Key Highlights

Macro- Economic

• Steps announced towards a sustained growth of 7-8 percent or above within the next 3-4 years along with macro-economic stabilization.
• The Government is committed to achieve the target of 4.1% of GDP for FY 14-15. Target to reduce it further to 3.6% in FY 15-16 & 3% by FY 16-17.
• Introduction of Goods & Services Tax (GST) to be given thrust.
• Government to promote FDI selectively in sectors.
• Estimated Non-Plan Expenditure of Rs 12.20 lakhs  crore for FY ’15.
• Estimated Plan expenditure of Rs 5.75 lakh crores for FY ’15 – increase of 26.9% over actual of 2013-14.

Investment

• The maximum investment limit in Public Provident Fund (PPF) scheme raised to Rs 1.5 lakh p.a.  from the present limit of Rs 1 lakh p.a.
• Reintroduction of Kissan Vikas Patra (KVP).
• To introduce National Savings Certificate (NSC) with insurance cover.
• To introduce special small saving scheme instrument to cater to the education  and marriage  requirements of girl child.
• To introduce one single operating Demat account.
• Introduction of uniform KYC norms and inter-usability of the KYC records across the entire financial sector.
• The holding period of mutual fund units (other than equity-oriented mutual fund) to be eligible for long term capital gains tax raised to 36 months from the present 12 months.
• Tax rate on long term capital gains on transfer of units of Mutual Funds (other than equity oriented funds) increased to 20% from the present tax rate of 10%.
• Conducive tax regime for Infrastructure Investment Trusts (INVITS) and Real Estate Investment Trusts (REITS) to be set up in accordance with SEBI regulations.
• The Government has notified a minimum pension of Rs 1,000 per month to all   subscriber members of Employee Pension Scheme (EPS).
• The mandatory wage ceiling of subscription to EPS raises from Rs 6,500 to Rs 15,000.
• Employee Provident Fund Organization (EPFO) to launch a Uniform Account Number service for contributing members to facilitate portability of Provident Fund Accounts.
• Income and Dividend Distribution Tax to be levied on gross amount instead of amount paid net of taxes for mutual funds and corporates.
• Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains.
• Concessional withholding tax rate of 5% on interest payments for foreign currency borrowings extended by 2 years to June 30, 2017 from present June 30, 2015. Also, the benefit of concessional withholding tax rate extended to foreign currency borrowings through a l types of long-term bonds and not just restricted to long-term infrastructure bonds.
• Capital of banks to be raised by increasing the shareholding of  the people in a phased manner.
• Employment exchanges to be transformed into career centres. A sum of Rs 100 crore provided.

Industry

• Extension of 10-year tax holiday to undertakings which begin generation, distribution and transmission of power by Mar 31 ‘2017.
• To   boost small scale manufacturing units, an investment allowance of 15% per annum to manufacturing companies that invest more than Rs 25 crore in any year in new plant and machinery. This benefit to be available for 3 years i.e. for investments up to Mar 31, 2017.
• Concessional tax rate of 15% on gross dividends received by Indian companies from specified foreign companies to be continued without any sunset date.
• The composite cap of foreign direct investment (FDI) in Defence sector to be raised to 49% from the existing 26% with full Indian management and control through the foreign investment Promotion Board (FIPB) route.
• The composite cap of FDI in Insurance Sector to be raised to 49% from the present 26% with full Indian management and control through FIPB route.
• Sum of Rs 7,060 crores allocated in the current fiscal for the project of developing 100 smart cities.
• Retrospective legislation to be exercised with extreme caution and judiciousness. All fresh cases arising out of retrospective amendments of 2012 in respect of indirect transfers to be scrutinized by a High Level Committee to be constituted by the Central Board of Direct Taxes (CBDT).

 Taxation – (A) Direct

• Personal Income Tax Exemption Limit raised by Rs 50,000 per annum. For individuals, other than senior citizens, the new tax exemption limit set at Rs 2.5 lakh from the present limit of Rs 2 lakh. For senior citizens, the same has been raised to Rs 3 lakh from present limit of Rs 2.5 lakh.

Subsequently, the new tax slab structure stands as:

• Investment limit eligible for deduction under section 80C raised to   Rs 1.5 lakh from the present limit of Rs 1 lakh.
• Deduction limit on interest on housing loan for self-occupied property raised to Rs 2 lakh from the present limit of Rs 1.5 lakh.
• Proposal to extend additional tax incentives on home loans to encourage people, especially the young, to own houses.

Taxation – (B) Indirect

• Services provided by radio-taxis to be brought under the service tax net.
• Additional duty of excise at 5% to be levied on aerated waters containing sugar (soft drinks).
• Specific rates of excise duty raised on cigarettes in the range of   11% – 72%.
• Excise duty increased on pan masala to 16% from present 12%; on unmanufactured tobacco to 55% from present 50% and on gutkha and chewing tobacco to 70% from present 60%.

Service Tax:

• For safe disposal of medical & clinical wastes, services   provided by common bio medical waste treatment facilities exempted.

• 24X7 customs clearance facility extended to 13 more airports in respect of all export goods & to 14 more sea ports in respect of specified import & export goods to facilitate cargo clearance.

• Customs & Central Excise Acts to be amended to expedite the process of disposals of appeals.

Disclaimer : This write up is for information purposes only and is not an offer to sell or a solicitation to buy any mutual fund units/securities. This information alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. It should be noted that the data, analysis, opinions, views mentioned / expressed in the note are based on the budget proposals presented by the Honourable Finance Minister in the Parliament of India on June 10, 2014 and the said budget proposals may change or may be different at the time the budget is passed by the Parliament and notified by the Government. The information contained in this document is for general purposes only and is not a complete disclosure of every material fact of Indian budget 2014. For a detailed study, please refer to the budget documents available on www.indiabudget.nic.in.