The Hon’ble Finance Minister Shri. Arun Jaitley on 10.07.2014 presented the Union Budget 2014 and mentioned that slowdown in Indian economy has to be seen in the context of slowing global economic growth. He admitted there are green shoots of recovery seen in the global economy but mandate of “sab ka saath, sab ka vikaas” to be followed in order to leave no stone unturned in creating a vibrant India. The central theme now is “minimum government, maximum governance” with emphasis on women, children, minorities, backward classes and disabled persons. Impetus has also been given to create opportunities for youth for skill development. Health, Education, Rural, Manufacturing, Infrastructure and affordable housing have been kept on the priority list. Capital Markets initiatives like liberalization of ADR, GDR regime, introduction of uniform KYC norms, one single operating DMAT account has also been touched upon. Overall the budget has consolidated and rationalized the things and has tried to plug in the tax loopholes. Further there has been a clear acknowledgment now that retrospective taxation in future will not be resorted. All fresh cases arising out of the retrospective amendments of 2012 in direct transfers will be scrutinized by High level committee to be constituted by the CBDT before any action is initiated in such cases. The proposal to allow resident taxpayers to obtain an Advance Ruling in respect of their income tax liability is also a welcome move. In our view, the delivery and governance of the budget with adherence to timelines will be a critical factor. Though a lot is needed but new Government has certainly laid down a roadmap of fiscal consolidation and stable growth in times to come.

2. “The policy of NDA
Government is to promote
Foreign Direct Investment
(FDI) selectively in sectors
where it helps the larger
interest of the Indian
Economy”
“The Country is in no
mood to suffer
unemployment,
inadequate basic
amenties, lack of
infrastructure and
apathetic governance”
“We can’t leave behind
legacy of debt…. Can’t
go on spending which
would be financed by
taxation at a future date”
“To provide all households in the
country with banking services, a
time bound programme would be
launched, it would particularly
focus on empower the weaker
sections of the society, including
women, small and marginal
farmers and labourers”
BIG PICTURE
Extracts from FM Budget speech

3. INTRODUCTION
The Hon’ble Finance Minister Shri. Arun Jaitley on 10.07.2014 presented the Union Budget 2014 and mentioned that slowdown in
Indian economy has to be seen in the context of slowing global economic growth. He admitted there are green shoots of recovery
seen in the global economy but mandate of “sab ka saath, sab ka vikaas” to be followed in order to leave no stone unturned in
creating a vibrant India.
The central theme now is “minimum government, maximum governance” with emphasis on women, children, minorities,
backward classes and disabled persons. Impetus has also been given to create opportunities for youth for skill
development. Health, Education, Rural, Manufacturing, Infrastructure and affordable housing have been kept on the priority
list. Capital Markets initiatives like liberalization of ADR, GDR regime, introduction of uniform KYC norms, one single
operating DMAT account has also been touched upon.
The Fiscal deficit for the current year has been contained at 4.5 per cent of GDP and for the year 2014-15 is estimated at 4.1 per
cent. By 2016-17 fiscal deficit is targeted to be brought down to 3 per cent. On the other hand, it is food inflation that is worrying, and
he said that all possible steps will be taken to augment the supply side to meet the growing demand for food items. The Finance
Minister has showed greater worry towards black money and has admitted that bold steps are required to enhance economic
activities and spurring growth in the economy.
Given this backdrop, the Finance Minister identified following focus areas in Budget 2014-15:
 Additional Resource Mobilization
 Measures to Promote Socio-economic Growth
 Relief and Welfare Measures
 Widening of Tax Base and Anti Tax Avoidance Measures
 Rationalization Measures
We are providing herein the snapshot of the major budget 2014 proposals with our comments

4. The key Investment environment and Tax aspects proposed in Budget 2014 are summarized below.
S.No. Proposal Impact
Individual
1
Income tax exemption limit has been raised from INR 2
lakhs to INR 2.50 lakhs and that for senior citizens has
been raised to INR 3.00 lakhs from INR 2.50 lakhs Individuals having taxable income up to INR.4 lakhs and making investment of
INR 1.50 lakhs under section 80C will go out of the tax net.
2
Investment limit under section 80C of Income Tax Act,
1961 has been raised to INR 1.50 lakhs from INR 1.00
lakhs
3
Under PPF Scheme, the annual ceiling is proposed
to be increased to INR 1.50 lakhs from the present limit of
INR 1.00 lakhs
This will encourage individuals to save more under PPF schemes and result in
long term tax free wealth creation.
4
Deduction limit on account of interest on loan in respect
of self occupied house property raised from INR 1.5 lakh
to INR.2 lakh.
This will provide relief and reduce the burden from high cost of borrowings and
rising value of house property.
5 Kisan Vikas Patra is re-introduced
This step will encourage people, who may have banked and unbanked savings to
invest in this instrument.
Corporate
1 Corporate tax rates and cess remain unchanged
2
For tax purpose only, it has been proposed the adoption
of the new Indian Accounting Standards (IndAs) by the
Indian companies from the financial year 2015-16
voluntarily and from the financial year 2016- 17 on a
mandatory basis.
This will curb the accounting jugglery practices and lead the Indian Financial code
more transparent
3
Unlisted security and a unit of a mutual fund (Other than
an equity oriented mutual fund) shall be a short term
capital asset if it held for not more than thirty six months
instead of twelve months.
This will increase tax incidence for both resident as well as non resident
transferors on transfer of such unlisted securities and may also have downward
impact on debt mutual funds which constitute 75% of the Mutual Fund Industry
This is also negative for M&A / PE industry.
4
Central Government may notify income computation and
disclosure standards to be followed in specified situations
This step will bring transparency
5
Income and dividend distribution tax to be levied on gross
amount instead of amount paid net of taxes.
This amendment shall take effect from 1 October
2014.
This increases the rate of DDT from 17% to 20% (Approx).
6
Concessional withholding tax rate of 5% has been
provided up to 1st July 2017 for interest on long term
This will encourage raising of long term foreign borrowings by Indian companies.

5. foreign currency denominated bonds (and not only Infra
bonds) .
The amendment shall take effect from October 1,
2014.
7
Only those CSR expenditure that is of the nature
described under section 30 to Section 36 of the Income
Tax Act, 1961 may be allowable as deduction subject to
fulfillment of the conditions prescribed in those sections.
Disallowance of CSR expenditure as not being general expenditure incurred
for business purpose provides clarity though not a welcome move
8
Disallowance of TDS default will be limited to 30% of
expenditure, further the deductor would be able to claim a
deduction for payments made to non-residents in the
relevant year itself, if tax is deducted during that year and
is paid on or before the due date for filing of the income
return.
This would improve TDS compliance
Applicable on both Individual / Corporate
1
Any sum of money received as an advance or otherwise
in the course of negotiations for transfer of a capital
asset. Such sum shall be chargeable to income-tax under
the head ‘income from other sources’ if negotiations do
not result in transfer of such capital asset and such sum is
forfeited.
Tax incidence will be preponed to the year of forfeiture (instead of year in which
the capital asset is transferred) and also it could be taxable at higher rate of 30%.
Capital Market
1
Income arising to foreign portfolio investors from
transaction in securities to be treated as capital gains.
This would help in to remove uncertainties related to characterization of income
of Foreign Portfolio Investors and encourage their fund managers to shift to
India. It is a big boost to capital markets considering that FII’s are the major
Value drivers
MSME
1
Fund of Funds with a corpus of INR 10,000 crore for
providing equity through venture capital funds, quasi
equity, soft loans and other risk capita
Will facilitate startup capital and risk capital for startup companies
2
Corpus of INR 200 crore to be set up to establish
Technology Centre Network.
Successful execution of all these promises will give a significant boost for
entrepreneurs and SME’s and facilitate the promotion and development and
enhancing the economic growth of the country.
3
Promised to develop an entrepreneur-friendly legal
bankruptcy framework for SMEs that will enable easy exit
4
To incentivize small entrepreneurs in the manufacturing
sector, the government has also proposed to provide
investment allowance at the rate of 15 percent to a
manufacturing company that invests more than INR 25

6. crore in any year in new plant and machinery. This benefit
will be available for three years i.e. for investments up to
March 31, 2017.
Transfer Pricing
1
Introduction of “Roll Back” mechanism in the current APA
(Advance Pricing Agreements) programme. For a period
upto 4 years.
This amendment will take effect from 1 October 2014
Accordingly, an APA, subject to prescribed conditions may also cover
previous four years preceding the first year of APA i.e. 2012. This will provide
further certainty and will align the regulations with the global best practices.
2
Range concept to be introduced for determination of
arm’s length price. Concept of arithmetic mean to
continue where number of comparables is inadequate.
Appropriate rules will be prescribed in due course.
This measure allows more flexibility and will go a long way in clearing out
Transfer Pricing related litigation.
3
Proposed to use multiple year data for comparability
analysis
This will help Taxpayers to obtain accurate and reliable current year data while
preparing the Transfer Pricing documentation.
4
A transaction between a taxpayer and an unrelated
person that satisfies the conditions provided under
Section 92B of the Act shall be deemed to be an
international transaction, whether or not such unrelated
person is a non-resident.
This will work towards plugging some anomalies in the scope of the Transfer
Pricing provisions where back to back agreements were entered to avoid
Transfer Pricing.
Foreign Direct Investment (FDI)
1
The composite cap in the insurance sector to be
increased up to 49 per cent from 26 per cent with full
Indian management and control through the FIPB route
This is another stepping stone towards growth for the insurance sector.
2
The composite cap on foreign investment in Defence
manufacturing to be raised to 49% with Indian
management and control subject to an approval from
FIPB
This is another stepping stone towards growth for the defence sector.
Infrastructure
1
Requirement of the built up area and capital conditions for
FDI to be reduced from 50,000 square metres to 20,000
square metres and from USD 10 million to USD 5 million
respectively for development of smart cities.
This will help in development of infrastructure sector.
2
Real Estate Investment Trusts (REITs) and a modified
REITs structure, i.e. Infrastructure Investment Trusts
(InvITs) be introduced and given tax pass through status
to avoid double taxation.
This step will promote funding for the infrastructure sector,

7. INDIRECT TAXES
In an attempt to boost the domestic manufacture, to encourage new investment in
various sectors and to address inverted duty structure for specified sectors. Key
changes taken are summarized below:
 SERVICE TAX
 The introduction of service tax on sale of ad space across platforms (except
print media)
 Services by air-conditioned contract carriages and technical testing of newly
developed drugs on human participants brought under service tax.
 Exemption available for specified micro insurance schemes expanded to
cover all life micro-insurance schemes where the sum assured does not
exceed Rs. 50, 000 per life insured.
 For safe disposal of medical and clinical wastes, services provided by
common biomedical waste treatment facilities exempted.
 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.
 Services provided by the Employees’ State Insurance Corporation for the
period prior to 1st July 2012 exempted, from service tax.
 To encourage prompt payment of service tax, simple interest rates per
annum payable on delayed payments, are prescribed as follows;
Extent of Delay Simple Interest rate per annum
Up to six months 18%
More than six months
& and upto one year
18% for the first six months, and 24% for the
period of delay beyond six months
More than one year 18% for the first six months, 24% for second six
months, and 30% for the period of
delay beyond one year
Above rates will be effective from 1st
October 2014

8.  EXCISE
o To finance Clean Environment initiatives, Clean Energy Cess increased from
Rs.50 per tonne to Rs.100 per tonne.
o Excise duty on cigarettes, pan masala, gutka, chewing tobacco and aerated
waters containing added sugar has been increased.
o Reduction in excise duty for specified food package industry from 10% to 6%
o Concessional excise duty of 2 percent without CENVAT benefit and 6
percent with CENVAT benefit on sports gloves.
 CUSTOMS
o Basic customs duty is being reduced on fatty acids, oils, glycerine,
petrochemicals, certain wind energy equipment etc. Cathode ray TVs, LCD
and LED TV panels of below-19 inches and certain inputs used in solar
power equipment are being fully exempted from basic customs duty.
o Import of smart card will now attract higher CVD.
o Imported flat-rolled stainless steel products will attract a higher basic
customs duty.
Overall the budget has consolidated and rationalized the things and has tried to plug in the
tax loopholes. Further there has been a clear acknowledgment now that retrospective
taxation in future will not be resorted. All fresh cases arising out of the retrospective
amendments of 2012 in direct transfers will be scrutinized by High level committee to be
constituted by the CBDT before any action is initiated in such cases. The proposal to allow
resident taxpayers to obtain an Advance Ruling in respect of their income tax liability is
also a welcome move.
In our view, the delivery and governance of the budget with adherence to timelines will be a
critical factor. Though a lot is needed but new Government has certainly laid down a
roadmap of fiscal consolidation and stable growth in times to come.

9. Our Online VenturesAs Close As You Need
As Far As You Go……
Delhi Office
D-28, South Ex., Part-I, New Delhi-110049,
D-38, South Ex., Part-I, New Delhi-110049,
T: +91 11 40622255
M: + 91 9871026040,
E: info@indiacp.com
Mumbai Office
520, Mastermind- I, Royal Palms Estate, Aarey
Colony,
Goregaon East, Mumbai -400065
T: +91 2267109044
M: + 91 9820079664
E: mahipal@indiacp.com
Indian Offices
Overseas Offices
Our Associates
India
Ahmedabad, Allahabad, Bangalore, Bhopal, Bhubaneshwar, Chandigarh, Chennai, Coimbatore, Goa, Guwahati, Gwalior,
Hyderabad, Indore, Jaipur, Jammu, Kanpur, Kochi, Kolkata, Lucknow, Ludhiana, Patna, Pune.
Overseas
Bulgaria, Belgium, British Virgin Islands, Canada, China, Costa Rica, Cyprus, European Union, Germany, Hongkong, Ireland,
Japan, Kenya, Malaysia, Mauritius, Singapore, Sri Lanka, Switzerland, The Netherlands, Turkey, United Arab Emirates, United
Kingdom, United States.
Bedford Office (United Kingdom)
2-4 Mill Street, MK40 3HD, Bedford
Switchboard: +44 (0) 2030063240,
E: ukoffice@indiacp.com