M

R
O
F
R
E
P
Y
E
L
T
I
A
J
,
I
D
MO

BUDGET 2015
GET BUDGET SMART
PRESENTED BY

OVERVIEW
BUDGET SNAPSHOT

After a breathless build-up of hopes, nervousness and excitement on the part of large investors
and common man alike, the big day in the life of Modi sarkaar was here today.
Finance Minister Arun Jaitley presented the Union Budget in Parliament, one that experts largely
said may not qualify as big bang. But it clearly contained several key provisions that would go a
long way in boosting infrastructure and growth, bringing in investments and making doing
business easier.

There were many things for the poor and middle class as well: greater tax savings as well as
resolute push to providing more access to credit.
The markets were on a seesaw ride but closed higher, though the full market reaction will be
known on Monday when FIIs (who were largely absent today) return.

MARKET
SNAPSHOT NIFTY

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

GAINERS
Axis Bank

Rs 612.60

8.01%

IndusInd Bank

Rs 916.55

6.02%

Kotak Mahindra

Rs 1,397.05

4.43%

Sun Pharma

Rs 911.00

3.65%

ICICI Bank

Rs 346.15

3.25%

ITC

Rs 361.35

8.22%

BHEL

Rs 262.15

3.23%

NMDC

Rs 139.10

2.73%

NTPC

Rs 155.90

1.61%

Hindalco

Rs 152.85

1.48%

LOSERS

MARKET
SNAPSHOT SENSEX

GAINERS
Axis Bank

Rs 613.40

8.15%

Sun Pharma

Rs 911.00

3.62%

ICICI Bank

Rs 345.55

3.15%

Tata Motors

Rs 593.65

3.15%

Dr Reddys Labs

Rs 3,367.00

2.82%

ITC

Rs 361.25

8.27%

BHEL

Rs 262.15

3.21%

NTPC

Rs 155.75

1.64%

Hindalco

Rs 153.05

1.39%

HDFC

Rs 1,336.15

0.81%

LOSERS

20 KEY HIGHLIGHTS FROM

THE UNION BUDGET 2015-16.
1.

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

The most ambitious tax reform in decades will eliminate most state and central taxes (service tax,
excise duties, VAT, etc) and create a national market.

2.

JAM trinity:

The combination of the Jan Dhan Yojana (free bank accounts for the poor), Aadhaar and mobile is
slated to boost direct transfer of subsidies, with beneficiaries slated to be increased from 1 crore to
10.3 crore. This will create a powerful way to deal with leakages, non-delivery and corruption and help
target subsidies effectively towards those who deserve it.

3.

Fiscal deficit maintained at 4.1 percent:

Targets for next few years relaxed (3.9 percent for FY16, 3.5 for FY17 and 3 for FY18).
Going easy on the deficit will allow government to pour more money into creating infrastructure.

4.

Sharp increase in outlays of roads and railways:

More infrastructure to lead to more growth.

5.

Disinvestment target at Rs 69,500 crore:

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

20 KEY HIGHLIGHTS FROM

THE UNION BUDGET 2015-16.
6.

Rural push:

Rs 25,000 crore in 2015-16 to the corpus of Rural Infrastructure Development Fund (RIDF) set up in
NABARD; Rs 15,000 crore for Long Term Rural Credit Fund; Rs 45,000 crore for Short Term
Co-operative Rural Credit Refinance Fund; and Rs 15,000 crore for Short Term RRB Refinance Fund.

7.

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

Rs. 20,000 crores, and credit guarantee corpus of Rs. 3,000 crores to be created:
The bank will help boost lending to small businesses and traders.

8.

Comprehensive bankruptcy code of global standards to be brought in fiscal

2015-16 towards ease of doing business:

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

9.

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

A formal interest-rate setting body to institutionalize the monetary-policy process. Stated inflation
targets will provide greater autonomy to central bank, help achieve price stability.

10.

Forward Markets Commission to be merged with SEBI:

Previously controlled by the government, the merger of the commodity market regulator with the
independent and powerful SEBI will help reduce possibility of scams such as NSEL.

20 KEY HIGHLIGHTS FROM

THE UNION BUDGET 2015-16.
11.

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

To give a boost to tourism.

12.

Reforms in education:

IIT in Karnataka. Indian School of Mines, Dhanbad to be upgraded to a full-fledged IIT. New AIIMS to
be set up in J&K, Punjab, Tamil Nadu, Himachal Pradesh and Assam. A post-graduate institute of
Horticulture Research & Education to be set up in Amritsar.
More institutes = greater education = more success.

13.

Stringent measures to be brought in to curb black money:

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

14.

Tax Deductions:

Limit of deduction of health insurance premium increased from Rs 15000 to Rs 25000. Limit for
senior citizens increased from Rs 20000 to Rs 30000. Will increase insurance coverage across
country. More taxes saved mean more consumption.

15.

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

A necessary step as the country transitions to GST next year, will help augment government revenues.
But may take a toll on near-term consumption.

20 KEY HIGHLIGHTS FROM

THE UNION BUDGET 2015-16.
16.

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

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

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

17.

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

Low-yield tax (Rs 1000 crore last year) made life tougher for officials in finding evaders. Surcharge on
those earning over Rs 1 crore will lead to stricter compliance while yielding higher amount (Rs 10,000
crore).

18.

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

four years starting FY17; exemptions to go:

Lower tax rate to bring India in line with peers. Elimination of industry-specific exemptions to do away
with element of discretion, reduce lobbying and corruption.

19.

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

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

20. Basic custom duty on 22 items reduced to minimise the impact of duty
inversion:
Inverted duty structure (imported raw materials having higher duty than finished products) was rendering local manufacturers noncompetitive.

BUDGET
ARTICLES
CORPORATE TAX TO FALL TO 25% IN 4 YRS
Exemptions to go In
what would come as a
boost to India Inc, Finance
Minister Arun Jaitley said
the government would cut
the base corporate tax rate
from 30 percent to 25
percent over the course of
the next four years but he
added that over the same
time, various exemptions
granted to corporates will
be phased out.

In what would come as a boost to India Inc, Finance Minister Arun Jaitley said the government would
cut the base corporate tax rate from 30 percent to 25 percent over the course of the next four years but
he added that over the same time, various exemptions granted to corporates will be phased out. The
move, he said, would facilitate a tax rate comparable to other countries, the finance minister said, while
adding that elimination of exemptions would bring down the element of discretion or lobbying. In a
further bid to India Inc, the FM further said that customs duty would be reduced on 22 items, a move
that would correct some of the inverted duty structures that exist in the economy. For overseas
investors, the FM had also said the controversial general anti-avoidance rules (GAAR) would be deferred
by two years.

BUDGET
ARTICLES
JAITLEY PROPOSES TO HIKE SERVICE TAX RATE TO 14%
The government was expected to hike service tax rate this time. A two percent service tax rate hike
could have yielded over Rs 30,000 crore to the cash-starved government. A service tax rate change
would have needed amendment in the Finance Act. Finance minister Arun Jaitley has proposed to hike
service tax rate to 14 percent from 12.36 percent to be effective by April 1, 2015. The government was
expected to hike service tax rate this time. A two percent service tax rate hike could have yielded over
Rs 30,000 crore to the cash-starved government. A service tax rate change would have needed
amendment in the Finance Act. He has also proposed to exempt service tax extended to pre-cold
storage warehousing, while also proposing to withdraw service tax exemption on mutual funds agents
to AMCs. Another proposal is to extend concessional withholding tax of 5 percent on FPI debt
investments by 2 years. This is a positive for FDI in India too with government proposing to do away with
the distinction between the two. The industry also felt that the government may prune exemptions on
service tax to broaden the tax base and tweak the negative list and mega exemption list on service tax.
The government had tweaked service tax exemptions in the negative list in the July Budget as well. As
of now, 39 services are completely exempt from service tax. The industry was also hoping for clarity on
certain areas such as taxability of liquidated damages/penalties recovered under contractual
arrangements (e.g. breach of contractual terms), activities undertaken by employers for its employees
(e.g. provision of amenities such as food, cab, etc.), taxability of food and beverage supply by way of
take-away/ off the counter/ home delivery. Highlights of Budget 2014 Tax proposals on the indirect taxes
side are estimated to yield Rs 7525 crore. Indian customs single window project to facilitate trade, to be
implemented. To broaden the tax base in Service Tax, sale of space or time for advertisements in
broadcast media, extended to cover such sales on other segments like online and mobile advertising.
Sale of space for advertisements in
print media however wouldremain
excluded from service tax. Service
provided by radio-taxis brought
under

service

tax.

Service

tax

exempted on loading, unloading,

storage,

warehousing

and

transportation of cotton, whether

ginned or baled.

BUDGET
ARTICLES
EXTRA BENEFIT OF RS. 50,000 ON NPS,
HOW BENEFICIAL IT IS?
Individual tax payers can
reduce their tax liability by
making their employers
contribute more in new
pension scheme as the limit
has been enhanced to Rs 1.5
lakh as compared to Rs 1 lakh
previous year.

While planning your money think long term, says the finance minister. In the union budget announced
today, finance minister Arun Jaitley has chosen to hike present limit of Rs 1 lakh under section 80CCD of
Income Tax Act to Rs 1.5 lakh per year. The gift offers dual benefits to taxpayers first they can save
income tax and second they can ensure regular cash flow in the golden years of the life in the form of
monthly pension. But how easy or difficult it is? Section 80CCD allows salaried individuals to enjoy tax
shelter in addition to Rs 1.5 lakh investment limit introduced under section 80C, if their employers
contribute to the new pension scheme. The contribution by the employer should be limited to 10% of the
salary paid to the employee. This means that you have to cajole your employer to contribute more to
NPS. Salaried individuals can themselves invest in NPS and claim tax deduction under section 80C.
However self-employed individuals do benefit in this as long as the overall investmet limit of Rs 1.5 lakh
is adhered to. In case of self-employed individuals they can contribute to NPS under section 80CCD
provided the money so invested in NPS does not exceed more than 10% of their total gross income,
under various heads before claiming any deductions. Last year in his maiden budget, finance minister
opted to hike the investment limit under section 80C by Rs 50000 to Rs 1.5 lakh. This was positively
received by individual tax payers. This year it was widely expected that the finance minister will continue
with his stance and further enhance it. Reserve Bank of India Governor, Raghuram Rajan too has called
for an increase in tax saving limit. The expectation materialized. On the backdrop of falling inflation,
rising stock markets and green shoots in job market, finance minister offered one more reason to rejoice
to individual tax payers.

BUDGET
ARTICLES
FY16 SUBSIDY DIPS 9.5% YOY
TO RS. 2.27L CR; PETROLEUM HALVES
The total major subsidies in Finance Minister Arun Jaitleys Union Budget 2015-16 fell 9.5 percent
compared to the previous year, from Rs 2.51 lakh crore to Rs 2.27 lakh crore. Within the major items,
fertilizer subsidies stood at Rs 72,968 crore, compared to Rs 72,970 crore in the last year. Subsidies for
food, disturbed through the public distribution system or ration shops, are forecast to increase from Rs
1.15 lakh crore last year. While that on fuel fell from Rs 63,000 crore this year to Rs 30,000 crore in the
next , helped by the steep fall in crude prices as well as the governments decision last year to bring
diesel to market prices. With both automotive fuels petrol and diesel out of the subsidy net, only
domestic fuels LPG and kerosene continue to remain subsidized. With fertilizer subsidies remaining at
the same level and those for food increase, the dip in overall subsidy figure has therefore largely been
driven by the fall in oil prices. But the FM did say that the government was committed to rationalizing
subsidies and that meant that while it did not intend to cut subsidies per se, there was a need to cut
subsidy leakages. Towards that end, he said the government would expand its direct benefit transfer
(DBT) scheme, in which subsidies such as on LPG cylinder will be directly transferred into consumers
bank accounts. The government provides asks state-run firm to sell domestic fuels (LPG , kerosene),
fertilizer (mainly urea) and food (through the public distribution scheme) below cost and reimburses
them later. In the last budget, the FM had appointed an Expenditure Management Commission led by
former RBI governor Bimal Jalan, which was tasked to look for ways to streamline the governments
expenses, including in the field of subsidies. The panel submitted an interim report in January this year,
in which it reportedly suggested ways to streamline expenses better cash management, greater use of
information technology and improved financial reporting systems.

BUDGET
ARTICLES
SUPER RICH PAY MORE AND NO RESPITE
FOR INDIVIDUALS IN TAX
Finance Minister has preferred to leave income tax exemption
limit unchanged to Rs 2.5 lakh. Last year it was hiked by Rs 50,000.
Though corporate income tax rate has been reduced to 25%
from 30%, individuals saw no reduction in income tax rate. The tax
exemption limit too has been left unchanged. Rather super-rich
individuals, individuals having an income of Rs 1 core or more per
year, have to pay a surcharge of 2% on their income. It was widely
demanded that the finance minister should hike the basic income
tax exemption limit in this union budget. The demand was based on the backdrop of high inflation seen
in Indian economy in recent years. Finance minister too is seen as a supporter of high basic exemption
limit, as he was heard talking about an exemption limit of Rs 5 lakh in April 2014 when he was
campaigning for Lok Sabha elections. His logic was simple - higher tax exemption limit will lead to more
money in the hands of the individuals. As individuals spend more, government revenues grow on
account of increase in value added taxes and excise duties. More demand for goods also pushes
economic growth. Of course individual tax payers had their own reasons behind the demand for higher
tax exemption limit. Salaried individuals do not have shelter in the form of standard deduction, which
was done away since assessment year 2006-2007. The trouble for the salaried individuals further
increased due to double digit inflation for prolonged period of time. This has reduced purchasing power
in the hands of individual tax payers. In such a scenario higher tax exemption limit made more sense.
Finance Minister Arun Jaitley took maiden step in that direction last year, when he hiked basic tax
exemption limit by Rs 50000 to Rs 250,000 per year. However the hot seat of finance minister has made
finance minister change his mind from a supporter to hiking tax exemption limit to an ardent defender
of containing fiscal deficit. One must remember that a hike of Rs 50000 in basic tax exemption limit
costs government Rs 15,000 crore in revenues. Only saving grace for individual tax-payers is the 100%
increase in travel allowance to Rs 1600 per month. However in absolute terms it has very little impact on
ones finances. Though this status quo on tax exemption limit may help government to adhere to fiscal
discipline, individual tax payers now have to wait for one more year for some relief on income tax front.

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

Finance Minister Arun Jaitley stepped up the war on black money in his Budget speech, saying that
the problems of poverty and inequity could not be eliminated unless generation of black money and its
concealment was dealt with effectively and forcefully. Following are the proposals made in the Budget
to check black money in the economy: *Evasion of tax in relation to foreign assets to have a punishment
of rigorous imprisonment upto 10 years, be non-compoundable, have a penalty rate of 300% and the
offender will not be permitted to approach the Settlement Commission. * Non-filing of return/filing of
return with inadequate disclosures to have a punishment of rigorous imprisonment upto 7 years.
*Undisclosed income from any foreign assets to be taxable at the maximum marginal rate. *Mandatory
filing of return in respect of foreign asset. *Entities, banks, financial institutions including individuals all
liable for prosecutionand penalty. *Concealment of income/evasion of income in relation to a foreign
asset to bemade a predicate offence under PML Act, 2002. *PML Act, 2002 and FEMA to be amended
to enable administration of new Act on black money. *Benami Transactions (Prohibition) Bill to curb
domestic black money to be introduced in the current session of Parliament.

POWER SECTOR
ANNOUNCEMENT :
Electrication of the remaining 20,000 villages including o-grid Solar Power- by 2020
5 new Ultra Mega Power Projects, each of 4000 MW, in the Plug-and-Play mode

IMPACT :
Positive
Electrication to boost infrastructure projects

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

CONSUMER SECTOR
ANNOUNCEMENT :
Excise duty on footwear having retail price of more than 1000 per pair
has been reduced by 6 per cent.

IMPACT :
To have a positive impact and help garner a larger share of the global footwear industry where India is
the second largest global producer, but accounting for only 13% of global footwear production. More
importantly, this will also help boost the domestic retail demand as nearly 95% of our production goes
to meet own domestic demand.

AUTO SECTOR
ANNOUNCEMENT :
Increase in customs duty on commercial vehicles

IMPACT :
Policy encourages domestic production and players like Tata and Ashok Leyland are
expected to benet.

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

IMPACT :
Though expected to encourage green vehicles it should have been for a longer period to have a
deeper impact

E-COMMERCE SECTOR
ANNOUNCEMENT :
Service tax imposed from 1 March 2015 on taxi service aggregator companies

IMPACT :
Negative. Radio taxi operators and taxi aggregators are now taxed at par, creating a level playing eld.
However, unlike Radio taxi operators, taxi aggregator companies who do not have a physical presence
in India would cause their representatives in India to be the person liable to pay service tax.

MANUFACTURING SECTOR
ANNOUNCEMENT :
a) Basic Custom duty on certain inputs, raw materials, inter mediates and
components in 22 items reduced.

IMPACT :
Makes domestic manufacturing competitive

INSURANCE SECTOR
ANNOUNCEMENT :
Enhanced deduction in respect of health Insurance Premia.

IMPACT :
Positive impact on the insurance industry and also on the individuals, and in particular, very
senior citizens. This would provide better business opportunities to insurance companies
and in particular, health insurance companies. Adequate attention has been given to the
health of the citizens of this country, which go a long way towards life longevity and
increased income for the insurance industry.

MUTUAL FUNDS SECTOR

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

IMPACT :
This is a reform in the right direction as it has been a long time endeavor of SEBI to encourage
Mutual Funds to consolidate dierent schemes of similar features so as to ensure simpler and
fewer schemes. This reform ensures that no capital gain tax is imposed on unit holders who are
impacted on account of the merger or consolidation.

PRIVATE EQUITY SECTOR

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

IMPACT :
Positive for industry, especially for domestic AIFs due to the pass-through status allowed
as well as limited exemption for business connection/permanent establishment exposure
for Foreign PE Funds. Further, allowing overseas investments into domestic AIFs is a game
changer allowing domestic funds to raise capital from LPs from domestic and overseas
investors on an integrated platform in India.

Source - Grant Thornton LLP

BUDGET 2015