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Budget and its Importance

A budget is an estimate of income and expenditure for a set period of time i.e. it is an itemized summary of likely incomes and expensesfor a given period.

A government budget is a government document presenting the government's proposed revenues and spending for a financial year.

It’s an invaluable tool to help you prioritize your spending and manage your money.

Budgeting is simply balancing your expenses with your income.

Current budget applicable for which Financial Year ??

RustomjeeBusinessSchool

In 2015-16, Fiscal deficit will be 3.9% of GDP

Current account deficit below 1.3 % of GDP

Govt sees GDP at 8-8.5% in FY16

Fiscal deficit - When a government's total expenditures exceed the revenue that it generates (excluding the money it has borrowed).

Current deficit - Current account deficit occurs when the country’s imports are greater than the country’s exports of goods, services and transfers.

Gross Domestic Product - The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis

Deficit expectations in the budgetRustomjeeBusinessSchool

GST ( Goods and Service Tax ) to be in place by April 1, 2016.

FMC (Forward Markets Commission) to be merged with SEBI.

It is the chief regulator of commodity futures markets in India

To enact a comprehensive new law on black money.

Defers GAAR (General Anti – Avoidance Rules) by 2 years i.e. to apply

prospectively from April 1, 2017

(The rules are aimed at minimizing tax avoidance for investments made by entities based in tax havens.)

Status of the Various Enactments and/or AgenciesRustomjeeBusinessSchool

Plan Expenditure spend Rs 4.65 trillion in FY 2016

FY 2016 non plan expenditure Rs 13.12 trillion

Plan Expenditure - Any expenditure that is incurred on programs which are detailed under the current (Five Year) Plan of the center or center's advances to state for their plans is called plan expenditure. Provision of such expenditure in the budget is called Plan Expenditure.

Non – Plan Expenditure - This refers to the estimated expenditure provided in the budget for spending during the year on routine functioning of the government. Non- Plan expenditure is all expenditure other than plan expenditure of the govt.

Plan and Non-Plan ExpenditureRustomjeeBusinessSchool

To abolish Wealth Tax

Increased the surcharge to 12% on individuals earning Rs 1 crore and above annually and on firms with an annual income of Rs 10 crore or more.

Introduced a surcharge of 7% on companies having an income between Rs 1 crore and Rs 10 crore

Financial Impact - These measures will lead to tax collection of Rs 9000 crores whereas the wealth tax could earn only Rs 1008 crores.

Other Impact - There was no point in continuing the Wealth Tax as the cost of collection was high. These measures will lead to tax simplification and widening of the tax base.

Taxation on Super RichRustomjeeBusinessSchool

Proposes to rationalize capital gains tax regime for Real Estate Investment Trusts (REITs)

No Capital Gains Tax on contribution to REITs

Investment in infrastructure to go up by 70000 crores

To start 5 ‘ultra mega’ power generation projects so as to end chronic power shortages.

Tax free infrastructure bonds for projects in rail, road and irrigation to be introduced.

Need to build additional 100,000 km of road

Revitalizing the PPP (Public – Private Partnership) model for infrastructure development

Impact on Real Estate and/or Infrastructure Sector

RustomjeeBusinessSchool

Proposes to increase service tax rate and education cess to 14% from 12.36%.

This will increase the government treasury by 41000 crores i.e. from 1.68 lakh crores to 2.09 lakh crores

Expensive – Cigarette, Tobacco, Drinks, Air fare, Restaurants, all sorts of bills, Cement etc.

Cheaper – Solar water heater, Tablets, LED, LCD Panels etc. due to reduction in custom and excise duty

Excise duty on footwear below Rs 1000 cut to 6%.

To levy 2% Swatch Bharat Cess on services, if required

Service tax exemption withdrawn on MF agents to AMC

Amendments in Service TaxRustomjeeBusinessSchool

Exemption for individual tax payers to continue.

Proposes to reduce corporate tax rate from 30% to 25% over next 4 years.

Income tax on royalty and technical fees reduced from 25% to 10%

100% tax exemption in CSR (Corporate Social Responsibility) activities for Swatch Bharat Kosh and Clean Ganga Fund

Further tax exemption of Rs 50,000 under 80C for pension plan (Limit not enhanced)

Avoid retrospective tax provisions

To include ‘Yoga’ in charitable purpose in Income Tax Act

Quoting PAN must for over Rs 100,000 purchase

Deduction for mediclaim u/s 80D increased by 10,000/-

Individual and Corporate Slab RatesRustomjeeBusinessSchool

Government to introduce Indian made Gold coins (with Ashok Chakra on its face) to reduce demand for foreign coins.

To launch sovereign gold bond with fixed interest rate as an alternative to purchasing metal gold.

To introduce a gold monetization scheme. The new scheme will allow the depositors of gold to earn interest in their metal accounts and the jewelers to obtain loans in their metal account. Banks/other dealers would also be able to monetize this gold.

Gold for Budget 2015RustomjeeBusinessSchool

The objective behind bringing these reforms was :

To curb gold imports and

Monetize(the conversion of an asset into money) large idle stocks of the precious metal

Gold for Budget 2015RustomjeeBusinessSchool

To launch National Skills Mission to develop youth employability.

To set up NRI fund for Ganga river conservation

5 more AIIMS in J&K, Punjab, Tamil Nadu, Himachal and Assam

IIMs in J&K and Andhra Pradesh

IIT in Karnataka

Social Sector and EducationRustomjeeBusinessSchool

Visa on arrival to citizens of 150 countries v/s 43 now

10% TDS introduced for PF withdrawal before 5 years

Transport allowance exemption increased to Rs 1,600/month

Govt proposes to exempt special additional duty on all items

Black money holders to be imprisoned up to 10 years

300% penalty on concealing income

To promote cashless transactions to curb black money (Exceptional circumstances for paying off more than 20000 in cash removed)

MiscellaneousRustomjeeBusinessSchool