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Budget 2014 Highlights

Here are the highlights of the budget 2014 presented today. We will follow it up with a more detailed analysis

FISCAL DEFICIT

  • FM Vows to keep fiscal deficit target of 4.1 percent of GDP for 2014/15
  • Fiscal deficit forecast to fall to 3.6 percent of GDP in 2015/16, 3 percent of GDP in 2016/17
  • Finance Minister says: “We cannot spend beyond our means”
  • Tax-to-GDP ratio must be raised, says Jaitley

GROWTH

  • GDP growth in 2014/15 estimated at 5.4-5.9 percent year-on-year
  • Aims for sustained growth of 7-8 percent in the next 3-4 years
  • Nominal GDP growth in 2014/15 expected to be 13.4 percent year-on-year
  • Must usher in policies for higher growth, lower inflation

POLICY REFORMS

  • Raises limit on foreign direct investment in defence sector to 49 percent from 26 percent
  • Raises FDI limit in insurance sector to 49 percent from 26 percent
  • Pledges to provide necessary tax changes to introduce real estate investment trusts and infrastructure investment trusts

Personal Taxes

  • Personal Income-tax exemption limit raised by Rs.50,000/- that is, 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
    • 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 percent to a manufacturing company that invests more than Rs.25 crore in any year in new plant and machinery. The benefit to be available for three years i.e. for investments upto 31.03.2017
  • 10 year tax holiday extended to the undertakings which begin generation, distribution and transmission of power by 31.03.2017
  • Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains.
  • To allow use of multiple year data for comparability analysis under transfer pricing regulations.
  • Income and dividend distribution tax to be levied on gross amount instead of amount paid net of taxes.
  • In case of non deduction of tax on payments, 30% of such payments will be disallowed instead of 100 percent.
  • SERVICE TAX PROPOSALS 
  • 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 would remain excluded from service tax.
  • Service provided by radio-taxis brought under 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.
  • Service tax exempted on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled.
  • 24X7 customs clearance facility extended to 13 more airports in respect of all export goods and to 14 more sea ports in respect of specified import and export goods to facilitate cargo clearance

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