HIGH LIGHTS OF BUDGET 2014-15

PERSONAL INCOME-TAX EXEMPTION LIMIT RAISED BY RS. 50,000;

INVESTMENT LIMIT UNDER SECTION 80C OF INCOME-TAX ACT RAISED TO RS. 1.5 LAKH.

DEDUCTION LIMIT ON ACCOUNT OF INTEREST ON LOAN IN RESPECT OF SELF
OCCUPIED HOUSE PROPERTY RAISED FROM RS.1.5 LAKH TO RS.2 LAKH

TAX PROPOSALS

The Finance Minister has retained the targets of tax collection at the level of the interim budget presented in February. Taxation proposals have been made with a view to introduce measures to revive the economy, promote investment in manufacturing sector and rationalize tax provisions so as to reduce litigation as well as to address the problem of inverted duty structure in certain areas. In addition, some relief is proposed to individual taxpayers and to certain sectors of the economy.

There is no change in income tax rates, surcharge and educational cess. To provide relief to small and marginal tax payers, personal income tax exemption limit is being raised from Rs. 2 lakh to Rs. 2.5 lakh. For senior citizens, the exemption limit will be Rs. 3 lakh. Further, the investment limit under Section 80C of the Income-tax Act is being raised from Rs. 1 lakh to Rs. 1.5 lakh. Deduction limit for interest on housing loan (for self-occupied house property) goes up from Rs. 1.5 lakh to Rs. 2 lakh.

Free baggage allowance is proposed to be increased to Rs. 45000; it is Rs. 35000 at present.

To incentivise small entrepreneurs in the manufacturing sector, it is proposed to provide investment allowance at the rate of 15 percent to a manufacturing company that invests more than Rs. 25 crore in any year in new plant and machinery. This benefit will be available for three

years i.e. for investments upto 31.03.2017. The scheme announced last year, to provide investment allowance to manufacturing companies investing more than Rs. 100 crore in plant and machinery will continue till March, 2015.

Investment linked deduction is being extended to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semi-conductor wafer fabrication manufacturing units. Ten-year tax holiday is being proposed to the undertakings which begin generation, distribution and transmission of power by 31.03.2017. This long-term measure will help the investors to plan their investments better.

On Direct Tax Code (DTC), the Government will consider the comments received from takeholders. It will review the DTC in its present shape and take a view in the whole matter.

With a view to transition towards Goods and Services Tax (GST) changes in service tax have been kept at the minimum. The focus is on widening the tax base and enhancing compliance. It is proposed to prune the negative list and exemptions. Services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants are being brought under service tax. Services provided by the Employees’ State Insurance Corporation for the period prior to 1st July 2012 will now be exempt from service tax. Service tax on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled, will also be exempt from service tax.

The Budget has a number of proposals for tax facilitation and dispute resolution. For income tax facilitation, 60 new Aykar Seva Kendras will be opened in 2014-15. Indirect tax facilitation measures include opening 24×7 customs clearance facility in 13 more airports in respect of all export goods and in 14 more sea ports in respect of specified import and export goods. It is also proposed to implement an ‘Indian Customs Single Window Project’ to facilitate trade.

The scheme of Advance Ruling in Indirect Taxes is being extended to cover resident private limited companies and the scope of Settlement Commission is being enlarged to facilitate quick dispute resolution. Amendments are proposed in the Customs and Central Excise Acts with a view to freeing Appellate Authorities for fast disposal of appeals. In order to reduce litigation on transfer pricing issues, a number of changes are proposed in Transfer Pricing Regulations.


To remove uncertainty in taxation of Foreign Portfolio Investors (FPIs) and to encourage their fund managers to shift to India, the Budget proposes to provide that income arising to them from transaction in securities will be treated as capital gains.

In order to augment low cost foreign borrowings by Indian companies, the eligible date of borrowing is being extended up to 30/06/2017 for availing concessional tax rate on interest payments.

Tax rates have been rationalized where needed, and made favourable to certain sectors to boost their growth. Basic customs duty is being reduced on fatty acids, oils, glycerine, petrochemicals, certain wind energy equipment etc. Cathode ray TVs, LCD and LED TV panels

of below-19 inches and certain inputs used in solar power equipment are being fully exempted from basic customs duty.

The Budget proposes rationalization of duties relating to different types of coal, scrap and diamond items.

Excise duty is proposed to be reduced on specified food processing and packaging machinery, footwear of retail price up to Rs. 1000 per pair and sports gloves. A number of items in use in renewable energy industry are proposed to be exempted from excise duty. Duty on a number of electronics items is being rationalized or reduced.

The Finance Minister has proposed to mobilize resources by increasing excise duty on cigarettes, pan masala, gutka, chewing tobacco and aerated waters containing added sugar. Clean energy cess will now be levied at higher rates on coal, peat and lignite. Import of smart card will now attract higher CVD. Imported flat-rolled stainless steel products will attract a higher basic customs duty.

The direct tax proposals will result in net revenue loss of Rs. 22,200 crore and indirect tax proposals, revenue yield of Rs. 7,525 crore.

Source;pib