Budget 2015 Analysis

Posted on : Saturday, February 28, 2015

With high expectation from Corporate and middle class, the Finance Minister Arun Jaitley presented the Finance Bill on February 28, 2015. Unfortunately, the Budget 2015 did not meet the expectations of a common man. The Income Tax exemption limit remains the same and the Service Tax has increased from 12.36% to 14% which makes the cost of all the essential services such as telephone and mobile service, hospital service etc more expensive.

On the other hand, the Budget 2015 was in line with the expectation from Corporate by focusing more on ease of doing business in India and planning to reduce Corporate Tax from 30% to 25% over a period of four years. It’s easy to determine that the Government plans to make Indian business eco system conducive with Narendra Modi’s Make in India campaign and his efforts to encourage entrepreneurship. The Budget aims to generate employment through revival of growth and investment and promotion of domestic manufacturing and Make in India. To achieve this, it plans to increase FDI in defence, Insurance, and Railway Infrastructure and rationalize the conditions of FDI in construction and medical devices sectors.

The tax reforms continue with abolition of Wealth Tax and introduction of GST from April 1, 2016. On the flip side, it has taken measures to block the pooling of black money in relation to foreign income and assets with rigorous imprisonment upto 10 years and 7 years in case of non-filing the Income Tax Return.

Now let us discuss the impact of Budget 2015 on the 3 Major Sectors.

Income Tax

1. The exemption of transport allowance has been increased from Rs. 800 per month to Rs. 1,600 per month.
2. The deduction limit u/s 80D has been increased from Rs. 15,000 to Rs. 25,000 (in case of senior citizen from Rs. 20,000 to Rs. 30,000).
3. Super rich are to be taxed more as surcharge has been increased from 10% to12% in case income earned is more than Rs. 1 crore.
4. The limit of Deduction U/s 80CCC has been increased from Rs. 1 lakhs to Rs. 1.5 Lakhs.
5. The limit of deduction u/s 80CCD for contribution to National Pension Scheme (NPS) has been increased from Rs. 1 lakh to Rs. 1.50 lakhs. Additional deduction is allowed upto Rs. 50,000 over and above the limit of Rs. 1.50 lakhs in respect of contributions made to NPS.
6. The limit u/s 80DDB has been increased from Rs. 60,000 to Rs. 80,000, if the expenses are incurred on Very Senior Citizen on specified diseases.
7. The Limit u/s 80DD has been increased from Rs. 50,000 to Rs. 75,000 in case of disability and from Rs. 1,00,000 to Rs. 1,25,000 in case of severe disability.
8. The tax benefits u/s 80U has been increased from Rs. 50,000 to Rs. 75,000 in case of disability and from Rs. 1 lakh to Rs. 1,25,000 in case of severe disability.
9. Donations to Swachch Bharat Kosh, Clean Ganga Fund, National Fund for Control of Drug Abuse (NFCDA) are eligible for 100% deduction under Section 80G.
10. Rigorous Imprisonment upto 10 years if foreign income or assets ought to be concealed.

Agriculture

1. Allocated Rs. 25,000 Crores for Rural Infrastructure Development Fund.
2. Allocated Rs. 5,300 Crores to support Micro Irrigation project.
3. Issuance of Tax Free Bonds for Rail Road and Irrigation.
4. Aims to give credits to the Farmers to tune of Rs. 8,50,000 Crores.

Infrastructure

1. Rs. 70,000 crore has been allocated for Infrastructure Sector.
2. Tax Free Bonds to be issued for Rail Road.
3. PPP model for Infrastructure development to be revitalized.
4. Rs. 150 Crore allocated to Attal Innovation Mission to draw on expertise of entrepreneurs and researcher to foster Scientific Innovation.

In a nutshell, the Budget strongly emphasized on non-populist Economic Policies in spite of forth coming elections in Bihar and West Bengal. It targets to roll out the easiness of doing business in India thereby increasing Agricultural productivity. However, the hopes of middle class people were shattered as there were hardly any reforms with respect to Income Tax. Further, price hike of Rs. 3 in prices of petrol and diesel from 28th Feb, 2015 night has disappointed them to a great extent.

To get the highlights of Union Budget 2015 download our free PDF guide Budget 2015 Highlights now!

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