Arun Jaitley's budget leaves income tax rates unchanged, revives Direct Taxes Code
July, 11th 2014
The Budget for 2014-15 today left income tax rates unchanged but provided sops to small and marginal assessees by raising the threshold exemption limit from Rs 2 lakh to Rs 2.5 lakh and investments under 80C by Rs 50,000 to Rs 1.5 lakh while promising not to bring tax changes with retrospective effect.
Presenting the maiden budget of the BJP-led NDA government, Finance Minister Arun Jaitley raised the deduction limit on interest on housing loan for self-occupied property from Rs 1.5 lakh to Rs 2 lakh and free-baggage allowance for inbound passengers from Rs 35,000 to Rs 45,000. The Budget makes cigarettes, tobacco, pan-masala, gutka and cold-drinks costlier by raising excise duties while CRT TVs used by poor, LCD and LED TV panels of less than 19-inches will be cheaper through cuts in customs duties.
In encouraging signals to domestic and foreign investors, Jaitley announced that all fresh cases arising out of retrospective amendments of 2012 in respect of indirect transfers will be scrutinised by a high level committee to be constituted by the CBDT before any action is initiated. "I hope the investor community both within India and abroad will repose confidence on our stated position and participate in the Indian growth story with renewed vigour," he said, offering a stable and predictable tax regime.
He also said the government will revive the revised Direct Taxes Code (DTC) taking into account the comments of stakeholders. The Finance Minister said government will promote FDI by raising the cap to 49% in Defence and Insurance with full Indian management and control. The direct tax proposals involve a sacrifice of Rs 22,200 crore while indirect tax proposal will yield a revenue of Rs 7,725 crore.
The Budget raises defence spending by 12.5% to Rs 2.29 lakh crore. Non-plan expenditure for the current year has been estimated at Rs 12,19,892 crore with additional amount for fertiliser subsidy and capital expenditure for armed forces. The total expenditure estimates stand at Rs 17,94,892 crore. Gross tax receipts will be Rs 13,64,524 crore, of which Centre's share will Rs 9,77,258 crore. Non-tax revenues for current financial year will be Rs 2,12,505 crore and capital receipts other than borrowings will be Rs 73,952 crore.
The Budget pegs the fiscal deficit for the current fiscal at 4.1% of the GDP and 3.6 and 3% in 2015-16 and 2016-17 respectively. In an apparent reference to the previous government, Jaitley said slow decision making had resulted in a loss of opportunity and two years of sub-5% growth in the economy has resulted in challenging situation.
He said government intends to usher in a policy regime that would bring the desired growth, lower inflation, sustained level of external sector balance and prudent policy stance. The Finance Minister said the present situation presents a challenge of slow growth in manufacturing sector, in infrastructure and also the need to introduce fiscal prudence. The tax to GDP ratio must be improved and non-tax revenue increased, he said while pruning the negative list for levy of service tax