The BJP-led NDA government’s maiden Budget on Thursday promised to kick-start the growth engine by stepping up investments in the infrastructure sector and provided incentives to the middle class to save more. Union Finance Minister Arun Jaitley also announced measures to spur manufacturing and revive investor confidence.
The budget gave tax concessions to offset the inflationary burden.
While the personal income tax exemption was raised to Rs 2.5 lakh from the current Rs 2 lakh for an individual tax payer without a change in slab, the investment under 80C was enhanced to Rs 1.5 lakh from the current Rs 1 lakh to encourage small savings. The interest exemption on housing loan for self-occupied property was raised to Rs 2 lakh from the present Rs 1.5 lakh. For senior citizens, the I-T relief bar was raised from Rs 2.5 lakh to Rs 3 lakh.
“Increase in savings and their productive use leads to higher economic growth. The households are the main contributors of savings…,” Finance Minister Arun Jaitley said, presenting the Budget for 2014-15 in Parliament. Exemption on three components together is expected to ensure a saving of over Rs 15,000 per annum to an average tax payer but the total revenue loss to the government on the direct tax proposals is expected to be Rs 22,200 crore.
This would be partly offset by revenues from indirect tax proposals to the tune of Rs 7,725 crore.
In another move to bring in Foreign Direct Investment (FDI) to the country, the Budget proposed to open up defence and insurance sectors. It promised to enhance FDI in the two critical sectors from 26 to 49 per cent.
“The insurance sector is investment starved. Several segments of insurance sector need expansion. The composite cap of the insurance sector is proposed to be increased to 49 per cent from the current level of 26 per cent with full management and control through the FIPB route,” Jaitley said. He said, a bill to this effect will soon be tabled in Parliament.
To fulfill Prime Minister Narendra Modi’s commitment to secure housing for all by 2022, the budget proposed to invest liberally in the sector. Due care was taken to lift the laggard manufacturing sector too, a key contributor to employment generation with emphasis on small entrepreneurs.
“The country is in no mood to suffer unemployment, inadequate basic amenities, lack of infrastructure and apathetic governance,” the finance minister said in his opening Budget speech.
The allocation to Rural Housing Fund, run by National Housing Bank (NHB), was increased to Rs 8,000 crore. Another Rs 4,000 crore was earmarked for NHB to increase the flow of cheaper credit for affordable housing for urban poor. The Budget also announced tax benefits for Real Estate Investment Trusts.
Unlike the previous UPA regime, the Jaitley Budget proposed an increase in the Plan expenditure to Rs 5,75,000 crore for the current fiscal, a 26.9 per cent increase over the actual spending in the previous fiscal. The expenditure under this head is incurred on development purposes.
Words such as investment, growth, jobs and skill development were frequently used in Jaitley’s Budget speech. But contrary to expectations, the outlay for subsidies, one of the major causes of deteriorating government finances, was increased close to 3 per cent.
The finance minister, however, promised to overhaul the grants for food, fuel and fertiliser to “make it more targetted”. The tax collection and fiscal deficit targets of the interim budget were retained but Jaitley said, the new government would review the Direct Tax Code (DTC) prepared by the previous UPA government. A promise was also made to expedite the long awaited indirect tax reform – the Goods and Services Tax.
The Budget made cigarettes, tobacco, pan masala, gutka and cold drinks costlier by raising excise duties. But soaps, footwear, and television sets for poor and middle income groups were made cheaper.
To make agriculture profitable, the Budget proposed Rs 8 lakh crore credit to the sector. It also created Price Stabilisation Fund, a promise made in the BJP manifesto, to check volatility in prices of farm produce.
Proposals
* Retrospective legislation to be exercised with caution
* For senior citizens limit raised from Rs 2.5 lakh to Rs 3 lakh
* Introduction of GST to be given thrust
* Will developone hundredSmart Cities
* FDI cap in insurance, defence raised to 49 pc
* IITs in Jammu, Chhattisgarh, Goa, AP and Kerala
* AIIMS-like institutions in AP, WB, Maharashtra and UP
* IIMs in HP, Punjab, Bihar, Odisha and Rajasthan
* Ultra Mega Solar Power Projects in Rajasthan, Gujarat, TN, AP and Ladakh.
* Integrated Ganga Conservation Mission called “Namami Gange”
* “Jal Marg Vikas” between Allahabad and Haldia on the Ganga
* Sports university in Manipur
Your tax benefits
What you will save under 80C of IT Act + housing loan interest
* Highest tax bracket (taxable income above Rs 10 lakh) will save Rs 36,050
* Income between Rs 5 and 10 lakh will save Rs 25,750
* Income between Rs 2.5 and Rs 5 lakh will save Rs 15,450
What Jaitley announced
* Hiked the IT exemption limit from Rs 2 lakh to Rs 2.5 lakh
* Hiked cap on long-term investments under Section 80C from Rs 1 lakh to
Rs 1.5 lakh
* Raised tax-free cap on interest paid on housing loan from Rs 1.5 lakh to Rs 2 lakh
What the govt will lose
* It will forego revenue of around Rs 22,000 crore
