Highlights of Budget 2015-16

Amidst high expectations, FM Arun Jaitley presented his first full term budget. Though it lacked big bang reforms, it did aim at kick starting investments along with balancing populism for the poor, middle class and corporate sector. He paved the way to a 8 to 8.5% GDP growth bringing the fiscal deficit down to 3% over next 3 years.

Direct Taxes:

  • Corporate Tax Rate reduced to 25% for over next four years, simultaneously exemptions to corporates to be withdrawn.
  • No change in income tax slabs for Individuals. Exemptions For Individual Tax Players To Continue. Overall tax deduction benefits to individual investors at 4.44 lacs.
  • Wealth Tax abolished. But 2% surcharge on income tax for super rich.
  • To Enact New Law For Black Money. Concealment of foreign income and assets will attract 10 yrs of rigorous imprisonment and penalty of 300%
  • Benami Property Transaction Bill to tackle black money transaction in real estate soon
  • Foreign Exchange Management Act to be ammended suitably to allow for seizure of equivalent assets in India in case of Foreign Assets created using black money.
  • To Tighten Reporting Of Cash transactions. Quoting PAN a must for all purchases above One Lakh.
  • Tax pass through to be allowed in alternative investment funds to boost small firms, startups
  • Proposes to rationalise capital gains tax regime for real estate investment trusts. Rental Income from REITS to have pass through facility.
  • 100% deduction allowed for all contributions in Swachh Bharat Abhiyan [except contribution in CSR].
  • To defer GAAR by 2 years. Retrospecive tax provisions will be avoided.
  • Income Tax On Royalty Fees For Technical Reduced To 10%. Reduced taxes on Technical Services to 10% from 25%
  • Deduction on Health insurance u/s 80D increased from 15000 to 25000. For senior citizens  to 30000. Additional deduction of Rs.50000 u/s 80CCD towards New Pension Scheme. No change in limits u/s 80C.
  • Transport Allowance exemption increased from 800 pm to 1600 pm
  • Domestic Transfer Pricing limit increased from 5crores to 20 crores
  • Introduction of Tax Free Infra Bonds for road, rail and irrigation projects
  • No MAT for FPIs and FIIs. This comes as a big boon for Foreign Investors in Indian Equities market who were being taxed under MAT despite Nil tax on Long Term Capital Gains.

Indirect Taxes:

  • GST roll out by 1st April 2016
  • Service Tax increased to 14%
  • To reduce Custom Duty on 22 items
  • Excise reduced to 6% for footwear above 1k per pair

Key Reforms and other highlights:

  • Merger of Commodity Regulator FMC with SEBI
  • Infrastructure investment push by 70000 crore on public capex expenditure
  • Subsidy rationalisation by cutting leakages through Jan Dhan-Aadhaar-Mobile
  • States get almost 62% of total resources allocation
  • Employee’s contribution to EPF below an income threshold will be optional without reducing employer’s contribution.
  • Contribution to ESI to be made optional against private health insurance
  • Ammendment to RBI Act and constitution of a Monetary Policy Committee
  • Bankruptcy law reform has been identified as a key to ease of doing business. Bring comprehensive Bankruptcy code in 2015-16.
  • Visa on Arrival scheme extended to 150 countries
  • Introduction of Gold Bonds and Indian Gold Coins with Ashoka emblem
  • FM proposes to do away with different types of foreign investment and replace them with composite caps.
  • Proposed a “plug and play” model, where all clearances will be put in place before a project is auctioned. 5 new ulta mega power plants at investment of approx. 1 lac crore in plug and play mode
  • Setting up a Financial Redressal Agency
  • Setting up of Atal Innovation Mission (AIM) to nurture innovation culture, R&D and Scientific Research
  • Setting up of National Skill Mission to consolidate all skill development initiatives
  • Benefits for MSME sector – setting up of Mudhra Bank, electronic bill discounting system and fund for technology startups.

Tushar Agarwal

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