New Delhi: The Union Budget 2014 on Thursday doled out sops to income tax payers by raising the threshold exemption limit from Rs2 lakh to Rs2.5 lakh and investments under Section 80C by Rs50,000 to Rs 1.5 lakh while seeking to revive growth, manufacturing and investor confidence.
In a bid to encourage savings, the budget raised the deduction limit on interest on housing loan for self-occupied property from Rs1.5 lakh to Rs2 lakh and raised the exemption limit in the case of senior citizens from Rs2.5 lakh to Rs3 lakh.
However, there is no change in rate of surcharge either for corporates or individuals and the education cess of 3% will also continue. Baggage allowance for passengers returning from abroad has been raised from from Rs35,000 to Rs45,000.
To enhance functioning of income tax department as facilitators, 60 more Ayaykar Seva Kendras will be opened to promote excellence in service delivery.
A special small savings instrument to cater to the requirement of education and marriage of the girl child will be introduced. A National Savings Certificate with insurance cover will also be launched to provide additional benefits for small savers.
In the public provident fund (PPF) scheme, annual ceiling will be enhanced to Rs 1.5 lakh per annum from Rs 1 lakh at present.
The Union Budget makes cigarettes, tobacco, pan masala, gutkha and cold drinks costlier by raising excise duties while CRT TVs used by poor, LCD and LED TV panels of less than 19-inches will be cheaper through cuts in customs duties.
Stable tax regime
Assuaging sentiments of foreign investors deterred by the change brought in 2012, Jaitley announced that all fresh cases arising out of retrospective amendments of 2012 in respect of indirect transfers will be scrutinized by a high-level committee to be constituted by the CBDT before any action is initiated.
"I hope the investor community both within India and abroad will repose confidence on our stated position and participate in the Indian growth story with renewed vigour," he said, offering a stable and predictable tax regime.
In post-budget comments, the minister said there will be no fresh liability but also ruled out refunding taxes collected over the last 30 or 40 years.
He also said the government will revive the revised Direct Taxes Code (DTC) taking into account the comments of stakeholders. Direct tax proposals in the budget involve a sacrifice of Rs22,200 crore while indirect tax proposals will yield a revenue of Rs7,525 crore.
The service tax net has been widened by inclusion of radio cabs and online ads to mop up additional revenue by pruning the negative list.
FDI in defence, insurance
The finance minister said that the government will promote foreign direct investment (FDI) by raising the cap to 49% in defence and insurance with Indian management and control.
The Budget raises defence spending by 12.5% to Rs2.29 lakh crore.
In defence allocation, Rs1,000 crore has been set apart for implementing one-rank-one-pension policy. Capital outlay for defence has been raised by Rs5,000 crore over the amount provided in the interim budget.
The finance minister also announced setting up a war memorial, war museum and a national police memorial. For modernisation of state police forces, Rs3,000 crore has been allocated.
Expenditure
Non-plan expenditure for the current year has been estimated at Rs12,19,892 crore with additional amount for fertilizer subsidy and capital expenditure for armed forces.
The total expenditure estimates stand at Rs17,94,892 crore. Gross tax receipts will be Rs13,64,524 crore, of which Centre's share will Rs9,77,258 crore.
Non-tax revenues for current financial year will be Rs 2,12,505 crore and capital receipts other than borrowings will be Rs73,952 crore.
The government will constitute an Expenditure Management Commission to look into every aspect of expenditure reform. It will overhaul the subsidy regime while providing full protection to the marginalised.
Fiscal deficit
The Union Budget pegs the fiscal deficit for the current fiscal at 4.1% of the GDP and 3.6% and 3% in 2015-16 and 2016-17 respectively.
In an apparent reference to the previous government, Jaitley said slow decision-making had resulted in a loss of opportunity and two years of sub-5% growth in the economy has resulted in challenging situation. He said government intends to usher in a policy regime that would bring the desired growth, lower inflation, sustained level of external sector balance and prudent policy stance.
Manufacturing, infrastructure and employment
The finance minister said the present situation presents a challenge of slow growth in manufacturing sector, in infrastructure and also the need to introduce fiscal prudence. The tax to GDP ratio must be improved and non-tax revenue increased, he said while pruning the negative list for levy of service tax.
"India today needs a boost for job creation. Our manufacturing sector in particular needs a push for job creation," he said.
Jaitley further said growth in infrastructure and construction sectors is necessary to revive the economy and generate jobs for millions of young boys and girls.
Manufacturing sector is of paramount importance for the growth of our economy and this sector has multiplier effect on creation of jobs and announced various incentives to facilitate investments in the sector, Jaitley added.
Considering the need to incentivise smaller entrepreneurs, the budget provides investment allowance at the rate of 15% to a manufacturing company that invests more than Rs25 crore in a year in plant and machinery for three years. Jaitely also proposed to extend the investment linked deduction to new sectors namely slurry pipelines for transportation of iron ore.
PPP initiatives
The budget contained a slew of measures to fast-track projects mostly in private-public partnerships (PPP), which finds renewed focus in the minister's speech.
It also announced proposal for investment of Rs38,000 crore for fast-tracking highways to augment the country's arterial network.
The real estate sector and infrastructure have got a boost in the budget which has proposed tax incentives for new investment instruments—Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (InvITs)—to help long term funds from foreign and domestic investors.
Jaitely said the government would like to introduce the Goods and Services Tax (GST) to streamline tax administration, avoid harassment of business and ensure higher revenue collection.
The concessional tax rate of 15 per cent on dividends received by Indian companies from foreign subsidiaries is being continued because it has resulted in enhanced repatriation of funds. There is no sunset date to ensure stability of policy.
Banking
The Union Budget proposes to infuse Rs2.40 lakh crore in PSU banks in which citizens will be allowed direct shareholding. It sets a target of Rs8 lakh crore for agriculture credit during the current year and will continue the interest subvention scheme and raise the corpus of rural infrastructure development fund (RIDF) to Rs25,000 crore.
Food security
Towards food security, the government commits itself to restructuring Food Corp of India (FCI), reducing transportation and distribution losses and efficacy of PDS.
Wheat and rice will be provided at reasonable prices to weaker sections.
Power sector
Taking note of the fact that power supply continues to a major area of concern in the country, Union Budget proposes to extend the 10-year tax holiday to undertakings which begin generation, transmission and distribution by 31 March 2017, instead of annual extensions.
Ganga clean up
An integrated Ganga conservation mission, called "Namami Gange" is proposed to be set up with an outlay of Rs2,037 crore for this year. An NRI fund for Ganga will be set up which will finance special projects. Rs100 crore have been set aside for ghat development and beautification of river front at Kedarnath, Varanasi, Haridwar, Kanpur, Allahabad, Patna and Delhi.
A 1,620-km Ganga inland waterway development from Haridwar to Haldia is planned to be completed in six years at a cost of Rs 4,200 crore, Jaitley said.
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