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Budget 2014: Highlights

10 July, 2014

Macro Picture

Committed to achieve fiscal deficit target of 4.1 per cent for FY15; and expects this to reduce to 3.6 per cent in FY16 and 3 per cent in FY17.

Non-plan expenditure of Rs 12,19,892 crore with additional provision for fertiliser subsidy and capital expenditure for armed forces.

Plan expenditure pegged at Rs 5,75,000 crore, an increase of 26.9 per cent over actuals of 2013-14.

Total expenditure pegged at Rs 17,94,892 crore.

Gross tax receipts of Rs 13,64,524 crore estimated.

Tax Proposals

Personal income-tax exemption limit raised by Rs 50,000 from Rs 2 lakh to Rs 2.5 lakh in the case of individual taxpayers, below the age of 60 years.

Exemption limit raised from Rs 2.5 lakh to Rs 3 lakh in the case of senior citizens.

No change in the rate of surcharge either for the corporates or the individuals, HUFs, firms, etc and the education cess to continue at 3 per cent.

Investment limit under section 80C of the Income-tax Act raised from Rs 1 lakh to Rs 1.5 lakh.

Deduction limit on account of interest on loan in respect of self occupied house property raised from Rs 1.5 lakh to Rs 2 lakh.

Investment allowance at the rate of 15 per cent to a manufacturing company that invests more than Rs 25 crore in any year in new plant and machinery.

Investment linked deduction extended to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semi-conductor wafer fabrication manufacturing units.

10-year tax holiday extended to the undertakings which begin generation, distribution and transmission of power by March 31, 2017.

Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains.

Concessional rate of 15 per cent on foreign dividends without any sunset date to be continued.

The eligible date of borrowing in foreign currency extended from June 30, 2015 to June 30, 2017 for a concessional tax rate of 5 per cent on interest payments.

Tax incentive extended to all types of bonds instead of only infrastructure bonds.

Introduction of range concept for determination of arm’s length price in transfer pricing regulations.

To remove tax arbitrage, rate of tax on long term capital gains increased from 10 per cent to 20 per cent on transfer of units of mutual funds, other than equity oriented funds.

Income and dividend distribution tax to be levied on gross amount instead of amount paid net of taxes.

Net effect of the direct tax proposals to result in revenue loss of Rs 22,200 crore

To encourage new investment and capacity addition in the chemicals and petrochemicals sector, basic customs duty reduced on certain items.

Imposition of basic customs duty on certain items falling outside the purview of IT agreement, exemption from SAD on inputs/ components for PC manufacturing, imposition of education cess on imported electronic products for parity, etc.

Colour picture tubes exempted from basic customs duty to make cathode ray TVs cheaper and more affordable to weaker sections.

To encourage production of LCD and LED TVs below 19 inches in India, basic customs duty on LCD and LED TV panels of below 19 inches reduced from 10 per cent to Nil.

To give an impetus to the stainless steel industry, basic customs duty on imported flat-rolled products of stainless steel increased from 5 per cent to 7.5 per cent.

Concessional basic customs duty of 5 per cent extended to machinery and equipment required for setting up of a project for solar energy production.

Reduction in basic customs duty from 10 per cent to 5 per cent on forged steel rings used in the manufacture of bearings of wind operated electricity generators.

Duty free entitlement for import of trimmings, embellishments and other specified items increased from 3 per cent to 5 per cent of the value of their export, for readymade garments

For passenger facilitation, free baggage allowance increased from Rs 35,000 to Rs 45,000

To incentivise expansion of processing capacity, reduction in excise duty on specified food processing and packaging machinery from 10 per cent to 6 per cent.

Reduction in the excise duty from 12 per cent to 6 per cent on footwear of retail price exceeding Rs 500 per pair but not exceeding Rs 1,000 per pair.

Withdraw concessional excise duty (2 per cent without Cenvat benefit and 6 per cent with Cenvat benefit) on smart cards and a uniform excise duty at 12 per cent.

Specific rates of excise duty increased on cigarettes in the range of 11 per cent to 72 per cent.

Excise duty increased from 12 per cent to 16 per cent on pan masala, from 50 per cent to 55 per cent on unmanufactured tobacco and from 60 per cent to 70 per cent on gutkha and chewing tobacco.

Levy of an additional duty of excise at 5 per cent on aerated waters containing added sugar.

Online and mobile ads brought under the ambit of service tax though sale of space for ads in print media remains excluded from service tax.

Services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants brought under service tax.

Services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India to be taken out of the tax net and Cenvat credit for services of rent-a-cab and tour operators to be allowed to promote tourism.

Tax proposals on the indirect taxes side are estimated to yield Rs 7,525 crore.

Administrative & economy initiatives

Employment exchanges to be transformed into career centres; sum of Rs 100 crore provided.

To constitute an expenditure management commission to look into various aspects of expenditure reforms.

Fresh cases arising out of retrospective tax cases to be scrutinised by high level panel.

To promote FDI selectively in sector; FDI in defence and insurance to be increased to 49 per cent from 26 per cent, with full Indian management and control through the FIPB route.

Greater autonomy for banks proposed; capital of banks to be raised by increasing the shareholding of the people in a phased manner.

Incentives for Real Estate Investment Trusts (REITS); complete pass through for the purpose of taxation.

A modified REITS type structure for infrastructure projects as the Infrastructure Investment Trusts (INVITS).

Infrastructure

An institution to provide support to mainstreaming PPPs to be set up with a corpus of Rs 500 crore.

To allocate Rs 11,635 crore for the development of Outer Harbour Project in Tuticorin for phase I.

To develop SEZs in Kandla and JNPT.

To announce comprehensive policy to promote Indian ship building industry.

Scheme for development of new airports in Tier I and Tier II cities to be launched.

An investment of an amount of Rs 37,880 crore in NHAI and state roads is proposed.

Target of national highway construction of 8,500 km in the current financial year.

Work on select expressways in parallel to the development of the industrial corridors will be initiated.

Rs 100 crore to be allocated for a new scheme “Ultra-Modern Super Critical Coal Based Thermal Power Technology”

Rs 500 crore to be allocated for Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, Andhra Pradesh and Ladakh.

Rs 400 crore allocation for a scheme for solar power driven agricultural pump sets and water pumping stations.

To allocate Rs 100 crore for the development of 1 MW solar parks on the banks of canals.

A Green Energy Corridor Project is being implemented to facilitate evacuation of renewable energy across the country.

Education

A School Assessment Programme is being initiated at a cost of Rs 30 crore.

Allocation of Rs 100 crore to set up virtual classrooms as Communication Linked Interface for Cultivating Knowledge (CLICK) and online courses.

To allocate Rs 500 crore for setting up 5 more IITs in the Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala; also 5 IIMs to be set up in Himachal Pradesh, Punjab, Bihar, Odisha and Rajasthan.

To simplify norms to facilitate education loans for higher studies.

IT/ IT and broadcasting

To launch pan India programme “Digital India” with an outlay of Rs 500 crore.

To set up National Centre for Excellence in Animation, Gaming and Special Effect; also Film & Television Institute, Pune and Satyajit Ray Film & Television Institute, Kolkata are proposed to be accorded status of Institutes of national importance.

Rs 100 crore is provided for Kisan TV, to disseminate real time information to the farmers on issues such as new farming techniques, water conservation, organic farming, etc.

Urban development

To allocate Rs 7,060 crore for the project of developing “One hundred smart cities” in FY15.

500 urban habitations to be provided support for renewal of infrastructure and services in next 10 years through PPPs.

To allocate Rs 100 crore metro projects in Lucknow and Ahmedabad.

A sum of Rs 4,000 crore for NHB from the priority sector lending shortfall with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.

Slum development to be included in the list of Corporate Social Responsibility (CSR) activities to encourage the private sector to contribute more.

Agriculture

To allocate Rs 100 crore for “Agri-tech Infrastructure Fund”.

To mitigate the risk of price volatility in the agriculture produce, a sum of Rs 500 crore to be allocated for establishing a “Price Stabilisation Fund”.

Corpus of Rural Infrastructure Development Fund (RIDF) raised by an additional Rs 5000 crore from the target given in the Interim Budget to Rs 25,000 crore.

To allocate Rs 5,000 crore for the Warehouse Infrastructure Fund.

To set up “Long Term Rural Credit Fund” for providing refinance support to Cooperative Banks and Regional Rural Banks with an initial corpus of Rs 5,000 crore.

To allocate Rs 50,000 crore for Short Term Cooperative Rural Credit.

Industry

To allocate Rs 100 crore for setting up a National Industrial Corridor Authority.

Master planning of three new smart cities in the Chennai-Bengaluru Industrial Corridor region—

viz., in Tamil Nadu, Andhra Pradesh and Karnataka—to be completed.

Perspective plan for the Bangalore Mumbai Economic Corridor (BMEC) and Vizag-Chennai Corridor to be completed with the provision for 20 new industrial clusters.

Development of industrial corridors with emphasis on smart cities linked to transport connectivity to spur growth in manufacturing and urbanisation will be accelerated.

Definition of MSME to be reviewed to provide for a higher capital ceiling.

Programme to facilitate forward and backward linkages with multiple value chain of manufacturing and service delivery to be put in place.

Financial Sector

Introduction of uniform KYC norms and inter-usability of the KYC records across the entire financial sector; one single operating demat account and uniform tax treatment for pension fund and mutual fund linked retirement plan.

Differentiated banks serving niche interests, local area banks, payment banks etc. are contemplated to meet credit and remittance needs of small businesses, unorganised sector, low income households, farmers and migrant work force.

To set up six new Debt Recovery Tribunals.

For venture capital in the MSME sector, a Rs 10,000 crore fund of fund to act as a catalyst to attract private capital by way of providing equity, quasi equity, soft loans and other risk capital for startups with suitable tax incentives to participating private funds to be established.

Others

Initial sum of Rs 100 crore to be provided for “Start Up Village Entrepreneurship Programme” for encouraging rural youth to take up local entrepreneurship programmes.

Rs 8,000 crore to be allocated to National Housing Bank to support rural housing.

New programme “Neeranchal” to give impetus to watershed development in the country with an initial outlay of Rs 2,142 crore.

To establish Technology Centre Network with a corpus of Rs 200 crore.

A nationwide “District-level Incubation and Accelerator Programme” to be taken up for incubation of new ideas and necessary support for accelerating entrepreneurship.

(Edited by Joby Puthuparampil Johnson)


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Budget 2014: Highlights

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