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Overview of the Union Budget, 2014-15

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An overview of the Indian Union Budget 2014-15 by ValueNotes Research - spending; borrowing; subsidies; revenues; direct & indirect tax; and its impact on sectors such as automobiles, BFSI, FMCG, IT, mining, infrastructure, capital goods, oil & gas, real estate, manufacturing, and power

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Overview of the Union Budget, 2014-15

  1. 1. Overview of Union Budget 2014 - 15
  2. 2. 3.8 9.6 8.9 7.4 6 FY'10 FY'11 FY'12 FY'13 FY'14 WPI 8.6 8.9 6.7 4.5 4.7 FY'10 FY'11 FY'12 FY'13 FY'14 GDP Growth (%) © ValueNotes 2014 - For internal use only, reproduction in whole or in part without written permission is prohibited 2 GDP Growth Inflation ( WPI ) Index of Industrial Production (IIP)Trends in Fiscal Deficit Source : Central Statistical Office Source : Reserve Bank of India Source : Reserve Bank of IndiaSource : Economy Survey 2012 – 13 6.5 4.8 5.7 4.9 4.5 FY'10 FY'11 FY'12 FY'13 FY'14 Gross Fiscal Deficit as % of GDP 5.3 8.2 2.9 1.1 -0.7 FY'10 FY'11 FY'12 FY'13 FY'14 Index of Industrial Production Overview: Indian Economy
  3. 3. © ValueNotes 2014 - For internal use only, reproduction in whole or in part without written permission is prohibited 3 Overview: Union Budget 2014 - 2015 • Total budget expenditure is seen at INR 17.95tr in 2014 – 15 • Non- planned expenditure estimated at about INR 12.20tr in 2014 – 15 • India’s 2014 – 15 planned expenditure is seen at INR 5.75tr Spending • Gross market borrowing stands at INR 6tr in 2014-15 • Net borrowings will be INR 4.61tr, after considering repayments of past loans and interests Borrowing • Total payments towards subsidies earmarked at INR 2.51tr in 2014-15 • Petroleum subsidy seen at INR 634.27bn in 2014-15 • Revised food subsidies at INR 1.15tr in 2014-15 • Revised 2014-25 fertilizer subsidy at INR 729.70bn Subsidies • Capital receipts seen at INR 739.5bn in 2014-15 • Non-tax revenues are estimated to rise by a more modest 10% to INR 2.13tr Revenue
  4. 4. © ValueNotes 2014 - For internal use only, reproduction in whole or in part without written permission is prohibited 4 Direct Tax Personal Tax 1) No change in tax rates 2) Income Tax exemption limit raised from INR 2 lacs to INR 2.5 lacs per annum for all tax payers below the age of 60 years and from INR 2.5 lacs to INR 3 lacs per annum for all senior citizens 3) Raised investment cap under section 80C from INR 1 lac to INR 1.5 lacs Indirect Tax Customs/Excise 1) Additional 5% excise tax to be levied on aerated drinks with added sugar (cold drinks) 2) Excise duty on tobacco products increased between 11% and 72% 3) Excise duty for specified food package industry reduced from 10% to 6% 4) Excise duty on footwear reduced from 12% to 6% Corporate Tax 1) No change in the rate of surcharge either for the corporate or the individuals, HUFs, firms etc 2) Investment allowance at the rate of 15% to a manufacturing company that invests more than INR 25cr in any year in new plant and machinery. This benefit will be available for the investments up to 31st March, 2017 3) Extended the above investment linked deduction to two new sectors, namely, slurry pipelines for the transportation of iron ore and semiconductor wafer fabrication manufacturing units Service Tax 1) Taxes proposed on the service provided by radio-taxis to place them on par with rent-a-cab service 2) Exemptions withdrawn, including those extended to services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants 3) The government will work to introduce the much awaited Goods and Service Tax (GST) this year. GST will streamline tax administration and result in higher tax collection for the centre and the states Overview: Union Budget 2014 - 2015
  5. 5. © ValueNotes 2014 - For internal use only, reproduction in whole or in part without written permission is prohibited 5 Sector Policy Changes Budget Impact Automobiles 1. Extended the excise duty concessions beyond 30th June 2014 for a period of 6 months up to 31st December 2014 Banking and Non Banking Financial Institutions 1. PSU Banks would need INR 2.4 lac cr government infusion by 2018 2. Finance Minister(FM) to examine proposal to give additional autonomy to banks 3. FDI in insurance to be increased from 26% to 49% through Foreign Investment Promotion Board (FIPB) route 4. Banks will be encouraged to extend long term loans to infrastructure sector 5. RBI will create framework for licenses of small banks 6. INR 5,000cr short time rural credit refinance fund for 2014-15 7. FM proposes to up cap gains tax cut-off for Mutual Funds, other than equity oriented funds, to 36 months 8. FM aims for INR 8 lac cr farm credit in FY’15 9. FM proposes additional 3% interest subsidy on farm loans FMCG 1. Excise duty for specified food processing and packaging machinery reduced from 10% to 6% 2. Excise duty on footwear reduced from 12% to 6% 3. Basic custom duty on LCD and LED panels below 19 inch made nil 4. Additional 5% excise tax to be levied on aerated drinks with added sugar (cold drinks) 5. Excise duty on tobacco products increased between 11% and 72% Post Budget Impact: Sector Summary Positive Neutral
  6. 6. © ValueNotes 2014 - For internal use only, reproduction in whole or in part without written permission is prohibited 6 Sector Policy Changes Budget Impact Information Technology 1. Impose basic customs duty at 10% on specified telecommunication products that are outside the purview of the Information Technology Agreement 2. Exempt all inputs/components used in the manufacture of personal computers from 4% Special Additional Duty (SAD) Mining 1. Rationalize coal linkages which will optimize transport of coal and reduce cost of power 2. Custom duty cut on steel grade limestone and steel grade dolomite from 5% to 2.5% 3. Increased the basic customs duty on imported flat-rolled products of stainless steel from 5% to 7.5% 4. The current impasse in mining sector, including, iron ore mining, will be resolved swiftly. Changes, if necessary, in the MMDR Act, 1957 would be introduced to facilitate this Infrastructure 1. INR 37, 800cr allotted for National Highways 2. New airports to be created in Tier I and Tier II cities 3. Proposal for 15,000km gas pipelines using appropriate PPP model 4. INR 1,000cr provided for rail connectivity in northeastern region 5. INR 7,060cr fund earmarked for smart cities 6. Ultra modern power projects to be taken up in Rajasthan, Tamil Nadu, Ladakh with INR 500cr Post Budget Impact: Sector Summary
  7. 7. © ValueNotes 2014 - For internal use only, reproduction in whole or in part without written permission is prohibited 7 Sector Policy Changes Budget Impact Capital Goods 1. Extended the excise duty concessions beyond 30th June 2014 for a period of 6 months up to 31st December 2014 Oil & Gas 1. Proposal for 15,000km gas pipelines using appropriate PPP models 2. Accelerate production and exploitation of Coal Bed Methane reserves Real Estate 1. Increase the deduction limit on account of interest on loan in respect of self occupied house property from INR 1.5 lac to INR 2 lac to reduce burden on middle and lower income groups 2. PM has vision of developing 100 new cities; INR 7,060cr fund earmarked for smart cities 3. Government proposes National Housing Banking programme; sets aside INR 8,000cr for this program 4. New mission for low cost affordable housing for urban poor -INR 4,000cr allocated Manufacturing 1. The manufacturing units will be allowed to sell its products through retail including E- commerce platforms without any additional approval Power 1. Extend the 10 year tax holiday to the undertakings which begin generation, distribution and transmission of power by 31st March 2017 Post Budget Impact: Sector Summary
  8. 8. Thank you ValueNotes Database Private Limited 1 Bhuvaneshwar Society, Abhimanshree Road, Pashan, Pune 411008. India Tel: +91 20 6623 1743 | URL: www.valuenotes.co.in | Email: research@valuenotes.co.in

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