UNION BUDGET2014-15

INVESTMENT & TAXATION

VIEW POINT

UNION BUDGET 2014–15 – BACKDROP

First government after 30 years, which has a clear majority of its own.

First time in Indian history, people of India voted for development & growth.

Tall Expectations from the Union Budget...

UNION BUDGET 2014–15 – BACKDROP

India needed comprehensive action plan in current economic environment.

ButJust 45 days to do this all !

Tall Expectations from the Union Budget...

UNION BUDGET 2014–15 – BACKDROP

Sector 2011 – 12 2012 – 13 2013 – 14 2014 – 15 *Agriculture 5.0% 1.4% 4.7% 3.3%Industries 7.8% 1.0% 0.4% 3.3%Service 6.6% 7.0% 6.8% 7.0%GDP 6.7% 4.5% 4.7% 5.4% - 5.9%

Urgent need to bring the economy on track

* Expected

GDP Trends & Forecasts

UNION BUDGET 2014–15 – BACKDROP

World GDP Trends

GDP of Gujarat has grown by 10% since 2001

UNION BUDGET 2014–15 – BACKDROP

Sector 2010 – 11 2011 – 12 2012 – 13 2013 – 14Agriculture 14.6% 14.4% 13.9% 13.9%Industries 27.9% 28.2% 27.3% 26.0%Service 57.5% 57.4% 58.8% 59.9%Sources : Central Statistics Office, RBI

Shares of Various Sectors of the economy in the GDP

UNION BUDGET 2014–15 – BACKDROP

Year 2011 – 12 2012 – 13 2013 – 14

Wholesale Price Index(WPI)

8.9 7.4 6.0

Consumer Price Index(CPI)

8.4 10.4 9.7

Effects Interest Rate & Exchange rates.

Inflation Rate

UNION BUDGET 2014–15 – BACKDROP

Gross Domestic Savings as a % of GDP2009 – 10 2010 – 11 2011 – 12 2012 – 13 2013 – 14

33.7 33.7 31.3 30.1 30.5

Unfortunately savings diverted to unproductive assets like Gold & Real Estate...

Savings Rate

UNION BUDGET 2014–15 – BACKDROP

2010 - 11 2011 - 12 2012 - 13 2013 - 14

Avg. Exchange Rate (Rs.) 45.56 47.92 54.4 60.5

FDI $ Million

11,834 22,061 19,819 21,564

FII$ Million

30,293 17,170 26,891 4,822

Forex Reserves$ Billion

304.8 294.4 292.0 304.2

Foreign Exchange Reserve, FDI & FII Flows

UNION BUDGET 2014–15 – BACKDROP

INR (in crores)

$ 156 Billion Equity 9,36,000$ 35 Billion Debt 2,10,000

$ 191 Billion Total 11,46,000

•Market Cap Rs. in Cr. •# as on July 09 2014

Rs. 60 = 1 USD

2009 – 10 2010 - 11 2011 - 12 2012 - 13 2013 - 14July

2014 # 2014 -

15

Sensex 17258 19445 17404 18836 22386 2544529685

?

Sensex PE 21 21 18 17 18 1821?

Market Cap * 62,61,787 69,07,788 62,45,365 64,16,268 75,21,057 89,98,036

Stock Markets & FII’s

FII Holding In India as on date

UNION BUDGET 2014–15 – BACKDROP

Current Account DeficitYear 2012 – 13 2013 – 14 2014 – 15

As a % of GDP

4.7% 1.7% 2.1%

Still remains a concern...

Foreign Trade

UNION BUDGET 2014–15 – BACKDROP

India the top performing market...

Country Index 2010 2011 2012 2013 2014

India Nifty 17.3 -24.9 27.3 3.12 27.31

USA Dow Jones 9.4 4.7 5.7 13.26 8.72

Japan Nikkei -4.0 -18.7 21.4 33.9 3.5

UK FTSE 7.3 -7.3 3.5 3.7 5.47

China Shanghai -13.4 -22.9 4.6 -7.14 6.86

Trends in global stock markets

We will have to decideShould we allow this drift to carry on and watch helplessly?

Should we allow our future to suffer because of indecisiveness?

Should we be victims of more populisum or wasteful expenditure?

- Finance Minister's Speech

Important Announcements in the

Budget SpeechRetrospective amendments to be made with extreme caution and judiciousness in future.

Fresh cases to be referred before action to a high powered committee formed by CBDT.

Existing cases shall go ahead as they are.

GAAR (General Anti Avoidance Rules) deffered?

Important Announcements in the

Budget SpeechReal Estate Investment Trusts (REITS), Infrastructure Investment Trusts (INVITS) to become operational.

Important Announcements in the

Budget Speech

FDI at 49% in Insurance & Defence with full Indian Management Control through FIPB route.

Important Announcements in the

Budget SpeechGST implementation to get priority.

DTC to be reviewed.

Important Announcements in the Budget Speech

Kisan Vikas Patras to be reintroduced – banked & unbanked savings.

PPF investment limit extended to Rs. 1.5 lac.

Budget at a glanceRs. Crore 2012 – 13 2013 – 14

2014 - 15 Budget estimates

1 Revenue receipts 8,79,232 10,29,252 11,89,7632 Tax revenues (net to centre) 7,41,877 8,36,062 9,77,5283 Non - tax revenue 1,37,355 1,93,226 2,12,505

4 Capital receipts (5+6+7) 5,31,140 5,61,182 6,05,1295 Recoveries of loans 15,060 10,802 10,5276 Other receipts 25,890 25,814 63,4257 Borrowings and other liabilities 4,90,190 5,24,539 5,31,177

8 Total receipts (1+4) 14,10,372 15,90,434 17,94,8929 Non - plan expenditure 9,96,747 11,17,902 12,19,892

10 On revenue account of which, 9,14,306 10,27,689 11,14,60911 Interest payments 3,13,170 3,80,066 4,27,01112 On capital account 82,441 87,214 1,05,283

13 Plan expenditure 4,13,625 4,75,532 5,75,00014 On revenue account 3,29,208 3,71,851 4,53,50315 On capital account 84,417 1,03,681 1,21,497

16 Total expenditure (9+13) 14,10,372 15,90,434 17,94,89217 Revenue expenditure (10+14) 12,43,514 13,99,540 15,68,111

18Of which, grants for creation of capital assets

1,15,170 1,38,228 1,68,104

19 Capital expenditure (12+15) 1,66,858, 1,90,894 2,26,781

20 Revenue Deficit (17-1)3,64,282 3,70,288 3,78,348

(3.6) (3.3) (2.9)

21 Effective revenue deficit (20-18)2,48,572 2,32,060 2,10,244

(2.5) (2.0) (1.6)

22 Fiscal Deficit (16-(1+5+6))4,90,190 5,21,539 5,31,177

(4.8) (4.6) (4.1)

23 Primary deficit (22-11)1,77,020 1,44,473 1,04,166

(1.8) (1.3) (0.8)

Where Rupee comes from and where it goes

Year2010 –

112011 –

122012 –

132013 –

142014 – 15 Estimated

Fiscal Deficit

4.9% 5.7% 4.9% 4.5% 4.1%

Fiscal Deficit

Year2007 – 08

2008 – 09

2009 – 10

2010 – 11

2011 – 12

2012 – 13

2013 – 14

2014 – 15

Share of subsidy as a % of GDP

1.3% 2.2% 2.2% 2.2% 2.4% 2.6% 2.3% 1.9%

Share of Subsidies – as it is, whether it is BJP or Congress

Defence Outlay

Huge opportunity for Indian Industry to tap Defence Sector

Total Capital Budget 94,588Total Revenue Budget 1,34,412Total Defence Budget 2,29,000

Boost to Real Estate SectorREITS to become operational.

FDI in Real Estate relaxed.

Cheaper credit to low cost housing.

Tax deduction limits for Housing Loan interest raised from Rs. 1.5 to Rs. 2 lacs U/S 24.

Sec 80 – C Limits from Housing Loan instalment deduction raised.

Development of 100 Smart Cities.

Income TaxExemption limits for Indi. / HUF raised

From 2,00,000 to 2,50,000 From 2,50,000 to 3,00,000 (Person above 60 yrs.) No change – Rs. 5,00,000 (Person above 80 yrs.)

Dividend Distribution Tax increased from 15% to 17.64%.

Debt based Mutual Fund to qualify as long term capital asset only if held for 36 months and shall be taxed @ 20% after indexation.

Income TaxTaxation of REITS – shall be listed on stock exchange will be taxed as Equity Shares.

Long term gain – NIL Short term gain – 15% Dividend – NIL Interest – Taxable on slab rates.

Investment limit for deduction @ 15% U/S 32AC reduced to 25 Cr from 100 Cr for investment in Plant & Machinery.

Limit for deduction U/S 80C raised from Rs. 1 lac to Rs. 1.5 lac.

Limit for deduction U/S 24 raised from Rs. 1.5 lac to Rs. 2 Lac.

Income TaxU/S 40 (a) (i) for non deduction of TDS, only 30% expenditure will be disallowed. All payments where TDS is supposed to be made now covered.

TDS defaults can be reopened parallel with reopening of assessment proceedings.

Deductions U/S 54 & 54 F available only for investment in residential house in India.

Income TaxTDS from insurance policy payments which are not exempt U/S 10 (10D) @ 2% on amount exceeding Rs. 1,00,000/-.

Powers of the Income Tax Commissioners to cancel the registration of the trust widened.

Benefit of 12AA registration to be given retrospectively.

Income TaxCapital gain exemptions in specified Bonds now limited to Rs. 50 lacs. Cannot be split in 2 years to claim Rs. 1 Cr deduction.

Under Section 145 method of computation (not method of accounting) income shall be notified.

Where a survey is carried out to verify the compliance of TDS, books of accounts cannot be impounded nor inventory stock, cash valuables can be made.

Income Tax

Advance Ruling Authority for resident tax payers above a defined threshold.

To enlarge the scope of Settlement Commission.

No provision for the same in the Finance Bill

Sale of PSU shares to Retail Public

Government Plans to sell shares of Public sector undertakings to the tune of Rs. 43,425 Crores. Highest ever target.

Plans to sell shares of PSU Banks after retaining 51% holding.

Interesting allocations in

Budget…Budgetary allocation to Indian Space Research Organisation (ISRO) at Rs. 6000 Cr, up by 50%

What can derail the dream

Uncertain monsoon

Situation in Iraq

Global Economic disturbances

“If you have built castles in the air, your work need not be lost… that is where they should be… Now put the foundations under

them.”

P. Chidambaram quoted

in his 2008 Budget speech – Henry David Thoreau

The Challenge

In the words of the Shri Atal Behari Vajpayee – quoted by Shri Yashwant Sinha in his Budget speech 1999 – 2000.

With dreams of prosperity and marching at a stormy pace, the tide of patriotism will not recede. Let the courageous come forward to join me.

Thank you…