Budget 14 Analysis

NILESH N. SHAH & ASSOCIATES, CHARTERED ACCOUNTANTS.
INDIA

Highlights of Budget for 2014
The following are some of the key highlights of the Union Budget
2014, presented by Honble Finance Minister Arun Jaitley in the
Parliament today on 10
th
J uly 2014:
NILESH N. SHAH & ASSOCIATES, CHARTERED ACCOUNTANTS.INDIA


1. All retrospective tax cases to be scrutinized by high-level
commission.. This government will not bring any
retrospective amendments.

2. Will streamline taxation and avoid harassment

3. No change in tax rate.

4. Personal tax exemption limit raised to Rs 2.5 lakh from
current Rs 2 lakh for taxpayers below 60 years.
a. Senior citizens' tax exemption limit hiked from Rs 2.5
lakh to Rs 3 lakh.
b. No Change in exemption limit of very senior citizen
assessee.
c. No change in surcharge & education cess.
d. Maximum Savings of Rs. 5150 across all individual
assesses other than very senior citizen assessee.

5. Annual Provident Fund limit will be increased from Rs. 1
Lakh to Rs.1.5 lakh


6. Investment limit under Section 80C from Rs 1 lakh to Rs 1.5
lakh
Maximum savings for all assessee due to changes in Section
80C as follows:
Income Range Maximum
tax
Savings
(A)
Education
cess
(B)
Total
Maximum
Savings
(A)+(B)
Up to 5,00,000 5,000 150 5,150
5,00,001-
10,00,000
10,000 300 10,300
Above 10,50,000 15,000 450 15,450
7. Housing loan interest deduction for Self Occupied Property
increased to Rs.2 lakh from Rs.1.5 lakh.(Section 24),
Maximum savings for all assessee due to changes in Section
24 as follows:
Income
Range
Maximum tax
Savings (A)
Education
cess
(B)
Total
Maximum
Savings
(A)+(B)
Up to
5,00,000
5,000 150 5,150
5,00,001-
10,00,000
10,000 300 10,300
Above
10,50,000
15,000 450 15,450

8. Hence TOTAL Maximum possible savings are as under:

1.) For all assessee (except very senior citizen):

Income
Range
Due to
exemption
limit
Due to 80C Due to
Interest on
housing loan
Total
Maximum
Savings
Upto
5,00,000
5,150 5,150 5,150 15,450
5,00,001-
10,00,000
5,150 10,300 10,300 25,750
Above
10,50,000
5,150 15,450 15,450 36,050

2.) For very senior citizen assessee:

Income
Range
Due to
exemption
limit
Due to 80C Due to
Interest on
housing loan
Total
Maximum
Savings
Upto
5,00,000
Nil Nil Nil Nil
5,00,001-
10,00,000
Nil 10300 10300 20600
Above
10,50,000
Nil 15450 15450 30900

ASSESSMENT YEAR 2015-16 RELEVANT TO FINANCIAL YEAR
2014-15

1. Tax Slab for an Individual (resident & below 60 years) or
HUF/AOP/BOI/AJP
Income Slabs Tax Rates
Total income up to Rs. 2.5
Lac
0% Tax
Total income above Rs. 2.5
Lac and below Rs.5 Lac
10% on amount exceeding Rs. 2.5 Lac
Total income above Rs. 5 Lac
and below Rs.10 Lac
20% on Income exceeding Rs. 5 Lac +Rs.
25,000
Total income more than Rs.
10 Lac
1,25,000
*U/S 87A the Individual having taxable income upto Rs 5 lacs can claim
rebate on the actual tax amount subject to a maximum of Rs 2000

Where the Taxable Income exceeds Rs. 1 crore, Surcharge @ 10% of
Income tax is applicable
2. Tax Slab for an Individual (resident & above 60 years but below 80
years)
Total income up to Rs. 3.00
Lac
0% Tax
Total income above Rs. 3.00
Lac and below Rs.5 Lac
10% on amount exceeding Rs. 3.00 Lac
and below Rs.10 Lac
20,000
10 Lac
1,20,000
*U/S 87A the Individual having taxable income upto Rs 5 lacs can claim
rebate on the actual tax amount subject to a maximum of Rs 2000

3. Tax Slab for an Individual (resident & above 80 years)

Total income up to Rs. 5 Lac 0% Tax
and below Rs.10 Lac
20% on Income exceeding Rs. 5 Lac
10 Lac
1 Lac

EDUCATION CESS
The amount of Income-tax shall be increased by Education Cess of 3% on
Income-tax.

9. Companies whose principal business is trading in shares will
not be treated as carrying out Speculation business by
Amending Explanation of Section 73.Hence loss from such
business will not be treated as speculation loss which has a
restriction of setting off against speculation business income
only. This will be positive for Brokering & Trading
Companies.

10. Advance received and forfeited will be charged to tax
in the year in which it is received under Income from other
sources if transfer does not takes place (Section 56)
Section 51 is amended accordingly to avoid double taxation
by reducing such advance from cost of asset at the time of
actual transfer where amended Section 56 is applicable.


11. Clarifactory amendment of exemption from capital gain
arising on transfer of Land or building or residential house or
any other capital asset allowed only if one residential house
is constructed under Section 54/ Section 54F.

12. Deduction on account of Interest , Royalty and Fees to
non- resident will be allowed as deduction if paid before the
due date of filing of return(which was earlier allowed in the
year in which TDS was paid. By amending Section 40(a) in
line with section 40(ia).

13. 30% of expense will be disallowed instead of the
entire expenditure for non-payment of TDS on interest
,royalty, rent, fees and payment to contractor. (Section
40(ia)) This is applicable only for payment to residents.

14. Holding period of Debt oriented fund less than 36
months (previously 12 months) will be treated as a short
term.(Section 2(42A)).
a. Long term capital gains from such units will be taxed at
20% (instead of lower of 10%(without indexation) and
20% with indexation as at present.)

15. Investment allowance at 15% for 3 years up to
31.03.2017 to manufacturing company which invest more
than Rs 25 crore in plant and machinery

16. Proposed to extend 10-year holiday to power generating
companies

17. Kisan Vikas Patra to be reintroduced

18. Income arising to foreign portfolio investors from
transaction in securities to be treated as capital gains.

19. Introduction of range concept for determination of
arms length price in transfer pricing regulations. To allow
use of multiple year data for comparability analysis under
transfer pricing regulations.

20. TDS @ 2% on non-exempt payments made under life
insurance policy wef 01.10.2014 including the sum allocated
by way of bonus on such policy .Section 194 DA.If such
payments are more than Rs.100000/- (Rupees One lac ) in a
year


Service Tax:

Minimal changes. Negative list: Sales of space for
advertisements on online. Newspapers will remain
exempted. To broaden the tax base in Service Tax, sale of
space or time for advertisements in broadcast media,
extended to cover such sales on other segments like online
and mobile advertising -
Tourism to be boosted for change in service tax. Services
provided by Indian tour operators to foreign tourists in
relation to a tour wholly conducted outside India to be taken
out of the tax net and Cenvat credit for services of rent-a-cab
and tour operators to be allowed to promote tourism.
Services by air-conditioned contract carriages and technical
testing of newly developed drugs on human participants
brought under service tax.
Exemption available for specified micro insurance schemes
expanded to cover all life micro-insurance schemes where the
sum assured does not exceed `.50, 000 per life insured -
For safe disposal of medical and clinical wastes, services
provided by common biomedical waste treatment facilities
exempted.

Direct Tax Code And GST:
Govt will review and take a decision. Previous proposal lapsed
with dissolution of Lok Sabha. Introduction of GST to be given
thrust


Indirect Taxes
Customs duty:
Reduced basic customs duty for some industries with varying
rates
LCD and LED TV prices below 19 inches to go down.
Basic custom duty on LED panel below 19 inch made zero
Coal customs duty changed to reduce disputes regarding
quality of coal
Hikes customs duty on flat steel products to 7.5% from 5%
Excise duty:
Tweaked to boost domestic production
Concessional 2% benefit to sports clubs
Cigarettes, Pan Masala, Gutka, chewing tobacco: Price to go
up by hiking duty
Additional duty of excise on aerated waters containing added
sugar
Reduced duty in footwear, packaged food
food processing will get incentives. Excise duty would be
reduced to 6% from 10%"
Rs.10,000 crore venture capital fund will be set up to attract
new entrepreneurs
Rs 7500 crore additional revenue due to changes in indirect
taxes
Warehousing capacity will be increased. Rs.5000 crore will
be set aside for this

Sectoral Reforms
Andhra Pradesh-Telengana: Provisions to help both states
60 more Ayakar Sewa Kendras to be set up across the country
Rs 10000 crore extra to build railways in North East over and
above Interim Budget
Displaced Kashmiri migrants: Rs 500 crore for rehabilitation
Himalayan studies: National centre in Uttarakhand with initial
outlay at Uttarakhand
North East: organic farming development: Rs 100 crore
Metro projects for cities with over 20 lakh population must begin
now. Lucknow to get Metro.Metro for Ahmedabad too".

Currency notes to have Braille-like signs
Tourism: e-visas to be introduced at nine airports in the country in
a phased manner

Real estate investment trusts modified REITS is being
announced for infrastructure projects to reduce pressure on
banking system .With pas way status to avoid double taxation

Sports
National Sports academies at different parts of the country
J ammu & Kashmir: special sum of Rs 200 crore to upgrade indoor
and outdoor stadiums
Sports University in Manipur: Rs 100 crore
International events to be held in North and North East India
Rs 100 crore for training of sports persons for Asian Games
Young leader's programme: Rs 100 crore
Rivers
Serious effort to link rivers. Sets aside Rs 100 crore for a report.
Substantial money spent to clean Ganga. Integrated Ganga
Conservative Mission: Rs 2037 crore for it
Rs 100 crore for Ghat development
Science and technology
Turn 5 centres into research instituions. PPP model
2 clusters for research in Kolkata and Pune

Defense
Rs 2,29000 crore for defense
1 rank- 1 pension for army
Rs 1000 crore set apart for it

Capital outlay increased by Rs 5000 crore over interim Budget

Police reforms: Rs 3000 crore set asie vs Rs 1800 crore last Budget

Banking
Govt in principle agrees to consolidation of PSU banks
Rise of NPA matter of concern
6 new revival tribunals to be set up
Bank will be encouraged to give long term funds & loans to the
infrastructure sector
Insurance
Insurance Bill to be brought for consideration in Parliament
Special small saving instrument for girl child education and girl
marriage
PPF scheme: Rs 1.5 lakh per annum
Financial Sector
Essential to strengthen financial sector
Modern monitory policy to be brought in

Advise regulators for liquid corporate bond market, eliminate
unnecessary restrictions
Allow international settlements of bond settlements
Introduce uniform KYC norms across financial sector
1 operating Demat account to control any instrument
New accounting norms for corporate India: mandatory by 2017
Energy and transport
Rs 4200 crore: Inland navigation
Airport:Scheme for airport in Tier 1 and 2 under Airport Authority
of India. Airport to be built under PPP mode
Road:NHAI to get Rs 37000 crore; include Rs 3000 crore for
North East
New and renewable energy: Ultra modern solar plant in Tamil
Nadu, Rajasthan and Ladakh
Oil and gas: Use of PNG to be increased
15000 km of gas pipeline in the country now. Additional 15000 km
required. To be developed under appropriate PPP model.
Mining: Encourage investment, promote sustainable mining.
Current impass including iron ore to be carried out quickly.
4200 cr set aside for the Jal Marg Vikas project on river Ganga
connecting Allahabad to Haldia,over 1620 km
National Industrial corridor with headquarter in Pune

SME: Bulk of service sector also SMEs. Majority run by SC ST
OBC. Financing is important. Need to examine financial
architecture of this sector. Set up committee to give suggestion in 3
months.
Venture capital in SME: Rs 10,000 crore fund. To attract other
investors
Apprentice Act to be suitably amended to strengthen the
Apprentice Training Scheme
All the Govt departments and ministries will be integrated through
E-platform by 31 Dec this year
16 new port porjects this year
Agriculture sector
Fertilser- must take care of degradation of soil. Intitial fund of Rs
100 crore for climate change fund.
Farmers bank lending: propose to produce of Rs 5 lakh to
Bhumeeheen Kisan groups through NABARD
Price stabilization fund
Food, oil subsidies to be more targeted
Indigenous cattle breeding to be supported
Banks: target of Rs 8,00,000 crore to lend to agriculture sector
Short term crop loan: Farmers to get further incentive of 3% for
farmers who pay on time. Was already getting loan at 7%.
Raise RIDF corpus by Rs 5000 crore. Target of Rs 25000 crore set
by Chidambaram

Rs 5000 crore for infrastructure fund in agriculture
Long term rural credit bank to provide support to cooperative
banks and RRBs, by NABARD. Rs 5000 crore allocated.
Producer's development fund to get Rs 200 crore in NAABARD
Food Sector
Need to restructure FCI
Govt will undertake open market sales to keep prices under control
Farmers to get information on new techniques. Rs 100 crore set
aside
E-based platforms:
FTII Pune, SRFTI Kolkata: special status of national importance
Use of recycled water, solid waste management, sae drinking
water: hubs using PPP model to be set up
Rs 100 crore: Metro project in Lucknow
Propose to set up 5 new IIMs in HP, Punjab, Bihar, Odisha &
Maharashtra:
Low cost housings 4000 crore for National Housing Bank
Slum development to be part of CSR.
Currency notes to have Braille
Rs 200 crore for 4 agricultural institutes in 4 states
Rs 100 crore has been allocated for the modernization of Madrasas

Universal healthcare: 4 more AIIMS in Andhra Pradesh, West
Bengal, Vidharbha, Purvanchal. Rs 500 crore set aside
12 more medical colleges in government hospitals.
Aim to create AIIMS in every state of the country
Rs 3650 crore for safe drinking water
Toilets and drinking water in all girls' school to begin with. More
than Rs 26000 crore set aside
Under the 'Pradhanmantri sadak yojna' propose 14,389 cr for
development of roads.

Budgetory Allocations
Rs 50548 crore for SC-ST plan
Senior citizens: Additional pension introduced by NDA govt last
time.
Unclaimed amount of PPF etc. Mostly out of investments
belonging of senior citizens. Set up a committee to protect senior
citizens. Report by December 2014.
EPFO to launch unified accounts to transfer PF funds.
Min pension of Rs 1000 per month. Initial fund of Rs 250 crore.
Differently abled persons: Make incluisve opportunities. Centre for
sports for differently abled
Visually challenged: 15 new braille press.

Women's safety: Rs 50 crore to be spent by Roads ministry to
increase safety of women on roads: Pilot project
Beti bachao Beti padhao Yojana: Apathy towards girl child
rampant. Rs 100 crore allocation.
NREGA: Rural SHGs extend 4% loans to more rural areas.
NREGA to target more productive work.
National Housing programme: Rs 8000 crore

Budget 14 Analysis

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NILESH N. SHAH & ASSOCIATES, CHARTERED ACCOUNTANTS.

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