Budget 2015-2016 – Speech of Finance Minister

Budget  2015-2016 

Speech  of Arun Jaitley Minister of Finance

 February 28, 
2015

 

Madam Speaker,

            I rise to
present the Budget of the Union for the year 2015-16.

2.         I
present this Budget in an economic environment which is far more positive than
in the recent past. When other economies are facing serious challenges, India
is about to take-off on a faster growth trajectory once again. The
International Monetary Fund (IMF) has downgraded its earlier forecast of global
economic growth by 0.3%, and the World Trade Organization has revised its
forecast of world trade growth from 5.3% to 4%. 
Forecasts for India, however, have either been upgraded, or remained the
same, without downgrades.  Madam Speaker,
we have also embraced the States as equal partners in the process of economic
growth.  States have been economically
empowered more than ever before and it is my belief that every rupee of public
expenditure, whether undertaken by the Centre or the States, will contribute to
the betterment of people’s lives through job creation, poverty elimination and
economic growth.

3.         In
the last nine months, the NDA Government headed by Prime Minister Shri Narendra
Modi, has undertaken several significant steps to energise the economy.  The credibility of the Indian economy has
been re-established.  The world is
predicting that it is India’s chance to fly.

            Kuch to phool khilaye
humne, aur kuch phool khilane hai

            Mushkil yeh hai bag me ab tak, kaante kai purane hai

4.         Though
the Union Budget is essentially a Statement of Account of public finances, it
has historically become a significant opportunity to indicate the direction and
the pace of India’s economic policy.  My
proposals, therefore, lay out the roadmap for accelerating growth, enhancing
investment and passing on the benefit of the growth process to the common man,
woman, youth and child: those, whose quality of life needs to be improved.  This is the path which we will doggedly and
relentlessly pursue.  As the Prime
Minister has often said, we are a round-the-clock, round-the-year Government.

5.         Madam,
allow me to describe the changes in the Indian economy since we first took
office.  In November, 2012, CPI
inflation, stood at 11.2%, the current account deficit by the first quarter of
2013-14 had reached 4.6% of GDP, and normal foreign inflows until March 2014
were $15 billion.  We inherited a
sentiment of, if I may say so, doom and gloom, and the investor community had
almost written us off. 

6.         We
have come a long way since then. The latest CPI inflation rate is 5.1%, and the
wholesale price inflation is negative; the current account deficit for this
year is expected to be below 1.3% of GDP; based on the new series, real GDP
growth  is expected to accelerate to
7.4%, making India the fastest growing large economy in the world; foreign
inflows since April 2014 have been about $55 billion, so that our foreign
exchange reserves have increased to a record $340 billion; the rupee has become
stronger by 6.4% against a broad basket of currencies; and ours was the
second-best performing stock market amongst the major economies.  In short, Madam Speaker, we have turned
around the economy dramatically, restoring macro-economic stability and
creating the conditions for sustainable poverty elimination, job creation and
durable double-digit economic growth. Domestic and international investors are
seeing us with renewed interest and hope.

7.         While
being mindful of the challenges, Madam Speaker, this gives us reason to feel
optimistic. With all the humility at my command, I submit that this opportunity
has arisen because we have created it. The people of India had voted
resoundingly for quick change, faster growth and highest levels of
transparency. They wanted the scam, scandal and corruption Raj to end.  They wanted a Government in which they can
trust. We have lived up to that trust.

8.         Our
actions have not been confined to the core or macro-economic areas alone.  Illustratively, action has been taken with
regard to allocation of natural resources; financial inclusion; health and
hygiene of the common man; girls and their education; employment for the youth;
improved and non-adversarial tax administration; effective delivery of
benefits; investment and job creation; welfare of labour; agricultural
productivity and increasing farm incomes; power; digital connectivity; skilling
our youth; efficient and better work culture in Government; ease of doing
business; mainstreaming North Eastern States; and, reviving our pride in the
nation and culture.  I am giving the
details in an Annexure to this speech.

9.         Madam
Speaker, of the work that we have done, I would like to talk of three
achievements as they demonstrate the quality and conviction of our
government.  One is the success of the
Jan Dhan Yojana.  Financial inclusion has
been talked about for decades now.  Who
would have thought that in a short period of 100 days, over 12.5 crore families
could have been brought into the financial mainstream?  The other is coal auctions.  Earlier, the States only got benefits of
royalty. Now, by the transparent auction process that we are carrying out, the
coal bearing States will be getting several lakh of crore of rupees which they
can use for creation of long awaited community assets and for welfare of their
people.

10.       The
third is ‘Swachh Bharat’ which we have been able to transform into a movement
to regenerate India.  I can speak of, for
example, the 50 lakh toilets already constructed in 2014-15, and I can also
assure the Members of this august House that we will indeed attain the target
of building six crore toilets.  But,
Madam, Swachh Bharat is not only a programme of hygiene and cleanliness but, at
a deeper level, a programme for preventive health care, and building awareness.

11.       We are
now embarked on two more game changing reforms. 
GST and what the Economic Survey has called the JAM Trinity – Jan Dhan,
Aadhar and Mobile – to implement direct transfer of benefits.  GST will put in place a state-of-the-art
indirect tax system by 1st April, 2016. 
The JAM Trinity will allow us to transfer benefits in a leakage-proof,
well-targetted and cashless manner. 

12.       Madam
Speaker, one of the major achievements of my government has been to conquer
inflation.  This decline, in my view,
represents a structural shift.  Going
forward, we expect CPI inflation to remain at close to 5% by the end of the
year.  This will allow for further easing
of monetary policy.

13.       To
ensure that our victory over inflation is institutionalized and hence
continues, we have concluded a Monetary Policy Framework Agreement with the
RBI, as I had promised in my Budget Speech for 2014-15.  This Framework clearly states the objective
of keeping inflation below 6%.  We will
move to amend the RBI Act this year, to provide for a Monetary Policy
Committee.

14.       The
Central Statistics Office has recently released a new series for GDP, which
involves a number of changes relative to the old series. Based on the new
series, estimated GDP growth for 2014-15 is 7.4%.  Growth in 2015-16 is expected to be between 8
to 8.5%. Aiming for a double-digit rate seems feasible very soon.

15.       I now
come to the task ahead of us. In respect of social and economic indicators, for
seven decades now, we have worked in terms of percentages, and numbers of
beneficiaries covered.  It is quite
obvious that incremental change is not going to take us anywhere.  We have to think in terms of a quantum jump.

16.       The
year 2022 will be the Amrut Mahotsav, the 75th year, of India’s
independence.  The vision of what the
Prime Minister has called ‘Team India’, led by the States and guided by the
Central Government, should include:

(i)         A
roof for each family in India.  The call
given for ‘Housing for all’ by 2022 would require Team India to complete 2
crore houses in urban areas and 4 crore houses in rural areas. 

(ii)        Each
house in the country should have basic facilities of 24-hour power supply,
clean drinking water, a toilet, and be connected to a road. 

(iii)       At
least one member from each family should have access to the means for
livelihood and, employment or economic opportunity, to improve his or her
lot. 

(iv)       Substantial
reduction of poverty.  All our schemes
should focus on and centre around the poor. Each of us has to commit ourselves
to this task of eliminating absolute poverty.

(v)        Electrification,
by 2020, of the remaining 20,000 villages in the  country, including by off-grid solar power
generation. 

(vi)       Connecting
each of the 1,78,000 unconnected habitations by all weather roads.  This will require completing 1,00,000 km of
roads currently under construction plus sanctioning and building another
1,00,000 km of road. 

(vii)      Good
health is a necessity for both quality of life, and a person’s productivity and
ability to support his or her family. 
Providing medical services in each village and city is absolutely
essential.

(viii)     Educating
and skilling our youth to enable them to get employment is the altar before
which we must all bow.  To ensure that
there is a senior secondary school within 5 km reach of each child, we need to
upgrade over 80,000 secondary schools and add or upgrade 75,000 junior/middle,
to the senior secondary level.  We also
have to ensure that education improves in terms of quality and learning
outcomes. 

(ix)       Increase
in agricultural productivity and realization of reasonable prices for
agricultural production is essential for the welfare of rural areas.  We should commit to increasing the irrigated
area, improving the efficiency of existing irrigation systems, promoting
agro-based industry for value addition and increasing farm incomes, and
reasonable prices for farm produce. 

(x)        In
terms of communication, the rural and urban divide should no longer be
acceptable to us.  We have to ensure
connectivity to all the villages without it. 

(xi)       Two-thirds of our
population is below 35.  To ensure that
our young get proper jobs, we have to aim to make India the manufacturing hub
of the world.  The Skill India and the
Make in India programmes are aimed at doing this. 

(xii)      We also have to
encourage and grow the spirit of entrepreneurship in India and support new start-ups.  Thus can our youth turn from being
job-seekers, to job-creators. 

(xiii)     The
Eastern and North Eastern regions of our country are lagging behind in
development on many fronts. We need to ensure that they are on par with the
rest of the country.

17.       By the
time of the 75th year of Indian independence, Amrut Mahotsav of our
independence is reached, we have to achieve all of the above, so that India
becomes a prosperous  country; and a
responsible global power.  This will be
our true and meaningful tribute to our freedom fighters. 

Major
Challenges Ahead

18.       As I
stated earlier, Madam Speaker, I am also mindful of the five major challenges I
have to reckon with.  Firstly,
Agricultural incomes are under stress. 
Our second challenge is increasing investment in infrastructure.  With private investment in infrastructure via
the public private partnership (PPP) model still weak, public investment needs
to step in, to catalyse investment.

19.       Our
third major challenge is that manufacturing has declined from 18% to 17% of GDP
as per new GDP data; and manufacturing exports have remained stagnant at about
10% of GDP.  The Make in India programme
is aimed at meeting this challenge, thus creating jobs. 

20.       Fourth,
we need to be mindful of the need for fiscal discipline in spite of rising
demands for public investment. In keeping with the true spirit of co-operative
federalism, we have devolved a 42% share of the divisible pool of taxes to
States.  As members of this august House
are aware, this is an unprecedented increase which would empower states with
more resources. The devolution to the States would be of the order of `5.24 lakh crore in 2015-16 as against the devolution of `3.38 lakh crore as per revised estimates of 2014-15.  Another `3.04 lakh crore would be transferred by way of grants and plan
transfers.  Thus, total transfer to the
States will be about 62% of the total tax receipts of the country.

21.       In
spite of the consequential reduced fiscal space for the Centre, the Government
has decided to continue supporting important national priorities such as
agriculture, education, health, MGNREGA, and rural infrastructure including
roads.  Programmes targeted for the poor
and the under-privileged, will be continued by us.

22.       With
fiscal space not just reduced but squeezed, I have to meet the fifth challenge
of maintaining fiscal discipline.   
Economic growth this year, at 11.5%, was lower in nominal terms by about
2%, due to lower inflation. 
Consequently, tax buoyancy was also significantly lower.  Despite this, Madam, I have kept my word, and
we will meet the challenging fiscal deficit target of 4.1% of GDP, that we had
inherited.  Madam Speaker, I need to
overcome these challenges to reduce and eliminate poverty.

Fiscal
Roadmap

23.       I want
to underscore that my government still remains firm on achieving the medium
term target of 3% of GDP.  But that
journey has to take account of the need to increase public investment.  The total additional public investment over
and above the RE is planned to be `1.25 lakh crore out of which `70,000 crore would be capital expenditure from budgetary outlays.  We also have to take into account the
drastically reduced fiscal space; uncertainties that implementation of GST will
create; and the likely burden from the report of the 7th Pay Commission.  Rushing into, or insisting on, a pre-set
time-table for fiscal consolidation pro-cyclically would, in my opinion, not be
pro-growth.  With the economy improving,
the pressure for accelerated fiscal consolidation too has decreased.  In these circumstances, I will complete the
journey to a fiscal deficit of 3% in 3 years, rather than the two years
envisaged previously.  Thus, for the next
three years, my targets are: 3.9%, for 2015-16; 3.5% for
2016-17; and, 3.0% for 2017-18.  The additional
fiscal space will go towards funding infrastructure investment.

24.       I am
moving amendments accordingly, in the Finance Bill, to the FRBM Act.

25.       Madam
Speaker, I want to round up the discussion on the fiscal road map on an
optimistic note.  While there is a
compositional shift, the aggregate envelope for job creation, poverty
elimination and building infrastructure is not disturbed; in fact it goes up
this year, and every subsequent year, in the same proportion as the tax
revenues of the Union, and the State Governments increase.  From this national perspective of public
finances, not only is the path to fiscal consolidation on track, aggregate
annual capital expenditure of the Governments, as a whole, can be expected to
rise  significantly, by more than 0.5% of
GDP.

26.       Madam
Speaker, it may be noted that the budget reflects considerable scaling up of
disinvestment figures.  This will include
both disinvestment in loss making units, and some strategic disinvestment. 

Good
Governance

27.       Madam,
Speaker, this Government is committed in its resolve, as Indians, to regain our
pre-eminence as a just and compassionate country.  Well-intentioned schemes  introduced in the past, have often been
ill-targeted, riddled with leakages and delivered with inefficiency.  The same is true of subsidies.  Subsidies are needed for the poor and those
less well off. What we need is a well targeted system of subsidy delivery. We
need to cut subsidy leakages, not subsidies themselves.We are committed to the
process of rationalizing subsidies based on this approach. 

28.       We
have embarked on that path.  The direct
transfer of benefits, started mostly in scholarship schemes, will be further
expanded with a view to increasing the number of beneficiaries from the present
1 crore to 10.3 crore.  Similarly, `6,335 crore have so far been transferred directly, as LPG subsidy to
11.5 crore LPG consumers.  I am sure,
persons who are better-off, such as those in the top tax bracket, and those
genuinely concerned for the welfare of the poor, such as members of this House,
will give up their LPG subsidy voluntarily.

Agriculture

29.       Our
commitment to farmers runs deep.  We have
already taken major steps to address the two major factors critical to
agricultural production: soil and water. 
An ambitious Soil Health Card Scheme has been launched to improve soil
fertility on a sustainable basis.  In
order to improve soil health, I also propose to support Agiculture Ministry’s
organic farming scheme – “Paramparagat Krishi Vikas Yojana”.  The Pradhanmantri Gram Sinchai Yojana is
aimed at irrigating the field of every farmer and improving water use
efficiency to provide `Per Drop More Crop’. 
I am allocating `5,300 crore to support micro-irrigation, watershed
development and the Pradhan Mantri Krishi Sinchai Yojana.  I urge the States to chip in substantially in
this vital sector.

30.       To
support the agriculture sector with the help of effective and hassle-free
agriculture credit, with a special focus on small and marginal farmers,
I propose to allocate `25,000 crore in 2015-16 to the corpus of Rural
Infrastructure Development Fund (RIDF) set up in NABARD; `15,000 crore for Long Term Rural Credit Fund;  `45,000 crore for Short Term Cooperative Rural
Credit Refinance Fund; and `15,000 crore for Short Term RRB Refinance Fund.

31.       Farm
credit underpins the efforts of our hard-working farmers.  I have, therefore, set up an ambitious target
of `8.5 lakh crore of credit during the year 2015-16 which, I am sure, the
banks will surpass.  

32.       Our
government is committed to supporting employment through MGNREGA. We will
ensure that no one who is poor is left without employment. We will focus on
improving the quality and effectiveness of activities under MGNREGA.  I have made an initial allocation of `34,699 crore for the programme.

33.       While
the farmer is no longer in the clutches of the local trader, his produce still
does not command the best national price. To increase the incomes of farmers,
it is imperative that we create a National agricultural market, which will have
the incidental benefit of moderating price rises.  I intend this year to work with the States,
in NITI, for the creation of a Unified National Agriculture Market.

Funding the
Unfunded

34.            Madam Speaker, our government firmly believes that
development has to generate inclusive growth. While large corporate and
business entities have a role to play, this has to be complemented by informal
sector enterprises which generate maximum employment. There are some 5.77 crore
small business units, mostly individual proprietorship, which run small
manufacturing, trading or service businesses. 
62% of these are owned by SC/ST/OBC. 
These bottom-of-the-pyramid, hard-working entrepreneurs find it
difficult, if not impossible, to access formal systems of credit.  I, therefore, propose to create a Micro Units
Development Refinance Agency (MUDRA) Bank, 
with a corpus of `20,000 crore, and credit guarantee corpus of `3,000 crore.  MUDRA Bank
will  refinance Micro-Finance
Institutions through a Pradhan Mantri Mudra Yojana. In lending, priority will
be given to SC/ST enterprises. These measures will greatly increase the
confidence of young, educated or skilled workers who would now be able to
aspire to become first generation entrepreneurs; existing small businesses,
too,  will be able to expand their
activities. Just as we are banking the un-banked, we are also funding the
un-funded.

35.       A
significant part of the working capital requirement of a MSME arises due to
long receivables realization cycles.   
We are in the process of establishing an electronic Trade Receivables
Discounting System (TReDS) financing of trade receivables of MSMEs, from
corporate and other buyers, through multiple financiers.  This should improve the liquidity in the MSME
sector significantly. 

36.       Bankruptcy
law reform, that brings about legal certainty and speed, has been identified as
a key priority for improving the ease of doing business.   SICA (Sick Industrial Companies Act) and
BIFR (Bureau for Industrial and Financial Reconstruction) have failed in
achieving these objectives.  We will
bring a comprehensive Bankruptcy Code in fiscal 2015-16, that will meet global
standards and provide necessary judicial capacity.

37.       The
Government is committed to increasing access of the people to the formal
financial system.  In this context,
Government proposes to utilize the vast Postal network with nearly 1,54,000
points of presence spread across the villages of the country.  I hope that the Postal Department will make
its proposed Payments Bank venture successful so that it contributes further to
the Pradhan Mantri Jan Dhan Yojana. 

38.       To
bring parity in regulation of Non-Banking Financial Companies (NBFCs) with
other financial institutions in matters relating to recovery, it is proposed
that NBFCs registered with RBI and having asset size of `500 crore and above will be considered for notifications as ‘Financial
Institution’ in terms of the SARFAESI Act, 2002.

From Jan
Dhan to Jan Suraksha

39.       A
large proportion of India’s population is without insurance of any kind –
health, accidental or life.  Worryingly,
as our young population ages, it is also going to be pension-less.  Encouraged by the success of the Pradhan
Mantri Jan Dhan Yojana, I propose to work towards creating a universal social
security system for all Indians, specially the poor and the under-privileged.

40.       The
soon-to-be-launched Pradhan Mantri Suraksha Bima Yojna will cover accidental
death risk of `2 lakh for a premium of just `12 per year. Similarly, we will also launch the Atal Pension Yojana,
which will provide a defined pension, depending on the contribution, and its
period. To encourage people to join this scheme, the Government will contribute
50% of the beneficiaries’ premium limited to `1,000 each year, for five years, in the new accounts opened before 31st
December, 2015. 

41.       The
third Social Security Scheme that I wish to announce is the Pradhan Mantri
Jeevan Jyoti Bima Yojana which covers both natural and accidental death risk of
`2 lakhs.  The premium will be `330 per year, or less than one rupee per day, for the age group
18-50. 

42.       There
are unclaimed deposits of about `3,000 crore in the PPF, and approximately `6,000 crore in the EPF corpus.  I
have proposed the creation of a Senior Citizen Welfare Fund, in the Finance
Bill, for appropriation of these amounts to a corpus which will be used to
subsidize the premiums of vulnerable groups such as old age pensioners, BPL
card-holders, small and marginal farmers and others. A detailed scheme would be
issued in March.

43.       Madam Speaker, special regard needs to be paid to the
population of senior citizens in the country which is now approximately 10.5
crore, out of which over one crore are above the age of 80 years.  70% live in rural areas and a large number
are in the BPL category.  A sizeable
percentage of them also suffer from age related disabilities.  Ours is a society that venerates its elders.
I, therefore, propose that a new scheme for providing Physical Aids and
Assisted Living Devices for senior citizens, living below the poverty
line.   

44.       In sum, these social security schemes reflect our commitment
to utilize the Jan Dhan platform, to ensure that no Indian citizen will have to
worry about illness, accidents, or penury in old age. Being sensitive to the needs
of the poor, under-privileged and the disadvantaged, my Government also remains
committed to the ongoing welfare schemes for the SCs, STs and Women.  Despite serious constraints on Union
finances, allocations made this year are as follows:

            SC                                         ` 30,851 crore

            ST                                         ` 19,980 crore

            Women                                 ` 79,258 crore

45.       An integrated education and livelihood scheme
called ‘Nai Manzil’ will be launched this year to enable Minority Youth who do
not have a formal school-leaving certificate to obtain one and find better employment.
Further, to show-case civilization and culture of the Parsis, the Government
will support, in2015-16, an exhibition, ‘The Everlasting Flame’.  The allocation for the Ministry of Minority
Affairs is being protected. The BE for the year 2015-16 is `3,738 crore.

Infrastructure

46.       Madam, it is no secret that the major slippage in the last
decade has been on the infrastructure front. Our infrastructure does not match
our growth ambitions.  There is a
pressing need to increase public investment. 
I have, therefore, increased outlays on both the roads and the gross
budgetary support to the railways, by `14,031 crore, and `10,050 crore respectively.   The
CAPEX of the public sector units is expected to be `3,17,889 crore, an increase of approximately `80,844 crore over RE 2014-15. In fact, all told, investment in
infrastructure will go up by `70,000 
crore in the year 2015-16, over the year 2014-15 from the Centre’s Funds
and resources of CPSEs. 

47.       Secondly, I intend to establish a National Investment and
Infrastructure Fund (NIIF), and find monies to ensure an annual flow of `20,000 crore to it.  This will enable the Trust to raise debt, and
in turn, invest as equity, in infrastructure finance companies such as the IRFC
and NHB.  The infrastructure finance
companies can then leverage this extra equity, many fold.  Thirdly, I also intend to permit tax free
infrastructure bonds for the projects in the rail, road and irrigation sectors.  Fourth, the PPP mode of infrastructure
development has to be revisited, and revitalised.  The major issue involved is rebalancing of
risk. In infrastructure projects, the sovereign will have to bear a major part
of the risk without, of course, absorbing it entirely. 

48.       Fifth, I also intend to establish, in NITI, the Atal
Innovation Mission (AIM).   AIM will be
an Innovation Promotion Platform involving academics, entrepreneurs, and
researchers and draw upon national and international experiences to foster a
culture of innovation, R&D and scientific research in India. The platform
will also promote a network of world-class innovation hubs and Grand Challenges
for India.  Initially, a sum of `150 crore will be earmarked for this purpose.  

49.       India has a well regarded and world-class IT industry with
revenues of about US$ 150 billion, over US$ 100 billion of exports, employing
nearly 40 lakh people directly.  We are
now seeing a growing interest in start-ups. 
Experimenting in cutting edge technologies, creating value out of ideas
and initiatives and converting them into scalable enterprises and businesses is
at the core of our strategy for engaging our youth and for inclusive and
sustainable growth of the country. Concerns such as a more liberal system of
raising global capital, incubation facilities in our Centres of Excellence,
funding for seed capital and growth, and ease of Doing Business etc. need to be
addressed to create lakh of jobs and hundreds of billion dollars in value.

50.       With this objective, Government is establishing a mechanism to
beknown as SETU (Self-Employment and Talent Utilisation).  SETU will be a Techno-Financial, Incubation
and Facilitation Programme to support all aspects of start-up businesses, and
other self-employment activities, particularly in technology-driven areas. I am
setting aside `1,000 crore
initially in NITI Aayog for this purpose.  

51.       As the success of so-called minor ports has shown, ports can
be an attractive investment possibility for the private sector.  Ports in the public sector need to both
attract such investment as well as leverage the huge land resources lying
unused with them.  To enable us to do so,
ports in public sector will be encouraged, to corporatize, and become companies
under the Companies Act.

52.       Madam Speaker, investors spend a large amount of time and
resources on getting the multiple permissions required.  We aim towards ease of doing in India.  I have myself launched the e-Biz Portal which
integrates 14 regulatory permissions at one source.  Good States are embracing and joining this
platform.  However, if we really want to
create jobs, we have to make India an investment destination which permits the
start of a business in accordance with publically stated guidelines and
criteria.

53.       I
intend to appoint an Expert Committee for this purpose to examine the
possibility and prepare a draft legislation where the need for multiple prior
permissions can be replaced with a pre-existing regulatory mechanism. 

54.       The
Government also proposes to set up 5 new Ultra Mega Power Projects, each of
4000 MWs in the plug-and-play mode.  All
clearances and linkages will be in place before the project is awarded by a
transparent auction system.  This should
unlock investments to the extent of `1 lakh
crore.  The Government would also
consider similar plug-and-play projects in other infrastructure projects such
as roads, ports, rail lines, airports etc. I am happy to announce that the
second unit of Kudankulam Nuclear Power Station will be commissioned in
2015-16.

55.       Madam
Speaker, I hope to garner some additional resources during the year from tax
buoyancy.  If I am successful, then over
and above the budgetary allocation, I will endeavour to enhance allocations to
MGNREGA by `5,000 crore;
Integrated Child Development Scheme (ICDS) by `1,500 crore; Integrated Child Protection Scheme
(ICPS) by `500 crore;
and the Prdhan Mantri Krishi Sinchai Yojana by `3,000 crore; and the initial inflow of `5,000 crore into the NIIF. 

Financial
Markets

56.       One
vital factor in promoting investment in India, including in the infrastructure
sector, is the deepening of the Indian Bond market, which we have to bring at
the same level as our world class equity market.  I intend to begin this process this year by
setting up a Public Debt Management Agency (PDMA) which will bring both India’s
external borrowings and domestic debt under one roof. 

57.       I also
propose to merge the Forwards Markets Commission with SEBI to strengthen
regulation of commodity forward markets and reduce wild speculation. Enabling
legislation, amending the Government Securities Act and the RBI Act is proposed
in the Finance Bill, 2015.

58.       Capital
Account Controls is a policy, rather than a regulatory, matter.
I, therefore, propose to amend, through the Finance Bill, Section-6 of FEMA to
clearly provide that control on capital flows as equity will be exercised by
the Government, in consultation with the RBI. 

59.       A
properly functioning capital market also requires proper consumer
protection.  I, therefore, also propose
to create a Task Force to establish a sector-neutral Financial Redressal Agency
that will address grievances against all financial service providers.  I am also glad to inform the House that work
assigned to the Task Forces on the Financial Data Management Centre, the
Financial Sector Appellate Tribunal, the Resolution Corporation, and the Public
Debt Management Agency are progressing satisfactorily.  We have also received a large number of
suggestions regarding the Indian Financial Code (IFC), which are currently being
reviewed by the Justice Srikrishna Committee. 
I hope, sooner rather than later, to introduce the IFC in Parliament for
consideration.

60.       Madam,
Speaker, this is just the beginning.  I
have a vision of putting in place a direct tax regime which is internationally
competitive on rates, is without exemptions, incentivises savings, and does not
realize tax from intermediaries.  Such a
direct tax regime would match the modernized indirect taxes regime we are
putting in place by way of GST, and will bring both greater transparency and
greater investments.

61.       Madam
Speaker the situation with regard to the dormant Employees Provident Fund (EPF)
accounts and the claim ratios of ESIs is too well known to be repeated
here.  It has been remarked that both EPF
and ESI have hostages, rather than clients. 
Further, the low paid worker suffers deductions greater than the better
paid workers, in percentage terms.

62.       With
respect to the Employees Provident Fund (EPF), the employee needs to be
provided two options. Firstly, the employee may opt for EPF or the New Pension
Scheme (NPS).  Secondly, for employees
below a certain threshold of monthly income, contribution to EPF should be
optional, without affecting or reducing the employer’s contribution. With
respect to ESI, the employee should have the option of choosing either ESI or a
Health Insurance product, recognized by the Insurance Regulatory Development
Authority (IRDA). We intend to bring amending legislation in this regard, after
stakeholder consultation.

Monetising
Gold

63.       India
is one of the largest consumers of gold in the world and imports as much as
800-1000 tonnes of gold each year. 
Though stocks of gold in India are estimated to be over 20,000 tonnes,
mostly this gold is neither traded, nor monetized. I propose to:

(i)      Introduce
a Gold Monetisation Scheme, which will replace both the present Gold
Deposit and Gold metal Loan Schemes.  The
new scheme will allow the depositors of gold to earn interest in their metal
accounts and the jewelers to obtain loans in their metal account.  Banks/other dealers would also be able to
monetize this gold.

(ii)     Also
develop an alternate financial asset, a Sovereign Gold Bond, as an alternative
to purchasing metal gold.  The Bonds will
carry a fixed rate of interest, and also be redeemable in cash in terms of the
face value of the gold, at the time of redemption by the holder of the
Bond. 

(iii)    Commence
work on developing an Indian Gold Coin, which will carry the Ashok Chakra on
its face.  Such an Indian Gold Coin would
help reduce the demand for coins minted outside India and also help to recycle
the gold available in the country.

64.       One
way to curb the flow of black money is to discourage transactions in cash.  Now that a majority of Indians has or can
have, a RUPAY debit card.  I, therefore,  proposes to introduce soon several measures
that will incentivize credit or debit card transactions, and disincentivise
cash transactions.

Investment

65.       Alternate Investment Funds Regulations have been notified by
SEBI.  Such alternate investment funds
provide another vehicle for facilitating domestic investments.  Keeping in view the need to increase
investments from all sources, I propose to also allow foreign investments in
Alternate Investment Funds. 

66.       To further simplify the procedures for Indian Companies to
attract foreign investments, I propose to do away with the distinction between
different types of foreign investments, especially between foreign portfolio
investments and foreign direct investments, and replace them with composite
caps  The sectors which are already on a
100% automatic route would not be affected.  

67.       The ‘Act East’ policy of the Government of India endeavours to
cultivate extensive economic and strategic relations in South-East Asia.  In order to catalyze investments from the
Indian private sector in this region, a Project Development Company will,
through separate Special Purpose Vehicles (SPVs), set up manufacturing hubs in
CMLV countries, namely, Cambodia, Myanmar, Laos and Vietnam.

Safe India

68.       My Government is committed to safety and security of
women.  In order to support programmes
for women security, advocacy and awareness, I have decided to provide another `1,000 crore to the Nirbhaya Fund. 

Tourism

69.       While India has 25 (twenty five) Cultural World Heritage
Sites.  These facilities are still
deficient and require restoration, including landscape restoration; signage and
interpretation centres; parking; access for the differently abled; visitors’
amenities, including securities and toilets; illumination and plans for
benefiting communities around them.  I
propose to provide resources to start work along these lines for the following
Heritage Sites:

(i)       Churches
& Convents of Old Goa

(ii)      Hampi,
Karnataka

(iii)     Elephanta
Caves, Mumbai

(iv)     Kumbalgarh
and other Hill Forts of Rajasthan

(v)      Rani
ki Vav, Patan, Gujarat

(vi)     Leh
Palace, Ladakh, J&K

(vii)    Varanasi
Temple town, UP

(viii)   Jalianwala
bagh, Amritsar, Punjab

(ix)     Qutub
Shahi Tombs, Hyderabad, Telengana

70.       After the success of VISAS on arrival issued to travelers of
43 countries,  I propose to increase the
countries covered to 150, in stages.

Green India

71.       Madam,
as environmental degradation hurts the poor more than others,  we are committed to make our development
process as green as possible.  Our de
facto ‘Carbon Tax’ on most petroleum products compares favourably with
international norms.  With regard to
coal, there is a need to find a balance between taxing pollution, and the price
of power.  However, beginning this year,
I intend to start on that journey too. My Government is also launching a Scheme
for Faster Adoption and manufacturing of Electric Vehicles (FAME).  I am proposing an initial outlay of `75 crore for this Scheme in 2015-16. 
The Ministry of New Renewable Energy has revised its target of renewable
energy capacity to 1,75,000 MW till 2022, comprising 100,000 MW Solar, 60,000
MW Wind, 10,000 MW Biomass and 5000 MW Small Hydro.

72.       Madam,
Speaker, we are putting the scam, scandal and corruption Raj behind us.  Malfeasance in public procurement can perhaps
be contained by having a procurement law and an institutional structure
consistent with the UNCITRAL model.  I
believe, Parliament needs to take a view soon on whether we need a procurement
law, and if so, what shape it should take. 

73.       On the
other hand, disputes arising in public contracts take long to resolve, and the
process is very costly too.  My
Government proposes to introduce a Public Contracts (Resolution of Disputes)
Bill to streamline the institutional arrangements for resolution of such
disputes.

74.       There is also a need, I feel, to tackle the lack of common approach and
philosophy in the regulatory arrangements prevailing even within the different
sectors of infrastructure.  Our
Government, therefore, also proposes to introduce a regulatory reform law that
will bring about a cogency of approach across various sectors of
infrastructure. 

Skill India

75.       India
is one of the youngest nations in the world with more than 54% of the total
population below 25 years of age.  Our
young people have to be both educated and employable for the jobs of the 21st
Century.  The Prime Minister has
explained how Skill India needs to be closely coordinated with Make in
India.  Yet today less than 5% of our
potential workforce gets formal skill training to be employable and stay
employable. 

76.       We
will soon be launching a National Skills Mission through the Skill Development
and Entrepreneurship Ministry.  The
Mission will consolidate skill initiatives spread across several Ministries and
allow us to standardize procedures and outcomes across our 31 Sector Skill
Councils. 

77.       With
rural population still forming close to 70% of India’s population, enhancing
the employability of rural youth is the key to unlocking India’s demographic
dividend.  With this in mind, we had
launched the Deen Dayal Upadhyay Gramin Kaushal Yojana.  `1,500 crore
has been set apart for this scheme. 
Disbursement will be through a digital voucher directly into qualified
student’s bank account.

78.       This
is the year when we will be entering the 100th birth anniversary of Shri Deen
Dayalji Upadhyay.  The intention of the
Government is to celebrate the anniversary of this great nationalist, in a
befitting manner.  A 100th Birthday
Celebration Committee will be announced soon, and adequate resources provided
for the celebration.

79.       With a
view to enable all poor and middle class students to pursue higher education of
their choice without any constraint of funds, I propose to set up a fully IT
based Student Financial Aid Authority to administer and monitor  Scholarship as well Educational Loan Schemes,
through the Pradhan Mantri Vidya Lakshmi Karyakram.  We will ensure that no student misses out on
higher education for lack of funds.

80.       Hon’ble
Members will remember that in the Budget Speech of July,
I had indicated my intention to provide one major Central Institute in each
State.  In the fiscal year 2015-16, I
propose to set up All India Institutes of Medical Sciences in J&K, Punjab,
Tamil Nadu, Himachal Pradesh and Assam. 
Keeping in view the need to augment Medical Sciences in Bihar, I propose
to set up another AIIMS like institution in these States.  I propose to set up an IIT in Karnataka, and
upgrade Indian School of Mines, Dhanbad into a full-fledged IIT.  I also propose to set up a Post Graduate
Institute of Horticulture Research and Education in Amritsar.  IIMs will be 
setup in J&K and Andhra Pradesh. 
In Kerala, I propose to upgrade the existing National Institute of
Speech and Hearing to a University of Disability Studies and Rehabilitation.  I also propose three new National Institutes
of Pharmaceutical Education and Research: in Maharashtra, Rajasthan, and
Chattisgarh; and an Institutes of Science and Education Research in Nagaland
and Odisha.  I also propose to set up a
Centre for Film Production, Animation and Gaming in Arunachal Pradesh, for the
North-Eastern States; and Apprenticeship Training Institute for Women in
Haryana and Uttrakhand.

81.       In order to improve the Governance of Public Sector banks, the
Government intends to set up an autonomous bank Board Bureau. The Bureau will
search and select heads of Public Sector banks and help them in developing
differentiated strategies and capital raising plans through innovative
financial methods and instruments.  This
would be an interim step towards establishing a holding and investment Company
for Banks.          

Digital
India

82.       Madam,
Speaker, I would like to inform the House we are making good progress towards
making Digital India.  The National
Optical Fibre Network Programme (NOFNP) of 7.5 lakh kms. networking 2.5 lakh
villages is being further speeded up by allowing willing States to undertake
its execution, on reimbursement of cost as determined by Department of
Telecommunications.  Andhra Pradesh is
the first State to have opted for this manner of implementation. 

83.       As
Members are aware, in making their recommendations, the Finance Commission has
not distinguished between special category and other states.  Moreover, both Bihar and West Bengal are
going to be amongst the biggest beneficiaries of the recommendations of the
Finance Commission. Yet, the Eastern States have to be given an opportunity to
grow even faster.  I, therefore, propose
to give similar special assistance to Bihar and West Bengal as has been
provided by the Government of India in the case of Government of Andhra
Pradesh.  As regards Andhra Pradesh and
Telengana, the Government is committed to comply with all the legal commitments
made to these States at the time of reorganization. 

84.       In
spite of the large increase in devolution to states, which implies reduced
fiscal space for the Centre in the same proportion we are committed to the
welfare of the poor and the neo-middle class. Keeping this in mind, adequate
provision is being made for the schemes for the poor and the
dis-advantaged.  Illustratively, I have
allocated `68,968 crore
to the education sector including mid-day meals, `33,152 crore to the health sector and `79,526 crore for rural development activities
including MGNREGA, `22,407 crore
for housing and urban development, `10,351 crore
for women and child development, `4,173 crore
for Water Resources and Namami Gange. The significant sums that will be spent
by the States on these programmes will ensure a quantum leap in expenditures in
these areas. I urge states to utilize their enhanced resources effectively in
these areas. 

85.       Madam,
Speaker, I am delighted to report good progress for DMIC corridors: the
Ahmedabad-Dhaulera Investment Region in Gujarat, and the Shendra–Bidkin
Industrial Park near Aurangabad, in Maharashtra, are now in a position to start
work on basic infrastructure.  In the
current year, I have earmarked an initial sum of `1,200 crore. 
However, as the pace of expenditure picks up, I will provide them
additional funds.

86.       Defence
of every square inch of our mother land comes before anything else.  So far, we have been over dependent on
imports, with its attendant unwelcome spin-offs.  Our Government has already permitted FDI in
defence so that the Indian-controlled entities also become manufacturers of
defence equipments, not only for us, but for export.  We are thus pursuing the Make in India policy
to achieve greater self-sufficiency in the area of defence equipment, including
aircraft.  Members of this august House
would have noted that we have been both transparent and quick in making  defence equipment related purchase decisions,
thus keeping our defence forces ready for any eventuality.  This year too, I have provided adequately for
the needs of the armed forces.  As
against likely expenditure of this year of `2,22,370 crore the budget allocation for 2015-16
is `2,46,727 crore.

87.       While
India produces some of the finest financial minds, including in international
finance, they have few avenues in India to fully exhibit and exploit their
strength to the country’s advantage. 
GIFT in Gujarat was envisaged as International Finance Centre that would
actually become as good an International Finance Centre as Singapore or Dubai,
which, incidentally, are largely manned by Indians.  The proposal has languished for years.  I am glad to announce that the first phase of
GIFT will soon become a reality. Appropriate regulations will be issued in
March.

88.       For
the quick resolution of commercial disputes, the Government proposes to set up
exclusive commercial divisions in various courts in India based on the
recommendations of the 253rd Report of the Law Commission. The Government
proposes to introduce a Bill in the parliament after consulting stakeholders in
this regard.

89.       Madam
Speaker, the Government will, during this session, also place before the
Parliament the required Bills, to convert Ordinances issued by the Government
into Acts of Parliament. 

BUDGET
ESTIMATES

90.       I now turn to the Budget Estimates for Budget 2015-16. 

91.       Non-Plan expenditure estimates for the Financial Year are estimated at `13,12,200 crore.  Plan
expenditure is estimated to be `4,65,277
crore, which is very near to the R.E. of 2014-15.  Total Expenditure has accordingly been
estimated at `17,77,477
crore. The requirements for expenditure on Defence, Internal Security and other
necessary expenditures are adequately provided. 

92.       Gross
Tax receipts are estimated to be `14,49,490
crore.  Devolution to the States is
estimated to be  `5,23,958 crore. 
Share of Central Government will be `9,19,842 crore. 
Non Tax Revenues for the next fiscal are estimated to be  `2,21,733 crore.

93.       With
the above estimates, fiscal deficit will be 3.9 per cent of GDP and Revenue
Deficit will be 2.8 per cent of GDP. 

 PART 
B

Madam
Speaker,

94.       I
now turn to my tax proposals.

95.       Taxation is an instrument of social and
economic engineering.  Tax collections
help the Government to provide education, healthcare, housing and other basic
facilities to the people to improve their quality of life and to address the
problems of poverty, unemployment and slow development.  To achieve these objectives, it has been our
endeavour in the last nine months to foster a stable taxation policy and
non-adversarial tax administration.  A
very important dimension to our tax administration is the fight against the
scourge of black money.  A number of
measures have already been taken in this direction. I propose to do much more.

96.       We need to revive growth and investment
to ensure that more jobs are created for our youth and benefits of development
reach millions of our poor.   We need an
enabling tax policy for this.  I have
already introduced the Bill to amend the Constitution of India for Goods and
Services Tax (GST) in the last Session of this august House.  GST is expected to play a transformative role
in the way our economy functions.  It
will add buoyancy to our economy by developing a common Indian market and
reducing the cascading effect on the cost of goods and services.  We are moving in various fronts to implement
GST from the next year. 

97.       We need to match this transformative
piece of legislation in indirect taxation with transformative measures in
direct taxation.  The basic rate of
Corporate Tax in India at 30% is higher than the rates prevalent in the other
major Asian economies, making our domestic industry uncompetitive.  Moreover, the effective collection of
Corporate Tax is about 23%.  We lose out
on both counts, i.e. we are considered as having a high Corporate Tax regime
but we do not get that tax due to excessive exemptions.  A regime of exemptions has led to pressure
groups, litigation and loss of revenue. 
It also gives room for avoidable discretion.  I, therefore, propose to reduce the rate of
Corporate Tax from 30% to 25% over the next 4 years.  This will lead to higher level of investment,
higher growth and more jobs.  This
process of reduction has to be necessarily accompanied by rationalisation and
removal of various kinds of tax exemptions and incentives for corporate
taxpayers, which incidentally account for a large number of tax disputes.  

98.       I wanted to start the phased reduction of
corporate tax rate and phased elimination of exemptions right away; but I
thought it would be appropriate to give advance notice that these changes will
start from the next financial year.  Our
stated policy is to avoid sudden surprises and instability in tax policy.  Exemptions to individual taxpayers will,
however, continue since they facilitate savings which get transferred to
investment and economic growth.

99.       While finalising my tax proposals, I have
adopted certain broad themes, which include:

A.    Measures
to curb black money;

B.    Job
creation through revival of growth and investment and promotion of domestic
manufacturing and ‘Make in India’;

C.    Minimum
government and maximum governance to improve the ease of doing business;

D.    Benefits
to middle class taxpayers;

E.    Improving
the quality of life and public health through Swachch Bharat initiatives; and

F.    Stand
alone proposals to maximise benefits to the economy.

100.     Madam
Speaker, the first and foremost pillar of my tax proposals is to effectively
deal with the problem of black money which eats into the vitals of our economy
and society.  The problems of poverty and
inequity cannot be eliminated unless generation of black money and its
concealment is dealt with effectively and forcefully. 

101.     In the last 9 months several measures have
been initiated in this direction.  A
major breakthrough was achieved in October, 2014 when a delegation from the
Revenue Department visited Switzerland and the Swiss authorities agreed to (a)
provide information in respect of cases independently investigated by the
Income-tax Department; (b) confirm genuineness of bank accounts and provide
non-banking information; (c) provide such information in a time bound manner;
and (d) commence talks with India for Automatic Exchange of Information between
the two countries at the earliest. 
Investigation into cases of undisclosed foreign assets has been accorded
the highest priority, resulting in detection of substantial amounts of
unreported income.  For strengthening
collection of information from various sources domestically, a new structure is
being put in place which includes electronic filing of statements by reporting
entities.  This will ensure seamless
integration of data and more effective enforcement.

102.     Tracking down and bringing back the wealth
which legitimately belongs to the country is our abiding commitment to the
country.   Recognising the limitations
under the existing legislation, we have taken a considered decision to enact a
comprehensive new law on black money to specifically deal with such money
stashed away abroad.  To this end, I
propose to introduce a Bill in the current Session of the Parliament. 

103.     With your permission, Madam Speaker, I
would like to highlight some of the key features of the proposed new law on
black money.

(1)   Concealment
of income and assets and evasion of tax in relation to foreign assets will be
prosecutable with punishment of rigorous imprisonment upto 10 years.  Further,

·   this offence will be made
non-compoundable;

·   the offenders will not be permitted to
approach the Settlement Commission; and

·   penalty for such concealment of income
and assets at the rate of 300% of tax shall be levied.

(2)   Non
filing of return or filing of return with inadequate disclosure of foreign
assets will be liable for prosecution with punishment of rigorous imprisonment
up to 7 years.

(3)   Income
in relation to any undisclosed foreign asset or undisclosed income from any
foreign asset will be taxable at the maximum marginal rate.  Exemptions or deductions which may otherwise
be applicable in such cases, shall not be allowed.

(4)   Beneficial
owner or beneficiary of foreign assets will be mandatorily required to file
return, even if there is no taxable income.

(5)   Abettors
of the above offences, whether individuals, entities, banks or financial
institutions will be liable for prosecution and penalty.

(6)   Date
of Opening of foreign account would be mandatorily required to be specified by
the assessee in the return of income.

(7)   The
offence of concealment of income or evasion of tax in relation to a foreign
asset will be made a predicate offence under the Prevention of Money-laundering
Act, 2002 (PMLA). This provision would enable the enforcement agencies to
attach and confiscate unaccounted assets held abroad and launch prosecution
against persons indulging in laundering of black money.

(8)   The
definition of ‘proceeds of crime’ under PMLA is being amended to enable
attachment and confiscation of equivalent asset in India where the asset
located abroad cannot be forfeited.

(9)   The
Foreign Exchange Management Act, 1999 (FEMA) is also being amended to the
effect that if any foreign exchange, foreign security or any immovable property
situated outside India is held in contravention of the provisions of this Act,
then action may be taken for seizure and eventual confiscation of assets of
equivalent value situated in India. 
These contraventions are also being made liable for levy of penalty and
prosecution with punishment of imprisonment up to five years.

104.     As regards curbing domestic black money, a
new and more comprehensive Benami Transactions (Prohibition) Bill will be
introduced in the current session of the Parliament.  This law will enable confiscation of benami
property and provide for prosecution, thus blocking a major avenue for
generation and holding of black money in the form of benami property,
especially in real estate.

105.     A few other measures are also proposed in
the Budget for curbing black money within the country.  The Finance Bill includes a proposal to amend
the Income-tax Act to prohibit acceptance or payment of an advance of `20,000 or more in cash for purchase of immovable
property.  Quoting of PAN is being made
mandatory for any purchase or sale exceeding the value of `1 lakh.  The third
party reporting entities would be required to furnish information about foreign
currency sales and cross border transactions. 
Provision is also being made to tackle splitting of reportable transactions.  To improve enforcement, CBDT and CBEC will
leverage technology and have access to information in each other’s database.

106.     Madam Speaker, the second pillar of my
taxation proposals this year is job creation through revival of growth and
investment and promotion of domestic manufacturing and ‘Make in India’.  I propose to undertake a series of steps in
this direction to attract capital, both domestic and foreign.  Tax ‘pass through’ is proposed to be allowed
to both Category-I and Category-II Alternative Investment Funds, so that tax is
levied on the investors in these Funds and not on the Funds per se.  This will step up the ability of these Funds
to mobilise higher resources and make higher investments in small and medium
enterprises, infrastructure and social projects and provide the much required
private equity to new ventures and start-ups. 

107.     A step was taken in the last Budget to
encourage Real Estate Investment Trusts (REITs) and Infrastructure Investments
Trusts (InvITs) by providing partial pass through to them.  These collective investment vehicles have an
important role to revive construction activity. 
A large quantum of funds is locked up in various completed projects
which need to be released to facilitate new infrastructure projects to take
off.   I therefore propose to rationalise
the capital gains regime for the sponsors exiting at the time of listing of the
units of REITs and InvITs, subject to payment of Securities Transaction Tax
(STT).  The rental income of REITs from
their own assets will have pass through facility.

108.     The present taxation structure has an
inbuilt incentive for fund managers to operate from offshore locations. To
encourage such offshore fund managers to relocate to India, I propose to modify
the Permanent Establishment (PE) norms to the effect that mere presence of a
fund manager in India would not constitute PE of the offshore funds resulting
in adverse tax consequences.

109.     Implementation of the General Anti
Avoidance Rule (GAAR) has been a matter of public debate.  The investment sentiment in the country has
now turned positive and we need to accelerate this momentum.  There are also certain contentious issues
relating to GAAR which need to be resolved. 
It has therefore been decided to defer the applicability of GAAR by two
years.   Further, it has also been
decided that when implemented, GAAR would apply prospectively to investments
made on or after 01.04.2017.

110.     Today I see a lot of young entrepreneurs
running business ventures or wanting to start new ones.  They need latest technology.  Therefore, to facilitate technology inflow to
small businesses at low costs, I propose to reduce the rate of income tax on
royalty and fees for technical services from 25% to 10%.

111.     To generate greater employment opportunities,
it is proposed to extend the benefit of deduction for employment of new regular
workmen to all business entities.  The
eligibility threshold of minimum 100 regular workmen is being reduced to fifty.

112.     The role of indirect taxes is also very important
in the context of promotion of domestic manufacturing and Make in India.  In indirect taxes, therefore, I propose to
reduce the rates of basic customs duty on certain inputs, raw materials,
intermediates and components (in all 22 items) so as to minimise the impact of
duty inversion and reduce the manufacturing cost in several sectors.   Some other changes address the problem of
CENVAT credit accumulation due to the levy of SAD.  I propose to fully exempt all goods, except
populated printed circuit boards for use in manufacture of ITA bound items from
SAD and reduce the SAD on imports of certain other inputs and raw materials
subject to actual user condition. These changes are detailed in the Annexure to
the Budget Speech.

113.     My next proposal is regarding minimum
government and maximum governance with focus on ease of doing business and
simplification of Tax Procedures without compromising on tax revenues.  The total wealth tax collection in the
country was `1,008 crore in 2013-14. 
Should a tax which leads to high cost of collection and a low yield be
continued or should it be replaced with a low cost and higher yield tax?  The rich and wealthy must pay more tax than
the less affluent ones.  I have therefore
decided to abolish the wealth tax and replace it with an additional surcharge
of 2% on the super-rich with a taxable income of over `1
crore.  This will lead to tax
simplification and enable the Department to focus more on ensuring tax
compliance and widening the tax base. As against a tax sacrifice of `1,008 crore, through these measures the Department would be
collecting about `9,000 crore from the 2% additional
surcharge.  Further, to track the wealth
held by individuals and entities, the information regarding the assets which
are currently required to be furnished in wealth-tax return will be captured in
the income tax returns.  This will ensure
that the abolition of wealth tax does not lead to escape of any income from the
tax net.

114.     The provision relating to indirect
transfers in the Income-tax Act which is a legacy from the previous government
contains several ambiguities.   This
provision is being suitably cleaned up. Further, concerns regarding
applicability of indirect transfer provisions to dividends paid by foreign
companies to their shareholders will be addressed by the Central Board of
Direct Taxes through a clarificatory circular. 
These changes would eliminate the scope for discretionary exercise of
power and provide a hassle free structure to the taxpayers. I reiterate what I
had said in the last Budget that ordinarily retrospective tax provisions
adversely impact the stability and predictability of the taxation regime and
resort to such provisions shall be avoided.

115.     Further, to reduce the associated hassles
to smaller taxpayers and the compliance costs in domestic transfer pricing, I
propose to increase the threshold limit from `5
crore to `20 crore.

116.     In order to rationalise the MAT provisions
for FIIs, profits corresponding to their income from capital gains on transactions
in securities which are liable to tax at a lower rate, shall not be subject to
MAT.

117.     The Tax Administration Reform Commission
(TARC) has given a number of recommendations to improve the administration in
the Tax Departments.  These
recommendations are in advanced stage of examination and will be appropriately
implemented during the course of this year.

118.     As part of the movement towards GST, I
propose to subsume the Education Cess and the Secondary and Higher Education
Cess in Central Excise duty.  In effect,
the general rate of Central Excise Duty of 12.36% including the cesses is being
rounded off to 12.5%.  I also propose to
revise the specific rates of Central Excise duty in certain other commodities,
as detailed in the Annexure.  However, in
the case of petrol and diesel such specific rates are being revised only to the
extent of subsuming the quantum of education cess presently levied on them,
keeping the total incidence of excise duties unchanged.  The ad-valorem rates of excise duty lower than
12% and those higher than 12% with a few exceptions are not being
increased.  Some changes are also being
made to excise levy on cigarettes and the compounded levy scheme applicable to
pan masala, gutkha and certain other tobacco products. 

119.     To give a boost to domestic leather
footwear industry, the excise duty on footwear with leather uppers and having
retail price of more than `1000 per pair is being reduced to 6%.

120.     To further facilitate the ease of doing
business, online central excise and service tax registration will be done in
two working days.  The assessees under
these taxes will be allowed to issue digitally signed invoices and maintain
electronic records.  These measures will
cut down lot of paper work and red tape. Time limit for taking CENVAT credit on
inputs and input services is being increased from six months to one year as a
measure of business facilitation.

121.     Introduction of GST is eagerly awaited by
Trade and Industry.  To facilitate a
smooth transition to levy of tax on services by both the Centre and the States,
it is proposed to increase the present rate of service tax plus education
cesses from 12.36% to a consolidated rate of 14%.  

122.     Madam Speaker, cleanliness of households
and clean environment are very important social causes.  The fourth pillar of my taxation proposals
this year therefore relates to initiatives for the Swachh Bharat Abhiyan.  In my direct tax proposals, I have proposed
100% deduction for contributions, other than by way of CSR contributions, to
the Swachh Bharat Kosh.  A similar tax
treatment is also proposed for the Clean Ganga Fund.

123.     In indirect taxes, I propose to increase
the Clean Energy Cess from `100 to `200
per metric tonne of coal, etc. to finance clean environment initiatives.  Excise duty on sacks and bags of polymers of
ethylene other than for industrial use is being increased from 12% to 15%.  It is also proposed to have an enabling
provision to levy Swachh Bharat Cess at a rate of 2% or less on all or certain
services if need arises.  This Cess will
be effective from a date to be notified. 
Resources generated from this cess will be utilised for financing and
promoting initiatives towards Swachh Bharat.

124.     It is also proposed to exempt services by
common affluent treatment plants from service tax.  The concessions from customs and excise
duties currently available on specified parts for manufacture of electrically
operated vehicles and hybrid vehicles are being extended by one more year i.e.
up to 31.3.2016.

125.     Madam Speaker, the fifth pillar of my
taxation proposals this year is extension of benefits to middle class tax
payers.  The proposals in this regard are
as follows :

ØIncrease
in the limit of deduction in respect of health insurance premium from `15,000 to `25,000.

o  For
senior citizens the limit will stand increased to `30,000  from the existing `20,000.

o  For
very senior citizens of the age of 80 years or more, who are not covered by
health insurance, deduction of  ` 30,000 towards expenditure incurred on their treatment
will be allowed.

ØThe
deduction limit of ` 60,000 towards expenditure on account
of specified diseases of serious nature is proposed to be enhanced to `80,000 in case of very senior citizens.

ØAdditional
deduction of ` 25,000 will be allowed for differently abled persons under
Section 80DD and Section 80U of the Income-tax Act.

ØThe
limit on deduction on account of contribution to a Pension Fund and the New
Pension Scheme is proposed to be increased from`1
lakh to `1.5 lakh.

ØTo
provide social safety net and the facility of pension to individuals, an
additional deduction of ` 50,000 is proposed to be provided for
contribution to the New Pension Scheme under Section 80CCD.  This will enable India to become a pensioned
society instead of a pensionless society.

ØInvestments
in Sukanya Samriddhi Scheme is already eligible for deduction under Section
80C.  All payments to the beneficiaries
including interest payment on deposit will also be fully exempt.

Ø    Transport allowance exemption is being
increased from `800 to `1,600
per month.

ØFor
the benefit of senior citizens, service tax exemption will be provided on
Varishta Bima Yojana.

126.     Madam Speaker, I am giving these
concessions to individual taxpayers despite inadequate fiscal space.  After taking into account the tax concession
given to middle class tax payers in my last Budget and this Budget, today an
individual tax payer will get tax benefit of `4,44,200
as detailed in the annexure.  As and when
my fiscal capacity improves, individual taxpayers will have a lot to look
forward to.

127.     Madam Speaker, there are several
stand-alone proposals relating to taxation. 
These include conversion of existing excise duty on petrol and diesel to
the extent of `4 per litre into Road Cess to fund investment in roads and
other infrastructure.  An additional sum
of ` 40,000 crore will be made available through this measure
for these sectors.  In service tax, exemption
is being extended to certain pre cold storage services in relation to fruits
and vegetables so as to incentivise value addition in this crucial sector.  The Negative List under service tax is being
slightly pruned and certain other exemptions are being withdrawn to widen the
tax base.

128.     Yoga is India’s well acknowledged gift to
the world.  It is proposed to include
yoga within the ambit of charitable purpose under Section 2(15) of the
Income-tax Act.  Further, to mitigate the
problem being faced by many genuine charitable institutions, it is proposed to
modify the ceiling on receipts from activities in the nature of trade, commerce
or business to 20% of the total receipts from the existing ceiling of `25 lakh.  A national
database of non profit organisations is also being developed.

129.     Enactment of a Direct Taxes Code (DTC) has
been under discussion for quite some time. 
Most of the provisions of the DTC have already been included in the
Income-tax Act.  Among the very few
aspects of DTC which were left out, we have addressed some of the issues in the
present Budget.  Further, the
jurisprudence under the Income-tax Act is well evolved. Considering all these
aspects, there is no great merit in going ahead with the Direct Tax Code as it
exists today.

130.     Madam Speaker, the details of direct and
indirect tax proposals are given in the Annexure to the Budget speech and the
other budget documents laid on the Table of the House.  My direct tax proposals would result in revenue
loss of `8,315 crore, whereas the proposals in indirect taxes are
expected to yield `23,383 crore.  Thus, the net impact of all tax proposals
would be revenue gain of `15,068 crore.

CONCLUSION

131.     To
conclude, Madam Speaker, it is no secret that expectations of this Budget have
been high.  People who urge us to
undertake Big Bang Reforms, also say that the Indian economy is a giant super
tanker, or an elephant.  An elephant,
Madam Speaker, moves slowly but surely. 
Even our worst critics would admit that we have moved rapidly.  In this speech, I think I have clearly
outlined not only what we are going to do immediately, but also a roadmap for
the future.

132.     I think
I can genuinely stake, for our Government, a claim of intellectual
honesty.  We have been consistent in what
we have said, and what we are doing.  We
are committed, Madam Speaker, to achieving what we have been voted to power
for:  Change, growth, jobs and genuine,
effective upliftment of the poor and the under-privileged.  Our commitment to the ‘Daridra Narayan’ is
steadfast, as is commitment to the Constitutional principles of Equality and
Justice for All, without concern for caste, creed or religion.  This will be in the spirit of the
Upanishad-inspired mantra:

            Om Sarve Bhavantu
Sukhinah

            Sarve Santu
Nir-Aamayaah

            Sarve Bhadraanni
Pashyantu

            Maa
Kashcid-Duhkha-Bhaag-Bhavet 

            Om Shaantih Shaantih
Shaantih 

            (OM! May All Be Happy

May All Be Free From Illness

May All See What is Beneficial

May No One Suffer)

133.     With these words, Madam Speaker, I commend the Budget to the
House.

 

ANNEXURE

·   Allocation of Natural Resources: Auction of coal, reform in the mining sector to
see that resources are used for development of the country and its people;

·   Financial Inclusion: through the Pradhan Mantri Jan Dhan Yojana-making every Indian a part
of the financial system;

·   Health and hygiene of the common man:  Launched a
successful campaign of Swachh Bharat to ensure cleanliness, leading to better
productivity and well being of the poor;

·   Girl Child & their Education: Started a drive for constructing toilets in the
remaining elementary schools and also Launched the Beti Bachao-Beti padhao
campaign;

·   Creation of Employment for the Youth: Launched the ‘Make in India’ campaign and
combined it with a detailed process and policy re-engineering to make India a
Global Manufacturing Hub for creation of job opportunities for millions of
youth;

·   Hassle Free Business Environment: Created a non-adversarial tax regime, ending tax
terrorism; Secured the political agreement on the goods and services tax (GST),
that will allow legislative passage of the constitutional amendment bill;

·   Delivery of benefits to the poor made efficient: Started direct transfer of cooking gas subsidy on
a national scale by use of technology;

·   Attracting Investment to create Jobs: Increased FDI caps in defence, Insurance and Railway Infrastructure;
rationalised the conditions for FDI in construction and medical devices
sectors;

·   Expanding the job market and ensuring welfare of the labour: 
Facilitated Sates which work to improve its Labour Laws and brought
systemic changes in the area through the umbrella programme of ‘Shrameva
Jayate’;

·   Better agri-productivity; more income to farmers: Launched the programme for Soil Health cards for
better productivity in agriculture;

·   Energising the country:
Brought rapid growth in power sector inspite of uncertainty on the coal front
and launched ambitious programmes for new and renewable energy;

·   Technology-from grass root to the Space: Launched the Digital India programme to make India a knowledge &
innovation based society with Broadband connectivity being taken to all
villages, Success of Mars Orbiter Mission;

·   Skill India programme:  Created a separate Ministry for skill
development which is about to launch a massive programme;

·   Efficiency & better work culture in Government: Brought a culture of responsibility without fear,
and with efficiency and transparency; created an environment of trusting the
citizens-encouraging self-certification in a number of areas;

·   Red tape to Red carpet: Ending
the red tape, created the ‘Ease of Doing Business’ in India by reforming and
rationalising a large number of procedures, rules and regulations;

·   North-eastern part of the country brought in the mainstream:  North East
given special priority in the development process by two visits of PM and
launch of important infrastructure projects; 

·   Pride in the Nation and its culture: Brought out India’s cultural and spiritual strength through UNO’s
recognition for Yoga, Namami Gange, Ghat and heritage city development
programmes.

Annexure to
part-b of the budget speech

The Finance Bill, 2015 proposes to
make amendments in the Income-tax Act, 1961, Wealth-tax Act, 1957, Excise
Tariff Act, Customs Act, Finance Act, 1994 and Finance (No.2) Act, 2004.  A gist of the main amendments is given
below:-

Direct Taxes

2.         Rates of
tax

2.1       It is
proposed that there will be no change in the rate of personal income-tax and
the rate of tax for companies in respect of income earned in the financial year
2015-16, assessable in the assessment year 2016-17. 

2.2       It is
further proposed to levy a surcharge @12% on individuals, HUFs, AOPs, BOIs,
artificial juridical persons, firms, cooperative societies and local
authorities having income exceeding ` 1 crore.  Surcharge in the case of domestic companies
having income exceeding ` 1 crore and upto ` 10 crore is proposed to be levied @ 7% and surcharge @ 12%
is proposed to be levied on domestic companies having income exceeding ` 10 crore.

2.3       It is
further proposed that in the case of foreign companies the surcharge will
continue to be levied @2% if the income exceeds `
1 crore and is upto ` 10 crore, and @5% if the income
exceeds ` 10 crore.

2.4       It is also
proposed to levy a surcharge @12% as against current rate of 10% on additional
income-tax payable by companies on distribution of dividends and buyback of
shares, or by mutual funds and securitisation trusts on distribution of income.

2.5       The
education cess on income-tax @ 2% for fulfilment of the commitment of the
Government to provide and finance universalised quality based education and 1%
of additional surcharge called ‘Secondary and 
Higher Education Cess’ on tax and surcharge is proposed to be continued
for the financial year 2015-16 for all taxpayers. 

3.         A. Measures to curb black money

3.1       With a view
to curbing the generation of black money in real estate, it is proposed to
amend the provisions of section 269SS and 269T of the Income-tax Act so as to
prohibit acceptance or re-payment of advance in cash of ` 20,000 or more for any transaction in immovable
property.  It is also proposed to provide
a penalty of an equal amount in case of contravention of such provisions.

3.2       Offence of
making false declaration/documents in the transaction of any business relating
to Customs (section 132 of the Customs Act) to be predicate offence under PMLA
to curb trade based money laundering.

4.         B.
Job creation through revival of growth and investment and promotion of
domestic ‘manufacturing’ and ‘Make in India’.

4.1       Taking into
account the representations received from various stakeholders and
international developments in this regard, it is proposed to defer
applicability of General Anti Avoidance Rule (GAAR) by 2 years.  Accordingly, it is proposed to be applicable
for income of the financial year 2017-18 (A.Y. 2018-19) and subsequent
years.  It is also proposed that the
investments made upto 31.03.2017 shall not be subjected to GAAR.

4.2       With a view
to streamline the taxation regime of Alternative Investment Funds (AIFs), it is
proposed to provide pass through status to all the sub-categories of category-I
and also to category-II AIFs governed by the regulations of Securities and
Exchange Board of India (SEBI).

4.3       With a view
to facilitate relocation of fund managers of offshore funds in India, it is
proposed to modify the permanent establishment (PE) norms.

4.4       With a view
to give effect to the provisions of section 94 of the Andhra Pradesh
Reorganisation Act, 2014, it is proposed to provide an additional investment
allowance (@15%) and additional depreciation (@15%) to new manufacturing units
set-up during the period 01.04.2015 to 31.03.2020 in notified areas of Andhra
Pradesh and Telangana.

4.5       In respect
of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts
(INViTs), it is proposed to provide that the sponsor will be given the same
treatment on offloading of units at the time of listing as would have been
available to him if he had offloaded his shareholding of special purpose
vehicle (SPV) at the stage of direct listing. 
Further, the rental income arising from real estate assets directly held
by the REIT is also proposed to be allowed to pass through and to be taxed in
the hands of the unit holders of the REIT.

4.6       It is
proposed to amend the provisions of section 194LD of the Income-tax Act so as
to extend the period of applicability of reduced rate of tax at 5% in respect
of income of foreign investors (FIIs and QFIs) from corporate bonds and
government securities, from 31.5.2015 to 30.06.2017.

4.7       With a view
to obviate the problems faced by small companies and to facilitate the inflow
of technology, it is proposed to amend the provisions of section 115A of the
Income-tax Act so as to reduce the rate of tax on royalty and fees for
technical services from 25% to 10%.

4.8       With a view
to facilitating generation of employment, it is proposed to amend the
provisions of section 80JJAA of the Income-tax Act so as to provide that tax
benefit under the said section shall be available to a ‘person’ deriving
profits from manufacture of goods in a factory and paying wages to new regular
workmen. The eligibility threshold of minimum 100 workmen is proposed is to
reduced to fifty.

4.9       Additional
depreciation @ 20% is allowed on new plant and machinery installed by a
manufacturing unit or a unit engaged in generation and distribution of
power.  However, if the asset is
installed after 30th September of the
previous year only 10% of the additional depreciation is allowed.  It is proposed to allow the remaining 10% of
the additional depreciation in the subsequent previous year.

5.         C.  Minimum government and maximum goverance to
improve the ease of doing business

5.1       Section 9 of
the Income-tax Act was amended by Finance Act, 2012 to clarify that if an
asset, being a share of, or interest, in a company or an entity derives its
value, directly or indirectly, substantially from an asset situated in India,
the gain arising from transfer of such share or interest shall be taxable in
India.   After the clarificatory
amendment, a large number of representations were received from various
quarters seeking clarification on certain terms used in the amended
provisions.  An Expert Committee was also
constituted to look into the concerns. Taking into account the recommendations
made by the Expert Committee and the concerns raised by the various
stakeholders, it is proposed to amend the provisions of the Income-tax Act so
as to provide that:-

•     the share or interest shall be deemed to derive its value
substantially from the assets located in India, if on the specified date, the
value of such assets represents at least fifty per cent of the fair market
value of all the assets owned by the company or entity.  However, the indirect transfer provisions
would not apply if the value of Indian assets does not exceed ` 10 crore.  Further,
the principle of proportionality will apply to the taxation of gains arising
from indirect transfer of Indian assets.

•     the Indian entity shall be obligated to furnish information
relating to the offshore transactions having the effect of directly or
indirectly modifying the ownership structure or control of the Indian company
or entity.  In case of non-compliance, a
penalty is also proposed.

•     the indirect transfer provisions shall not apply in a case where
the transferor of share or interest in a foreign entity, along with his
associated enterprises, neither holds the right of control or management nor
holds voting power or share capital or interest exceeding five percent. of the
total voting power or total share capital in the foreign company or entity,
directly or indirectly, holding the Indian assets.

•     the capital gains shall be exempt in respect of transfer of share
of a foreign company deriving its value, directly or indirectly, substantially
from the shares of an Indian company, under a scheme of amalgamation or
demerger.

5.2       It is
proposed to amend the provisions of section 92BA of the Income-tax Act so as to
increase the threshold limit for applicability of transfer pricing regulations
to specified domestic transactions from `5
crore to `20 crore.

5.3       It is
proposed to amend the provisions of section 2(15) of the Income-tax Act so as
to include ‘yoga’ as a specific category of activity in the definition of
‘charitable purpose’ and also to provide relief for activities in the nature of
business undertaken by genuine charitable organizations subject to the
condition that aggregate receipts from such activity is less than 20% of the
total receipts.

5.4       It is
proposed to exempt the income of Core Settlement Guarantee Fund established by
Clearing Corporations as per mandate of SEBI.

5.5       It is
proposed to amend the provisions of section 255 of the Income-tax Act so as to
increase the monetary limit from `5 lakh to `15 lakh, for a case to be heard by a Single Member Bench of
the ITAT.

5.6       It is
proposed to amend the provisions of the Income-tax Act so as to provide tax
neutrality on transfer of units of a scheme of a Mutual Fund under the process
of consolidation of schemes of Mutual Funds as per SEBI Regulations, 1996.

5.7       It is
proposed to amend the provisions of the Income-tax Act so as to provide a
mechanism to pre-empt the repetitive appeals by the revenue in the same
assessee’s case on the same question of law year after year.

5.8       It is
proposed to empower the Board to prescribe rules for grant of relief in respect
of taxes paid in foreign jurisdictions. 

5.9       It is
proposed to abolish the levy of Wealth-tax with effect from 2016-17 (Assessment
Year) for reducing the compliance burden on the tax payers. The revenue loss on
account of such abolition is proposed to be compensated by increase in the
existing surcharge by 2% in case of domestic companies and all non corporate
taxpayers.

5.10     With a view
to rationalise the dispute resolution mechanism available to taxpayer in the
form of Settlement Commission, it is proposed to provide that while making an
application to the Settlement Commission for an assessment year which has been
re-opened by the Assessing Officer, the assessee can make an application for
other assessment years in which the proceedings could be re-opened provided the
return of income for such assessment years has been furnished by the assessee.

6.         D.  Improving the quality of life and public
health through Swachh Bharat Initiatives

6.1       It is
proposed to provide that the donations (other than the CSR contributions made
in accordance with section 135 of the Companies Act, 2013) made to Swachch
Bharat Kosh (by both resident and non-resident) and Clean Ganga Fund (by
resident) shall be eligible for 100% deduction under section 80G of the
Income-tax Act. 

7.         E.  Benefits to middle class taxpayers

With a view
to encourage savings and to promote health care among individual taxpayers, a
number of measures are proposed to be taken by way of incentives under the
Income-tax Act.  The same are enumerated
below:-

7.1       It is
proposed to provide that investment in Sukanya Samriddhi Scheme will be
eligible for deduction u/s 80C and any payment from the scheme shall not be
liable to tax.

7.2       It is
proposed to increase the limit of deduction u/s 80D of the Income-tax Act from `15,000
to `25,000
on health insurance premium (in case of senior citizen from ` 20,000 to ` 30,000). It is also proposed to allow
deduction of expenditure of similar amount in case of a very senior citizen not
eligible to take health insurance.

7.3       It is
proposed to increase the limit of deduction in case of very senior citizens u/s
80DDB of the Income-tax Act on expenditure on account of specified diseases
from ` 60,000 to ` 80,000.

7.4       It is
proposed to increase the limit of deduction u/s 80DD of the Income-tax Act in
respect of maintenance, including medical treatment of a dependant who is a
person with disability, from ` 50,000 to `75,000.  It is also proposed to increase the limit of
deduction from `1 lakh to `1.25 lakh in case of severe
disability.

7.5       It is
proposed to increase the limit of deduction u/s 80U of the Income-tax Act in
case of a person with disability, from `
50,000 to ` 75,000.  It is also
proposed to increase the limit of deduction from `
1 lakh to `1.25 lakh in case of severe disability.

7.6       It is
proposed to increase the limit of deduction u/s 80CCC of the Income-tax Act on
account of contribution to a pension fund of LIC or IRDA approved insurer from ` 1 lakh to ` 1.5 lakh.

7.7       It is
proposed to increase the limit of deduction u/s 80CCD of the Income-tax Act on
account of contribution by the employee to National Pension Scheme (NPS) from ` 1 lakh to ` 1.50 lakh.  It is also proposed to provide a deduction
of  upto `
50,000 over and above the limit of ` 1.50 lakh in respect of contributions
made to NPS.

7.8       It is
proposed to amend the provisions of section 197A of the Income-tax Act so as to
provide the facility of filing self-declaration of non-deduction of tax by the
recipients of taxable maturity proceeds of life insurance policy.

7.9       Under the
existing provisions of the Income-tax Act, an individual buying an immovable
property from a resident is required to deduct tax but is not required to
obtain TAN for depositing the tax so deducted. 
With a view to extend the same facility to an individual or HUF
purchasing an immovable property from a non-resident, it is proposed to relax
the requirement of obtaining TAN by the individual or HUF who is required to
deduct tax on acquisition of immovable property from a non-resident.

7.10     It is
proposed to provide that donation made to National Fund for Control of Drug
Abuse (NFCDA) shall be eligible for 100% deduction under section 80G of the
Income-tax Act.

7.11     Details of
tax deductions referred to in para 99.

            ·       Deduction u/s 80C                                                      `1,50,000

            ·       Deduction u/s 80CCD                                                  `50,000

            ·       Deduction on account of interest                                  

                    on
house property loan

                    (Self
occupied property)                                               `2,00,000

            ·       Deduction u/s 80D on health   insurance
premium        `25,000

            ·       Exemption of transport allowance                                  `19,200

                    Total                                                                             `4,44,200

8.         F.   Stand alone proposals to maximise benefits to
the economy

8.1       It is
proposed to provide for chargeability of interest paid by a permanent
establishment (PE) or a branch of foreign bank to its Head Office (HO) and
other overseas branches under the source rule of taxation and for treating the
PE or branch as a taxable entity for computation of income and for purpose of
levy of TDS.

8.2       With a view
to providing a uniform method of computation of period of stay in Indian for
the purposes of determination of ‘resident’ status in the case of a India
seafarer, whether working on a Indian-ship or foreign-ship, it is proposed to
provide an enabling power to CBDT to prescribe the same in the rules.

8.3       In search
cases, it is proposed to allow seized cash to be adjusted towards the
assessee’s tax liability under his settlement application.

8.4       With a view
to ensuring proper deduction of tax on payments made to non-residents, it is
proposed to amend the provisions of section 195 of the Income-tax Act so as to
provide for enabling power to the CBDT for capturing information about
prescribed foreign remittances which are claimed to be not chargeable to tax.

INDIRECT TAXES

A.        Job
creation through revival of growth and investment and promotion of domestic
manufacturing and ‘Make in India’.

 

CUSTOMS

I.         Reduction
in duty on certain inputs to address the problem of duty inversion:

1)        ‘Metal
parts’ for use in the manufacture of electrical insulators.

2)        Ethylene-Propylene-non-conjugated-Diene
Rubber (EPDM), Water blocking tape and Mica glass tape for use in the
manufacture of insulated wires and cables.

3)        Magnetron
upto 1 KW for use in the manufacture of microwave ovens.

4)        C-
Block for Compressor, Over Load Protector (OLP) & Positive thermal
co-efficient and Crank Shaft for compressor, for use in the manufacture of
Refrigerator compressors.

5)        Zeolite,
ceria zirconia compounds and cerium compounds for use in the manufacture of
washcoats, which are further used in manufacture of catalytic converters.

6)        Anthraquinone for manufacture of hydrogen peroxide.

7)         Sulphuric
acid for use in the manufacture of fertilizers.

8)        Parts
and components of Digital Still Image Video Camera capable of recording video
with minimum resolution of 800×600 pixels, at minimum 23 frames per second, for
at least 30 minutes in a single sequence, using the maximum storage (including
the expanded) capacity.

II.        Reduction
in Basic Customs Duty to reduce the cost of raw materials:

1)        Ethylene dichloride (EDC), vinyl chloride monomer (VCM) and
styrene monomer (SM) from 2.5% to 2%.

2)        Isoprene
and Liquefied butanes from 5% to 2.5%.

3)        Butyl
acrylate from 7.5% to 5%.

4)        Ulexite
ore from 2.5% to Nil.

5)        Antimony metal, antimony waste and scrap from 5% to 2.5%.

6)        Specified
components for use in the manufacture of specified CNC lathe machines and
machining centres from 7.5% to 2.5%.

7)        Certain
specified inputs for use in the manufacture of flexible medical video
endoscopes from 5% to 2.5%.

8)        HDPE
for use in the manufacture of telecommunication grade optical fibre cables from
7.5% to Nil.

9)        Black
Light Unit Module for use in the manufacture of LCD/LED TV panels from 10% to
Nil.

10)      Organic
LED (OLED) TV panels from 10% to Nil.

11)      CVD and SAD are being fully exempted on specified raw materials
[battery, titanium, palladium wire, eutectic wire, silicone resins and rubbers,
solder paste, reed switch, diodes, transistors, capacitors, controllers, coils
(steel), tubing (silicone)] for use in the manufacture of pacemakers.

12)      Evacuated
Tubes with three layers of solar selective coating for use in the manufacture
of solar water heater and system to Nil.

13)      Active
Energy Controller (AEC) for use in the manufacture of Renewable Power System
(RPS) Inverters to 5%, subject to certification by MNRE.

14)      Parts,
components and accessories (falling under any Chapter) for use in the
manufacture of tablet computers and their sub-parts for use in manufacture of
parts, components and accessories are being fully exempted from BCD, CVD and
SAD.

III.      Reduction
in SAD to address the problem of CENVAT credit accumulation:

1)        All
goods except populated PCBs, falling under any Chapter of the Customs Tariff,
for use in manufacture of ITA bound goods from 4% to Nil.

2)        Naphtha,
ethylene dichloride (EDC), vinyl chloride monomer (VCM) and styrene monomer
(SM) for manufacture of excisable goods from 4% to 2%.

3)        Metal
scrap of iron & steel, copper, brass and aluminium from 4% to 2%.

4)        Inputs
for use in the manufacture of LED drivers and MCPCB for LED lights, fixtures
and LED lamps from 4% to Nil.

IV.      Increase in
Basic Customs Duty:

1)        Metallurgical
coke from 2.5% to 5%.

2)        Tariff
rate on iron & steel and articles of iron or steel, falling under Chapters
72 and 73 of the Customs Tariff, from 10% to 15%. However, there is no change
in the existing effective rates of basic customs duty on these goods.

3)        Tariff
rate on Commercial Vehicles from 10% to 40% and effective rate from 10% to 20%.
However, customs duty on commercial vehicles in Completely Knocked Down (CKD)
kits and electrically operated vehicles including those in CKD condition will
continue to be at 10%.

V.        Miscellaneous:

1)        Export
duty on upgraded ilmenite is being reduced from 5% to 2.5%.

2)        Excise
duty structure for mobiles handsets including cellular phones is being changed
from 1% without CENVAT credit or 6% with CENVAT credit to 1% without CENVAT
credit or 12.5% with CENVAT credit.

3)        Excise
duty structure of 2% without CENVAT credit or 12.5% with CENVAT credit is being
prescribed for tablet computers.

4)        Basic
Customs Duty on Digital Still Image Video Camera capable of recording video
with minimum resolution of 800×600 pixels, at minimum 23 frames per second, for
at least 30 minutes in a single sequence, using the maximum storage (including
the expanded) capacity is being reduced to Nil. Basic Customs Duty on parts and
components of these cameras is also being reduced from 5% to Nil.

5)        Concessional
customs duty structure of Nil Basic Customs Duty, 6% CVD and Nil SAD on
specified parts of electrically operated vehicles and hybrid vehicles,
presently available upto 31.03.2015, is being extended upto 31.03.2016.

EXCISE

I.         Excise
duty structure on certain goods is being restructured as follows:

1)        Wafers
for use in the manufacture of integrated circuit (IC) modules for smart cards
from 12% to 6%.

2)        Inputs
for use in the manufacture of LED drivers and MCPCB for LED lights, fixtures and LED lamps from 12% to 6%.

3)        Mobiles
handsets, including cellular phones from 1% without CENVAT credit or 6% with
CENVAT credit to 1% without CENVAT credit or 12.5% with CENVAT credit. NCCD of
1% on mobile handsets including cellular phones remains unchanged.

4)        Tablet
computers from 12% to 2% without CENVAT credit or 12.5% with CENVAT credit.

5)        Specified
raw materials [battery, titanium, palladium wire, eutectic wire, silicone
resins and rubbers, solder paste, reed switch, diodes, transistors, capacitors,
controllers, coils (steel), tubing (silicone)] for use in the manufacture of
pacemakers to Nil.

6)        Pig
iron SG grade and Ferro-silicon-magnesium for use in the manufacture of cast
components of wind operated electricity generators to Nil, subject to
certification by MNRE.

7)        Solar
water heater and system from 12% to Nil without CENVAT credit or 12.5% with CENVAT
credit.

8)        Round
copper wire and tin alloys for use in the manufacture of Solar PV ribbon for
manufacture of solar PV cells to Nil subject to certification by Department of
Electronics and Information Technology (DeitY).

 

 

II.        Miscellaneous:

1)        Excise
duty on leather footwear (footwear with uppers made of leather of heading 4107
or 4112 to 4114) of Retail Sale Price of more than ` 1000 per pair from 12%
to 6%.

2)        Excise
duty levied on the value of duty paid on rails for manufacture of railway or
tramway track construction material is being exempted retrospectively for the
period from 17.03.2012 to 02.02.2014, if no CENVAT credit of duty paid on such
rails is availed.

B.        Mimimum
government and maximum governance to improve the ease of design business

I.         Reduction in number of
levies:

EXCISE

1)        Education
Cess and Secondary & Higher Education Cess leviable on excisable goods are
being subsumed in Basic Excise duty. Consequently, Education Cess and Secondary
& Higher Education Cess leviable on excisable goods are being fully
exempted. The standard ad valorem rate of Basic Excise Duty is being increased
from 12% to 12.5% and specific rates of Basic Excise
Duty on petrol, diesel, cement, cigarettes & other tobacco products (other
than biris) are being suitably changed. However, the total incidence of various
duties of excise on petrol and diesel remains unchanged. Other Basic Excise
Duty rates (ad valorem as well as specific) with a few exceptions are not being
changed. Customs Education Cesses will continue to be levied on imported goods.

II.        Ensure
certainty and uniformity in valuation of the goods
for the purposes of levy of excise duty:

1)        All
goods falling under Chapter sub-heading 2101 20, including iced tea, are being
notified under section 4A of the Central Excise Act for the purpose of
assessment of Central Excise duty with reference to the Retail Sale Price with
an abatement of 30%. Such goods are also being included in the Third Schedule
to the Central Excise Act, 1944.

2)        Goods,
such as lemonade and other beverages, are being notified under section 4A of
the Central Excise Act for the purpose of assessment of Central Excise duty
with reference to the Retail Sale Price with an abatement of 35%. Such goods
are also being included in the Third Schedule to the Central Excise Act, 1944.

III.      Compliance
Facilitation:

1)        Online
Central Excise/Service Tax Registration within two working days.

2)        Time
limit for taking CENVAT Credit on inputs and input services is being increased
from six months to one year.

3)        Facility
of direct dispatch of goods by registered, dealer from seller to customer’s
premises is being provided. Similar facility is also being allowed in respect
of job-workers. Registered importer can also send goods directly to customer
from the port of importation.

4)        Penalty
provisions in Customs, Central Excise & Service Tax are being rationalized
to encourage compliance and early dispute resolution.

5)        Central
Excise/Service Tax assessees are being allowed to issue digitally signed
invoices and maintain other records electronically.

IV.      Miscellaneous:

1)        The
entry “waters, including mineral waters and aerated waters, containing added
sugar or other sweetening matter or flavoured” in the Seventh Schedule to the
Finance Act, 2005 related to levy of additional duty of excise @ 5% is being
omitted. Till the enactment of the Finance Bill, 2015, the said additional duty
of excise of 5% leviable on such goods is being exempted. Simultaneously, the
Basic Excise Duty on these goods is being increased from 12% to 18%.

2)        Excise
duty on chassis for ambulances is being reduced from 24% to 12.5%.

C.        Improving
the quality of life and public health through Swachh Bharat Initiatives.

CUSTOMS & EXCISE

1)        The
Scheduled rate of Clean Energy Cess levied on coal, lignite and peat is being
increased from `100 per tonne to `300 per tonne. The
effective rate of Clean Energy Cess is being increased from `100 per tonne to `200 per tonne.

2)        Concessional
customs and excise duty rates on specified parts of Electrically Operated Vehicles
and Hybrid Vehicles, presently available upto 31.03.2015, is being extended
upto 31.03.2016.

3)        Excise
duty on sacks and bags of polymers of ethylene other than for industrial use is
being increased from 12% to 15%.

SERVICE TAX

1)        An
enabling provision is being made to empower the Central Government to impose a
Swachh Bharat Cess on all or certain taxable services at a rate of 2% on the
value of such taxable services. The proceeds from this Cess would be utilized
for Swachh Bharat initiatives. This Cess will be effective from a date to be
notified.

2)        Service
provided by a Common Effluent Treatment Plant
operator for treatment of effluent is being exempted.

D.        Stand
alone proposals to maximise benefits to the economy

D.I      Broadening
the Tax Base:

EXCISE

1)        Excise
duty of 2% without CENVAT credit or 6% with CENVAT credit is being levied on
condensed milk put up in unit containers. It is also being notified under
section 4A of the Central Excise Act for the purpose of valuation with
reference to the Retail Sale Price with an abatement of 30%.

2)        Excise
duty of 2% without CENVAT credit or 6% with CENVAT credit is being levied on
peanut butter.

SERVICE TAX

I.         Change in
Service Tax rates:

1)        The
service tax rate is being increased from 12% plus Education Cesses to
14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be
subsumed in the new service tax rate. The revised rate shall come into effect
from a date to be notified.

II.        Review of
the Negative List

1)        Service
tax to be levied on the service provided by way of access to amusement facility
such as rides, bowling alleys, amusement arcades, water parks, theme parks,
etc.

2)        Service
tax to be levied on service by way of admission to entertainment event of
concerts, non-recognized sporting events, pageants, music concerts and award
functions, if the amount charged for admission is more than Rs 500. Service by
way of admission to exhibition of the cinematographic film, circus, dance, or
theatrical performances including drama, ballets or recognized sporting events
shall continue to be exempt.

3)        Service
tax to be levied on service by way of carrying out any processes as job work
for production or manufacture of alcoholic liquor for human consumption.

4)        An
enabling provision is being made to exclude all services provided by the
Government or local authority to a business entity from the Negative List. Once
this amendment is given effect to, all service provided by the Government to
business entities, unless specifically exempt, shall become taxable.

III.      Review of
General Exemptions

1)        Exemption
presently available on specified services of construction, repair of civil
structures, etc. when provided to Government shall be restricted only to,-

a)   a historical
monument, archaeological site

b)  canal, dam or
other irrigation work;

c)   pipeline, conduit
or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment
or disposal.

2)        Exemption
to construction, erection, commissioning or installation of original works
pertaining to an airport or port is being withdrawn.

3)        Exemption
to services provided by a performing artist in folk or classical art form of
(i) music, or (ii) dance, or (iii) theater, will be limited only to such cases
where amount charged is upto Rs 1,00,000 per performance (except brand
ambassador).

4)        Exemption
to transportation of ‘food stuff’ by rail, or vessels or road will be limited
to transportation of food grains including rice and pulses, flours, milk and
salt only. Transportation of agricultural produce is separately exempt which
would continue.

5)        Exemptions
are being withdrawn on the following services:

(a) 
       services provided by a
mutual fund agent to a mutual  fund or
assets management company;

(b)        distributor to a mutual fund or AMC; and

(c)         selling or marketing agent of lottery
ticket to a   distributor of lottery.

6)        Exemption
is being withdrawn on the following services,-

(a)         Departmentally run public telephone

(b)         Guaranteed public telephone operating only local
calls

(c)         Service by way of making telephone calls from free
telephone at airport and hospital where no bill is issued

7)        Existing
exemption notification for service provided by a commission agent located
outside India to an exporter located in India is being rescinded, as this
notification has become redundant in view of the amendments made in law in the
previous budget, whereby services provided by such agents have been excluded
from the tax net.

D.II     Relief Measures:

CUSTOMS

1)        Exempt
artificial heart (left ventricular assist device) from Basic Customs Duty of 5%
and CVD.

EXCISE

1)        Full
exemption from excise duty is being extended to captively consumed intermediate
compound coming into existence during the manufacture of Agarbattis. Agarbattis
attract Nil excise duty.

SERVICE TAX

1)        Services
of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of
fruits and vegetables are being exempted.

2)        Life
insurance service provided by way of Varishtha
Pension Bima Yojna is being exempted.

3)        Service
provided by way of exhibition of movie by the exhibitor/theatre owner to the
distributor or association of persons consisting of exhibitor as one of it’s
member is being exempted.

4)        All
ambulance services provided to patients are being exempted.

5)        Service
provided by way of admission to a museum, zoo, national park, wild life
sanctuary and a tiger reserve is being exempted.

6)        Transport
of goods for export by road from the factory to a land customs station (LCS) is
being exempted.

D.III   Allocation of additional
resources for infrastructure:

EXCISE & CUSTOMS

1)        The
Scheduled rates of Additional Duty of Customs / Excise levied on Petrol and
High Speed Diesel Oil [commonly known as Road Cess] are being increased from `2 per litre to `8 per litre. The effective rates of
Additional Duty of Customs / Excise levied on Petrol and High Speed Diesel Oil
[commonly known as Road Cess] are being increased from `2
per litre to `6 per litre. Simultaneously, Basic Excise Duty Rates on
Petrol and High Speed Diesel Oil (both branded and unbranded) are being reduced
by `4 per litre. Basic Excise duty rates on petrol and diesel are also
being increased suitably so as to subsume Education Cess and Secondary and
Higher Education Cess presently levied on them. Thus, the net decrease in Basic
Excise Duty on branded petrol is `3.46 per litre, on unbranded petrol is `3.49 per litre, on branded diesel is `3.63 per litre and on unbranded diesel is `3.70 per litre. However, total incidence of excise duties on petrol and diesel remains
unchanged.

D.IV   Promote public health:

EXCISE

1)        Excise
duty on cigarettes is being increased by 25% for cigarettes of length not
exceeding 65 mm and by 15% for cigarettes of other lengths. Similar increases
are proposed on cigars, cheroots and cigarillos.

2)        Maximum
speed of packing machine is being specified as a factor relevant to production
for determining excise duty payable under the Compounded Levy Scheme presently
applicable to pan masala, gutkha and chewing tobacco. Accordingly, deemed
production and duty payable per machine per month are being notified with
reference to the speed range in which the maximum speed of a packing machine
falls.

D.V     Other measures relating to Service Tax

1.         Changes in
the Finance Act, 1994

1.    A
definition of the term “government” is being incorporated in the Act to resolve
interpretational issues as regards the scope of this term in the context of the
Negative List and service tax exemptions.

2.    To
amend the definition of term “service” to specifically state the intention of
legislature to levy service tax on:

i.    chit
fund foremen by way of conducting a chit; and

ii.   distributor
or selling agent of lottery, as appointed or authorized by the organizing state
for promoting, marketing, distributing, selling, or assisting the state in any
other way for organizing and conducting a lottery.

3.    It is
being specifically prescribed in the Act that value of a taxable service shall
include any reimbursable cost or expenditure incurred and charged by the
service provider to make legal position clear and avoid disputes.

4.    Section
66F of the Act prescribes that unless otherwise specified, reference to a
service shall not include reference to any input service used for providing
such service. An illustration is being incorporated in this section to exemplify
the scope of this provision.

2.         Rationalization
of abatement

1.         A
uniform abatement is being prescribed for transport by rail, road and vessel to
bring parity in these sectors. Service Tax shall be payable on 30% of the value
of such service subject to a uniform condition of non-availment of Cenvat
Credit on inputs, capital goods and input services. Presently, tax is payable
on 30% of the value in case of rail transport, 25% in case of road transport
and 40% in case of transport by vessels.

2.         The
abatement for executive (business/first class) air travel, wherein the service
element is higher, is being reduced from 60% to 40%. Consequently, service tax
would be payable on 60% of the value of fare for business class.

3.         Abatement
is being withdrawn on chit fund service.

3.         Service
Tax Rules

1.         In respect of any
service provided under aggregator model, the aggregator is being made liable to
pay service tax if the service is provided using the brand name of aggregator
in any manner.

2.         Consequent to the upward revision in Service Tax rate, the composition
rate on specified services, namely, life insurance service, services of air
travel agent, money changing service provided by banks or authorized dealers,
and service provided by lottery distributor and selling agent, is proposed to
be revised proportionately.

4.         Reverse
charge mechanism

1.         Manpower
supply and security services when provided by individual, HUF, partnership firm
to a body corporate are being brought to full reverse charge as a
simplification measure. Presently, these are taxed under partial reverse charge
mechanism.

2.         Services
provided by mutual fund agents, mutual fund distributors and lottery agents are
being brought to under reverse charge consequent to withdrawal of exemption on
such services.

5.         The Cenvat Credit Rules, 2004

Cenvat
Credit Rules are being amended to allow credit of service tax paid under
partial reverse charge by the service receiver without linking it to the
payments of value of service to service provider as a trade facilitation
measure.