ABC of your total taxable income
Introduction:
Prime Minister Modi and Finance Minister Jaitley have their work turn off as they face slower growth rate and steep inflation. During decade’s rules of the previous government, state of the economy was in bad shape. This year India is facing bad monsoon which gears fears among farmer’s mindset of advent of steep drought. The new government is 45 days old and produces its first general budget amidst bad economy and the worst financial situations all around India. In the past, most of economic measures aimed at taking away a chunk of money from large middle classes all around India and this triggered a vast scale of non-expenditure of rupees which gave away a deep crisis of loss of goods among different manufacturing sectors. This budget tries to introduce good moves that raise moods of the middle classes and creates hopes to save more money instead of spending a huge sum of money in irrational policies and unwanted expenditure. This budget provides for a smaller share of rupees through tax breaks through certain policies which impart probably increase of savings among the middle classes. Tax breaks are in the form of tax credit, tax exemptions and tax deductions.
Union Budget 2014 is a smooth and populist budget:
There are no more tough measures and it is a recurring budget which aims at certain percentages of growth at the end of financial year and set goals to achieve a higher growth rate in years to follow. In one shot finance minister raises the income tax exemption limit and allowed extra 50,000 for tax-saving investments. He prescribes Rs 50,000 tax exemptions more for senior citizens. It brings hopes and positivity among middle classes of India. Tax-saving instruments like savings, insurances creates a sense of assurance for people who are now willing to save more and also willing to spend more in order to visualize a strong and sensible future. This budget comes out hope for real-estate and manufacturing sectors which generate the largest employments and this brings in hopes for uneducated youths to perform and set bigger standards towards achievement of long cherished goals. It provides tax-exemption up to Rs. 50,000 for interest payment on home loans. In this way, banks received money and movement of tax-payer’s money for suitable measures provides richer dividends to common man.
Many financial experts are speculating about these measures, but no one thinks of the advent of tax-exemption, tax-saving investment and tax-savings on interest write-offs in one go. For the highest income bracket taking all three tax breaks, the annual tax savings can go up to Rs. 39,000. It is one such huge incentive for tax payer in times of economic crisis’s which amounts to greater interest of paying back taxes in large numbers. The basic exemption limit increased from Rs two lakhs to Rs 2.5 lakhs and for senior citizens from Rs. 2.5 lakhs to Rs 3 lakhs. The continuing education tax of 3% will continue and surcharge on 10% of annual incomes of Rs 1 crore or more continue. The change in the exemption limit gives additional rebate of income tax to every earning circle of income groups. The maximum deductions for payment of interest on home loans for self-occupied property are to be taken within three years from the end of financial year in which the loan for the construction of property is to be taken. In the early years of payment of interest in home loans, the rate of interest is on the higher side and this exemption is certainly going to help immensely to middle income groups and generate deep interest among customers and drastically set aside ailing loans.
Progressive employment schemes:
Finance Minister Jaitley’s maiden Union budget has shown signs of radical change from its predecessors in terms of construction of a larger vision clearly distinguishable from UPA (United Progressive Alliance). There is a clear road map for economic revival with plenty of tax holidays for industries and considerable tax breaks for lower and higher income groups. This budget is an incurring budget which creates space for the reduction of subsidies, reaching subsidies to needy people and keeping the fiscal deficit to a manageable limit in order to have a clear cut definitive reach towards possible attendances of complete economic independence in years to come. The budget speech was one of the longest budget speech ever which was heavy on details of even small schemes which aim at maximizing administrative details to prioritize investment and reduce expenditure. This budget does not relate with free markets sentiments endorsed during election campaigning of BJP due to the seriousness of economic and financial conditions arising out of complete mismanagement of governance by the previous government. Fuel subsidy will be allowed to progressively decline in years to come. He has shown assertive acceptances to progressive employment schemes but makes sure that this money is intended to be spent where it will fetch productive assets and reach to real needy people. There is considerable intent from Union Budget to announce plan to preserve and expand core vote base through neat distribution of resources targeting niche ideas. Allocation of huge funds is announced for Kashmir pundits to settle and secure them in their homeland go on to show the intent of Prime Minster which he had vociferously proclaimed to offer them relief during his high voltage election campaigning in the recently concluded general-election.
Wealth tax:
Counting assets of wealth tax include property, urban land, car, yacht, boat, aircraft, and cash on hand in excess of Rs 50,000. French economist Thomas Piketty’s idea depicted in his best seller book is about creating a universal wealth tax devoid of boundaries of nations. This idea remains vague till date but general budget witnesses different types of wealth and property taxes and there are a large number concessions on some fonts also. If a person has a second property, and rent it out for 300 days a year, then according to the new budget the person doesn’t have to pay wealth tax in the current fiscal year. Cash or gifts at present from non-relatives is not subject to taxation up to an economic value of Rs. 50,000 in a financial year. Fair market values of such gifts are always considered. If you have presented assets worth Rs. 200,000 to relative and she deposited it in bank and receives interests from it then such deposit is deemed to be under the preview of income tax. This does not mean the complete abolition of such laws. Lottery, interest incomes all fall under the wealth tax.
Tax incentives and tax deductions:
There are many tax incentives to augment positive motivational influence among people to invest and create a suitable path for proper inflow of money into the market. First time investors can avail tax deductions up to Rs. 25,000 are subject to certain per-determined conditions. Mutual fund investors can avail tax deductions within Rs. 1.5 lakhs limits of Section 80C. Dividend of equity shares are tax free. Any income from mutual fund investment is tax free. Interests from notified tax-free bonds are tax free. Debenture is the ability of a customer to procure goods and services before payment based on trust that payment will be carried out in future. Interest income from notified debentures is not taxable. Interest incomes from debentures are taxable. Interest income from normal tax-free bonds is taxed. Stock markets are volatile, but the positive is that interests from dividends of shares and mutual funds are not taxable. Buying medical insurance assures you of the tax benefit. Yours employer covers you and your family under the preview of medical insurance schemes. Insurance and the premium covered under paying for insurance by the corporation are now tax free. This will give proper access to medical health care due to the advent of stronger and easier tax regime. It will help and spread medical insurance schemes in a different segment of society. Any claim settlement received under group or individual medical health settlement policies is a tax exempt. Ensuring insurance for parents gives you additional tax exemption of Rs. 15,000 and if your parents are above 60 years of age, tax exemption limits increases to Rs. 20, 000. Payment of interest in medical insurance must be in the process of demand drafts or net banking. There is some medical insurance which is deemed under preventive health care medical insurance. The maximum deduction possible with preventive health care system is Rs. 5000, even contributed by cash or wires.
Tax breaks and caveats:
Certain specified diseases related tax benefits for self and dependents are available. Diseases such as AIDS, progressive and uncontrolled growth of cancer provide examples of specified diseases. This deduction is restricted to maximum Rs. 40,000 and in the case of senior citizen it is limited to Rs. 60,000. The age of a senior citizen is 60 years or above. Disability related tax benefits are confined to Rs. 50,000 and for the chronically disabled person, the deductions of medical health insurance are limited to Rs. 1,00,000. Investment has dual characteristics. It gives you tax benefits as well as provides a realm of security for rainy days. Public provident fund (PPF) subtracted from the payroll of the employee is a popular form of tax deduction. Investment in EPF from Rs. 500 to Rs. 1.5 lakhs every year amounts to tax deductions. Such accounts can be adopted in the name of self; spouse or child and the maturity amounts are fully exempt from tax. Withdrawals of money from PPF account before five years are not permissible. After one year, loan on the accumulated balance on PPF funds for certain specified funds can be acquired. Investment schemes in National Savings Certificates (NSC) are operated through post offices in India.
Interests accrued through NSC are termed as other income. Reinforced interest on accrued income of NSC in each year qualifies for further tax deductions. Premiums paid towards life insurance policies are subject to tax deductions. A five year term deposits in a bank or post office qualifies for tax deduction. Interests on bank term deposit and post office are taxable and not tax free. Under this budget, there are many provisions which give deductions on tax payments. Tax deductions are ready for transfer charges and payment of any stamp duty of housing loans. Tuition fees paid for full-time education for your children inside educational institutions of India are subject to tax deductions. Development and donation fees paid to institutions to acquire corporate seat cannot be considered for tax deductions. A new pension scheme (NPS) offers lump sum and monthly salary after retirement. It provides a permanent income to employees after retirement. Staff’s contribution to NPS is subject to tax deduction. There is a caveat to employee’s contribution scheme. Employee’s contribution to NPS is to be regarded as taxable salary income and employee have to pay taxes on these incomes still he attends the age of 60.
Capital gains:
In an era of a rejuvenated economy, people want to buy house property in order to constantly ignore stippling rise of rents from time to time. If you get your self-occupied house or apartment, selling it earns your capital gains. According to word web capital gain is “the amount by which the selling price of an asset exceeds the purchase price; the gain is realized when the asset is sold. ” So, capital gain is the marginal difference between sale proceeds and cost of acquisition of immovable property. Capital gain is two types. One is short term capital gain and the other is long term capital gain. If the house is sold within 36 months of purchase, then the owner has a short term capital gain. Each capital gain has different tax regimes and falls under different tax structures. If the property is held for a longer period, long term capital gains (LT CG) come into the picture. Reinvestment of capital gains could get you tax breaks and saves you from paying tax as high as 33.99%. You could construct another residential non-profitable residence within three years sales of previous property. In this way, you could save vital taxes from capital gains. While buying your own house, you would have to consider many facets of economic burden arising out of paying out of EMI (equated monthly installment). The longer EMI is shorter the amount of paying out money. But, the interest outgo, accruing through inflation from all these years accumulated into far higher side of payment.
Once the loan is you will be paying a periodical interest as well as repayment of principal. There are many provisions in income tax laws (IT laws) prescribed in the budget to provide smooth deductions on interest payment as well as repayment of principal. Under the head of “income and house property” of budget, personal occupied bungalow property can get maximum deduction of Rs 200,000. There are great provisions for first time buyers of capital property. All these tax deductions are aimed at “self-occupied-property”. Even if you are transferred to another city and stay there in a rented house, still you would get a tax deduction from previously “self-occupied-property”. In another scenario, if you are staying in a rented apartment and plan to buy a new “self-occupied” apartment in a tier 2 towns you are entitled for deduction of housing loan interest.
Cost to company:
When you and your spouse jointly purchase a “self-occupied” apartment or individual property, then each of you is entitled to tax deductions of 2 Lakhs each. In another scenario, if your son or daughter in the service sector and have their office avails the opportunity for split loans than from the contribution of each three of you two persons is entitled to deductions of 2 Lakhs each. Deductions of principal repayment are allowed only to loans that have taken from listed financial institutions such as banks. This budget is all about minimization of tax and maximization of earnings. It provides larger objectives and way outs to minimize tax spending so that the individual can retain the highest percentages of earnings and cover all investments in securing stable financial status. Salaried class cannot escape from monthly tax deduction at source, but there are many opportunities that are buried deep inside tax laws which can provide richer dividends for salaried class in minimizing tax laws. You can split your loan with your spouse and can get richer tax benefits from accumulated interest and principal amount. In this way, tax minimization can be achieved and indirectly this will give pay hike to your salary. Every rupee is saved is a rupee earned. It is important to find truth about investment and tax benefits before finding out and consulting with charted accountant and investment adviser. Salary of an employee includes basic pay which is shown on the salary slip, basic amenities such as car, house, cleaning bill, telephone bill, and paper bill and so on. All these allowances and benefits are included in the segment cost to company (CTC).
It is the total cost incurred by a company in retailing payroll employees. It is important for employees to get advice from human resource department (HRD) of the company and devise a good CTC strategy in order to minimize taxes. Car provided by an employer is a prerequisite for tax proposals. If a company gives fuel charge and cost of salary of driver then all these are taxable income and falls under taxable prerequisites. For fuel of the car you can enjoy maximum concession of Rs 2400 per month. If a company gives you Rs 5000 per month as fuel benefits, then the taxable prerequisite value will be Rs 2600 per month (Rs 5000 less Rs 2400). When you move to a new town, hotel accommodation provided by the company for first 15 days is not a taxable prerequisite. Flat provided by employer does take away hassles of finding a new rented house in a new town. But it adds up to your tax woos. Staying at hotels, rented house or furnished house the prerequisite values of tax changes with each alternative accommodations. If you are not staying in an employer provided accommodation. Then cost to company (CTC) becomes vital in calculating taxable prerequisite. Here, employee is eligible for house rent allowance (HRA) which is critical for CTC which leads indirectly to taxation of income. For claiming of HRA deductions for tax benefits which are Rs 2000 per month, employee should provide rental receipts or rental agreements and PAN card of landlord before submitting a proposal for tax deductions to human resource department (HRD).
LTC, ESOPs and leave encashment:
Company, every employee is assigned with specified leaves for a year. Many a time’s majority of employees have not completed the leave quota provided by organization. The rest days of leave can be employed to leave encashment. Leave encashment is a taxable prerequisite. Maximum exemption available on leave encashment is 3 lakhs. This is a lifetime exemption limit for all your workers. It is wise not to en-cash leave while you are on employment as this is a taxable prerequisite. Encasing of leave after retirement does not constitute a taxable prerequisite. Yours annual or bi-annual holidays within India can get you a tax-break. It is named as the leave travel concession (LTC). Tax exemption related to LTC is attached to economic class of air fare between two shortest routes. Keep the travel bill for safety so as to go back to the HR department while availing for tax deductions. There will be no concession and deduction on lodging, boarding and local conveyances. Many a time, much bigger organizations which have open stocks has offered shares and stocks to employees under employee stock option plans (ESOPS) in order to retain workers and stop the brain drain. ESOPS are assessable on two fronts. At the time of purchase of ESOPs, the difference between fair market value of stock and the price paid by the worker, is a taxable prerequisite.
At the time of sale of shares, capital gain taxes benefits to an employee in difference between the original value and selling value of the shares are subject. Reimbursements of medical expenses up to Rs 15000 per year by your employer do not represent a taxable prerequisite. Staff can avail for medical insurances written in detail in above segments in order to reap richer tax benefits. Meal vouchers up to Rs 50 per meal provided by the employer are exempted from the tax regime. Transport allowance for conveyance home to office is not taxable prerequisite as long as it is Rs 800 per month. Children educational allowance is committed as part of the cost to company (CTC) which gives miniature deductions on taxes in the form of Rs 100 per month per child as tuition fees and Rs 300 per month per child as hostel expenses. Telephone expense reimbursement does not represent a taxable prerequisite. Watch out for upper call limit capped by employer. Keep all telephone receipts at a safer place before placing for reimbursement to human resource department (HRD).
A budget of hope!
Employee’s share of provident fund (PF) is not taxable. Withdrawal of PF under certain circumstances such as retirement, daughter’s marriage, building a house is not taxable. Such withdrawal is not taxable if the employee has worked for five or more years continuously in an organization and under payroll system which entitles the employer to provide PF for employee. Gratuity is a relatively smaller amount of money given for services in an organization. Maximum amount of tax benefit for gratuity payment is Rs 10 lakhs. It is a lifetime exemption limit and if you have withdrawn money beforehand then the rest of the amount is deducted from Rs 10 lakhs to be calculated for induction of tax. In short, your taxable income consists of income from salary, income from house property, capital gains from investment or property and income from other sources. Apart from individual tax regimes, there are many shops announced for various industries which are fighting hard to regain control over periodic loss regimes. Airlines have continued to show operating losses but due to lower aviation turbine fuel (ATF) prices and fringe hike in passenger fares and favorable tax regimes, airlines are slowly reducing percentages of losses and marginally showing the signs of growth. In the last decade due to unfavorable tax regimes, vast reduction of foreign tourists was reaching inside India. This imparts heavily on domestic airline industries. This budget introduces e- Visa, for foreign tourists, which will impact on the long term in creating many tourists to visit India. Foreign tourists constitute 18% of air travel in the domestic circuit.
This move will result in a larger share of foreign tourists inside domestic aviation sectors. Besides with the announcement of development of linking four Buddhist places to build an international Buddhist circuit will result in increase of foreign nationals visiting such places of historical importance. In this budget, honorable finance minister has announced the creation of five other tourist circuits for visitors attraction which will attract many foreign and domestic visitors from flocking into these places, which will ultimately gain and give fodder to already starved airlines and travel industries. Extension of lower excise duty till December 2014 is a positive step for the automobile industry. Sale of small car segment will rise exponentially to boost expected recovery of automobile industries. Due to the advent of a new government, there is gradual positive boost of consumer sentiments through a revival of economic growth which will fuel growth of automobile industries despite fluctuating fuel prices. This budget gives away virtual freebies on direct tax sops and brilliant announcement to revive already jeopardized agriculture economy which will alternatively boost for major purchase of two wheeler segments among different sections of the middle classes.
Foreign direct investment (FDI):
Infrastructure, automobile and manufacturing sector generates the highest scale of employment statuses all over India. Due to recession and policy paralysis, there was a sudden fall of growth in these sectors being expected to result in loss of jobs which created vast unemployment. Budget permits banks to sanction long-term funds for readying for the infrastructure sector. In the last decade, banks decline to risk of granting of loans to big infrastructure projects due to heavy possibilities arising out of depression and bad economic policies. Capital support to public sector banks does not change. Easier regulatory restrictions on the cash reserve ratio (CRR) and priority sector lending on bonds enable the bank to equate a perfect match of asset-liability mismatch. Foreign direct investment (FDI) limits on insurance sector hiked to 49%. Insurance sector is reeling under deep financial crisis and identity crisis in some sector and the hike of FDI limit in this sector. Much needed generation of FDI will impact working environments of these sectors.
Impetuses for growth:
Increase exemption limit on housing loans, interests, FDI in the insurance sector, easier policy regulations of CRR and changes in tax slabs will boost housing finance. A ten year tax holiday on power industries will boost already downsizing the power sector. An Indian is a power deficit state and this sector requires urgent need for revival of the power segment. There is just about double finance available for allocation of transmission and distribution segment of power infrastructure. All these measures will lead to high availability of funds to power and infrastructure industries. In initial allocation, there is a huge allocation of funds to develop vast sources of alternative energy such as solar power plants and wind power plants. India is going to build the biggest solar powered plant in Tibet and this will generate huge power supply for entire northern India in future. In the future, there will be heavy plans to introduce solar powered water pump sets and solar powered portable electric generation units to avail easily to people so that they should not always be dependent upon conventional power sources. Current budget is a recurring budget and the allocated amount will be distributed through additional allocation of resources in next year’s budget. Current budget shows authenticity and clear visibility of ideas of Prime Minister Modi in which he has visualized for a developed India.
The rise of disbursing of money towards urban infrastructure such as roads and highways in this budget is expected to result in improving profitability in incremental annual cement consumption in India. Duties and government taxes on exports and imports of cement remain unchanged and stay as it is from the previous general budget. Tariffs on raw materials used for creation of cement such as coal and others have increased tax and this would impact cost of clean energy price hike to some extent. Crude oil prices are expected to be remaining prominent in this current fiscal year due to hike in natural gas demand and low domestic output. Surprisingly, despite heavy domestic natural gas present, the total output of natural gas is not up to expectations. This budget showcase overall recovery of gas prices and hope for a complete gas price stabilization in this current fiscal year due to stabilization of upfront domestic output. Central excise duty on branded petrol boils down. Owing to ongoing tensions in Libya, Ukraine and Iraq international gas prices may be hiked to save considerable losses of domestic companies. This would impact heavily on provincial gas distributors owing to fewer margins per gas sale.
More positives from this budget:
In this depressed economic scenario, the only positive growth of 50% increase of data service usages by consumers of telecom and mobile companies has shown a positive outlook for further development. Delay in launch of 4G spectrum services has given scope for current operators to maximize earning potential. Renewal of spectrum licenses expected to be done later this year will further strengthen existing market players to expand the scope of the bandwidth limit to provide better services and speedier accesses to all telecom related services. Large portion of telecom equipment will remain in the subject of zero custom duty and in some negligible telecom products a basic custom duty of 10% will be levied in this budget. This will have a nil impact in this sector. Telecom sector is expected to perform well from previous years due to favorable tax regimes and anticipated allocation of spectrum allocation in later parts of this year. Apparel and textile exports are expected to stay healthy in this current fiscal year. Budgetary allocation for encouragement of newer technology in the field of apparel and textile will continue to grow, leading to long term development of these industries which is facing terminal competition from apparel export industries from China. Due to continuance of zero excise duty on apparel industries domestic demand for apparel industries will likely to see further growth than the previous year. Support for development of six textiles and hand loom clusters is a further encouragement for the textile industry.
Basic custom duty on the raw material that is needed to ensure that spandex yarn is reduced. This may be lower prices and augment demand. Spandex yarn produces an elastic synthetic fabric. In the last decade, the demand for steel and aluminum metals is constantly on decreasing side due to rise of duties in these sectors. Margins for heavy steel industries may rise due to favorable budget announcements. The increase in customs duty on flat stainless steel products will benefit domestic steel markets. There are some optimistic for aluminum players in this budget. Hike in export duties of bauxite will ameliorate bauxite allocation in the domestic market. Bauxite is a clay like material used as raw material for aluminum, composed of aluminum oxides and aluminum hydroxides; used as an abrasive and catalyst. This continues by proving how bauxite is important for generation of aluminum products. Increase in export duty on bauxite is going to make a contribution to aluminum players immensely in reviving their fortunes in domestic markets.
Increase in interest subvention limit is going to help real-estate industries:
State of real-estate industry is in constant decline in the last decade. In this current fiscal year, it is supposed to regain some lost grounds. It is expected to reach towards profitability limits in the next fiscal year if favorable tax regimes and encouragement from government sector continue with further economic advancements. This budget has increased interest subvention limit and overall exemption limit for real-estate loans, thus providing tangible support to strengthen this industry. Foreign direct investment (FDI) in real-estate sector has been relaxed. It provides opportunity for mid-sized developers to amass funds from different financial institutions due to lower of minimum capitalization limit. All these are long term steps to increase productivity and healthy financial statuses of mid level and high level real-estate industries. Despite sluggish demand and rise of inflation in the last decade, most of organized retailers reported having higher earnings due to rising share and faith upon private retailers by consumers. Owing to higher basic tax exemption of individual tax players in this budget, which will drive away disposable incomes in various schemes, and that will decrease buying powers of customers. This will increase savings and move more money to market in the form of banks and other savings instruments. Branded garments have covered 30% of organized retail segment.
This budget continues to take measures to give relief to this segment by allowing zero excise duty on branded garments sold under organized retail sectors. Excise duty on the lower segment of footwear is reduced and this may partially affect increase of sales of footwear in organized retail markets. Excise duty is a tax which is measured by the amount of business done. It does not relate to property or income from real-estate. Construction of Greenfield air port projects has been proposed which may augment rise of inland and foreign traffics. The government has budgeted allocation for public private partnership (PPP) to develop basic facilities for airports and ports. In the last two years, many national highway projects are delayed and suspended due to lack of funds and policy paralysis. 12% hike in proposed investments in highway projects and an additional allocation to build expressway projects across India through various modules of public private partnership (PPP) projects for immediate disposal on decision making and funding allocations.
Public private partnerships (PPP):
For the past couple of years, slower economic growth and higher inflation have considerably reduced spending capacity of consumers. Higher basic tax exemption limit creates massive disposable funds for consumer. This is directly proportional to speed capacity of consumers. Custom duties on various raw materials for making soaps such as palm oil, glycerin are zero. This will reduce prices of body care products. Excise duties on agri-products have been decreasing. This will be lower prices of vegetables and drastically reduce prices of packaging foods. Higher duties on tobacco products and increase of excise duties on soft drinks which contains carbon dioxide will be even more expensive. Finance Minister Arun Jaitley’s maiden budget is not inflationary and could be a strong impetus for growth in an incremental manner for a few years. Owing to huge fiscal constraints this budget falls short of brings about a qualitative change. This budget is all about putting more money in the hands of consumers and giving right incentives to manufacturing sectors. This budget showcase stability of policy decisions which are the core of policy making. This will ensure huge incentives for consumers and manufacturing sectors to further grow from already dipping economy. By sticking to fiscal consolidation, finance minister chords right messages to investors about reducing fiscal deficit, despite tax breaks and numerous incentives to manufacturing sectors.
Finance minister put forward a stable tax regime and reassurance on reconsideration of retrospective taxation will envelope foreign direct investment (FDI) flows into India. This general election gives out a decisive electoral verdict. Foreseen expectations from voters to bring about huge economic change all around for a stable financial situation of India. People have waited for a better economic and financial situation in India, lowered fiscal deficit and inflation and higher job growth. The priority is to gradual repair of economy through recurring budgets. This budget makes hopes and many anticipations for a better future and creates amenities for good days which prime minister has promised during his long and tireless election campaigning. There are many tax breaks and tax holidays for important segments which are connecting with people in general. This goes on to demonstrate how this budget is not an inflationary budget. This creates a sense of constructive mood all around and enables triple happiness everywhere. This budget has seen immense fiscal consolidation which becomes more due to bad monsoon expectations and for this aggressive fiscal consolidation measures are introduced in this budget. Rainfall in a previous month is a lowest in a last 113 years. Then, it will have impact on prices of foods which deal with purses of people directly. On money-raising front, this budget goes towards unconventional fronts of money rising from not taxable benefits. So far, predecessors of finance minister have been taxing people and industries more to increase the flow of money. This reduces disposable income of people and it imparts decision buying behavior (DBB) of consumers. This impacted badly towards manufacturing sectors which saw slow down in progress in previous regimes. Productive spending in augmenting increase of benefits for manufacturing, infrastructure and tourism will boost an economy in a long run and amass massive influx of foreign funds through public private partnerships (PPP).
Cascading effects of goods and service taxes:
Modi government tries hard to meet expectations from the common man and industries through announcements of many niche projects which help to meet expectations of people and industries in general. If you give a man food then, you feed him for a day. If you teach him cultivation, you feed him for a lifetime. Similarly, subsidies are like feeding a man for a day. If you want to empower people with their own income than government should reduce subsidies on fertilizer, kerosene and petrol incrementally in order to create a strong and vibrant economy. This budget rightly prioritizes productive spending on infrastructure, manufacturing, and real-estate sectors. This budget gives tax holidays and tax exemptions to labor intensive segments such as textiles and infrastructure segment where massive labor workforce will remain huge benefits. This will ensure massive labor intensity and growth from 4.8% to expect 12%. This will help and boost more employment opportunities. This budget allocates immense funds for enhancing and augmenting skills for workers. This will create jobs. This budget links MGNREGA scheme to useful and valuable quality job formation. This will help to contain flow of immense resources to these populist schemes and creation of real asset creation through these schemes that will boost infrastructure and textile industries. This budget aims to achieve three percentages of reduction of a fiscal deficit in coming three years. It aims to touch mammoth growth due to creation of congenital environment and try hard to find suitable opportunities to create an environment free of any unwanted tax evasions.
Government expenditure on GDP has been reduced considerably in the last two years. This year’s budget for this tries hard to reduce this expenditure. By eliminating cascading effect of goods and service tax (GST) in central and state side; evil of double taxation goes further away. This will impart more productivity and benefit industries which will make the cost of production lower and prices of goods lowest at the hand of consumers. This budget is for growth though there are many unstoppable variables such as the crisis in the Middle East, Ukraine-Russia, Iraq and a perceived bad monsoon can spoil the growth rate but cannot create a negative growth due to massive steps to revive manufacturing and real-estate sectors. This budget shows mild withdrawal of subsidies. This budget is not inflationary; it deals with many sub elements which can boost growth and generate a congenial environment for productivity. Now, the main focus of the budget is execution of brilliant ideas and speedy implementation of all such innovative announcements which will can create a vibrant economy. This budget creates provisions for opening up closely controlled sectors such as defense and insurance sectors to foreign direct investment (FDI). This budget considerably reduces FDI in construction. This will enable flow of FDI to small and medium sectors of industries.
FDI in insurance, Indian Railways and defense procurements:
This budget openly sends out a positive signal to foreign institutional investors (FII) that India is open for business. Railways sector is now sweeping up to business with FII and FDI. This will help institutional investors to invest additional money for building up modern infrastructure related with Indian Railways (IR). In countless areas, government falls short of funds and opening up many important areas for development such as infrastructure and manufacturing sectors. Depending on Finance Minister, FDI is an additional resource which helps in promoting domestic industries. That is why FDI in e-commerce is not approved by the finance minister. He knows, in e-commerce there are countless indigenous websites which are doing excellent businesses. There is no dearth of funds in e-commerce sectors and that is why it does not need for further worsening of competition by inviting external players where indigenous players have been performing excellently. Foreign players are not so enthusiastic about 49% share in the defense sector. This will not empower them to take full control of acquiring a majority stake in defense procurements. Previous government allowed 25% stake in the defense sector for private players, but that does not create a suitable environment for private defense procurement industries.
Less government and more governance:
Overall it is a very good budget. MNREGA benefits will now be through productivity works instead of sheer distribution of money for name sake works which have been normal so far. It will make more productivity and development in infrastructure and textile industries. Dividend distribution tax hike is a negative step. FDI in defense and insurance is a progressive step. This budget reflects government’s ideology of less government and more governance. It deals with integrates of every department and shows how the government is going to react to different segments of India’s population. Setting up an expenditure management commission is a welcome step which aims to reduce the fiscal deficit by 4% in coming three years. Efforts to improve productivity of conventional as well as non conventional energy sectors are trustworthy. This budget is done considering diversifying nature of India and this budget is done for the people of India and it is meant for them. There will be six more debt recovery tribunals that will help banks to recover dues and there will be an increase in flow of bank credits. Stronger banks mean a stronger economy and healthier financial statuses of India. This budget provides a stronger commitment to fiscal discipline and a stronger resolve to solve goods and services tax (GST) by year-end is a positive for manufacturing industries. Investment allowances will boost manufacturing sectors. This budget is an incurring budget which provides sufficient indication of new government’s commitment to reaching out next generation reforms.
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