diesel prices were in-creased. So much for achche din!

Md Reyaz, a research scholar at Jamia Millia Is-lamia, finds nothing significant in the budget. The country was expecting big bang reforms, but sadly there was nothing extraordinary in the budget. All the proposed reforms are painful for common people like us, he added.

Satirist Rahul Pandey responded on a lighter note but didnt forget to be offensive. Those in high offices should increase their security cover as leather shoes has been made cheaper. But the service will be a little costly as the tax rate has been hiked, he said.

Another such comment came from Sandeep Kumar who said, Shayad, angrezi budget bhashan padhne wale Arun Jaitleyji ko yeh pata nahin tha ki Babaji Ka Thullu ko English men kya kahte hain, warna woh saaf saaf bata dete (Perhaps, Arun Jaitley, who delivered budged speech in English, did not know how to trans-late into English Babaji Ka Thullu- a famous punchline of a comedy show being hosted by actor Kapil Sharma that means for when you do something in hopes for reward, you get nothing at all otherwise he would have made it clear.

Self-employed Rakesh Maloo warned the Modi government of the same fate as the Manmohan Singh-led UPAs if the former continued with its pro-rich policies.

The BJP will be wiped out from Bihar in the upcoming assembly elections there and it will have to sit on the Opposition if it does not stop fooling people in the name of development and bringing back economy on right track. Its pro-rich policies make the government lose the ground support it had garnered ahead of gen-eral elections 2014, he added.


Jaitleys tax gimmick: Budget 2015 results in tax benefit of only Rs 52,221, not Rs 4.44 lakh

Vivek Kaul Mar 1, 2015

T he finance minister Arun Jaitley during the course of his budget speech today remarked: After taking into account the tax concession given to middle class tax pay-ers in my last Budget and this Budget, today an individual tax payer will get tax benefit of Rs 4,44,200.

The details are provided in the annexure to the budget speech (which is reproduced below).

Jaitley's statement is incorrect at multiple lev-els. First and foremost he wants us to believe that he has been responsible for all these deduc-tions. Secondly, what he is talking about are essentially tax deductions and not tax benefits. What Jaitley should have said is that the total tax deductions will amount to Rs 4.44 lakh. And the tax benefit would depend on the tax bracket one falls in. So, an individual in the 10.3% tax bracket would save tax of Rs 45,752.6. An indi-vidual in the 20.6% tax bracket would save tax of Rs 91,505.2. And an individual in the 30.9% tax bracket would save tax of Rs 1,37,257.8.

Further, Jaitley's statement suggests that he is responsible for all these tax deductions, which is not correct. All these tax deductions have been around for a while. Jaitley in his two budgets has just re-jigged the total amount of deduc-tions that are allowed, under the various sec-tions of the Income Tax Act.

So, in the last year's budget he increased the deduction allowed under Section 80 C from Rs 1 lakh to Rs 1.5 lakh. He also increased the deduc-tion allowed for interest being paid on a home loan for self occupied property from Rs 1.5 lakh to Rs 2 lakh. This year, he increased the deduc-tion on health insurance premium from Rs 15, 000 to Rs 25,000. He also allowed an 'extra deduction' of Rs 50,000 for investments made into the New Pension Scheme. The transport allowance allowed as an exemption has been doubled from Rs 9,600 to Rs 19,200.

Once all this is taken into account Jaitley has essentially allowed an extra deduction of Rs 1,69,600 in his last two budgets.(Rs 50,000 extra for Section 80C + Rs 50,000 extra for investing in NPS + Rs 50,000 extra for inter-est paid on a home loan + Rs 10,000 extra on health insurance premium + Rs 9,600 extra on transport allowance).

Any 'extra' benefit is on this Rs 1,69,600. For those in the 10.3% tax bracket this works out to Rs 17,407. For those in the 20.6% tax bracket this works out to Rs 34,814. For those in the 30.9% tax bracket this works out to Rs 52,221.Hence, the tax deductions and exemptions offered by Jaitley have led to a maximum tax benefit of Rs 52,221 and not Rs 4.44 lakh, as he claimed in his speech.


More deductions but no changes in tax slabs: What Union Budget 2015 offers middle class

FP Staff Mar 1, 2015

F inance Minister Arun Jaitley did not really bring in acche din for the salaried class as the income tax slabs remain unchanged but it did offer some respite by dou-bling monthly transport allowance ( which is tax free) to Rs 1600 as well as offering deductions under section 80 (D).

Firstly, Medical reimbursement/Mediclaim deductions under section 80D have been raised from Rs 15,000 to Rs 25,000; and Rs 30,000 for senior citizens.

Secondly, Disabled and very senior citizens will get higher deductions.

"For senior citizen above the age of 80 years, not eligible to take health insurance, deduc-tion is allowed for Rs 30,000 toward medical expenditure. Deduction limit of Rs 60,000 on expenditure on account of specified diseases is enhanced to Rs 80,000 in the case of senior citi-zens," the government release said.

Additional deduction of Rs 25,000 is allowed for differently-abled persons, increasing the limit from Rs 50,000 to Rs 75,000. It is also proposed to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of severe dis-ability.

Thirdly, Additional deductions of Rs 50,000 per annum will be available for contributions to pension schemes.

Fourthly, Tax-free travel allowances raised from Rs 800 pm to Rs 1,600.

What this means is that individual taxpayers can effectively have a tax-free income of Rs 4,44,200 if they use all deduction options.

See the break-up below:

Jaitley also proposed to provide that investment in Sukanya Samriddhi Scheme will be eligible


for deduction under section 80C of the income-tax and any payment from the scheme shall not be liable to tax.

However, there have been no changes in the personal income tax exemption limit. Last year Jaitley had raised the personal Income Tax exemption limit by Rs 50,000 to Rs 2.50 lakh and also raised by same amount the exemption from payment of Income Tax on savings to Rs 1.50 lakh. Jaitley had also raised the tax exemp-tion limit on repayment of housing loans to Rs 2 lakh from Rs 1.5 lakh but hut apart from deduc-tions no other sops for the salaried class have been offered.

Here's the bad news for the super rich though: Wealth tax has been replaced with an additional 2 percent surcharge on the super rich.

"Jaitley proposed to levy a surcharge at the rate of 12% on individuals, HUFs, AOPs, BOIs, arti-ficial juridical persons, firms, cooperative socie-ties and local authorities having income exceed-ing Rs 1 crore. Surcharge in the case of domestic companies having income exceeding Rs 1 crore and upto Rs 10 crore is proposed to be levied @ 7% and surcharge @ 12% is proposed to be levied on domestic companies having income exceeding Rs 10 crore," said a government re-leased.


Budget 2015: Why cut corporate tax but not personal tax, Mr Jaitley?

Vivek Kaul Mar 1, 2015

A s far as goodies for the common man are concerned, there was nothing much in the budget presented by the finance minister Arun Jaitley today.The tax deduction allowed on the payment of health insurance premium was increased to Rs 25,000 from the current Rs 15,000. This will lead to tax savings of Rs 1,030-Rs 3,090, depending on which tax bracket you fall into. For senior citizens this limit was increased to Rs 30,000 from the current Rs 20,000 per year.

Also, for very senior citizens of the age 80 years or more, who are not covered by health insurance, a deduction of Rs 30,000 per year has been allowed on expenditure incurred on their treatment. For expenditure incurred towards specified diseases of serious nature, very senior citizens will now be allowed a deduction of Rs 80,000, in comparison to the earlier Rs 60,000.

The one good development has been an increase in the limit of deduction allowed on investing in the National Pension Scheme(NPS) to Rs 1.5 lakh from the current Rs 1 lakh, under Section 80CCD.

In fact, Jaitley has also proposed an extra deduction of up to Rs 50,000 for investing in the NPS, over and above the Rs 1.5 lakh.

Oh, and the transport allowance exemption has been increased from the current Rs 800 to Rs 1600. That should be a huge help indeed.


Hence, net-net the budget does not have much to offer to the middle-class taxpayer. The question that arises here is that why should the budget have goodies to offer to the middle-class taxpayer every year? Ultimately, a stable income tax policy is also very important.

That is indeed a fair point. Nevertheless, when the government is working towards bringing down the tax rate for corporates, why shouldn't something be on offer to the middle-class tax payers as well? That's a question worth asking.

The finance minister Arun Jaitley in his speech said: The basic rate of Corporate Tax in India at 30% is higher than the rates prevalent in the other major Asian economies, making our domestic industry uncompetitive. Moreover, the effective collection of Corporate Tax is about 23%.

Along with bringing down the tax rate for corporates, Jaitley also said that we do not get that tax due to excessive exemptions. A regime of exemptions has led to pressure groups, litigation and loss of revenue. It also gives room for avoidable discretion. The suggestion here was that along with income tax rates coming down, the exemptions that are allowed to corporates will come down as well. The idea seems to be that at lower rates more corporate taxes can be collected.

Along with the budget every year, the government also releases a document called the statement of revenue foregone. The estimates and projections are intended to indicate the potential revenue gain that would be realised by removing exemptions, deductions, weighted deductions and similar measures, the statement points out.

As can be seen from the above table, the revenue foregone number of the central government for this financial year is Rs 5,89,285.2 crore. This is higher than the fiscal deficit of Rs 512628 pro-jected for this financial year.

Nevertheless, it is important to point out that the revenue foregone number is based on certain as-sumptions. The estimates are based on a short-term impact analysis. They are developed assum-ing that the underlying tax base would not be affected by removal of such measures...The impact of each tax incentive is determined separately, assuming that all other tax provisions remain un-changed. Many of the tax concessions do, however, interact with each other. Therefore, the inter-active impact of tax incentives could turn out to be different from the tax expenditure calculated by adding up the estimates and projections for each provision.

So the revenue foregone figure needs to be looked at with these limitations in mind. Having said that, the government of India is losing out on revenue because of the exemptions and deductions. There is no denying that.


As can be seen from the above table, corporate India is a major beneficiary of all the exemptions and deductions. If one adjusts for personal income tax, the revenue foregone for the central gov-ernment still comes in at a whopping Rs 5,48,850.6 crore for 2014-2015. While this number maybe notional, there is clearly no denying that corporates benefit immensely out of the deductions and exemptions that have crept into our tax laws over the years.

In fact, bigger the corporate the more deductions and exemptions they take. Corporates, which make an operating profit within the range of Rs 0-1 crore have an effective tax rate of 26.89% Those in the Rs 50-100 crore range have an effective tax rate of 24.29%. Whereas those making a profit of greater than Rs 500 crore have an effective tax rate of 20.68%.

The overall rate is 23.22%. Jaitley wants to push up this rate of actual tax paid by bringing down the corporate tax rate to 25% from the current 30%, over the next four years. The hope also seems to be that at lower tax rates more taxes will eventually get paid.

The question is why can't the same logic be applied to individual tax payers? Around 3% of Indians pay income tax. If more corporates are likely to pay more tax at lower rates, can't the same as-sumption be made for individual tax payers as well? Further, like the corporates income tax laws, can't the personal income tax laws simplified as well?


This is something that the finance minister Arun Jaitley needs to answer. May be he will in the days to come.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)


Budget 2015 takeways: Eating out gets costlier as FM raises service tax to 14%

FP Staff, Feb 28, 2015

F inance Minister Arun Jaitley today pre-sented the Union budget for FY16 in the backdrop of easing inflation and interest rates but continued growth challenges which the government needs to address. Jaitley an-nounced plans for a universal social security system that would give poor Indians access to subsidised insurance and pensions. Tax ben-efits were proposed on health insurance, rais-ing the exemption ceiling to Rs. 25,000 from Rs. 15,000. For senior citizens, the exemption would be up to Rs 30,000. The finance minister also proposed to provide coverage for accidents and death to the poor for just Rs. 12 a year.

Jaitley raised the tax incentive limit for invest-ment in pension fund by Rs. 50,000, taking it to Rs. 1.5 lakh. But here's the biggest setback: Service tax has been hiked from 12.3 percent to 14 percent, which means everything from eating out, to ordering in, going to the theatres is all going to get expensive.

The 3 achievements of Govt have been PM's Jan Dhan Yojana, transparent auctions & Swachh Bharat, said Jaitley: Here are the high-lights of his speech in parliament:The world is predicting it is India's chance to fly and credibility of the economy has been re-estbalished. Not only is ours the second best performing stock markets among the big econo-mies, but India is poised to be the fastest-grow-ing economy

ReutersReutersCoal bearing states will get several lakhs of crores thanks tot he coal block auction

50 lakh toilets have already been constructed in 2014-2015 and we will achieve our target of six crore toilets

GST will be put in place as a state of art indi-rect tax system by April 1st 2016

Our achievement is to conquer inflation; will be only five percent by end of year

GDP growth for 2015-16 seen at between 8 - 8.5 percent. Estimated GDP for current fiscal is 7.4%

Increase in agriculture productivity is essential for welfare for rural population,we should com-mit to increase irrigation area

Need to upgrade 80,000 secondary schools so that they are within 5 km reach for students. According to the FM, Skill development should start from class XI for those who are not that bright academically. Students should work as trainee in the industry and the industry should give stipend to these students. In the classroom should be taught about their rights and respon-sibility towards the country. FM proposes new scheme called Nayi Manzil to enable youth without school leaving certificates to get em-ployment

Fiscal discipline has to be achieved despite demands for public investment. States will now be empowered with more resources as recom-mended by the Financial Commission report.Devolution will be Rs. 5.2 lakh crore in 2015. Total transfer to States will 62 per cent.

Economic growth this year at 11.5 percent is lower in nominal terms but will meet the chal-lenging fiscal target of 4.1 percent of GDP. Jaitley further said that fiscal deficit target of 3 percent will be achieved in three years rather than the two years announced earlier. So fiscal deficit seen at 3.9% of GDP in 15/16; 3.5% of GDP in 16/17 and 3% in 2017/18.

CPI inflation to remain close to 5 pct by March, opening room for more monetary policy easing

Economy faces five challenges: Agri income


are under stress, increase in public and private investment, manufacturing reduced to 17%, fis-cal discipline, devolution to states

Need to cut subsidy leakage, not subsidy itself. Working towards rationalisation of subsidies, says FM. Subsidies will be targeted and done directly, expect those in the top tax bracket will give up LPG subsidy voluntarily. Direct Transfer of Benefits will be expanded from 1 crore ac-counts to 10.3 accounts

Government to set up Mudra Bank aimed at lending to lower income groups

Rural Infrastructure Development Fund to be 25000 crore

FM proposes much needed bankruptcy code in the year 2015-2016 to meet global standards and provide for judicial capacity. The code is aimed at addressing bad loan challenges

Social security systems for all poor and an af-fordable insurance policy for the poor is also be-ing promised. Measure to bring in more equity. Atal Pension Yojana will provide defined pen-sion according to contribution ; 50% contribu-tion to be from the government

Infrastructure outlays for roads and railways go up. Investment in infrastructure will go up by Rs 70000 crore in 2015/16 over last year

PPP model of Infrastructure to be revital-ized and realigned where government will bear larger part of the risk

Second unit of Kudankulam nuclear power station to be commissioned in 2015/16. Govt also proposes to set up 5 ultra mega power projects, each of 4000 MW, will be plug and play projects

Deepening of bond markets is the need of the hour. FM proposes to merge FMC with Sebi to reduce speculation

MNREGA allocation to go up by Rs 5000 crore. This is the highest ever allocation to the scheme

Ports in public sector will be encouraged to

corporatize & become companies under compa-nies act

FM promises Rs 1,000 crore corpus for estab-lishing a mechanism to facilitate startups

FM proposes to introduce gold monetisation scheme to allow investors to earn interest in metal account. Also says an alternative sover-eign gold bond to replace physical gold. Jaitley also proposes to work on developing Indian gold coin which carries the Ashok Chakra to help recycle gold available in country

Debit card transactions to be encouraged and cash transaction dis incentivised

Employees EPF contribution may become optional

Jaitley now proposes to do away with different types of foreign investment and replace them with composite caps instead

Another Rs 1,000 crore committed to the Nir-bhaya Fund

Jaitley proposes increase in Visa on Arrivals to 150 countries from its current 43 in an attempt to boost tourism

Dispute of resolution bill to be set to see that stuck projects can be unlocked

FM propose to set up AIIMS this year in J&K, Punjab, Tamil Nadu, HP and Assam and new New Indian Institute of Managements in J&K and Andhra Pradesh. Meanwhile ISM Dhana-bad will be upgraded to full IIT

India ups defence budget to Rs 2,46,727 crore for coming fiscal

FM proposes to develop heritage sites El-ephanta Caves; old Goan churches; Varanasi; Hampi etc

Taxation: FM Proposes to reduce the rate of corproate tax to 25 percent from the current 30 percent over the next four years

Black money law shall be implemented by next year: Foreign Exchange Management Act and


Money Laundering Act will be amended in rela-tion to confiscation of assets

In order to curb benami transaction in prop-erty deals, Jaitley has proposed to rationalise capital gains tax regime for real estate invest-ment trusts.

GAAR deferred by another 2 years

Indirect tax: Govt to reduce custom duty on 22 items

FM proposes to replace wealth tax with addi-tional 2% surcharge on super rich ( those earn-ing above Rs 1 crore in a year) This will add Rs 9000 crore to the government's kitty

Pan Number quoting made compulsory for transactions more than Rs 1 lakh.

For senior citizens, health insurance premium will now be Rs 30,000

Additional deduction of Rs 50000 under sec-tion 80CCD, with aim of moving from pension-less to a pension society

An individual tax payer can now get exemp-tions up to Rs 4.4 lakh.

Transport allowance increased to Rs 1600 a month from the current Rs 800

Service tax has been raised from 12.3 percent to 14 percent

To discourage transactions in cash, Rupee debit card to incentivise credit transactions

Clean energy cess increased from 100 to 200 Rupees per metric ton of coal to finance Green Energy Fund

Custom duty on tobacco increased to Rs 70 a kg from the current Rs 60/kg. This means ciga-rettes are getting more expensive.

Custom duty on commercial vehicles hiked to 40 percent from 10 percent

Excise duty on footwear with leather uppers to be reduced to six percent

100 percent Tax exemption for contributions to 'Swachh Bharat Abhiyan' and 'Clean Ganga Fund' by corporates as part of CSR

Swachh Bharat cess of two percent, if neces-sary

Law against Benami property in fight against black money

Splitting of transaction not to be permitted

Tax regime to be rationalised

Rigorous imprisonment of up to 10 years for concealing income

Prevention of Money Laundering Act to be amended to provide for forfeiture of property in India if the one abroad cannot be attached

Exemption to individual tax payers to continue

In last nine months several steps taken to ef-fectively deal with problem of black money

Comprehensive new law to be brought against black money

New structure to be put in place in banking sector for seamless integration of data

Adequate provision for defence with Rs.246,727 crore earmarked this year

Fully IT-based student-help facility for needy students

Eastern states to be given opportunity to develop faster. Special boost to Bihar and West Bengal as in the case of Andhra Pradesh and Telangana

Good progress in DMIC corridor and other infra-projects. Rs.1,200 crore earmarked and additional funds if pace of work picks up on ongoing projects


Misplaced priorities? Budget 2015 doesnt allow govt to take on spread of diseases like swine flu

Rajesh Pandathil, Mar 2, 2015

W hen it comes to allocation for the healthcare sector, governments in India have always been stingy. Arun Jaitley's 2015-16 budget shows the Modi gov-ernment is no different and that is bad news, especially when swine flu is spreading across the country.

The government has allocated Rs 33,152 crore to the health sector. In his Budget in July 2014, Jaitley had earmarked Rs 30,645 crore, which, according to an earlier Reuters report, was fur-ther cut by 20 percent due to the fiscal strains.

Apart from this allocation, the minister has made proposals to set up All India Institute of Medical Sciences (AIIMS) in J&K, Punjab, Tamil Nadu, Himachal Pradesh and Assam. Another AIIMS-like institution will come up in Bihar too.

Another step taken by the finance minister to widen healthcare net is increasing the limit of deduction in respect of health insurance premi-um (Section 80D of the Income Tax Act) from Rs 15,000 to Rs 25,000.

However, experts are disappointed with the measures taken as they fail to address many burning issues that need urgent attention.

"It is not clear how the marginal increase in

allocation will take care of the family plan-ning agenda and the new AIIMS," Population Foundation of India executive director Poonam Muttreja has been quoted as saying in a report in The Times of India.

The announcement of the five more AIIMS need to be taken with a pinch off salt as this is not going to happen in the foreseeable future. The July budget had also proposed to set up four AIIMS-like institutions in Andhra Pradesh, West Bengal, Maharashtra and Uttar Pradesh. The fund set aside was a meagre Rs 500 crore. There is no update on what has happened to this plan yet. But with the cut in the health al-location last year, there is no reason to believe that the government has made any headway on this.

Coming back to the immediate issues in the healthcare sector, one has to look at the alloca-tion in the context of the spreading swine flu in the country. According to a PTI report, citing health ministry statistics, swine flu has claimed 1,041 lives as of 28 February while the number of people affected by the virus crossed 19,000.

In this context, as the healthcare sector experts point out, it is urgently needed to allocate funds to control such disease outbreaks.

The allocation itself is too low. As a percent of total expenditure it is just 1.86 percent, which is also the second lowest in the last 10 years. The lowest was in 2012-13, when the allocation stood at Rs 25,539 crore, which was just 1.81 percent of the total expenditure that year.

However, this is nothing new in India. As per data, India's health and family care allocations have on an average always remained a low 1.96 percent of the total expenditure over the last 10 years (without taking into account the 20 per-cent cut in 2014-15). Next year's allocation is lower than this 10-year average.


"Good health is a necessity for both quality of life, and a persons productivity and ability to support his or her family. Providing medical services in each village and city is absolutely es-sential," the finance minister said in his budget speech.

Clearly, he actions do not support his words fully.

Data by Kishor Kadam


Budget 2015: Super rich senior citizens to take biggest hit

PTI, Mar 1, 2015

N ew Delhi: Individuals with an annual income of above Rs 10 lakh but below Rs 1 crore have emerged as the biggest beneficiaries of the new taxation proposals, if they are aged below 60 years, while the super rich above this age bracket will be hit the hard-est.

As per an analysis of new income tax propos-als, an individual aged below 60 years can make additional saving of up to Rs 24,596 a year if his or her annual income is above Rs 10 lakh but below Rs 1 crore. For senior citizens in this income bracket, savings would be little lower at Rs 21,630.

At the same time, senior citizens above 60 years of age would have to pay additional tax of Rs 64,550 a year if their annual income is more than Rs one crore.

For the individuals below 60 years of age, with annual income of over Rs one crore, the ad-ditional tax works out to a little lower at Rs 61,271, according to an 'impact report' prepared by consultancy major PwC for the income tax proposals made by Finance Minister Arun Jait-ley in his Budget yesterday.

Jaitley has announced increasing the super-

rich surcharge to 12 percent from 10 percent for those individuals earning more than Rs one crore. However, he has also proposed additional deductions in lieu of investments in pension and health insurance schemes.

The additional savings would be the lowest at Rs 7,210 for senior citizens in the age bracket of 60-80 years and with annual income of below Rs five lakh. For individuals below 60 years of age in this income bracket, the additional sav-ings would be Rs 8,199.

In case of annual income of Rs 5-10 lakh, the additional savings would be Rs 16,398 for indi-viduals below 60 years, while the same would be Rs 14,420 for senior citizens aged 60 years and above.

Under new proposals, further deductions of Rs 50,000 a year would be allowed for contribution made to the National Pension Scheme. Deduc-tion on Mediclaim premium has been raised from Rs 15,000 to Rs 25,000, while that for senior citizen parents has been increased from Rs 20,000 to Rs 30,000.

A fresh deduction of Rs 30,000 has been pro-vided for the amount paid on account of medi-cal expenditure incurred on health of a very senior citizen where no amount is paid towards mediclaim premium.

PwC India Partner and Leader Personal Tax, Kuldip Kumar said that "having raised the basic exemption limit and 80C limit last year, there was hardly any scope for further concession.

"Raising the limit of health insurance premium, transport allowance exemption and additional deduction of 50,000 for NPS will help taxpayers save little more in taxes. However, super rich tax payers (having taxable income exceeding Rs 1 crore) will have to shell out more due to in-


crease in surcharge from 10 to 12 per cent.

"Abolishment of wealth tax will give savings to those who are having taxable wealth. There is a greater focus in the budget on curbing of black money."


Macroeconomics and sector impact: Breaking it down


Budget 2015: The 4 measures announced by Jaitley that will be long remembered

K Yatish Rajawat, Mar 2, 2015

F inance minister Arun Jaitley's Budget 2015-16 may have disappointed the masses, middle class and markets as he has not handed out sops as they expected. It would have been brave and bold of him to hand them out as expected. Several FMs, including P Chidambaram in his dream budget, did it exces-sively.

Jaitley did not play to the galley of expectations or the perceptions that says all is well. Sitting where he is he has belied the fancy numbers put out by the CSO of the revised GDP numbers and seconded the criticism of the CEA in the Eco-nomic Survey.

The FM has taken heed of the global slowdown and the inherent opportunity and risk that lie there. In a way, Jaitley has become a central banker whose move and words hide more than they reveal.

The opposition is alleging the Budget is pro-corporate and anti- farmer. There is little headroom on revenue front and no leeway on expenditure. So plan expenditure for most min-istries is down, barring his own and couple of others. The investment environment has actu-ally not changed much from 2013-14 with the private sector still waiting and watching.The tax revenues show a lack of economic

growth perception. The actual gross tax revenue in 2013-14 were Rs 11,38,733 crore and Jaitley's last budget had estimated this to grow to Rs 13,64,524 crores, a growth of almost 20 percent.

These were numbers that were carried forward from Chidambarams interim budget and not tinkered at all. It was an optimistic growth target and was fed by the same hype that is cur-rently feeding the perception of high economic growth. Which is why he said Phool khilane hai... par bagh kantein kai purine hain.

Budgetary estimates are generally higher than actual receipts and are never fully accurate. But the revised estimates for 2014-15 show the tax revenues are at Rs 12,51,391 crores a growth of approximately 10 percent, that means a short-fall of almost 10 percent. If the fuel prices had not dropped we would have been staring at a very challenging situation.

He is still trying to project an upbeat percep-tion of 8.5 percent growth in GDP and at the same time curtailing all big spending. This is the quandary that the finance minister expects the common man to understand, and this is what will not be in the noise that even the pink dailies will not explain on Page One.

Not tinkering with the tax rates for the middle class or asking them to take care of themselves may not go down well. But some things will long be remembered - as the strokes of Chris Gayle - after the pink newspapers have become pack-ing papers and the noise in the studios shift to a new controversy.

i) For instance, laying down a roadmap for reducing corporate taxes, and reforming the corporate tax structure by removing exemp-tion. This is Jaitleys 'saral' taxation attempt for the corporates. This will occupy centerstage in industry associations as they lobby heavily for retaining the exemptions. Tax consultants who


position themselves as management consulting firms will be in the forefront of this charge, half a league, half a league at a time. Their tax advi-sories business will be hit and this makes up the bulk of their revenues.

ii) The move to create a super regulator through the merger of the Securities and Exchange Board of India and Forward Markets Com-mission will reduce regulatory positions, grey area between two derivative markets and also scams (remember Financial Technologies and National Spot Exchange). Moreover, Jaitley has elevated the Sebi to a status higher than the RBI as it will get more resources, people and pow-ers. It also makes the finance ministry more powerful as the Sebi chairman finally reports to the finance minister. It also sets the roadmap for UK Sinhas successor at SEBI. It creates so many possibilities, consolidation or mergers of exchanges. Resulting in a seamless mar-ket, arbitrage opportunities across exchanges, instruments, stakeholders, traders across the world would be rejoicing. Expect consolidation in trading teams in brokerage firms, etc.

c) By creating a national infrastructure fund, Jaitley is for the first time opening up the flood-gates to long-term fund to participate in the India opportunity. Pension funds and sovereign funds will follow this development closely. Ex-pect roadshows unlike the ones which the UPA government did in its first term. But it wont be easy as any private equity fund manager will tell you. Dont expect an immediate closure as it will easily take 12-18 months. It will take all the marketing skills, tax arbitration moves, sov-ereign guarantees to sell this fund. It wont be easy, but it will be something just right for the minister of state for finance Jayant Sinha.

d) A bankruptcy law a first for the country that will ease the process of closure of NPAs. King-fisher and several companies in the recent past have taught us that the banks need this law more than they need anything else. If it allows them to seize management control from dubi-ous promoters and recover funds this law is needed asap. A tremor would have gone up the spine of several promoters who have siphoned off bank loans with impunity.

The author is is a senior journalist and policy commentator based in Delhi. He tweets @yat-ishrajawat


Budget 2015 does nothing spectacular for the health of the economy

Pawan Khera, Mar 1, 2015

B oth on the expenditure and revenue side, a budget has to be judged by what it does to the maximum number of peo-ple. Corporate India responded to the 2015-16 budget with an apprehensive smile. It loves the postponement of GAAR and removal of wealth tax but is unsure of what the new law on black money will imply. It has brought a sadistic smile to the inspectors and the bureaucrats of the CBDT. Markets have a confused frown.

And the middle class has several questions to ask. How will this budget see the reduction of prices of essential commodities and more mon-ey in their pockets? Will the increase in service tax not make a hole in its pockets and disincen-tivise consumption? What would be the infla-tionary implication of the increase in customs duty on commercial vehicles from 10 percent to 40 percent? The underlying assumption behind reducing corporate tax is that the money thus saved will be reinvested by the corporate. If the tax slabs were rationalized, wouldnt the same premise work for personal tax? The money thus saved would have boosted consumption.

Will the top 100 richest Indians end up paying higher taxes? The banking sector was looking up to the FM for recapitalization and easing of the massive bad debts that have slowed down lending, slowing the investment cycle down. Where are the labour reforms? Likewise, the manufacturing sector was looking at both short-term kickstart and a long-term push.

The underlying projection of this budget is 8.5 percent growth and 3 percent inflation. Are these projections realistic? Last year, presenting the interim budget, Arun Jaitley had set the Fis-cal Deficit at 3.6 percent. Today it has been put at 3.9 percent. India has become an impatient country. The campaign driven politics and gov-ernance of Narendra Modi makes Indians start taking the words of politicians seriously. This is a PMO budget and was hence expected to be a

delivery budget.

On the eve of the budget itself, the Chief Eco-nomic Advisor was very realistic in helping us moderate our expectations.

The proposed Investment and Infrastructure Fund has brought a mild cheer to the industry but the atmosphere for investments does not see a big change. For fiscal deficit to be brought down, the government must trigger the invest-ment cycle. Without any reduction in interest rates, it does not seem possible. Investments have not kicked off in the last eight months (from 38 percent to 32 percent).

Where is the blue print for a double digit growth?

DBT and GST are the only two major reforms being tom-tommed. Were they brought in by this government? The FFCs recommendation of fiscal federalism increases the states revenue but at the same time puts the onus of failure on them.

The budget does nothing spectacular for the health of the economy. Only the stock markets can continue to be sentiment driven. Manufac-turing and infrastructure need more than just sentiment and slogan. The government must


emerge from its legacy obsession.

The attractive pre-election campaign on mini-mum government does not get reflected in the budget. The size of the budget remains the same with the balance shifting more towards corpo-rates but without any promise for either a boost in investments or growth. The budget comes across as a transaction between those who pay taxes and those who recover taxes. The rest do not matter and can do with crumbs.

Experts have complimented the government for its pro-growth vision. The difference between a long-term vision and an actual deliverable is the difference between philosophy and religious faith. Everyone likes the concepts of Nirvana and spending life after death in the heaven above, but everyone wants a promotion, a house and a car from his or her God here and now.

Pawan Khera is associated with the Congress and the views expressed are his own


Budget 2015 has two game-changers that will make India a global financial hub

Gautam Chikermane, Mar 2, 2015

A run Jaitley's Budget 2015 is bold in its stance, futuristic in its approach, and above all, reformist in its spirit. While there will be much written and critiqued on its boldness (a frontal attack on black money, for instance) and future-preparedness (the fall in corporate taxes to 25 percent in four years from 30 percent today), I will look at a two mega-reforms, both financial, that his Budget has unveiled.

The first looks inward at the domestic financial sector. Under this, the major reform is placing consumers of finance, the average household, at the centre of all laws. "A properly functioning capital market also requires proper consumer protection," Jaitley said. "I, therefore, propose to create a task force to establish a sector-neu-tral Financial Redressal Agency (FRA) that will address grievances against all financial service providers."

As consumers, all of us would have experienced the push towards an insurance product when we went to invest in the Public Provident Fund or a mutual fund. In an environment of institu-tionalised mis-selling, we dont know where to go, whom to complain. All we seek is a return on investment at a low cost and transparent archi-tecture. Under the FRA, we will have a single complaint management agency to go to.

The FRA will setup a nationwide machinery to become a one-stop shop where consumers can carry complaints against all financial firms, the Financial Sector Legislative Reforms Commis-sion (FSLRC) report states, and which Jaitley has started actioning. Gone are the days of running from one regulator to another as firms, wearing the garb of universal banking, wreaked havoc on the savings of Indians. Who, for in-stance, is liable for a mis-sold insurance policy by a bank --- banking regulator RBI or insur-ance regulator Irda? The answer now will be: FRA.But Jaitley doesnt stop his reform at simply the creation of one more regulator. There is a thought-through system behind it - the Indian Financial Code (IFC). I am also glad to inform the House that work assigned to the task forces on the Financial Data Management Centre, the Financial Sector Appellate Tribunal, the Resolu-tion Corporation, and the Public Debt Manage-ment Agency are progressing satisfactorily, he said. We have also received a large number of suggestions regarding the IFC, which are cur-rently being reviewed by the Justice Srikrishna Committee. I hope, sooner rather than later, to introduce the IFC in Parliament for considera-tion.

This is big - really, really big. In effect, the IFC disrupts existing regulatory structures and rec-reates a more cohesive, more accountable finan-cial architecture that oversees nine important moving parts - consumer protection, micro-pru-dential regulation, resolution, capital controls, systemic risks, development and redistribution, monetary policy, public debt management, and contracts, trading and market abuse.

The IFC is one law that alone is a giant reform. By placing the consumer at its core, the IFC completely changes the contours of Indias financial sector that so far has been held hos-tage to companies that thrive on anomalies and regulators too busy playing turf-wars than


focusing on customer services and protection. From financial repression to legitimising mis-selling, IFC will hopefully change that for good.

That said, it wont be easy to implement. The IFC is an extremely bold law to enact: a

decoding indian budget

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