Finance Minister Arun Jaitley’s maiden Union Budget went through without raising too much of a hue and cry from the opposition benches. Though there will be a bit of a disappointment that there was not much for the individual tax payer, FM Jaitley presented a focused budget with incentives for the poor and the industry.
Let’s take a look at some of the salient points from Budget 2015.
Starting off his speech, FM Jaitley highlighted, “We have embraced the states as equal partners in the process of economic growth. The credibility of the Indian economy has been re-established.”
The minister also reiterated the government’s commitment to GST, which he assured would be implemented by April 2016. He also pointed out another program the government has embarked on; namely JAM Trinity.
The estimated GDP for 2015-16 will be between 8 and 8.5 per cent (the best in 5 years), said the FM. Meanwhile, the CAD for the year is expected to be below 1.3% of GDP. Foreign exchange reserves have risen to $340 billion. Investment in Infrastructure will go up by Rs 70,000 crore in 2015-16.
The FM also proposed to create Mudra Bank with corpus of Rs. 20,000 crore for microfinance. "We are banking the unbanked and funding the unfunded," he said. Rs 1,000 crore has also been set aside for establishing a mechanism for techno-financial incubation and facilitation programme.
In terms of taxation, the FM said that some of the main themes of the tax policy would be measures to curb black money, job creation, encourage manufacturing, benefits for middle class tax payers and the promotion of Swach Bharat Abhiyan.
A Direct Tax regime, which is internationally competitive in terms of rates, has been proposed. The FM also said that the government will do away with distinction between FPI and FDI and replace them with a comprehensive type. Fiscal deficit is expected to be around 3.9 per cent of the GDP. The FM also said that progress was being made with the Digital India initiative and states have been given the option of going ahead with digitization and get reimbursed by central government later. FM Jaitley informed that Andhra Pradesh has become the first state to take up this option.
One of the more important decisions was to reduce corporate tax rate from 30 per cent to 25 per cent over a period of 4 years starting next financial year. “Basic rate of corporate tax is 30% but the effective collection is only 23 per cent. We have a high corporate tax regime but we do not get the tax due to excessive exemptions. I propose to reduce corporate tax to 25 per cent over the next 4 years accompanied by elimination of various exemptions,” he said. However, exemption to individual tax payers will continue.
The FM has also proposed to abolish Wealth Tax and replace it with additional 2 per cent surcharge as super rich tax for taxable income of Rs 1 crore. Basic custom duty rate reduced for 22 items.
Other tax changes include; 12.36% general rate of central excise rate including CESS to be rounded to 12.5%. Online excise and service tax registrations will be allowed. Service tax rate is to be raised to a consolidated rate of 14%. Educational CESS and higher educational CESS to be subsumed as a part of GST. These tax measures are expected to help the individual taxpayer get benefits up to Rs. 4,44,200; said the FM.
“We will meet the challenging fiscal target of 4.1 per cent of GDP which we had inherited and I will meet the fiscal deficit of 3 per cent in the next two years,” he said. The net impact of tax proposals is expected to be Rs 15,068 crore.