MGM's Summary of Key Highlights of Indian Union Budget 2015-16

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Highlights of Union Budget-2015 Page 1 of 17
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Indian Union Budget - 2015

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Table of ContentTable of ContentTable of ContentTable of Contentssss
• Introduction
……………………………………………………………………………………………………………………3…
• Economic Indicators
……………………………………………………………………………………………………………………4…
• Budget Highlights- Direct Taxes
……………………………………………………………………………………………………………………10…
• Budget Highlights-Indirect Taxes
……………………………………………………………………………………………………………………12…
• Budget Proposals & Key policy Announcements
……………………………………………………………………………………………………………………14…

Highlights of Union Budget-2015
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IntroductionIntroductionIntroductionIntroduction
The Narendra Modi led NDA Government presented its full-time
budget for the Fiscal Year 2015-16,after getting a thumping victory in
the general elections held last year.
As it has the impetus of having the strongest mandate in the house for
the past three decades, expectations from the Budget were sky-high.
The Economic Survey presented by the Chief Economic Advisor
Arvind Subramanium on the eve of budget, presented a broad
framework for tackling soaring inflation and optimizing the leverage
provided by the international markets. Growth rate is projected to be
between 8 and 8.5 per cent for this fiscal, indicating scope for big bang
reforms. The Fiscal deficit target has been kept unchanged at 4.1 per
cent of GDP. Current Account Deficit has been estimated to fall at 1.3
per cent of GDP.
The Finance Minister in this budget has used his dexterity in balancing
the tight fiscal situation which the economy is currently facing. The
Budget has presented a broad road map of the economic policy of the
new Government and outlined its plan for reviving the growth spirit of
the Indian Economy. In his budget speech, the Finance Minister (FM)
has placed emphasis on fiscal consolidation, tackling inflation, creating
infrastructure, increasing investments in manufacturing, improving
investor sentiment and agriculture and the social sectors. Being
positive about inflation he mentioned that they have been successful in
keeping CPI to below 5 per cent, opening room for more monetary
policy easing.
In line with Government’s goal of reducing subsidy burden, the
Finance Minister emphasized on need to cut subsidy leakages while
placing stimulus on broadening the base of Direct Benefit Transfer
scheme. In its initiative to boost investment in infrastructure, tax-free
infrastructure bonds for projects in roads, rail and irrigation projects
have been introduced. Also a national investment infrastructure fund
shall be set up.
In a major footstep for tax reforms, Finance Minister has announced
that Goods and Services Tax is expected to be rolled out from April
2016. Wealth tax has been abolished and additional 2% surcharge has
been introduced instead. Introduction of GAAR has been postponed to
April 1, 2017. Service Tax rates have been increased to 14%.
In order to savour its tax friendly image the Finance Minister has
further clarified on retrospective tax amendment, and has assured such
instances shall be avoided in future.
Detailed insights into the proposals introduced will follow

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Economic IndicatorsEconomic IndicatorsEconomic IndicatorsEconomic Indicators
GDP Trends
The Central Statistics Office (CSO), Ministry of Statistics &
Programme Implementation revised the base year from 2004-05 to
2011-12 for measuring the real growth. With the base year revision, as
recommended by the international guidelines, in the new series Gross
Domestic Product (GDP) at factor cost would no longer be discussed.
As is the practice internationally, industry-wise estimates is presented
as Gross Value Added (GVA) at basic prices, while ‘GDP at market
prices’ will henceforth be referred to as GDP. GDP growth rates in Q3
(Oct-Dec) of 2014-15 at constant (market price, new base, 2011-12)
prices was placed at 7.2 per cent as compared with growth of 8.2 per
cent in Q2 (Jul-Sep, new base) of 2014-15 and 6.5 per cent in Q1 (Apr-
Jun, new base) of 2014-15 respectively. GDP growth in earlier method
(at factor cost at old base 2004-05) for the Q2 (July-September) of
financial year 2014-15 (FY15) was estimated at 5.3 per cent per annum
as compared with 5.7 per cent in Q1 FY15 and 5.2 per cent per annum
in the previous year’s same quarter (Q2 of FY14) and GVA at basic
prices at constant (2011-12) prices in Q3 of 2014-15 is estimated at
`24.97 lakh crore, as against 23.24 lakh crore in Q3 of 2013-14,
showing a growth rate of 7.5 per cent. Growth rates in various sectors
are ‘agriculture, forestry and fishing’ (-0.4 per cent), ‘mining and
quarrying’ (2.9 per cent), ‘manufacturing’ (4.2 per cent), ‘electricity,
gas and water supply and other utility services’ (10.1 per cent)
‘construction’ (1.7 per cent), Trade, hotels, transport, communication
and services related to broadcasting ' (7.2 per cent), 'financial, real
estate and professional services ' (15.9 per cent), and Public
administration, defence and Other Services' (20.0 per cent). The first
revised statistics of GDP estimate (at base 2011-12 constant prices) for
2013-14 and advance estimates for 2014-15, placed the growth at 6.9
per cent and 7.4 per cent for full year, respectively
Source: Ministry of Finance

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Inflationary Trends
The declining trend in inflation rate was halted when WPI inflation
marginally edged up in December 2014 to 0.11 per cent (provisional)
from -0.17 per cent in November 2014 and 6.40 per cent during the
corresponding month of the previous year Average WPI inflation rate
during the Q3 of FY15 was, however, much lower at 0.54 per cent as
compared with 3.88 per cent in the previous quarter. Food inflation
rose to 5.2 per cent during December 2014 (y-o-y) as compared with
0.66 per cent in November 2014, but was much lower as compared
with Dec 2013 inflation (13.7 per cent). Inflation of ‘fuel & power’
group continue to be negative and stood at - 7.82 per cent in December
2014 as against positive fuel inflation of 10.87 per cent in December
2013. ‘Manufactured products’ too showed a lower inflation rate of
1.57 per cent in December 2014 (1.90 per cent in Nov 2014 and 3.04
per cent during December 2013). Build up inflation rate in the
financial year so far was -0.28 per cent as compared to a build up rate
of 5.58 per cent in the corresponding period of the previous year.
Retail inflation, measured by change in CPI (y-o-y, on base 2010=100)
edged up in December 2014 to 5.0 per cent. A slight softening of
cereal prices and a sharp seasonal fall in vegetables prices moderated
the trajectory of headline inflation, despite persistent firmness in the
prices of protein-rich items such as milk, meat and pulses. Inflation
excluding food and fuel, however declined for the second consecutive
month in December 2014. This was largely on account of the declining
prices of transport and communication since August, reflecting the
impact of plummeting international crude oil prices; and softer
commodity prices more generally. Average CPI inflation rate during
Q3 of FY 15 also moderated to 4.97 per cent as compared with 7.38
per cent in previous quarter and 10.40 per cent in previous year’s Q3.
Near-term as well as longer-term inflation expectations of households
dropped to single digits for the first time in 21 quarters.
Source: Ministry of Statistics and Programme Implementatio

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Foreign Investments
Net capital inflows remained strong during Oct-Dec 2014, not only in
the form of buoyant portfolio investment flows but also supported by
foreign direct investment inflows as well as external commercial
borrowings and the CAD was comfortably financed .Global crude oil
prices also followed its declining trend since June 2014 during the
quarter. Despite these positives, the rupee continued its depreciating
trend since late May 2014 when it touched a high of about ` 58.35 a
USD, after trading in a narrow range during October and November
2014, and ended the quarter at ` 63.03 a USD mark on December 31,
2014 as against at ` 61.74 a USD mark on September 30, 2014. The
average rupee exchange rate was ` 61.34 a USD in October 2014 and
` 61.70 a USD in November 2014, respectively. The rupee opened the
month of December 2014 on a considerably bearish note tracking
announcement by the Government to lift the curbs on gold imports and
tracking a tepid domestic GDP growth (y-o-y) estimate (at base 2004-
05 prices) of 5.3 per cent for Q2. The fall was sharp in Mid- December
in light of global developments such as the currency crisis in Russia,
weak macroeconomic data in China and Europe, tapering of global risk
sentiment due to continued crude price fall (to about five and half year
lows), etc., raising global growth concern and impacting markets
across the asset classes. This caused significant pressure on currencies
across the emerging markets and rupee touched an eleven month low
of ` 63.88 a USD on December 17, 2014. Further, lowering of global
inflationary expectations also put pressure on rupee. However, the
rupee recovered over the next few days as global currency market
stabilised and performed better vis-a-vis many other currencies. Rupee
intermittently got boost from the softer reading on CPI as well as the
WPI inflation during the quarter.
Source : SEBI and Oanda Corporation

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Liquidity Situation
Liquidity conditions in the economy remained generally comfortable
during the quarter, barring quarter-end when liquidity in market
tightened on account of advance tax outflows. The liquidity deficit, as
reflected by net borrowings from RBI under Liquidity Adjustment
Facility (LAF) including MSF, remained comfortably below the
Reserve Bank’s stated comfort zone of about one per cent of net
demand and time liabilities (NDTL) of banking system during most of
the quarter. The net amount provided under LAF operations during the
quarter further moderated with average amount provided at ` 52,701
crore in October and ` 42,836 crore in November, however, increased
to ` 83,141 crore in December 2014. The quarter began with surplus
liquidity in the system and after continuing easy liquidity conditions
for most of the quarter till mid- December 2014, borrowings under
LAF peaked at ` 1,23,110 crore on December 22, 2014. However, the
average net borrowings under LAF during Q3 of FY 14-15 at ` 59,968
crore was lower than ` 74,503 crore in the previous quarter (Q2 of FY
14-15). On policy front, RBI in its fifth bi-monthly monetary policy
review on December 2, 2014 maintained status quo on the statutory
liquidity ratio (SLR) of scheduled commercial banks (22.0 percent of
their NDTL) and key policy rates (LAF repo rate unchanged at 8.0
percent). There was also status quo on providing liquidity through
overnight repos at 0.25 per cent of bank-wise NDTL, and providing
liquidity under 7-day and 14-day term repos up to 0.75 per cent of
NDTL of the banking system. RBI stated that the daily one-day term
repos and reverse repos would continue to ensure smooth liquidity in
the system.

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Import Export Trends
India’s merchandised exports during Q3 of 2014-15 (Oct-Dec 2014)
shrank by 1.0 per cent (y-o-y) after two consecutive quarters of
growth, with the slump in international crude prices taking its toll on
exports of petroleum products, and non-oil export growth also
decelerating sharply. Export performance has been impacted by weak
global demand conditions and the real appreciation of the rupee. The
fall in international crude prices translated into a sizable saving on
account of petroleum oil lubricants (POL) imports, despite a pick-up in
import volumes in Q3. Gold imports also moderated, coming off from
the seasonal cum pent-up demand spurt in September-November 2014.
Although overall merchandise imports declined in December, they
recorded an expansion for Q3 as a whole on the back of the earlier rise
in gold and non-oil non-gold items. Imports rose by 7.5 per cent (y-o-
y) during Q3 of 2014-15 as compared with a growth of 10.1 per cent
(y-o-y) in Q2 of 2014-15. As a consequence, the trade deficit widened
in Q3 (increased to USD 39.303 bn) relative to the preceding quarter
(USD 39.112 bn in Q2 of 2014-15). On a y-o-y basis, however, trade
deficit increased lower by 29.5 per cent during Q 3FY 15 (Oct-Dec) as
compared with a rise of 33.5 per cent in Q 2 of 2014-15. The average
monthly trade deficit during Oct-Dec 2014 increased marginally to
USD 13.101 bn as against USD 13.037 bn in Q2 of 2014-15 . The
estimate of the current account deficit (CAD) for 2014-15 is placed at
1.3 per cent of GDP, significantly lower than earlier projections.

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Secondary Market Transactions
Chart on secondary market transactions depicts the movement in
Goverment bond yields (10-year yield as benchmark) during the
quarter. 10-year benchmark paper opened at 8.49% on October 1, 2014
and after trading between 8.51% (on October 1, 2014) and 7.78% (on
December 15, 2014) during the quarter, closed at 7.90% on December
31, 2014. G-Secs marched upward during the quarter, following its
upward trend since mid-August 2014. Overcoming disappointment on
RBI’s status quo on key policy rates in its fourth bi-monthly monetary
policy review on September 30, 2014, the G-Sec market opened on
positive sentiment on expectations of low inflation number for
September as crude continued its downward fall. The momentum was
bolstered by continually declining oil prices, which has salutary impact
on both fiscal and current account deficit situation. This softening in
yields was sustained after the release of CPI and WPI data, which
posted better than expected number. Market also welcomed
announcement of diesel price deregulation by the government. The
sentiment further supported in November as domestic fuel price saw
first cut by Oil marketing companies after deregulation, release of
weaker than expected NFP data in US and expectations of low
inflation numbers for October 2014 as well. In the meantime, US Fed
concluded its last tranche of USD 15 Bn bond buying program in last
week of October, however, reiterated its guidance to keep federal fund
rates at near zero level for a considerable time. Market saw
intermeeting corrections on profit taking on long rallies, OMO sales
from RBI, etc., during mid-November and traded in a range for rest of
the month.
Source: SEBI
In its fifth Bi-monthly monetary policy statement on December 2
2014, RBI maintained status quo as regards the policy rates, however,
it acknowledged faster pace of decline in inflation and revised down its
forecast for CPI inflation to 6% by March-2015. With RBI indicating
that it is likely to act even outside policy day, if the incoming
information is strong, and crude touching fresh five year lows, the ten
year yields slid below repo rate post RBI policy.

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DirecDirecDirecDirectttt TaxesTaxesTaxesTaxes
The proposed schemes are effective for FY 2015-16, unless otherwise
specified.
• Tax rate, surcharge and education cess remain
unchanged.
• Section 80D – Mediclaim / Health Insurance
deductions increased from Rs.15,000 to Rs.25,000 and
Rs.30,000 for senior citizen and Rs.80,000 for serious
diseases for senior citizens.
• Transport allowance exemption increased from
Rs.800 p. m to Rs.1,600 p. m.
• Quoting of PAN no. is mandatory for any purchase
above Rs.1 Lakh.
• Wealth tax to be abolished and replaced by 2%
surcharge on Super rich having income above
Rs.1Crore
• All contributions to Sukanya Samridhi Scheme to be
Tax Free.
• Additional investment of Rs. 50,000 p.a. allowed for
deposition under new pension scheme under section
80CCD.
• The limit of deduction on account of contribution to a
Pension Scheme is proposed to be increased from Rs.
1 Lakh to Rs. 1.5 Lakh.
• Contribution in EPF by employee is optional for an
employee earning salary below threshold limit.
• Corporate Tax Rate will be reduced to 25% from 30%
in coming next four years.
• Retrospective tax provision to be avoided.
• 100% deduction for contribution to swacchh Bharat
and clean Ganga schemes.

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• Non filing of Income Tax Return is proposed to make
punishable with imprisonment.
• Specified Domestic Transfer Pricing transaction limit
is proposed to increase to 20 crore from 5 crore to
tighten the reporting of Cast Transactions.
• Additional deduction of Rs.25,000 for differently
abled persons.
• Tax benefits on Income upto Rs.4.42 Lakh.
• Acceptance or re payment of an advance of Rs.20,000
or more in cash for purchase of immovable property to
be prohibited.
• Splitting of transaction not to be permitted.
• Concealment of income will attract 10 years of
rigorous imprisonment.
• Implementation of GAAR postponed by 2 years
• Announcement of Tax free bonds for Railways and
Roads
• In a major relief in genuine charitable institutions,
ceiling limit for such institutions engaged in trade,
business has been fixed at 20% of total receipts
instead of existing Rs.25 lakhs
• Direct Tax Regime will be internationally competitive
on rates
• Yoga included in the ambit of Charitable Purposes
under the Income Tax Act.
• Income Tax on Royalty fees for technical services to
be reduced to 10% from 25%
• All investments made in favour of girl child to be
exempted under SuKanya Samridhi Scheme.
• In order to curb benami transaction in property deals,
Finance Minister has proposed to rationalize capital
gains tax regime for real estate investment trusts.
• Penalty for concealment of income and asset will be at
the rate of 300% of tax evaded.
• In order to rationalize the MAT provisions for FIIs,
profits corresponding to their income from capital
gains on transactions in securities which are liable to
tax at a lower rate, shall not be subject to MAT.

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InInInInddddirecirecirecirectttt TaxesTaxesTaxesTaxes
GOODS AND SERVICE TAX (GST)
• One of the key expectations of the industry from the
Budget was regarding the implementation of GST And
the Finance Minister lay down the roadmap of it and
will be put in place by April 1, 2016
• Service tax exemption to Construction, Erection,
Commissioning or Installation of original works
pertaining to an Airport or Port Withdrawn.
SERVICE TAX
• The Finance Minister has amended the Service Tax
Rate from 12.36% to 14% with NO Education Cess
and Secondary Higher Education Cess.
• Time limit for taking CENVAT credit on inputs and
input services increased from 6 Months to One year.
• The Pre-cold Storage Warehouse Service will be
exempted from Service Tax.
• Service Tax Exemption to Varishta Bima Yojana
• Central Excise and Service Tax assessee to be allowed
to use digitally signed invoices and maintain record
electronically
• Enabling provisions made to exclude all services
provided by the Government and Local Authority to a
Business Entity from the negative list.

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CUSTOM DUTY EXCISE DUTY
• The government has proposed to reduce the Custom Duty on
22 items.
• FM Proposes to exempt SAD on all items
• Custom duty on commercial vehicle hiked to 40% from 10%.
• Phone bill may be reduced a bit as customs duty on
telecommunication grade optical fiber cables has been
exempted completely (as against a duty of 7.5 per cent).
Similarly, customs duty has been removed for LCD/LED
television panels as opposed to a duty of 10 per cent earlier.
• Custom duty on tobacco increased to Rs.70 per Kg. from the
current Rs.60 per Kg.
• Similarly, basic customs duty is being reduced on certain raw
materials used in lathe machines to 2.5 per cent from 7.5 per
cent, medical video endoscopes to 2.5 percent from 5 per cent
• Artificial heart has been exempted from basic custom duty of 5
percent and counter vailing duty (CVD)
• Service Tax and Central Excise Certificates to be issued in 2
working days.
• Standard ad valorem rate of duty of excise (i.e. CENVAT) is
being increased from 12% to 12.5%.
• Education Cess and Secondary & Higher Education Cess
leviable on all excisable goods are being fully exempted.
Effective from 1st
March, 2015.
• Excise duty has been reduced to six per cent from 12 per cent
for footwear industry, on footwear of retail price exceeding Rs
500 per pair but not exceeding Rs 1,000.

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Budget ProposalBudget ProposalBudget ProposalBudget Proposalssss
Agricultural Sector:
• Government has proposed Rs. 8.5 Cr credit for Rural
Development.
• Rs.5300 Cr for Micro Irrigation Watershed Project.
• Soil Health Card scheme has been launched to improve soil
fertility.
• MNREGA allocation to go up by Rs 5000 crore. This is the
highest ever allocation to the scheme.
• FM proposes Rs. 25000 Crore for Rural Infrastructure
Development Bank.
• “Per Drop More Crop” scheme for better irrigation.
Educational Sector:
• Nayi Manzil – A new proposal for youth where they can get
School Leaving Certificate and get employment.
• The Government Proposes Higher Education loan scheme
• New 80,000 Secondary Schools to be started
• New AIIMS to be set up in J&K, Punjab, Tamilnadu,
Himachal Pradesh and Assam.
• New IIT to be set up in Karnataka and Dhanbad
• New Horticulture University in Amritser
• New IIM in J&K and Andhra Pradesh
• New Pharmaceutical Research Institute in Maharashtra and
Rajasthan.
• New Film production centres in North East
• Fully IT based student help facility for needy students
• Integrated education and livelihood scheme to be launched
• Total Allocation to education sector is Rs.68,968 crores

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Page 15 of 17
Travel and Tourism Sector:
• FM proposes to develop 8 Heritage Sites like Elephanta Caves,
Jalianwala Baug, Churches and Convents of old Goa, Hampi,
Rani ki Vav, Leh Palace, Varanasi Temple Town, Qutub Shahi
Toms
• Visa on arrival increased from 43 to 150 countries in different
stages.
Banking Sector:
• New structure to be put in place in banking sector gor seamless
integration of data.
• Debit card transaction to be encouraged and cash transaction to
be disincentives.
• Government to set up Mudra banks for SMEs and Lower
income Group.
• FDI and FII will be no more diffentiated
• NBFC registered with RBI with Rs.500 Crore and above will
be considered as Financial Institutions.
• Public Debt management agency to be created to strengthen
the bond market
Infrastructure Sector:
• Government proposes new 2 crore house in Rural Area and 5
crore house in Urban area.
• Every family in India would have roof over their head by 2022.
• Each house in the country should have basic facilities of 24
hours power supply, clean drinking water and other amenities.
• FM proposes to merge Forward Markets with SEBI to avoid
speculation
• FEMA Act to be amended to incorporate Black Money
Provisions
• Indian Gold Coin with Ashok Chakra on its face. Sovreign
Gold Bond Alternative to Gold
• Gold Monetization Scheme to replace deposit and Metal loans
and to allow depositors to earn interest
• Good progress in DMIC corridor and other infra projects
• Rs.1200 crore earmarked and additional funds if pace of work
picks up on ongoing projects.
• Ports in public sector will be encouraged to corporatize &
become companies under companies act
• National Investment in infrastructure Funds to be launched
with corpus of Rs.20000 Crore to generate more funds.
• Postal network across the country to be used for increasing
access to formal financial syatem.
• Gamechanging Reforms: GST and JAM Trinity (Jan Dhan
Yojana, Mobile Number and Aadhar)
• Five ultra –mega power projects each of 4000 MW to be set
up. Second unit of Kudankulam Nuclear Power Station will be
commissioned in 2015-16
• Self Employment and Talent Utilization (SETU) to be utilized
• Subsidy Rationalisation based on Cutting Leakages
• Electronic Vehicles are encouraged and allocated Rs.75 crore
towards it.

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Page 16 of 17
Health Sector:
• Physical Aids and Assisting devices for physically challenged
senior citizens.
• Providing Medical services in each village and city.
General Sector:
• In order to support programmes for women security, advocacy
and awareness, Finance Minister has decided to provide 1,000
crore to the Nirbhaya Fund
• 1,500 crore Rs has been allocated to Deen Dayal Upadhyay
Gramin Kaushal Yojana for enhancing the employability of
rural youth. Disbursement will be through a digital voucher
directly into qualified student’s bank account
• With a view to facilitate relocation of fund managers of
offshore funds in India, it is proposed to modify the permanent
establishment (PE) norms.
• Provisions of the Income-tax Act have been proposed in order
to provide tax neutrality on transfer of units of a scheme of a
Mutual Fund under the process of consolidation of schemes of
Mutual Funds as per SEBI Regulations, 1996
• Universal social security system for all Indians, specially the
poor and the underprivileged has been proposed by FM
• In its initiative to boost entrepreneurs government plans to
launch a E- Business Portal which regulates 14 regulatory
permissions at one Source.

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MGM's Summary of Key Highlights of Indian Union Budget 2015-16

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