Indian Budget

Presented by : Anuvav Mishra and Ashtik Nayak

Budget 2015

Introduction

Financial Inclusion - 12.5 crores families financially mainstreamed in 100 days.

• Goods and Service Tax (GST) • Jan Dhan, Aadhar and Mobile (JAM) - for direct benefit

transfer.

Transparent Coal Block auctions to augment resources of the States.

Swachh Bharat is not only a programme to improve hygiene and cleanliness but has become a movement to regenerate India.

Game changing reforms on the anvil:

Key Achievements :

Major Challenges Ahead

Five major challenges:

• Agricultural income under stress, • Increasing investment in infrastructure, • Decline in manufacturing, • Resource crunch in view of higher devolution in taxes to states, • Maintaining fiscal discipline.

Public sector needs to step in to catalyze investment

• Make in India – create jobs in manufacturing, • Continue support to programmes with important national priorities :

• Agriculture, • Education, Health, • MGNREGA, • Rural infrastructure including roads.

Challenge of maintaining fiscal deficit of 4.1% of GDP met in 2014-15, despite lower nominal GDP growth due to lower inflation and consequent sub-dued tax buoyancy.

Pre-Budget Sentiments – A brief

Lot of expectation from the budget.

An overall positive atmosphere

People looking for actions to reflect

Buoyant economic scenario and the positive investor sentiment

Tax reforms and regulatory policy reforms

Expectations – At a glanceLower Rate of MAT for MSME’s and SEZ’s

100 smart cities - secure & technologically correct

Radical changes benefiting Social & Environmental conditions

Need non-RBI Regulator For NBFCs

Allocation of funds – Financial Inclusion

Prefer – GST to role out immediately

Foundry Development – Make in India

Housing :

• On-ground impetus – affordable housing for all• Should empower the house buyer• Re-introduce Interest subvention for affordable housing

Real - Estate

• Ensure industry status to Real-estate• Fast track REITs – vital for the real-estate - offer investors high yields

Expectation – At a glance

Policy Reforms – What do they expect ?

Indirect Tax – What do they expect ?

Foreign Investors – What do they expect ?

Personal Taxation – What do they expect ?

Real-Estate Sector – What do they expect ?

Tax Rates – What do they expect ?

Top 7 Expectation - KPMG

Budget Talks – Arun JaitleyGood

Governance Agriculture

Funding the Unfunded

From Jan Dhan to Jan Suraksha

Infrastructure

Financial Markets

Monetizing Gold

Investment Safe India

Tourism Green India Skill India

Digital IndiaTAX

PROPOSALS

Budget at a glance - Financials

Green India

New scheme

• Rapid manufacturing and adoption of electric vehicles• Faster Adoption and manufacturing of Electric Vehicles (FAME)• 75 crore – 2015-16

A balance between taxing pollution and the price of power

Clean Energy cess from Rs.100 to Rs.200 per metric tonne of coal 

Excise duty on sacks and bags of polymers of ethylene – 12 -15%

Swachh Bharat cess at the rate of 2 percent or less

Renewable energy capacity – 175000MW wind, bio-mass, hydro

Skill India

Emphasis on education and employability

• Deen Dayal Upadhyay Gramin Kaushal Yojana• 1500 cr.

Launch – National Skills Mission

• IT based Student Financial Aid Authority• Pradhan Mantri Vidya Lakshmi Karyakram Yojana• New AIIMS and IITs

Rural population

Education

Standardize - 31 sector skills

Link Skill Mission & Make in India

It's not how much, but how will skill and education mission work

Digital India – IT Projects

National Optical Fibre Network Programme (NOFNP) – 7.5 lakh kms

Networking 2.5 lakhs villages

Categorizing the states – special

Projects following PPP model

Coordination with IT sector - Procurement Bill and a Dispute Resolution Bill

Digital profile of India is very skewed today. It's confined to a few cities.

Make in India

Self sufficiency

• Defense equipments• Aircrafts• Promotion of Domestic Manufacturing• Along with Skill India• Creation of Global Manufacturing Hub• Depreciation & Taxation

Required Reforms

• A stable tax regime• Clarity on tax law• Tax sops for investment in key sectors and reduction in the Minimum Alternate Tax (MAT)• Implementation of GST• Transparent and quick resolution of disputes• Transfer Pricing

Goal to achieve self-sufficiency in all fields and improving GDP

Jan Dhan to Jan Suraksha

Pradhan Mantri Suraksha Bima Yojana

• Accidental death risk of `2 lakhs for a premium of just `12 per year

Atal Pension Yojana

• Provide a defined pension• 50% of the beneficiaries’ premium -1,000 each year (5 years)

Pradhan Mantri Jeevan Jyoti Bima Yojana

• Natural and accidental death risk of `2 lakhs• 330 per year, or less than one rupee per day, for the age group 18-50

Senior Citizen Welfare Fund

• 3,000 crores in the PPF, and approximately 6,000 crores in the EPF corpus

Jan Dhan Platform

Education and livelihood scheme called ‘Nai Manzil’

India’s population is without insurance of any kind - health, accidental or life

Agriculture Sector

Positives

• Organic farming scheme • Paramparagat Krishi Vikas Yojana• Pradhanmantri Gram Sinchai Yojana

• Rs. 25,000 crore for Rural Infrastructure Development Fund (RIDF)• 15,000 crore for Long Term Rural Credit Fund• 45,000 crore for Short Term Cooperative Rural Credit Refinance Fund• 15,000 crore for Short Term RRB Refinance Fund• Rs. 5,300 crore to support Micro Irrigation Programme• Farmers credit - target of 8.5 lakh crore• Pradhanmantri Gram Sanchar Yojana for ‘Per Drop More Crop’

Negatives

• Subsidies still provided for fertilizers which hampers the soil quality• The budget remained silent on schemes like crop insurance, crop wastage due to insufficient/suboptimal

warehousing.

An ambitious Soil Health Card Scheme

Direct Taxes & Regulatory

Contribution to National Pension Scheme increased to INR 150,000

Health insurance premium increased – INR 15,000 to INR 25,000

For Senior Citizens – INR 20,000 to INR 30,000

New Law regarding black money – 10 years, 300% of tax evade

Reforms :

• Strengthening Prevention of Money Laundering Act• cashless society - spur debit and credit card usage• regulate equity capital flows – RBI to manage debt instruments• Monetizing Gold - Sovereign Gold Bond alternative• Changes in Foreign Exchange Management Act

A robust taxation regime

Personal Taxes

Positives :

• Insurance premium & transport allowance exemption – deduction 50000/-• Abolition of Wealth Tax – taxable wealth• Introduction of GST 1 April, 2016• Phased reduction in corporate tax – 30%-25%

Negatives :

• Rich tax payers - to pay more• Increase in surcharge – from 10% - 12%

Implementation of these plans holds the key.

Indirect Taxes

Swachh Bharat Cess @ 2% on the value of taxable services

Manpower supply and securities services are fully taxable

All reimbursements of costs may be included in the value of taxable services

Negatives

• Service tax increased from 12.36% to 14%• Dividend distribution tax(DDT) to increase from 20.47% to 20.92%• Minimum alternate tax(MAT) increases from 20.96% to 21.34%• Swachh Bharat Cess – steep by industry standards

A mixed response and lot of apprehension

Taxation

Abolition of Wealth Tax.

Additional 2% surcharge for the super rich with income of over Rs. 1 crore.

Rate of corporate tax to be reduced to 25% over next four years.

Total exemption of up to Rs. 4,44,200 can be achieved.

100% exemption for contribution to Swachch Bharat, apart from CSR.

Service tax increased to14 per cent.

Aerospace & Defence

Acquisition of technology – self-sufficiency in defence

Rs 246721 cr. allocated for defence – 9.87% increase over last year

Royalty WHT – from 25% to 10%

30% weighted deduction in wages – hiring additional 50

11% increase in budget

limited but very effective provisions that will promote indigenization

Disinvestment

Rs 69,500 crore from disinvestment and strategic sale in state-owned companies.

• Rs 41,000 crore is estimated to come from minority stake sale in PSUs• Rs 28,500 crore is projected to come from strategic sale in both profit and loss-making

companies

Current Year

• The government is expected to mop up only Rs 31,350 crore as against the budget target of Rs 63,425 crore• The revised estimates have pegged the disinvestment receipts from minority stake sale in PSUs at Rs 26,353

crore, as against the target of Rs 43,425 crore

Rs 5,000 crore will be raised from PSU Exchange Traded Fund (ETF).

Pharmaceuticals & Healthcare

Health Insurance as an alternative to ESI

contribution will promote choice for

workers

Growth of the health Insurance

sector and coverage

Banking & Capital Markets

Operatonalize the International Financial Services Centre (IFSC) regulation regarding setting up FII

Incentivize Credit/debit transactions

MUDRA - bank the un-bank and fund the un-fund

Monetization by the banks of gold deposits placed by the jewelers

Autonomous Bank Board Bureau - improve the Governance of PSBsliquidity in MSME - Trade Receivables Discounting System (‘TReDS’) which shall finance trade receivables of such MSMEs Introduction of SARFAESI act for NBFC's - Sell-offbusinesses

Banking :

Non-banking Finance Companies :

• RBI registered NBFCs having an asset size of INR 5000 Mn and above will be considered to be a ‘Financial Institution’ under the Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)

Capital Markets :

• A proposal to merge the Forwards Markets Commission with SEBI to strengthen the regulation of commodity forward markets and to reduce wild speculation

• Deepening of the Indian bond market by setting up a Public Debt Management Agency which intends to bring both India’s external borrowings and domestic debt under one roof

• Permitting tax free infrastructure bonds for projects in the rail, road and irrigation sectors • The concept of a task force to establish a sector-neutral Financial Redressal Agency that will address

grievances against all financial service providers • Proposal to place the Indian Financial Code, Bankruptcy Code, Benami Transactions (Prohibition) Bill in the

Parliament for consideration

Infrastructure & Real-estate

Positives

• Net Capital expenditure of 75000 crore is proposed• To setup 5 ultra mega power projects(UMPPs) of total 20000 Mw entailing a total investment of

100,000 crore• Support to the road and railways to the tune of Rs. 14,031 crore and Rs. 10,050 crore • CAPEX of the public sector units is expected to be Rs. 3,17,889 crore• NIIF -National investment and infra fund with annual contribution of 20,000 crore proposed• Plans to permit tax free infrastructure bonds for projects in the rail, road and irrigation sector• Initial investment of 150 crore on innovation center• PPP model for infrastructure development – govt. to bear risk

Rural Sector

Positives

• Six crore toilets under Swachh Bharat Abhiyan• JAM Trinity for welfare of poor• Rs. 5,000 crore additional allocation for MGNREGA

Negatives

• Not much focus for health and safety in rural sector. Lack of medical services’ access main issue in rural India

Housing for all by 2020 ( in crore)

Education Sector

Positives

• Rs. 68,968 crore for education sector• AIIMS in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh, Bihar and Assam. IT in Karnataka;

Indian School of Mines in Dhanbad to be upgraded to IIT. IIM for Jammu and Kashmir and Andhra Pradesh• PG institute of Horticulture in Amritsar, Kerala to have University of Disability Studies• Centre of film production, animation and gaming to come up in Arunachal Pradesh• Up gradation of 80,000 secondary schools• National Skills Mission for skill development and entrepreneurship - Rs. 1,500 crore

Negatives

• There is no check on quality of education provided in secondary schools. Hence, It becomes difficult to compete at higher studies level for these students.

Telecom Sector

Positives

• The JAM trinity - Jan Dhan Yojana, Aadhar and Mobile is a good Digital India initiative. This will help telecom companies engage with a wide strata of population which will increase the network penetration.

• Deferral of General Anti Avoidance Rules ('GAAR') for 2 years • Reduction of tax rate on royalty and technical services payments made to non-

resident parties to 10% (from the existing 25%)

Negatives

• Increase in service tax to 14% will be taken from pockets of consumers• Litigation against big companies are yet to be resolved. No mention in budget

Automobile Sector

Positives

• Corporate tax – Reduction of corporate tax to 25% will lead to boost in any industry. Automobile industry will also have effect on it.

• 70000 crore to Infrastructure sector, Rs. 75 crore for electric cars production

Negatives

• No focus on alternative sources of energy for automobile or to curb automobile pollution.• Electric cars not a feasible option because most of the electricity is still produced by the use

of fossil fuels. So, net efficiency = 30%*30% = 9% instead of 34% by use of diesel/petrol.• No major initiatives/incentives were proposed to improve sentiment and help boost Auto

sector.

FIIs/FPIs

Distinction between FDIs and FPIs to be done away with

Surcharge rate for foreign non-corporate entities – 10% to 12%

GAAR provisions deferred by two years and are now effective from 1 April 2017

Clarification – taxation of foreign funds whose fund manager is in India

No MAT on most of the FPIs

Mutual Funds

• Increase in surcharge from 10% to 12% &

• Education cess @ 3%

Transfer of units (where held as a capital asset) under a consolidation scheme of a mutual fund not to be regarded as a taxable ‘transfer.

• Consolidation of equity oriented funds• As per SEBI Regulations, 1996

Private Equity & VCsForeign investments allowed in Alternative Investment Funds (‘AIF’)

• Small shareholders holding not more than 5% (together with associate enterprise) and not having any right of management and control • Offshore restructuring

Exemptions for:

50% threshold of the fair value – situs of overseas asset in India

Applicable if assets exceed INR 10 crores

Domestic AIFs

• Tax ‘pass-through’ status provided for all Category-I and Category-II of AIFs (‘Investment funds') governed by SEBI

• Tax ‘pass-through’ also extended to LLPs and body corporate

InsurancePradhan Mantri Suraksha Bima Yojana

Pradhan Mantri Jeevan Jyoti Bima Yojana

Atal Pension Yojana

Deduction limit for any amount paid under an annuity plan of an insurance company, increased from INR 100,000 to INR 150,000

Deduction is now allowed for INR 75,000 in place of INR 50,000 - maintenance of a disabled dependent

The recipients of any proceeds under non-qualifying life insurance policies can now furnish a self-declaration to the life insurance company for non-deduction of tax

Entertainment & Media

Target GDP growth 8-8.5% advertising industry

GST – bring transparency & uniformity in collections

exempting film exhibition industry from service tax

Reduction in customs duty on import of digital cameras and its accessories

Manufacturing

Make in India Skill India

A growth oriented budget that encourages investment generation and job creation in the country

Infrastructure development stimulate growth and manufacturing sector

MAT rate could have been reduced more for the manufacturing sector.

The Big Highlight

Acceptance of micro-economic strategic recommendation that very sharp increases in public expenditure should be the order of the day

Individual taxpayer can get benefits up to Rs. 4,44,200

Net impact of tax proposals Rs. 15,068 crore

GST to be put in place by April 1, 2016

Sensex Fluctuation

Lot of volatility in the stock markets

30-share BSE – up 0.48% 141.38 points

50-share Nifty – up 0.65% 57.25 points

Rose early - bright picture of India's prospects• Cut the corporate tax to 25 percent from 30 percent• Delay in tax-avoidance rules for foreign investors by two

years.Fell later - pace of cutting the country's fiscal deficit would be slowed

Prices climbed up -  

ITC sinks 9% - Major impact of budget

Social Media

Although it was not really the Big Bang budget that many hoped for, he managed to get more bouquets than brickbats for showering benefits on senior citizens (through a noteworthy corpus fund), on aam aadmi (increase in deductions on tax savings) as well as industry (a tax cut of five per cent)

Budget - Trending• Will help ease in doing business• Not much for common man

"The announcement that the much awaited GST will be introduced on 1st April 2016, will definitely rejuvenate the industry," Sachin Menon, COO - Tax & Head of Indirect Tax, KPMG India told Financial Express.

Thank You

Om Sarve Bhavantu SukhinahSarve Santu Nir-Aamayaah Sarve Bhadraanni Pashyantu Maa Kashcid-Duhkha-Bhaag-Bhavet Om Shaantih Shaantih Shaantih