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Chartered Accountantsshankarlal jain associates&

B U D G E T

2014

Shankarlal Jain & Associates

INDEXM/s. Shankarlal Jain & Associates

A Member of AGN International

v

v

v OVERALL SECTORAL IMPACT 5-6

v FINANCE BILL 2014 7-14

v INDIRECT TAX PROPOSAL 15-19

H CENTRAL EXCISE 15-16

H CUSTOM DUTY 16-17

H SERVICE TAX 17-19

v KEY FEATURES OF BUDGET 2014-2015 20-37

v BUDGET AT A GLANCE 38

FOREWORD 1

ECONOMIC SURVEY 2113 - 2014 2-4

Every effort has been made to avoid errors or omissions in this publication. Inspite of this,

errors may creep in. Any mistake, error or discrepancy noted may be brought to the notice of

our office. It is notified that Shankarlal Jain and Associates will not be responsible for any

damage or loss of action to anyone, of any kind, in any manner therefrom. It is suggested that

to avoid any doubt the reader should cross check all the facts, Law and contents of the

Publication with our office.

All rights reserved. No part of this book may be reproduced in any manner whatsoever; stored

in a retrieval system or transmitted or translated in any form or manner by any means, without

the prior written permission of SHANKARLAL JAIN AND ASSOCIATES. FOR PRIVATE

CIRCULATION.

Shankarlal Jain & Associates 01

Fiscal Consolidation and Long term Growth

Mr Arun Jaitley, the Finance Minister of India laid

the budget for the year 2014-15. The budget was

presented with the tag of “Fiscal Consolidation and

long term growth” The budget touched upon the

right chords and needs of the economy. He didn't

play into the populist budget, instead stood strong

for the long term needs like job creation,

investments and reduction of fiscal deficit.

The glimpse of what was to come was laid from his

opening comments on the day of the budget, as he

started with the need for fiscal consolidation. Fiscal

Consolidation implies minimising deficits and

reducing debts. The fiscal deficit which stood at

5.7% in 2011-12 was gradually brought down to 4.5

in 2013-14. The targeted level of fiscal deficit in the

current year is 4.1% of the GDP. The FM didn't want

to burden the state exchequer with soaps and

freebies to gain short term popularity. A healthy

and positive sign by all means.

The Narendra Modi led BJP government got a clear

majority as mandate from the largest democracy in

the world on grounds of economic growth and

prosperity. The FM laid special emphasis on job

creation as the budget tries to raise 5-8 million jobs

in the next 3-4 years. Special emphasis was placed

on the revival of manufacturing, power and

infrastructure sector. Proposal for 49% FDI in

insurance and defence was also made.

Infrastructure sector which has been reeling from

the shortage of finances shall have a relatively

easier time to tap the vast pool of reserves that the

FM is trying to create in the hands of the people via

various savings instruments. He also promoted the

private-public model as a long term model for

development of the infra sector.

The FM increased the basic exemption slab to 2.5

lakhs and increased the deduction under 80C to 1.5

lakhs. This will come as a respite for all personal

income tax payers. This budget shall also reduce

the price of footwears, laptops, PC's and TV's while

Foreword

excise duty was increased for tobacco ,pan masala,

cigarettes and aerated drinks He sure has the

health of people in mind.

There was special emphasis on education as

proposals for 5 IIM's, 5 IIT's and 4 AIIMS were made

in the budget. This will come as a respite for youth

of the country who want quality higher education in

the country. Certain structural changes like the

constitution of expenditure management

committee, to look into the food and fertilizer

subsidy and a new Urea policy were also

announced.

The Finance minister, a profound lawyer see the

multiple taxes as hindrance and made efforts to

finalise the rolling out of GST in the current year.

Also he made his intent towards a newer Direct Tax

Code.

The budget had a touch of Gujarat in all aspects, be

it Rolling out of a bullet train between Mumbai and

Gujarat, or providing special incentives to the

diamond industry or cotton. There is nothing

wrong with promoting and developing Gujarat as it

was development of the state and its growth

model, which had brought the current government

into power.

In our country plans and execution don't always go

hand in hand, but the promise and expectation

from the current government is very high and we

may expect this budget to clear the economic

turmoil and lay down the foundation stone for a

stronger economy in the future.

Regards

(S.L. Jain)


The year 2013-14 was characterised by various

challenges like unsupportive external environment,

domestic structural constraints, growth slowdown

and inflationary pressures to sustain its economic

success. Indian economy witnessed a growth in

GDP by 4.9% against the projected 6.1 to 6.7%

growth projected by the Finance minister in the last

budget. The sharp downturn in growth owes to the

interface of domestic factors with the global

economic environment of uncertainties and slow

growth in many advanced economies. The

slowdown in growth was mainly caused by

protracted slowdown in industry and moderation

of services like trade, hotels, transport and

communications. However the positive growth in

agricultural sector, driven by steady monsoon was

able to offset the slowdown to some extent.

Electricity, gas & water supply, financial, insurance,

real estate & business services and community,

social & personal services also saw better growths

in 2013-14 as compared to 2012-13.

The previous government came up with policy

responses to battle the rising inflation and reducing

the bottlenecks of growth. These policies came in

the firm of reducing entry level barriers and

boosting competition and production in various

sectors, reforms in administered prices and

strengthening the banking sector. They also

introduced instruments to encourage savings. The

previous government was left with no option for a

fiscal stimulus to boost the economy, as they had

opted for in the previous years.

Economic Survey 2013 - 2014

Rupee

Rupee had seen severe volatility throughout the

year. It had touched a low of 68 per US $ in August,

2013 and averaged at 61.91 per US $ in December,

2013. This had severely hit our economy as fuel

subsidy outlay increased leading to inflationary

pressure. However the Balance of Trade saw a

decline in the imports of non-petroleum oil

lubricant (PoL) and non-gold and silver.

Inflation

The Wholesale Price Index moderated to a four year

low of around 6% in 2013-14 after averaging 8.6 %

in the last 3 years. A major chunk of this reduction is

on account of moderation in non food inflation. The

non food inflation had subsided to a mere 2.9% in

the year 2013-14. However the average of Food

inflation in India in the last 5 years stood at 12.2 %.

Fortunately, the upward trend of inflation that

played a part in slowdown in growth, savings,

investment, and consumption, appears to have

subsided. The RBI Governor, Raghuram Rajan had

announced that Consumer Price Index is a better

measure of Inflation than the traditionally used

Wholesale Price Index.

USD/INR 365 Day History67.0016

65.5269

63.0622

60.5975

58.1328Aug 13 Dec 13 Apr 14 Jun 14

2009-10 2010-11 2011-12 2012-13 2013-14

25

20

15

10

5

0

12.4

3.8

10.4

9.6 8.9

8.4 10.4

7.4

9.7

6

CPI (%)

WPI (%)

GDP Growth (%)10

8

6

4

2

008-09 09-10 10-11 11-12 12-13 13-14

GDP Growth (in%) Linear (GDP Growth) (in%)

67

8.6

9.3

6.2

4.5 4.9


The Whole Sale Price Index(WPI) might show signs

of reaching a comfortable scenario, the Consumer

Price Index (CPI) show that it is a distant situation as

CPI has higher weight on food as compared to the

WPI. A host of policy actions were taken to reduce

food inflation like banning export of certain

products and importing important oils etc, fixing

the stock limits for essential commodities.

Tax Revenue

The slowdown in growth affected the tax revenues

of the Central Government. There was a 2.3% drop

in the Tax revenue of the Central Government. The

tax revenues were also hit because of the frequent

retrospective changes in law to benefit the govt

and the frequent delay in rolling out a host of

changes like the GST and the New Income Tax Act

which were expected from the last government.

Balance of Payments

The India's balance-of-payments (BoP) position

improved dramatically in 2013-14, particularly in

the last three quarters. This owed in large part to

measures taken by the government and the

Reserve Bank of India (RBI) and in some part to the

overall macroeconomic slowdown that fed into the

external sector.

Current account deficit (CAD) declined sharply

from a record high of US$ 88.2 billion (4.7 per cent

of Gross domestic product [GDP]) in 2012-13 to

US$ 32.4 billion (1.7 per cent of GDP) in 2013-14.

After staying at perilously unsustainable levels of

well over 4.0 per cent of GDP in 2011-12 and 2012-

13, the improvement in BoP position is a welcome

relief, and there is a need to sustain the position

going forward.

The IMF has projected the growth in the world

economy at 3.6% in 2014 and 3.9% in 2015. The

advanced economies are expected to grow at 2.2%

and developing economies substantially better at

3.9%.

The below chart will help us compare the growth in

the years 2012-13 and 2013-14 and the projected

growth by IMF in the next two years.

Subsidy

The subsidy burden of the Central Government has

been on an upward rise. It stood at 1.41 lakh crores

in 2009-10 to 2.58 lakh crores in 2013-14. It was

pegged at 2.26% of the GDP in the year 2013-14 up

from 1.42% in 2007-08. The government burden on

food subsidy will further increase on account of the

Food Security Bill passed by the Central Govt.

However the government is taking action to reduce

the fertilizer and petroleum subsidy.

Agriculture

Agriculture was once again the story of success.

Aided by favourable monsoons, the agriculture and

allied sectors achieved a growth of 4.7 per cent in

2013-14 compared to its long-run average of


40.00

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0

2010-11 2011-12 2012-13 2013-14 2013-14 2013-14

Personal Incom Tax

Corporation Tax

Customs

Excise

Service Tax

Tax Revenues over the year

2012 2013 2014 2015

GDP Growth Across Economies

10

5

0

-5World Output United States Euro Area China India #

300000

200000

100000

0

Food Fertilizer Petrolum Major Subsidy

2009-10 2010-11 2011-12 2012-13 2013-14 (RE)

Subsidy Layout


around 3 per cent. Food grain production during

the current year was estimated at 263 million up

from 255.36 million in 2012-13. Correspondingly,

the food exports are pegged at USD 45 Billion up

from USD 41 Billion in 2012-13. Agricultural credit

exceeded the target of 7 Lakh Crores.

Industry and Infrastructure

The industrial and infrastructure sector has taken

the slowdown in the economy on the chin. The

contraction in growth was mainly because of

decline in mining sector, capital goods and

consumer goods.

Manufacturing is a dominant sector in the industry.

Manufacturing sector has seen growth at mere .2 %

per annum. India's industrial sector grew at a peak

average of 2004-05 to 2007-08, where in it

recorded robust growth in profits and investments.

Manufacturing sector saw sluggishness because of

rise in policy rates, high inflation, bottlenecks facing

large project and reduction in overall demand.

Mining and quarrying activities have seen negative

growth in both 2012-13 and 2013-14. The

slowdown in mining is also on account of scams `

which have hit the mine allocations and the ban of

coal mining in the North-East. The constant decline

in the mining sector is also reflective of the need for

comprehensive reforms.

Service Sector

Service sector was the shining armour of the Indian

economy during the last 10 years recording CAGR

at 9%. This was the second highest growth in

service sector, next to China's 10.9 %. It constituted

a major portion of India's GDP with 57% of GDP.

The growth of service sector in 2013-14 was 6.8 %

as compared to the 4.9% growth in overall

economy. The deceleration was mainly on account

of lower growth rates in combined category of

trade, hotels, and restaurants and transport,

storage, and communications to 3 per cent from 5.1

per cent in 2012-13.

India's share in the world service has been

increasing from 0.6% in 1990 to 1.1% in 2000 to

3.3% in 2013.

Conclusion

The Economic Survey has made the right noises

and as always in India it needs to be seen whether

the issues raised in the economic survey can be

effectively addressed. A lot of questions need to be

answered by the upcoming year. Like how the

government juggles between fiscal deficit, rising

inflation, high interest rate regime, devalued Rupee

and the rising expectation of the people from the

Modi Government. The budget will balance the

rising deficit and lay down the foundation of a

strong growth regime while matching the people’s

expectations. It needs to be seen whether “Ache din

sach mein aagaye”.


14121086420

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Growth of Various Sectors

2011-12

2012-13

2013-14

Index of Industrial Production

2009-10

10

8

6

4

2

0

-22010-11 2011-12 2012-13 2013-14

5.3

8.2

2.9

Index of

Industrial

Production

1.1

-0.1


Sector Policy Impact Effect

Automobiles ♦ Excise Duty on sops unchanged. • Focus on reviving capital spending. F

♦ Thrust on creating 100+ more cities. • Increase in demand for

♦ Increased allocation towards construction enabled vehicles.

infrasector specially roads and

highways.

Banking ♦ Easing of rules for long term fund • Cost of funds may reduce. F

for infrasector. • Volume in bond market may

♦ More tax sops on housing loan. improve.

♦ Tax on long term capital gain on • Home loan demand may increase.

mutual fund schemes other than

equity oriented funds.

Capital Goods ♦ 15% investment allowance for • Continuation of investment F

& Utilities investment above Rs.25 cr. allowance likely to

♦ Allocation of funds for launching increase demand.

schemes for solar power driven

agricultural pumpsets.

♦ Improved Industrial Climate

Infrastructure ♦ Long term funds for lending • Clearance of stall projects. F

& Construction to infrasector projects. • Increase in allocation towards

♦ Construction of 8500km. roads will help the order booke.

national highways.

Metal & Mining ♦ Reduction in custom duty on • Favourable policies on F

steel-grade dolomite. demand side.

♦ Increase in duty on stainless steel • Development of smart cities,

flat products. new ports and air ports will

♦ Resolution of issues in mining and support demand.

revision of royalty rates on mining. • Increase in export duty in bauxite

♦ Excise duty on bauxite increased will benefit the aluminum player as

to 20% from 10%. it will improve domestic availability.

Retail / FMCG ♦ Excise duty cut on food processing • Focus on transportation and, F

and packing machinery. warehousing to boost supply

♦ Allocation of funds towards chain efficiency.

warehouse infrastructure. • Reduction in transportation would

♦ Exemption of custom duty on lead to decrease in distribution

sub-19inch LCD panels. losses.

Overall Sectoral Impact


Sector Policy Impact Effect

Oil & Gas ♦ Fresh gas pipeline to be built. • Decrease in excise duty could N

♦ Excise duty reduction on help revive sales.

branded petrol.

Pharmaceutical ♦ Increase budgetary allocation • Increase allocation and focus on N

in health care. providing free drugs will result

♦ Focus on providing in higher demand.

affordable medicines.

Telecomm- ♦ 10% custom duty on specified • No major impact as large portion N

unication telecom products of the equipments used will remain

subject to nil import duty.

Real Estate ♦ Relaxation in condition for FDI • Relaxation in FDI will provide much F

investment in real estate project. needed funds to the real

♦ Increase in limit for interest on loan estate industry.

for self-occupied houses raised • There may be increase in demand

from Rs.1.5 Lakhs to Rs.2 Lakhs. on account of benefit to retail

customers towards buying of

new houses.

Hospitality and ♦ Electronic E-visa facility to be • The proposal is expected to ease N

Hotels rolled at nine Air Ports. documentation process for

foreign tourist.

Textile ♦ Investment allowance of 15% on • Investment allowance may N

investment of Rs.25 cr in plant provide the much needed impetus

and machinery. for modernization.

♦ Allocation of Rs.200 cr for setting

up six textiles mega clusters.

F – Favorable. U – Unfavorable. N - Neutral




Finance Bill 2014to be eligible to claim deduction under sub-

section (1) of section 32AC, even if investment in

Assessment Year 15-16 is below the proposed new

threshold limit of Rs.25 cr. during the year.

Under the existing provisions of clause (iv) of sub-

section (4) of section 80IA a deduction of profits

and gains is allowed to an undertaking which:

(a) Is set up for the generation anddistribution of

power if it begins to generate power at any

time during the period beginning on 1st April

1993 and ending on 31st March 2014.

(b) Starts transmission or distribution by laying a

network of new transmission or distribution

lines at any time during the period beginning

on 1st April 1993 and ending on 31st March

2014.

(C) Undertakes substantial renovation and

modernization of existing network of

transmission or distribution lines at any time

during the period beginning on 1st April 1993

and ending on 31st March 2014.

With a view to provide 100% deduction of profit of

such undertaking the terminal date for setting up

of such undertaking is further enhanced to

31.3.17.

The existing provisions of section 35AD of the

Income Tax Act provides investment linked tax

incentive by way of allowing a deduction in

respect of any expenditure of capital nature (other

than expenditure on land, goodwill and financial

instrument) incurred for the purpose of specified

business during the previous year in which such

expenditure is incurred. The specific business

which are entitled for the necessary deduction

u/s.35AD are enumerated in clause ( c) of sub-

section (8) of section 35AD. By amendment to the

said section, two new businesses are included in

the list of specified business:

(a) Laying and operating a slurry pipeline for the

transportation of iron ore.

(b) Setting up and operating a semiconductor

wafer fabrication manufacturing unit, if

• Exemption to Power sector

• Deduction of capital expenditure in case of

specific business.

The amendments as carried out by Finance Bill 2014 are

summarized below:

The Finance Minister has left out rate of Income Tax

unchanged. However, exemption limit in case of

individual, HUF, association of person etc. is

enhancedfrom Rs.2 lakhs to Rs.2.5 lakhs. In case of

individuals who are of the age of 60 years or more,

such exemption limit enhanced to Rs.3 lakhs. The

comparative chart of tax in case of individuals not

being senior citizen is as under:-

Exemption limit in case of individuals exceeding 80

years of age is retained at Rs.5 lakhs.

Rate of tax in case of Co-operative Societies, firm,

local authorities, companies including foreign

companies remains unaltered.

Finance Act 2013 inserted section 32AC in the Act

to provide that where assessee being a company

engaged in the business of manufacturing, makes

an investment of more than Rs.100 cr. in new plant

and machinery during the period beginning from

1.4.13 and ending on 31.3.15, such company shall

be allowed a deduction of 15% of the cost of new

assets in Assessment Years 2014-15 & 15-16.

Now it is provided by inserting a new clause that

where the assessee is a company engaged in the

business of manufacturing makes an investment

in new plant and machinery after 1.4.14 of more

than Rs.25 cr. in a previous year, it will be entitled

for necessary deduction of 15% u/s.32AC being

investment allowance. The provisions of section

32AC are extended till 31.3.17. In case of assessee

who is eligible to claim deduction under the

existing provisions of section 32AC, a combined

threshold limit of Rs.100 cr. for investment made

in Assessment Year 14-15 & 15-16 shall continue

Rate of Income Tax

Business Income

• Investment allowance to manufacturing

companies

Tax Rate Current Slabs Proposed Slabs

Nil 2,00,000/- 2,50,000/-

10% 2,00,001 to 5,00,000 2,50,001 to 5,00,000

20% 5,00,001 to 10,00,000 5,00,001 to 10,00,000

30% 10,00,000 and above 10,00,000 and above


suchunit is notified by the Board in accordance

with the prescribed guidelines.

The capital assets for which deduction are allowed

u/s.35AD are now required to be used only for

specified business for a period of 8 years

beginning with the previous year in which the

assets is acquired or constructed if such assets is

demolished or destroyed or discarded or

transferred, the proceeds received thereof be

chargeable to tax as business income. In case such

assessee to whom a deduction has been allowed

u/s.35AD, uses such assets for any purpose other

than specified business, the total amount of

deduction so claimed and allowed in the previous

year in respect of such assets as reduced by the

amount of depreciation allowable in accordance

with provisions of section 32 shall be deemed to

be income of the assessee chargeable under the

head ̀ profit and gain of business or profession' of

the previous year in which such assets is used for

any other purpose. The provisions of this sub-

section (7B) however would not apply to a

company which has become a sick industrial

company under sub-section-1 of section-17 of the

sick industrial companies (special provisions) Act

1985 within the time period specified.

The existing provisions of sub-section(3) provides

that when a deduction is allowed u/s.35AD, no

deduction will be allowed under the provisions

part `c' of Chapter-VIA for the same year or any

other assessment year. The Act is amended to

provide that in such cases even no deduction be

allowed u/s.10AA as available to units set up in

Special Economic Zone.

Under the existing provisions of section 115JC

provides that where on regular income computed,

tax payable by a person other than company for a

year is less than alternate minimum tax for that

year, such assessee be required to pay income tax

@ 18 ½% of its adjusted total income. Income

computed in the normal provisions of the law will

be increased for the purpose of section 115JC by

deduction claimedunder Part`C' of Chapter-VIA as

well as deduction claimed u/s.10AA available for

SEZ to arrive at the adjusted total income. Now it

is proposed to be provided that investment linked

deduction claim u/s.35AD subject to depreciation

• Alternate Minimum Tax

allowance u/s.32 be taken into account for

computing adjusted total income for the purpose

of section 115JC.

Under the Companies Act 2013, the companies

having net worth of Rs.500 cr. or more or turnover

of Rs.1000 cr. or more or net profit of Rs.5 cr. or

more during any financial year, are required to

spend 2% of their average net profit on activities

relating to CSR. It is clarified by amendment to

section 37(1) that such CSR expenditure incurred

will not be allowable as business deduction.

Under the existing provisions of the law,

u/s.40(a)(i) in case of payment to a non-resident

of interest, royalty and fees for technical services is

not allowable as deduction for computing

business income if tax on such payment was not

deducted or after deduction was not paid within

the time prescribed u/s.200(i) of the Act. Now it is

proposed toamend the section so as to enable

allowance of such expenditure paid to a non-

resident if such tax deducted is paid before the

due date for filing the Return of Income u/s.139 (i)

of the Act.

Under the existing provisions of section 40 (a)(ia),

in case of payment to a resident without deduction

of tax or non-payment thereof before the due date

of filing the Return of Income u/s.139(i), 100% of

such expenditure is not allowable as deduction

while computing business income. Now it is

provided that such disallowance will be restricted

to 30% of the expenditure subject to such default.

Consequentially it is provided that in case TDS is

paid in subsequent assessment year, such

disallowance of 30% be allowed as deduction.

Under the existing provision of section 44AE the

presumptive taxation is provided of income of an

assessee engaged in the business of plying/hiring

or leasing goods carriage not owning more than

10 such goods carriage at a time during the

previous year, such income is calculated in case of

heavy goods vehicle @ Rs.5000/- per month per

vehicle and incase of other than heavy vehicles @

• Corporate Social Responsibility (CSR)

• Disallowance of expenditure for non-

deduction of tax at source

• Business of plying, hiring or leasing goods

carriages

Finance Bill 2014


Rs.4500/- per month for every such vehicle. Now

the provisions is proposed to be amended so as to

provide that such income be calculated in case of

all types of carriages @ Rs.7500/- per month.

The Central Board of Direct Taxes (CBDT), with a

view to lay down accounting standard for

computation of income constituted an accounting

standard committee in 2010. The committee has

submitted final report in August 2012. The

committee has recommended that accounting

standard as may be notified under Income tax Act

u/s.145 should be made applicable for the

computation of taxable income and tax payer will

not be required to amend its books of accounts.

Such accounting standard are awaiting its

finalization. It is provided that accounting

standard as notified u/s.145(2) of the Act be

followed for computation of income and

disclosure of information by the assessee. Such

accounting standard be notified from time to time.

In case income is not computed or necessary

information are not disclosed as per prescribed

accounting standard, income can be computed as

per best judgment of the Assessing Officer.

Finance Act 2013 added proviso( e) to sub-

section(5) to section-43 so as to provide that any

eligible commodities derivative transactions

carried out in a recognized association will be

treated as non-speculative transaction. It is now

clarified that only transaction in commodity

derivatives carried out in a recognized association

which is chargeable to commodities transaction

tax shall not be considered to be speculative

t ransact ion. The amendment is g iven

retrospective effect from 1st April 2014.

Under the provisions of section-73, speculative

business loss cannot be set off against normal

business income. Explanation to section-73

provides that in case of a company deriving its

income mainly under the head ̀ profits and gain of

business or profession' except in certain

exceptional cases as provided in said explanation

if any part of the business of a company consists

• Income computation and disclosure standards

• Speculative transactions in respect of

commodities derivatives

• Losses in speculation business

of purchase or sale of shares, such business loss for

the purpose of section-73 was treated speculative

loss. The explanation to section-73was applicable

even in cases where the whole of the business of

the assessee is dealing in shares and securities. By

proposed amendment to explanation to section-

73 now it is proposed to provide that said

explanation shall not be applicable to a company,

the principal business of which is trading in shares.

Clause (42A) of section 2defines ̀ short term capital

assets' to mean a capital assets held by an

assessee for not more than 36 months

immediately preceding the date of transfer. As per

the existing provisions of the law, in case of shares

held in a company , any other listed securities,

units of UTI or units of Mutual Funds or zero-

coupon bonds are treated as short term capital

assets, only if are held for less than 12 months. By

amendment to clause (42A) of section 2 now it is

proposed to provide that in case of unlisted

securities including unlisted shares in a company

and units of Debt Schemes of Mutual Funds will be

treated as short term capital assets, if it is not held

for more than 36 months. However, units in the

Mutual Funds of any equity oriented schemes shall

be treated as `long term capital assets' if held for

more than 12 months.

Under the existing provision of section 112, where

the long term capital gain payable on transfer of

capital assets being listed securities or unit of

mutual funds, or zero-coupon bonds exceeds

10% of the amount of capital gain before

allowance of indexation, then such excess tax

payable is ignored. It is proposed to amend

section-112 so as to allow concessional rate of

10% of tax on long term capital gain only on listed

securities other than units of the mutual funds and

zero-coupon bonds.

By amendment to definition of capital assets

under clause (14) of section 2 it is proposed to

provided that in case of FII's income arising from

transactions in securities be treated as capital gain

in contrast to business income. It is provided that

securities held by FII's would be treated as capital

Capital Gain

• Units of Mutual Funds and unlisted shares:

• Foreign Institutional Investors (FII)

Finance Bill 2014


assets only and hence, gain arising therefrom be

chargeable as capital gain. It will put an end to the

dispute whether income of FII's on portfolio

investments in capital gain as business income.

Under the existing provisions of section 51, if an

advance is received and such advance is forfeited,

the cost of the assets is reduced by such advance

received. Now it is provided by amendment to

section 56 by inserting a new clause (ix) to sub-

section (2) of section 56 that such advance

received and forfeited be assessed as `income

from other sources' and consequential

amendment is being made u/s.51 so as not to

reduce cost of assets by such advance..

It is proposed to insert Clause (viib) to section 47

so as to provide that any transfer of capital assets

being government securities carrying periodic

payment of interest made outside India through

an intermediary dealing in settlement of securities

by a non-resident to another non-resident shall

not be considered as transfer for the purpose of

capital gain. The provision is proposed to be

inserted so as to facilitate listing and

trading in government securities outside India.

Under the existing provision of subsection (5) to

section 45, it is provided that capital gain arising

on transfer by way of compulsory acquisition if

enhanced by the court or tribunal or any other

authority be taxable in the year of receipt. Now it

is proposed to provided that enhanced

compensation received in pursuance of an interim

order of the court or tribunal or any other

authority shall be deemed to be income

chargeable under the head “Capital Gain” of the

previous year in which final order determining

such compensation is passed by the authorities.

Under the provisions of section 48, for

computation of capital gain cost is provided to be

indexed as per `cost of inflation index', such 'cost

of inflation index' under the head Explanation to

section 48 was to be notified from year to year by

•

• Transfer of government securities by one non-

resident to another non-resident

• Capital gain arising in case of compulsory

acquisition

• Cost Inflation Index

Advance against sale of capital assets

the government having regard to CPI for UNME

which stands discontinued, hence it is now

proposed to provide that such `cost of inflation

index' be notified based on 75% of the average

rise in consumer price index (urban) for immediate

preceding year.

It is proposed to amend section 54 as well as

section 54F so as to provide that capital g a i n

exemption under these sections be limited to

acquisition of only one residential house. Certain

courts recently have taken view that such

exemption is available even to number of

residential houses which view is overruled by the

amendment.

Section 54EC is proposed to be amended so as to

provide that total exemption available under

the section be limited to Rs.50 Lakhs whether

invested in one financial year or m o r e t h a n

one financial year. This amendment is also carried

out to overrule certain decisions to hold that

limit of investment of Rs.50 Lakhs u/s.54EC is per

Financial Year.

Regulations are proposed to be notified as per

recommendation of SEBI for these two

categories of investment vehicles namely, Real Estate

Investment Trust and Infrastructure Investment

Trust. These trusts would raise capital by way of issue

of units to be listed on recognized stock exchange

and can also raise debts directly both from resident

as well as non-resident investors.Income bearing

assets would be held by the trust by acquiring

controlling or other specific interest in an Indian

company (SPV) from the sponsor. These investment

vehicles are proposed to be initiated for raising

finance for infrastructure and development activities.

The necessary provisions are proposed to be made

for taxation of income in the hands of such trust

as well as in the hands of unit holders. These trusts

are called “Business Trusts”

(i) Listed units of such business trusts, when

traded on a recognized stock exchange will be

•

• Capital Gain exemption u/s.54EC

Capital Gain u/s.54 & 54F

Taxation of Real Estate Investment Trust

(REIT) & Infrastructure Investment Trust

(INVIT)

Finance Bill 2014


liable to pay STT and to be treated equal to

equity shares for the purpose of exemption of

long term capital gain and in case of short

term capital gain to be taxed @15%.

(ii) In case of sponsor, capital gain arising at the

time of exchange of shares in SPV with units of

such business trust, capital gain shall be

deferred and taxed at the time of disposal of

units of such trusts by the sponsor. However,

sale of such units will be taxable as capital gain

Cost of such units will be the cost of shares in

the hands of sponsor of SPV. The holding

period of shares to be also counted as holding

period of units for the purpose of

computation of short term/long term capital

gain. The spouse will not be entitled for

exemption u/s 10(38) of the Act.

(iii) Income received from SPV by way of interest

by such trusts is accorded pass through

treatment i.e there is no taxation of such

interest income in the hands of the trust and

no withholding tax at the level of SPV. The

withholding tax be @5% in case of payment of

interest component of income distributed to

non-resident unit holder and @10% in respect

of payment of interest component of

distributed income to a resident unit holder.

(iv) In case of borrowings through ECB by such

business trusts benefit of taxation @5% on

interest payments to non-resident u/s.194LC

be available.

(v) Dividend received by such trust from SPV be

liable for payment of dividend distribution tax,

however, such dividend will be exempt from

taxation in the hands of the trust as well as unit

holders.

(vi) Income by way of capital gain on disposal of

capital assets of the trust shall be taxable in

the hands of the trust at applicable rates.

However, income arising by way of capital

gain if distributed among the unit holders to

the extent of income distributed being capital

gain would be exempt in the hands of unit

holders.

(vii) Any other income of the trust shall be taxable

at the maximum marginal rate in the hands of

the Trust.Such business trust is required

tofurnish return of income.

The above provision will have effect from

01/10/14.

Section 92CC provides methodology for advance

pricing agreement (APA) for determining Arm's

Length Price (ALP) or specifying the manner in

which ALP is to be determined in relation to an

international transaction which is to be entered

into by the person to agreement. Such agreement

is valid for a period not exceeding 5 years. After

entering into such advance pricing agreement,

ALP of international transaction be de te rmined

accordingly. It is proposed to provide for “roll

back” mechanism for dealing with ALP issues in

relation of which the methodology is approved

under APA to be applied for determining ALP of

international transaction which has already been

entered into prior to period covered under APA .

Such`roll back' relief be available for earlier 4 years

subject to certain conditions to be specified . This

amendment will be effective from 01/10/14.

Section 92B defines international transaction

between two or more associated enterprises either

or both of whom are non-residents. Subsection (2)

of the said section extends the scope of definition

of international transaction by providing that a

transaction entered into with an unrelated person

shall be deemed to be a transaction with an

associated enterprise if there exists a prior

agreement in relation to the transaction between

other person and the associated enterprise. It is

now provided that such unrelated person need not

be a non-resident. Hence, section 92B provides

that where in respect of a transaction entered into

by an associated enterprise with a person other

than an associated enterprise, there exists a prior

agreement in relation to the relevant transaction

between the other person and the associated

enterprise or where the terms of the relevant

transaction are determined in substance between

such other person and the associated enterprise

and either the enterprise or the associated

enterprise or both of them are non-resident, then

such transaction shall be deemed to be an

Transfer Pricing:

• Advance Pricing Agreement Scheme:

• Definition of International Transaction:

Finance Bill 2014


international transaction entered into between

two associated enterprises, whether or not such

other person is a non-resident.

Under the existing provision of section 271G,

penalty is imposable by Assessing Officer o n

the person who has entered into an international

transaction or specified domestic t r ansac t ion

who fails to furnish any documentation or

information as required under subsection (3)

of section 92D. Now it is provided that such

penalty can be imposed by TPO.

Under the existing provision of the Act, incomes of

charitable trusts/institutions are exempt u/s.11

subject to certain conditions as provided u/s.12,

12A, 12AA and section 13. It is now proposed to

specify that when a trust or institution is granted

registration for the purpose of exemption u/s.11

and such registration is available then such

trust/institution cannot claim any exemption

under any provision of section 10 except relating

to exemption of agricultural income and income

exempt u/s.10(23C) of the Act.

It is also clarified that under provision of section 11

as well as section 10(23C) income applied to

acquire capital assets is to be treated as

application of income. Hence now it is proposed

to provide that no notional deduction by way of

depreciated be allowed on cost of capital asset

which is considered as application of income for

the purpose of sec. 11 of the Act.

The existing provision of sub-clause (iiiab) & (iiiac)

of section 10(23C) of the Act, provides exemption

subject to compliance of certain conditions to the

income of certain educational institutions,

universities and hospitals wholly or substantially

financed by the Government. No definition is

provided of the phrase “substantially financed by

the Government” which has led to litigation and

hence it is proposed to provide a specified

percentage of the total receipts to determine such

'substantially financed by the Government'.

• Levy of penalty u/s.271G by Transfer Pricing

Officers

• No Exemption u/s 10

• No depreciation allowable

• Taxation of Educational Institutions etc.

Taxation on charitable trust and institutions:

•

• Cancellation of registration u/s.12AA

• Recognition of registration with prior effect.

Anonymous donations u/s.115BBC

Now it is proposed to provide that in case of

anonymous donations exceeding @5% of the total

donations received by the assessee or Rs.1 Lakhs

whichever is higher, tax will be payable @30%

along with tax payable on balance total income as

may be applicable.

The existing provision of the law provides that

registration once granted to a trust or

institution shall remain in force till it is cancelled by

the Commissioner. The Commissioner can cancel

the registration under two circumstances namely:-

(i) Activities of the trust or institution are not

genuine

(ii) The activities are not being carried out in

accordance with the objects of the trust or

institution.

Now it is proposed to add following further

conditions for cancellation of such registration:-

(i) Its income does not ensure for the benefit of

general public.

(ii) It is for the benefit of any particular religious

community or caste in case it is established

after commencement of the Act.

(iii) Any income or property of the trust is applied

for the benefit of specified persons like author

of trust, trustees, etc.

(iv) Its funds are invested in prohibited modes.

This provision will be applicable from 01/10/14.

As per existing provisions of the law, registration

of Charitable Trust under the provisions of section

12AA, is effective from the date of registration

only. In absence of registration for earlier years,

such charitable organisations are denied benefit of

exemption u/s.11. There is no power of

condonation of delay at present. With a view to

remove the hardship in genuine cases, it is

proposed to amend section 12A to provide that

when a Trust or Institution has been granted

registration u/s.12AA of the Act, benefit of section

11 & 12 shall be available to such institutions or

trusts, for any assessment proceedings for an

earlier assessment year, which is pending before

the Assessing Officer on the date of such

registration, if the objects and activities of such

Finance Bill 2014


Trust or Institution in the relevant assessment year

are the same as those on the basis of which the

registration has been granted at present. The

provision will be effective from 1st October 2014.

Under the existing provisions of section 201(1) an

order of declaring payer as `assessee in default',

who dos not deduct or after deducting does not

pay the whole or part of tax so deducted or

deductible, can be passed before expiry of two

years from the end of financial year in which TDS

statement has been filed. It is proposed that time

limit provided u/s.201(3) of the Act for passing the

order treating a payer as `assessee in default'

u/s.201(1) shall be seven years.

Provisions of section 271H provides for imposition

of penalty in case of failure to file statement of

TDS/tax collection. Now it is provided that such

penalty will be imposable by the Assessing Officer.

Under the provision of section 10(10D) of the Act,

any sum received under Life Insurance policy

including bonus accrued thereon is exempt from

tax provided Life Insurance Policy is in compliance

of certain conditions provided under the said

section. In case of policies which are not in

complaint with such provision are taxable. In case

of policies which arein non-compliance of section

10(10D), any sum received on such policies is

taxable. It is provided that on such taxable sum

TDS will be deducted @2%, however, no tax will be

deducted on payment not exceeding Rs.1 Lakh in a

financial year. This amendment will be applicable

from 01/10/14.

Under the provision of section 115-O, a domestic

company is liable for payment of dividend

distribution tax @15% of the amount declared,

distributed or paid by way of dividend to share

holders, similarly, under the provision of section

115R additional income tax on income distributed by

Tax Deducted at Source

Dividend and income distribution tax:

•

provide that a deductor can file a correction

statement for rectification / updation of the

information furnished in original TDS

statement.

• Tax deducted at source on non-exempt paym-

ent of Life Insurance policy

By amendment to section 200 it is proposed to

Mutual Funds to its investors is payable @15%. B o t h

the sections are proposed to be amended so as to

provide that such taxes u/s.115-0 as well as u/s.115 R

be payable on the gross amount instead of net

amount.

The existing limit of deduction u/s.80C of Rs.1 Lakh is

proposed to be increased to Rs.1.50 Lakhs. The

consequential amendments are proposed to be

made in section 80CCE and 80CCD of the Act.Limit of

contribution to PPF account is enhanced from

rupees one lakh to rupees one and half lakhs.

By amendment to section 24 it is proposed to allow

deduction of interest paid on borrowings for the

purpose of self-occupied house from 1.50 Lakh to

Rs.2 Lakhs, by effecting suitable amendment to

section.

Under the existing provision of section 115BBD, in

case of a Indian company making investment abroad

and receiving dividend, tax is payable @15% on such

foreign dividend received, however, such

concessional rate is applicable for A.Ys. 2012-13 to

2014-15. It is proposed to make this provision

available for future, hence foreign dividend received

be taxable for FY 2014-15 & subsequent F.Ys. @15%.

Under the existing provisions of section 194LC

provides lower withholding tax @5% on

interest paid by an Indian company to non-residents

on monies borrowed in foreign currency from a

source outside India under a loan agreement

through issue of long term infrastructure bonds at

any time on or after 01/07/12 but before 01/07/15

subject to certain conditions. The benefit is now

proposed to extend to all borrowings and not

limited to long term infrastructure bond. The period

of borrowings is also proposed to be extended upto

30/06/17. The provision of 206AA for PAN will not

be applicable to such borrowings. This amended

provision will be applicable from 01/10/14.

Under the existing provisions of section 133A,

Income Tax authorities has power to carry out a

survey on an assessee for the purpose and in the

matter provided under the section. Such Income Tax

Deduction u/s.80C

Deduction from House property:

Rate of tax on foreign dividend

Rate of tax on overseas borrowings

Power of survey

Finance Bill 2014


authorities are entitled to impound and retain in his

custody any books of account or other documents

inspected by it during the course of survey. In the

existing provisions of law, such books of

accounts/documents can be retained for a period of

not exceeding ten days (exclusive of holidays)

without obtaining prior approval of Chief

Commissioner or Director General, as the case may

be. It is proposed to amend such period of retention

to fifteen days without prior approval of the

authorities concerned.

It is proposed to further amend section 133A to

authorise Income Tax authorities to carry out the

survey on an assessee liable to deduct TDS to

ascertain that correct TDS has been deducted and

paid. It is provided that while carrying out a survey for

verification of TDS deducted/collected, books of

accounts and all other documents found shall not be

impounded or retained in custody. The provisions

will be effective from 1st October, 2014.

A new section 133C is proposed to be inserted so as

to authorise an Income Tax authority to verify the

information in its possession relating to any person.

For the purpose such Income Tax authorities may

issue a notice to such person requiring him on or

before a date to be specified to furnish information

or documents verified in the manner specified

therein, which may be useful or relevant to any

enquiry or proceeding under the Act. The provisions

will be effective from 1st October, 2014.

By amendment to section 139 it is made obligatory

on Mutual Funds, securitization trust and Venture

Capital companies or Venture Capital Funds to file

return of income.

Under the existing provisions of section 142A an

Assessing Officer is authorised while making

assessment or re-assessment to refer valuation of

any investment, property, bullion, jewelry to arrive at

a fair estimate of market value of any such property

to valuation officer. In certain cases as decided by

Courts it is held that such reference can be made only

after rejection of books of accounts. It is now

proposed to amend the section so as to provide that

Assessing Officer may make a reference to the

Enquiry - prescribed Income Tax authorities

Filing of Return of Income

Valuation of assets by Valuation Officer

Valuation Officer for arriving at a fair valuation of

investment, property, bullion, jewelry etc. even

without rejection of the books of accounts. In case

the assessee does not cooperate with direction of the

Valuation Officer, the valuation Officer can arrive at a

fair value, best to his judgment. It is further provided

that time available for making assessment u/s.153

and 153B of the Act be further extended by the time

taken by the Valuation Officer while making the

valuation report. The provision be effective from 1st

October 2014.

Under the existing provisions of law, subsection(1) of

section 220 provides that a demand raised u/s.156 be

paid within thirty days of service of notice of demand.

In case demand is not paid within the time permitted,

interest will be payable under the provisions of sub-

section(2) of section 220 at 1% for every month or

part of the month comprised in the period

commencing from the date immediately following

the end of period of 30 days from the date of service

of notice. In case the demand is amended in further

appel late proceedings , such interest i s

proportionately reduced. Now it is proposed to

amend the section 220 so as to provide that where

any notice of demand has been served upon the

assessee, such demand will be valid and subsisting

inspite of any appellate order on appeal filed by the

assessee is passed and on further appeal by

department such appellate order is amended

resulting in enhancement of demand. In such case

interest will be payble on finally determined demand

from data when demand became due on original

service of notice. It is further provided that in case of

an appeal, the demand is reduced and subsequently

as a result of an order u/s.263, the demand is

enhanced. The interest will be payable on enhanced

demand. The amended provision will be applicable

from 1st October, 2014.

Under the provisions of section 269SS and under

section 269T, loans or deposits exceeding

Rs.20,000/- are required to be obtained and repaid

by Account Payee Cheque or Account Payee Bank

Draft. Now it is proposed to provide that any loan or

deposit taken or repaid by internet banking facility

or by use of payment gateways through banking

channel, will be valid.

Note : All the provisions are applicable w.e.f. 1.4.2015 i.e. to

A.Y. 2015-16, except in cases specified hereinabove.

Interest payable by assessee u/s.220

Mode of acceptance of loans and deposits

Finance Bill 2014


I Central Excise

1. Changes with immediate effect (i.e. form

11/07/2014) unless there is no specified date.

a) There is no change in Basic rate of excise duty

as well as education cess.

b) Changes in the rate of duty

2. Mandatory penalty is applicable (under Rule 3A)

in cases where the duty declared in the return is

not paid within one month. Presently assessee is

not allowed to take cenvat credit on removal of

goods. Penalty will be 1% p.m. or part thereof on

the declared duty not paid. However, now

assessee can utilize Cenvat Credit.

3. New provision (Rule 6(1)) of the CENTRAL EXCISE

VALUATION RULES 2000, is introduced to

consider the sale price of the excisable goods as

transaction value for payment of excise duty

where goods are sold even below cost price. This

provision has been inserted due to ruling of

Honorable Supreme Court in the case of FIAT

INDIA PVT. LTD. Wherein the sales value was not

accepted as assessable value.

4. Additional Excise duty of 5% has been levied on

Aerated Drinks.

5. Clean Energy Tax (Carbon Tax) on coal has been

enhanced from Rs. 50 per M.T. to Rs. 100 per M.T.

6. Following changes have been made w.e.f

01/10/2014:

a) Every assessee to make electronic payment of

excise duty mandatorily. At present only those

assessee making payment of Rs. 1 lakh or

more are required to make payment

electronically.

b) Exemption from excise for suppliers when

international bidding has been extended to

sub contractors who supply goods to main

contractors of such project. (w.e.f 11/07/2014)

7. Changes in Cenvat Credit Rules 2004 (w.e.f

11/07/2014) unless otherwise specified:

a) Cenvat credit on service under reverse charge

mechanism where in entire service tax is paid

by service recipient can be taken without

payment to service provider, this will also be

applicable in case of import of services. But in

case of partial reverse charge, cenvat credit

can be availed only after the payment to

service provider as well as service tax

deposited.

b) Cenvat credit can be availed within 6 months

(w.e.f 01/09/2014), earlier there was no time

limit to avail the credit. Similarly, in case of

export of service where foreign currency has

not been received within 6 months or

extended period as may be allowed by RBI,

cenvat credit cannot be availed.

8. INPUT SERVICE DISTRIBUTOR (ISD) : Now

credit is to be distributed to all the units if any

input service pertains to more than one unit base

on their respective turnover.

Proposal in Respect of Indirect Taxation

Sr. Product Old Rate upto New Rate w.e.f.

No. July 10, 2014 July 11, 2014

1. Footwear 12% 6%

exceeding

Rs.500/– but

not exceeding

Rs. 1000/–.

2. Petrol. (Sale Rs. 7.50 Per Ltr Rs. 2.35 Per Ltr

under a Brand

name )

3. Gloves specially 12% 2% (Cenvat Not

designed for Available)

use in sports. 6%(Cenvat

Available)

4. Recorded 2% (Cenvat Not 12%

Smart Card Available)

6% (Cenvat

Available)

5. Writing or 2% (Cenvat Not 6% (Cenvat

printing paper Available) Available)

for printing of 6% (Cenvat

educational Available)

textbooks.

6. Plastic materials NIL 12%

reprocessed in

India out

of Scrap


PERFORMANCE FIBRE LTD. In which it is said

that cess is a surcharge & not a levy. Hence, the

same cannot be charged twice.

1. There is no change in Basic rate i.e. 10%.

2. Changes in duty with immediate effect of major

items:

II Custom Duty


Sr. Description of Goods Rate of BCD

No. Till From

10/7/2014 11/7/2014

1 Ethane and Other Goods 5.00% 2.50%

2 Ethylene 5.00% 2.50%

3 Propylene 5.00% 2.50%

4 Butadiene 5.00% 2.50%

5 Ortho Xylene 5.00% 2.50%

6 Propane 5.00% 2.50%

7 Methyl Alcohol 7.50% 5.00%

8 Naphthalene 10.00% 5.00%

9 Stainless Steel Flat Products 5.00% 7.50%

10 Specified HIV/AIDS drugs 10.00% NIL

and diagnostic kits

imported under National

AIDS Control Programme

(NACP) funded by the

Global Fund to Fight AIDS,

TB and Malaria (GFATM)

11 LCD and LED TV panels of 10.00% NIL

below 19 inches

12 Specified parts of LCD 10.00% NIL

and LED panels for TVs

13 Colour Television picture 10.00% NIL

tubes for use in manufacture

of cathode ray television

14 The specified goods used 10.00% NIL

in the manufacture of

EVA (Ethylene Vinyl Acetate)

sheets or backsheet, which

are used in the manufacture

of solar photovoltaic cells

or modules

15 Cut, Polished Diamonds / 2.00% 2.50%

Colored Gem Stone

16 Semi Process / Half Cut NIL 2.50%

Diamonds

17 Raw Material for 5.00% NIL

manufacture of

Spandex Yarn

9. LTU is not allowed to transfer cenvat credit from

one unit to another unit (w.e.f 11/07/2014). This

reduces the attraction of LTU.

10. Proposed changes effective from the date of

receipt of assent on Finance bill 2014 from

President.

a) Amendment in section 35B regarding

monetary limit of discretionary power to

refuse to admit an appeal by CESTAT from Rs.

50,000 to Rs. 2 Lakhs.

b) Now the stay granted will be operational

until the disposal of the appeal or

withdrawal, earlier there was a time limit of

180days.

c) New Section 35F is introduced to levy

mandatory pre deposit before filing of

appeal before authorities

Appeal to who Amount of Deposit

Commissioner 7.5% of Duty + Penalty amount

appeal

CESTAT 10% of Duty + Penalty amount

• Subject to ceiling of Rs. 10 Crore.

• Provision for compulsory stay on payment of

pre deposit will reduce the pending litigation

significantly especially at CESTAT stage.

11. Retrospective Exemptions:

a) Unbranded precious metal articles are being

exempted for the period 01/03/2011 to

16/03/2012.

b) Ployster stable fiber (PSF) and Polyster

Filament Yarn (PFY) manufactured from

waste/scrap which is already exempted w.e.f

08/05/2012. Now is being exempted w.e.f

29/06/2010 to 07/05/2012.

12. Dual Charging of Cess on customs as well as on

total duty of excise for removal made by EOU

has been withdrawn w.e.f 11/07/2014.The

current amendment is made in line with the

decision of Tribunal in the matter of SARLA


3. 4% SAD is exempted for the following items

subject to compliance of certain conditions

specified in Notification no. 12/2012.

a) All inputs & components used in

manufacturing of personal computers

(Chapter 8471).

b) AVC sheets & r ibbon for use in

manufacturing of smart card.

c) Raw material for manufacturing of wind

operated generator.

4. Export duty has been increased from 10% to

20% on Bauxite.

5. I m p o r t e r w h o i m p o r t e d g o o d s b y

Land/Post/Courier is allowed to make an

application to settlement commission.

6. Mandatory Pre Deposit for hearing the appeal

has been introduced.

7. Duties on various forms of Coal have also been

rationalized.

8. Monetary limit for refusing the application of an

appeal has been increased from Rs. 50,000 to Rs.

2 Lakhs.

9. Section 8B of Customs Tariff Act is being

amended so as to provide for levy of safeguard

duty on inputs/raw materials imported by EOU

and cleared to DTA as such or are used in the

manufacture of final products & cleared to DTA.

10. Duty free entitlement for import of trimmings &

other specified items for garments is increased

from 3% to 5% of the value of exports.

11. BAGGAGE RULES :

a) Free baggage allowance has been increased

from Rs. 35,000 to Rs. 45,000.

b) Duty free allowance in respect of Cigarettes

& Tobacco products is

reduced upto 50%.

a) Changes in Mega Exemption (Notification

No. 25/2012)

III Service Tax:

1 Changes with immediate effect i.e.

11/07/2014.

Exemptions are being provided to the

following :

• Service provided by common Bio Medical

waste treatment facility operators to clinical

units.

• Transportation of goods by Road/Rail/

Vessel exemption is extended to organic

manure & cotton (ginned or baled).

• Loading/unloading, packaging/ warehou-

sing of Cotton.

• Service provided by a tour operator to a

foreign tourist in relation to tour conducted

wholly outside India following a concept of

export of service.

• Specialized financial services received by RBI

from outside India, in the course of

management of foreign exchange reserves,

e.g. external asset management, custodial

services, securities lending services, are

being exempted.

• Exemption available for specified micro

insurance schemes approved by IRDA

expanded to cover all life micro-insurance

schemes where the sum assured does not

exceed Rs. 50, 000/- per life insured.

Exemption Withdrawn:

• Technical testing or analysis of newly

developed drugs including vaccines/Herbal

remedies (Sr No. 7).

• Services provided by or provided to

Educational institution (Sr No. 9). Concept of

Auxiliary Educational service has been

omitted thus renting of Immovable property

to Educational institute is taxable.

• Renting of Hotel/Inn now include non

commerc ia l p laces l i ke Ashrams ,

Dharamshalas etc. now renting is taxable if

tariff is more than Rs. 1000 or more per day.

• Transport of passengers by Air conditioned

contract carriage – service provider to pay

40% of total value of service. However, Non

air conditioned contract carriages remain

non - taxable.

b) Scope of Reverse charge mechanism has been

increased in the following matter:

ç

ç



• Service provided by a recovery agent to

NBFC.

• Service provided by a Director to any Body

Corporate, earlier it was to our company.

c) Amendment in procedures of exemption of

service provided to SEZ unit or developer. Now

SEZ unit will provide authorization (form A-2) to

be issued by the concerned authority within 15

Days to the service provider so that service

provider can provide service without payment of

service tax.

a) Partial Reverse Charge in respect of renting of

Motor Vehicle, Now service provider as well as

service recipient will pay 50% each on non

abated value of service.

b) Mandator i ly Payment of serv ice tax

electronically for all the assessee. At present who

are paying service tax of Rs. 1 Lakh or more in

year.

c) The first Proviso to rule 7 of the Point of Taxation

Rules (POTR) is being amended to provide that

point of taxation in respect of reverse charge will

be the payment date or the first day that occurs

immediately after a period of three months from

the date of invoice, whichever is earlier. This

amendment will apply only to invoices issued

after 1st October, 2014. A transition rule is being

prescribed (new rule 10 of POTR). (Noti.

13/2014-ST)

d) Place of provision in case of service of hiring of

Vessels or Aircrafts is the place of service

recipient.

e) The definition of intermediary is being amended

to include the intermediary of goods in its scope.

Accordingly, with effect from 1.10.2014, an

intermediary of goods, such as a commission

agent or consignment agent shall be covered

under rule 9(c) of the Place of Supply of Services

Rules. (Notification 14/2014-ST)

f) Amendment in abatement of Service Tax

(Notification No. 26/2012).

• Service of transport of goods by vessels is

increased to 60%. Now service provider will

pay service tax on 40%.

2. Changes w.e.f 01/10/2014.

• Now tour operator can claim credit on input

taxable service though he has availed

abatement.

• In case of works contract other than original

work, abatement of 40% is reduced to 30%.

Hence, service provider is liable to pay on

70% value.

g) Amendment in interest rate on delayed

payment:

a) SECTION 73 OF THE FINANCE ACT, 1994

Presently Sec 73 is not providing time limit for

completing the adjudication of Show Cause

Notice (SCN). The section 73 is amended so as to

provide a time limit for completing the

adjudication of the show cause notice where it is

possible as under:

b) SECTION 80 OF THE FINANCE ACT, 1994

Presently section 80 empowers the adjudicating

authority to waive the penalty of 50% of the tax

amount imposed under first proviso section 78

(1) provided there was reasonable cause for

non-payment of service tax. The section 80 is

proposed to be amended so as to exclude the

said penalty from its purview. Thus penalty

under first proviso to section 78(1) cannot be

waived under section 80.

3 Changes with effect from the date of receipt of

assent of President:


Period of Delay Rate of Interest

Upto 6 months 18% p.a.

More than 6 18% for First 6 months

months upto 1 year & 24% for next 6 months

More than 1 year 18% for first 6 months,

24% for next 6 months &

30% for Balance period of delay.

Sr. Case Type Time limit for issuing

the order in original

1. Where the extended 6 months from the date

period of 5 years is of show cause notice

not invoked

2. Where the extended 1 year from the date of

period of 5 years show cause notice

is invoked


c) TAXABLE SERVICES PROVIDED BY EMPLO-

YEES STATE INSURANCE CORPORATION

EXEMPTED RETROSPECTIVELY

A new section is proposed to be introduced in

the Finance Act 1994 which provides that taxable

services provided prior to 1, July 2012 by the

Employees State Insurance Corporation will not

be liable to service tax.

Amendment in Negative list:

• Now service provided by Radio Taxis is

taxable like MERU/TAB etc.

4 Changes w.e.f the date to be notified later

after the bill receives assent from the

President:

• Sale of space for advertising in business

directories, yellow pages, online, mobile

which is primarily meant for commercial

purpose is taxable. However, sale of space

for advertisement in newspapers, magazines

still remain exempted.

The Central Government has shown commitment to

implement the GST. The economic survey has suggested

that the implementation of a Central GST could be first

step towards GST. It means that the decoupling of

Central GST & State GST instead of current model of

Dual GST.

IV Goods & Service Tax (GST)



• Decisive vote for change represents the desire of the people to grow, free themselves

from the curse of poverty and use the opportunity provided by the society. Country is

in no mood to suffer unemployment, inadequate basic amenities, lack of infrastructure

and apathetic governance.

• Challenging situation due to Sub five per cent growth and double digit inflation.

• Continued slow-down in many emerging economies poses a threat to sustained global

recovery.

• Recovery seen with the growth rate of world economy projected at 3.6 per cent in 2014

vis-à-vis in 2013.

• First budget of this NDA government to lay down a broad policy indicator of the

direction in which we wish to take this country.

• Steps announced are only the beginning of the journey towards a sustained growth of

7-8 per cent or above within the next 3-4 years along with macro-economic

stabilization.

• Growing aspirations of people will be reflected in the development strategy of the

Government led by the Prime minister Shri Narendra Modi and its mandate of “Sab ka

Saath Sab ka Vikas”.

• Need to revive growth in manufacturing and infrastructure sectors.

• Tax to GDP ratio must be improved and Non-tax revenues increased.

• Decline in fiscal deficit from 5.7% in 2011-12 to 4.5% in 2013-14 mainly achieved by

reduction in expenditure rather than by way of realization of higher revenue.

• Improvement in current account deficit from 4.7 % in 2012-13 to year end level of 1.7%

mainly achieved through restriction on non-essential import and slow-down in overall

aggregate demand. Need to keep watch on CAD.

• 4.1 per cent fiscal deficit is a daunting task in the backdrop of two years of low GDP

growth, static industrial growth, moderate increase in indirect taxes, subsidy burden

and not so encouraging tax buoyancy.

• The government is committed to achieve this target. Road map for fiscal consolidation

outlines fiscal deficit of 3.6 % for 2015-16 and 3 % for 2016-17.

• Inflation has remained at elevated level with gradual moderation in WPI recently.

• The problem of black money must be fully addressed.

• Bold steps are required to enhance economic activities and spur growth in the

economy.

The Current Economic Situation and The Challenges

Deficit and Inflation

Key Features of Budget 2014-2015


Administrative Initiatives

Economic Initiatives

Foreign Direct Investment (FDI)

• Sovereign right of the Government to undertake retrospective legislation to be

exercised with extreme caution and judiciousness keeping in mind the impact of each

such measure on the economy and the overall investment climate.

• A stable and predictable taxation regime which will be investor friendly and spur

growth.

• Legislative and administrative changes to sort out pending tax demands of more than 4

lakh crore under dispute and litigation.

• Resident tax payers enabled to obtain on advance ruling in respect of their income-tax

liability above a defined threshold.

• Measures for strengthening the Authority for Advance Rulings.

• Income-tax Settlement Commission scope to be enlarged.

• National Academy for Customs & Excise at Hindupur in Andhra Pradesh.

• The subsidy regime to be made more targeted for full protection to the marginalized,

poor and SC/ST.

• New Urea Policy would be formulated.

• Introduction of GST to be given thrust.

• High level committee to interact with trade and industry on regular basis to ascertain

areas requiring clarity in tax laws is required to be set up.

• Convergance with International Financial Reporting Standard (IFRS) by Adoption of the

new Indian Accounting Standards (2nd AS) by Indian Companies.

• Setting up of Expenditure Management Commission to look into expenditure reforms.

• Employment exchanges to be transformed into career centres. A sum of ` 100 crore

provided .

• Government to promote FDI selectively in sectors.

• The composite cap of foreign investment to be raised to 49 per cent with full Indian

management and control through the FIPB route.

• The composite cap in the insurance sector to be increased up to 49 per cent from 26 per

cent with full Indian management and control through the FIPB route.

• Requirement of the built up area and capital conditions for FDI to be reduced from

50,000 square metres to 20,000 square metres and from USD 10 million to USD 5

million respectively for development of smart cities.

• The manufacturing units to be allowed to sell its products through retail including

Ecommerce platforms.



• Requirement to infuse ̀ .2,40,000 crore as equity by 2018 in our banks to be in line with

Basel-III norms

• Capital of banks to be raised by increasing the shareholding of the people in a phased

manner.

• PSUs will invest through capital investment a total sum of ` 2,47,941 crores in the

current financial year.

• A sum of ̀ 7060 crore is provided in the current fiscal for the project of developing “one

hundred Smart Cities’

• Incentives for Real Estate Investment Trusts (REITS). Complete pass through for the

purpose of taxation.

• A modified REITS type structure for infrastructure projects as the Infrastructure

Investment Trusts (INVITS).

• These two instruments to attract long term finance from foreign and domestic sources

including the NRIs .

• ` 1000 crore provided for “Pradhan Mantri Krishi Sinchayee Yojna” for assured

irrigation.

• Shyama Prasad Mukherji Rurban Mission for integrated project based infrastructure in

the rural areas.

• ` 500 crore for “Deen Dayal Upadhyaya Gram Jyoti Yojana” for feeder separation to

augment power supply to the rural areas.

• ` 14,389 crore provided for Pradhan Mantri Gram Sadak Yojna(PMGSY) .

• More productive, asset creating and with linkages to agriculture and allied activities

wage employment would to be provided under MGNREGA.

• Under Ajeevika, the provision of bank loan for women SHGs at 4% to be extended to

another 100 districts.

• Initial sum of ` 100 crore for “Start Up Village Entrepreneurship Programme” for

encouraging rural youth to take up local entrepreneurship programs .

• Allocation for National Housing Bank increased to ` 8000 crore to support Rural

housing.

• New programme “Neeranchal” to give impetus to watershed development in the

country with an initial outlay of ̀ 2142 crores.

Bank Capitalization

PSU Capital Expenditure

Smart Cities

Real Estate

Irrigation

Rural Development



• Backward Region Grant Fund (BRGF) to be restructured to address intra-district

inequalities.

• An amount of ` 50,548 crore is proposed under the SC Plan and ` 32,387 crore under

TSP.

• For the welfare of the tribals “Van Bandhu Kalyan Yojna” launched with an initial

allocation of ̀ 100 crore.

• Varishtha Pension Bima Yojana (VPBY) to be revived for a limited period from 15

August, 2014 to 14 August, 2015 for the benefit of citizens aged 60 years and above.

• A committee will to examine and recommend how unclaimed amounts with PPF, Post

Office, saving schemes etc. can be used to protect and further financial interests of the

senior citizens?

• Government notified a minimum pension of ` 1000 per month to all subscriber

members of EP Scheme. Initial provision of ̀ 250 crore.

• Increase in mandatory wage ceiling of subscription to ̀ 15000. A provision of ̀ 250 crore

in the current budget.

• EPFO to launch the “Uniform Account Number” Service for contributing members .

• Scheme for Assistance to Disabled Persons for purchase/fitting of Aids and Appliances

(ADIP) extended to include contemporary aids and assistive devices.

• National level institutes for Universal Inclusive Design , Mental Health Rehabilitation

and a Centre for Disability Sports to be established.

• Assistance to State Governments to establish fifteen new Braille Presses and modernize

ten existing Braille Presses.

• Government to print currency notes with Braille like signs for visibly challenged

persons.

• Outlay of ` 50 crores for pilot testing scheme on “Safety for Women on Public Road

Transport”.

• Sum of ̀ 150 crores on a scheme to increase the safety of women in large cities.

• “Crisis Management Centres” in all the districts of NCT of Delhi this year government

and private hospitals.

• A sum of ` 100 crore is provided for “Beti Bachao, Beti Padhao Yojana”, a focused

scheme to generate awareness and help in improving the efficiency of delivery of

welfare services meant for women.

• School curriculum to have a separate chapter on gender mainstreaming.

Scheduled Caste/Scheduled Tribe

Senior Citizen & Differently Abled Persons

Women & Child Development



Drinking Water & Sanitation

Health and Family Welfare

EDUCATION

School Education

Higher Education

Information Technology

• 20,000 habitations affected with arsenic, floride, heavy/ toxic elements,

pesticides/fertilizers to be provided safe drinking water through community water

purification plants in next 3 years

• “Swachh Bharat Abhiyan” to cover every household with sanitation facility by the year

2019.

• Free Drug Service and Free Diagnosis Service to achieve “ Health For All”

• Two National Institutes of Ageing to be set up at AIIMS, New Delhi and Madras Medical

College, Chennai.

• A national level research and referral Institute for higher dental studies to be set up.

• AIIMS like institutions in Andhra Pradesh, West Bengal, Vidarbha in Maharashtra and

Poorvanchal in UP. A provision of ̀ 500 crores made.

• States’ Drug Regulatory and Food Regulatory Systems to be strengthened by creating

new drug testing laboratories and strengthening the 31 existing State laboratories.

• A national programme in Mission Mode to halt the deteriorating malnutrition situation

in India to be put in place within six months.

• Government would strive to provide toilets and drinking water in all the girls school in

first phase. An amount of ̀ 28635 crore is being funded for Sarv Shiksha Abhiyan(SSA)

and ̀ 4966 crore for Rashtriya madhyamic Shiksha Abhiyan (RMSA).

• A School Assessment Programme is being initiated at a cost of ̀ 30 crore.

• ` 500 crore provided for “Pandit Madan Mohan Malviya New Teachers Training

Programme” to infuse new training tools and motivate teachers.

• ` 100 crore provided for setting up virtual classrooms as Communication Linked

Interface for Cultivating Knowledge (CLICK) and online courses.

• Jai Prakash Narayan National Centre for Excellence in Humanities to be set up in MP.

• ` 500 crore provided for setting up 5 more IITs in the Jammu, Chhattisgarh, Goa, Andhra

Pradesh and Kerala.

• 5 IIMs in the States of HP, Punjab, Bihar, Odisha and Rajasthan.

• Simplification of norms to facilitate education loans for higher studies.

• Pan India programme “Digital India” to with an outlay of ̀ 500 crore to be launched.

• Programme for promoting “Good Governance” to be launched .A sum of ` 100 crore

provided.



Information and Broadcasting

Urban Development

Housing

Minorities

Agriculture

• ` 100 crore allocated for 600 new and existing Community Radio Stations.

• Film & Television Institute, Pune and Satyajit Ray Film & Television Institute, Kolkata are

proposed to be accorded status of Institutes of national importance and a “National

Centre for Excellence in Animation, Gaming and Special Effects to be set up.

• ` 100 crore is provided for Kisan TV, to disseminate real time information to the farmers

on issues such as new farming techniques, water conservation, organic farming etc.

• Vision of the Government is that 500 urban habitations to be provided support for

renewal of infrastructure and services in next 10 years through PPPs

• Present corpus of Pooled Municipal Debt Obligation Facility to be enlarged to ̀ 50,000

Crore from ̀ 5000 crore.

• ` 100 crore provided for Metro Projects in Lucknow and Ahemdabad.

• Extended additional tax incentive on home loans shall be provided to encourage

people, especially the young, to own houses.

• Mission on Low Cost Affordable Housing anchored in the National Housing Bank to be

set up.

• A sum of ̀ 4000 crores for NHB from the priority sector lending shortfall with a view to

increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG

segment is provided

• Slum development to be included in the list of Corporate Social Responsibility (CSR)

activities to encourage the private sector to contribute more.

• A programme for the up gradation of skills and training in ancestral arts for

development for the minorities “Up gradation of Traditional Skills in Arts, Resources

and Goods” to be launched.

• An additional amount of ̀ 100 crores for Modernization of Madarsas .

• Government to establish two more Agricultural Research Institute of excellence in

Assam and Jharkhand with an initial sum of ̀ 100 crore.

• An amount of ̀ 100 crores set aside for “Agri-tech Infrastructure Fund”.

• ` 200 crore provided to open Agriculture Universities in Andhra Pradesh and Rajasthan

and Horticulture Universities in Telangana and Haryana.

• A scheme to provide every farmer a soil health card in a Mission mode will be launched.

` 100 crore has been provided for this purpose and additional ̀ 56 crores to set up 100

Mobile Soil Testing Laboratories across the country.



• To meet the vagaries of climate change a “National Adaptation Fund” with an initial

sum an amount of ̀ 100 crore will be set up.

• A sustainable growth of 4% in Agriculture will be achieved

• Technology driven second green revolution with focus on higher productivity and

including “Protein revolution” will be area of major focus.

• To mitigate the risk of Price volatility in the agriculture produce, a sum of ̀ 500 crore is

provided for establishing a “Price Stabilization Fund”.

• Central Government to work closely with the State Governments to re-orient their

respective APMC Acts.

• Sum of ` 50 crores provided for the development of indigenous cattle breeds and an

equal amount for starting a blue revolution in inland fisheries.

• Transformation plan to invigorate the warehousing sector and significantly improve

post-harvest lending to farmers.

• To provide institutional finance to landless farmers, it is proposed to provide finance to

5 lakh joint farming groups of “Bhoomi Heen Kisan” through NABARD .

• A target of ̀ 8 lakh crore has been set for agriculture credit during 2014-15.

• Corpus of Rural Infrastructure Development Fund (RIDF) raised by an additional ̀ 5000

crores from the target given in the Interim Budget to ̀ 25000 crores .

• Allocation of ̀ 5,000 crore provided for the Warehouse Infrastructure Fund.

• “Long Term Rural Credit Fund” to set up for the purpose of providing refinance support

to Cooperative Banks and Regional Rural Banks with an initial corpus of ̀ 5,000 crore.

• Amount of ̀ 50,000 crore allocated for Short Term Cooperative Rural Credit .

• Sum of ` 200 crore for NABARD’s Producers Development and Upliftment Corpus

(PRODUCE) for building 2,000 producers organizations over the next two years.

• Restructuring FCI, reducing transportation and distribution losses and efficacy of PDS

to be taken up on priority.

• Government committed to provide wheat and rice at reasonable prices to the weaker

sections of the society.

• Government when required will undertake open market sales to keep prices under

control.

• Central Government Departments and Ministries to integrate their services with the e-

Biz -a single window IT platform- for services on priority by 31 December this year.

• ` 100 crore provided for setting up a National Industrial Corridor Authority.

• Amritsar Kolkata Industrial master planning to be completed expeditiously.

Agriculture Credit

Food Security

INDUSTRY



• Master planning of 3 new smart cities in the Chennai-Bengaluru Industrial Corridor

region, viz., Ponneri in Tamil Nadu, Krishnapatnam in Andhra Pradesh and Tumkur in

Karnataka to be completed.

• Perspective plan for the Bengaluru Mumbai Economic corridor (BMEC) and Vizag-

Chennai corridor to be completed with the provision for 20 new industrial clusters.

• Development of industrial corridors with emphasis on Smart Cities linked to transport

connectivity to spur growth in manufacturing and urbanization will be accelerated.

• Proposed to establish an Export promotion Mission to bring all stakeholders under one

umbrella.

• Apprenticeship Act to be suitably amended to make it more responsive to industry and

youth.

• Skill India to be launched to train the youth with an emphasis on employability and

entrepreneur skills.

• Committee to examine the financial architecture for MSME Sector, remove bottlenecks

and create new rules and structures to be set up and give concrete suggestions in three

months.

• Fund of Funds with a corpus of `.10,000 crore for providing equity through venture

capital funds, quasi equity, soft loans and other risk capital specially to encourage new

startups by youth to be set up.

• Corpus of ̀ 200 crore to be set up to establish Technology Centre Network .

• Definition of MSME to be reviewed to provide for a higher capital ceiling

• Programme to facilitate forward and backward linkages with multiple value chain of

manufacturing and service delivery to be put in place.

• Entrepreneur friendly legal bankruptcy framework will be developed for SMEs to

enable easy exit.

• A nationwide “District level Incubation and Accelerator Programme” to be taken up for

incubation of new ideas and necessary support for accelerating entrepreneurship.

• ` 50 crore is provided to set up a Trade Facilitation Centre and a Crafts Museum to

develop and promote handloom products and carry forward the rich tradition of

handlooms of Varanasi.

• Sum of ` 500 crore for developing a Textile mega-cluster at Varanasi and six more at

Bareilly, Lucknow, Surat, Kutch, Bhagalpur and Mysore.

• ` 20 crore to set up a Hastkala Academy for the preservation, revival, and

documentation of the handloom/handicraft sector in PPP mode in Delhi.

• ` 50 crore is provided to start a Pashmina Promotion Programme (P-3) and

development of other crafts of Jammu & Kashmir.

Micro Small and Medium Enterprises (MSME) Sector

Textiles



Infrastructure

Shipping

Inland Navigation

New Airports

Roads sector

Energy

New & Renewable Energy

• An institution to provide support to mainstreaming PPPPs called 4PIndia to be set up

with a corpus of ̀ 500 crores.

• ` 11635 crore will be allocated for the development of Outer Harbour Project in

Tuticorin for phase I.

• SEZs will be developed in Kandla and JNPT.

• Comprehensive policy to be announced to promote Indian ship building industry.

• Project on Ganges called “ Jal Marg Vikas’ to be developed between Allahabad and

Haldia.

• Scheme for development of new airports in Tier I and Tier II Cities to be launched.

• Sector needs huge amount of investment along with debottlenecking from maze of

clearances.

• An investment of an amount of ` 37,880 crores in NHAI and State Roads is proposed

which includes ̀ 3000 crores for the North East.

• Target of NH construction of 8500 km will be achieved in current financial year.

• Work on select expressways in parallel to the development of the Industrial Corridors

will be initiated. For project preparation NHAI shall set aside a sum of ̀ 500 crore.

• ` 100 crore is allocated for a new scheme “Ultra-Modern Super Critical Coal Based

Thermal Power Technology.”

• Comprehensive measures for enhancing domestic coal production are being put in

place.

• Adequate quantity of coal will be provided to power plants which are already

commissioned or would be commissioned by March 2015.

• An exercise to rationalize coal linkages to optimize transport of coal and reduce cost of

power is underway.

• ` 500 crores provided for Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil

Nadu, Andhra Pradesh and Laddakh.

• ` 400 crores provided for a scheme for solar power driven agricultural pump sets and

water pumping stations.



• ` 100 crore provided for the development of 1 MW Solar Parks on the banks of canals.

• A Green Energy Corridor Project is being implemented to facilitate evacuation of

renewable energy across the country.

• Production and exploitation of Coal Bed Methane reserves will be accelerated.

• Possibility of using modern technology to revive old or closed wells to be explored.

• Usage of PNG to be rapidly scaled up in a Mission mode.

• Proposal to develop pipelines using appropriate PPP models.

• Changes, if necessary, in the MMDR Act, 1957 to be introduced to encourage

investment in mining sector and promote sustainable mining practices.

• Ongoing process of consultations with all the stakeholders on the enactment of the

Indian Financial Code and reports of the Financial Sector Legislative Reforms

Commission (FSLRC) to be completed.

• Government in close consultation with the RBI to put in place a modern monetary

policy framework.

• Following measures will be taken to energize Capital markets:

• Introduction of uniform KYC norms and inter-usability of the KYC records across the

entire financial sector.

• Introduce one single operating demat account.

• Uniform tax treatment for pension fund and mutual fund linked retirement plan.

• Time bound programme as Financial Inclusion Mission to be launched on 15 August

this year with focus on the weaker sections of the society.

• Banks to be encouraged to extend long term loans to infrastructure sector with flexible

structuring.

• Banks to be permitted to raise long term funds for lending to infrastructure sector with

minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending (PSL).

• RBI to create a framework for licensing small banks and other differentiated banks.

• Differentiated banks serving niche interests, local area banks, payment banks etc. are

contemplated to meet credit and remittance needs of small businesses, unorganized

sector, low income households, farmers and migrant work force.

Petroleum & Natural Gas

Mining

FINANCIAL SECTOR

Capital Market

BANKING AND INSURANCE SECTOR

Banking



• Six new Debt Recovery Tribunals to be set up.

• For venture capital in the MSME sector, a ` 10,000 crore fund to act as a catalyst to

attract private Capital by way of providing equity , quasi equity, soft loans and other risk

capital for start-up companies with suitable tax incentives to participating private

funds to be established.

• The pending insurance laws (amendment) Bill to be immediately brought for

consideration of the Parliament.

• The regulatory gap under the Prize Chits and Money Circulation Scheme (Banking) Act,

1978 will be bridged.

• Kissan Vikas Patra (KVP) to be reintroduced.

• A special small savings instrument to cater to the requirements of educating and

marriage of the Girl Child to be introduced.

• A National Savings Certificate with insurance cover to provide additional benefits for

the small saver.

• In the PPF Scheme, annual ceiling will be enhanced to `.1.5 lakh p.a. from `.1 lakh at

present.

• A further sum of ̀ 1000 crore to meet requirement for “One Rank One Pension”.

• Capital outlay for Defence increased by ̀ 5000 crore including a sum of ̀ 1000 crore for

accelerating the development of the Railway system in the border areas.

• Urgent steps would also be taken to streamline the procurement process to make it

speedy and more efficient.

• ` 100 crore is provided for construction of a war memorial in the Princes Park, which will

be supplemented by a War Museum. I am allocating a sum of ` 100 crore for this

purpose.

• ` 100 crore is provided to set up a Technology Development Fund for Defence.

• ` 3000 crore is provided in the current financial year for modernization of state police

forces.

• Adequate allocation for Additional Central Assistance for Left Wing Extremist Affected

districts.

• ` 2250 crore provided to strengthen and modernize border infrastructure.

• ` 990 crore allocated for the socio economic development of the villages along the

borders.

Insurance Sector

Small Savings

Defence & Internal Security

Internal Security



• A sum of ` 150 crore ear-marked for the construction of Marine Police Station, Jetties

and for the purchase of boats etc.

• ` 50 crores provided for construction of National Police Memorial.

• ` 200 crore provided to build the Statue of unity (National project).

• Facility of Electronic Travel Authorization (e-Visa) to be introduced in phased manner at

nine airports in India.

• Countries to which the Electronic Travel authorisation facility would be extended would

be identified in a phased manner.

• ` 500 crore provided for developing 5 tourist circuits around specific themes.

• ` 100 crore provided for National Mission on Pilgrimage Rejuvenation and Spiritual

Augmentation Drive (PRASAD).

• ` 200 crore provided for National Heritage City Development and Augmentation

Yojana (HRIDAY).

• ` 100 crore provided for Archaeological sites preservation.

• Sarnath-Gaya-Varanasi Buddhist circuit to be developed with world class tourist

amenities to attract tourists from all over the world.

• ` 100 crore provided for Detailed Project Reports for linking of rivers.

• ` 2037 crores provided for Integrated Ganga Conservation Mission “NAMAMI GANGE”.

• ` 100 crore provided for Ghat development and beautification at Kedarnath, Haridwar,

Kanpur, Varanasi, Allahabad, Patna and Delhi.

• NRI Fund for Ganga will be set up.

• Government to strengthen at least five institutions as Technical Research Centres.

• Development of Biotech clusters in Faridabad and Bengaluru.

• Nascent agri-biotech cluster in Mohali to be scaled up. In addition, two new clusters, in

Pune and Kolkata to be established.

• Global partnerships will be developed under India’s leadership to transform the Delhi

component of the International Centre for Genetic Engineering and Biotechnology

(ICGEB) into a world-leader in life sciences and biotechnology.

• Several major space missions planned for 2014-15.

• ` 200 crore provided for upgrading the indoor and outdoor sports stadiums in Jammu

and Kashmir Valley to international standards.

• ` 100 crore provided for sports university in Manipur.

Culture & Tourism

Water Resources and cleaning of Ganga

Science and Technology

Sports and Youth Affairs



• India to start an annual event to promote Unique sports traditions in the Himalayan

region games.

• ` 100 crore provided for the training of sports women and men for forthcoming Asian

games.

• A “Young Leaders Programme” with an initial allocation of ̀ 100 crore to be set up.

• ` 100 crore provided for development of organic farming in North Eastern States.

• ` 1000 crore provided for development of rail connectivity in the North Eastern Region.

• To provide a strong platform to rich cultural and linguistic identity of the North-East, a

new 24x7 channel called “Arun Prabha” will be launched.

• Government committed to addressing the issues relating to development of Andhra

Pradesh and Telangana in the AP Re-organization Act, 2014. Provision made by various

Ministries/Departments to fulfill the obligation of Union Government.

• ` 200 crore for power reforms and ` 500 crore for water reforms to make Delhi a truly

World Class City.

• ` 50 crore provided to solve the long term water supply issues to the capital region.

Construction of long pending Renuka Dam to be taken up on priority.

• ` 150 crore provided to tide over communication related problems of the Island.

• ` 188 crore to Puducherry for meeting commitments for Disaster preparedness.

• ` 500 crore provided to support displaced Kashmiri migrants for rebuilding their lives.

• ` 100 crore provided to set up a National Centre for Himalayan Studies in Uttarakhand.

• Mandate to be fulfilled without compromising fiscal consolidation.

• Non-plan Expenditure of ` 12,19,892 crore with additional provision for fertilizer

subsidy and Capital expenditure for Armed forces.

• `.5,75,000 crore Plan expenditure – increase of 26.9 per cent over actuals of 2013-14.

• Plan increase targeted towards Agriculture, capacity creation in Health and Education,

Rural Roads and National Highways Infrastructure, Railways network expansion, clean

energy initiatives, development of water resources and river conservation plans.

North Eastern States

Andhra Pradesh and Telangana

NCT of Delhi

Andaman and Nicobar Island and Puducherry

Displaced Kashmiri Migrants

Himalayan Studies

Budget Estimates



• Total expenditure of ̀ .17,94,892 crore estimated.

• Gross Tax receipts of ̀ 13,64,524 crore estimated.

• Net to centre of ̀ 9,77,258 crore estimated.

• Fiscal deficit of 4.1% of GDP and Revenue deficit of 2.9% estimated.

• New Statement to separately show plan allocation made for North Eastern Region.

Allocation of ̀ 53,706 crore for North East Regions.

• Allocation of ̀ 50,548 crore under SCSP and ̀ 32,387 under TSP.

• Allocation for women at ̀ 98,030 crore and for children at ̀ 81,075 crore.

• Ambitious Revenue Collection Targets in Interim Budget. Proposed tax changes

factored in the Budget Estimates 2014-15.

• Measures to revive the economy, promote investment in manufacturing, rationalize tax

provisions to reduce litigation, address the problem of inverted duty structure in

certain areas. Tax reliefs to individual tax payers.

• Personal Income-tax exemption limit raised by ` 50,000/- that is, from ` 2 lakh to `2.5

lakh in the case of individual taxpayers, below the age of 60 years. Exemption limit

raised from ̀ 2.5 lakh to ̀ 3 lakh in the case of senior citizens.

• No change in the rate of surcharge either for the corporates or the individuals, HUFs,

firms etc.

• The education cess to continue at 3 percent.

• Investment limit under section 80C of the Income-tax Act raised from ̀ 1 lakh to ̀ 1.5

lakh.

• Deduction limit on account of interest on loan in respect of self occupied house

property raised from ̀ 1.5 lakh to ̀ 2 lakh.

• Conducive tax regime to Infrastructure Investment Trusts and Real Estate Investment

Trusts to be set up in accordance with regulations of the Securities and Exchange Board

of India.

• Investment allowance at the rate of 15 percent to a manufacturing company that

invests more than ̀ 25 crore in any year in new plant and machinery. The benefit to be

available for three years i.e. for investments upto 31.03.2017.

• Investment linked deduction extended to two new sectors, namely, slurry pipelines for

the transportation of iron ore, and semi-conductor wafer fabrication manufacturing

units.

• 10 year tax holiday extended to the undertakings which begin generation, distribution

and transmission of power by 31.03.2017.

Tax Proposals

Direct Taxes Proposals



• Income arising to foreign portfolio investors from transaction in securities to be treated

as capital gains.

• Concessional rate of 15 percent on foreign dividends without any sunset date to be

continued.

• The eligible date of borrowing in foreign currency extended from 30.06.2015 to

30.06.2017 for a concessional tax rate of 5 percent on interest payments. Tax incentive

extended to all types of bonds instead of only infrastructure bonds.

• Introduction of a “Roll Back” provision in the Advanced Pricing Agreement (APA)

scheme so that an APA entered into for future transactions is also applicable to

international transactions undertaken in previous four years in specified

circumstances.

• Introduction of range concept for determination of arm’s length price in transfer

pricing regulations.

• To allow use of multiple year data for comparability analysis under transfer pricing

regulations.

• To remove tax arbitrage, rate of tax on long term capital gains increased from 10

percent to 20 percent on transfer of units of Mutual Funds, other than equity oriented

funds.

• Income and dividend distribution tax to be levied on gross amount instead of amount

paid net of taxes.

• In case of non deduction of tax on payments, 30% of such payments will be disallowed

instead of 100 percent.

• Government to review the DTC in its present shape and take a view in the wholematter.

• 60 more Ayakar Seva Kendras to be opened during the current financial year to

promote excellence in service delivery.

• Net Effect of the direct tax proposals to result in revenue loss of ̀ 22,200 crore

• To boost domestic manufacture and to address the issue of inverted duties, basic

customs duty (BCD) reduced on certain items.

• To encourage new investment and capacity addition in the chemicals and

petrochemicals sector, basic customs duty reduced on certain items.

• Steps taken to boost domestic production of electronic items and reduce our

dependence on imports. These include imposition of basic customs duty on certain

items falling outside the purview of IT Agreement, exemption from SAD on inputs/

components for PC manufacturing, imposition of education cess on imported

electronic products for parity etc.

• Colour picture tubes exempted from basic customs duty to make cathode ray Tvs

cheaper and more affordable to weaker sections.

Indirect Taxes Proposals.



• To encourage production of LCD and LED TVs below 19 inches in India, basic customs

duty on LCD and LED TV panels of below 19 inches reduced from 10 percent to Nil.

• To give an impetus to the stainless steel industry, increase in basic customs duty on

imported flat-rolled products of stainless steel from 5 percent to 7.5 percent.

• Concessional basic customs duty of 5 percent extended to machinery and equipment

required for setting up of a project for solar energy production.

• Specified inputs for use in the manufacture of EVA sheets and back sheets and flat

copper wire for the manufacture of PV ribbons exempted from basic customs duty.

• Reduction in basic customs duty from 10 percent to 5 percent on forged steel rings

used in the manufacture of bearings of wind operated electricity generators.

Exemption from SAD of 4 percent on parts and raw materials required for the

manufacture of wind operated generators.

• Concessional basic customs duty of 5 percent on machinery and equipment required

for setting up of compressed biogas plants (Bio-CNG).

• Anthracite coal, bituminous coal, coking coal, steam coal and other coal to attract 2.5

per cent basic customs duty and 2 per cent CVD to eliminate all assessment disputes

and transaction costs associated with testing of various parameters of coal.

• Basic customs duty on metallurgical coke increased from Nil to 2.5 percent in line with

the duty on coking coal.

• Duty on ship breaking scrap and melting scrap of iron or steel rationalized by reducing

the basic customs duty on ships imported for breaking up from 5 percent to 2.5

percent.

• To prevent mis-use and avoid assessment disputes, basic customs duty on

semiprocessed, half cut or broken diamonds, cut and polished diamonds and coloured

gemstones rationalized at 2.5 percent.

• To encourage exports, pre-forms of precious and semi-precious stones exempted from

basic customs duty.

• Duty free entitlement for import of trimmings, embellishments and other specified

items increased from 3 percent to 5 percent of the value of their export, for readymade

garments.

• Export duty on bauxite increased from 10 percent to 20 percent.

• For passenger facilitation, free baggage allowance increased from ̀ .35,000 to ̀ .45,000.

• To incentivize expansion of processing capacity, reduction in excise duty on specified

food processing and packaging machinery from 10 percent to 6 percent.

• Reduction in the excise duty from 12 percent to 6 percent on footwear of retail price

exceeding ̀ 500 per pair but not exceeding ̀ 1,000 per pair.

• Withdraw concessional excise duty (2 percent without Cenvat benefit and 6 percent

with Cenvat benefit) on smart cards and a uniform excise duty at 12 percent.



• To develop renewable energy, various items exempted from excise duty.

• Exemption to PSF and PFY manufactured from plastic waste and scrap including PET

bottles from excise duty with effect from 29th June, 2010 to 7th May, 2012.

• Prospective levy of a nominal duty of 2 percent without Cenvat benefit and 6 percent

with Cenvat benefit on such PSF and PFY.

• Concessional excise duty of 2 percent without Cenvat benefit and 6 percent with

Cenvat benefit on sports gloves.

• Specific rates of excise duty increased on cigrettes in the range of 11 per cent to 72 per

cent.

• Excise duty increased from 12 percent to 16 percent on pan masala, from 50 percent to

55 percent on unmanufactured tobacco and from 60 percent to 70 percent on gutkha

and chewing tobacco.

• Levy of an additional duty of excise at 5 percent on aerated waters containing added

sugar.

• To finance Clean Environment initiatives, Clean Energy Cess increased from `.50 per

tonne to ̀ .100 per tonne.

• To broaden the tax base in Service Tax, sale of space or time for advertisements in

broadcast media, extended to cover such sales on other segments like online and

mobile advertising. Sale of space for advertisements in print media however would

remain excluded from service tax. Service provided by radio-taxis brought under

service tax.

• Services by air-conditioned contract carriages and technical testing of newly

developed drugs on human participants brought under service tax.

• Provision of services rules to be amended and tax incidence to be reduced on transport

of goods through coastal vessels to promote Indian Shipping industry.

• Services provided by Indian tour operators to foreign tourists in relation to a tour

wholly conducted outside India to be taken out of the tax net and Cenvat credit for

services of rent-a-cab and tour operators to be allowed to promote tourism.

• Service tax exempted on loading, unloading, storage, warehousing and transportation

of cotton, whether ginned or baled.

• Services provided by the Employees’ State Insurance Corporation for the period prior

to 1st July 2012 exempted, from service tax.

• Exemption available for specified micro insurance schemes expanded to cover all life

micro-insurance schemes where the sum assured does not exceed `.50, 000 per life

insured.

• For safe disposal of medical and clinical wastes, services provided by common

biomedical waste treatment facilities exempted.

Service tax



• Tax proposals on the indirect taxes side are estimated to yield ̀ .7525 crore.

• 24X7 customs clearance facility extended to 13 more airports in respect of all export

goods and to 14 more sea ports in respect of specified import and export goods to

facilitate cargo clearance.

• ‘Indian Customs Single Window Project’ to facilitate trade, to be implemented.

• The scheme of Advance Ruling in indirect taxes to be expanded to cover resident

private limited companies. The scope of Settlement Commission to be enlarged to

facilitate quick dispute resolution.

• Customs and Central Excise Acts to be amended to expedite the process of disposal of

appeals.



Budget at a Glance

(In crore of Rupees)

Particulars 2012-2013 2013-2014 2013-2014 2014-2015

Actuals Budget Revised Budget

Estimates Estimates Estimates

1. Revenue Receipts 879232 1056331 1029252 1189763

2. Tax Revenue (Net to Centre) 741877 884078 836026 977258

3. Non-Tax Revenue 137355 172252 193226 212505

4. Capital Receipts (5+6+7)$ 531140 608967 561182 605129

5. Recoveries of Loans 15060 10654 10802 10527

6. Other Receipts 25890 55814 25841 63425

7. Borrowings and other liabilities * 490190 542499 524539 531177

8. Total Receipts (1+4)$ 1410372 1665297 1590434 1794892

9. Non-Plan Expenditure 996747 1109975 1114902 1219892

10. On Revenue Account of which, 914306 992908 1027689 1114609

11. Interest Payments 313170 370684 380066 427011

12. On Capital Account 82441 117067 87214 105283

13. Plan Expenditure 413625 555322 475532 575000

14. On Revenue Account 329208 443260 371851 453503

15. On Capital Account 84417 112062 103681 121497

16. Total Expenditure (9+13) 1410372 1665297 1590434 1794892

17. Revenue Expenditure (10+14) 1243514 1436169 1399540 1568111

18. Of Which, Grants for creation of 115710 174633 138228 168104

Capital Assets

19. Capital Expenditure (12+15) 166858 229129 190894 226781

20. Revenue Deficit (17-1) 364282 379838 370288 378348

(3.6) (3.3) (3.3) (2.9)

21. Effective Revenue Deficit (20-18) 248572 205205 232060 210244

(2.5) (1.8) (2.0) (1.6)

22. Fiscal Deficit {16-(1+5+6)} 490190 542499 524539 531177

(4.8) (4.8) (4.6) (4.1)

23. Primary Deficit (22-11) 177020 171814 144473 104166

(1.8) (1.5) (1.3) (0.8)

* Includes draw down of cash balance$ Excludes receipts under marked stabilisation scheme

NOTES

Shankarlal Jain & Associates

Head Office :12, Engineer Building,265 Princess Street, Mumbai - 400 002 Tel.: +91-22-2203 6623, 2206 5739Fax : +91-22-2208 6269E-mail : [email protected] : sljainindia.comChartered Accountants

shankarlal jain associates&

Branch Office :Shopper’s Point,5th Floor, H. B. Road,Fancy Bazar,Guwahati - 781 001,ASSAM Tel.: +91-361-2600471

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