Super Budget 2015-16: Fiscal Deficit is 3.9% and Revenue Deficit 2.8% of GDP

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Finance Minister Arun Jaitley today refused to take the short-cut to populism through subsidy and freebies and instead chose to present in Parliament a pragmatic Budget for 2015-16 by avoiding sudden surprises and plugging loopholes leading to instability in tax policy.

arun jaitleyNew Delhi: Finance Minister Arun Jaitley today refused to take the short-cut to populism through subsidy and freebies and instead chose to present in Parliament a pragmatic Budget for 2015-16 with a Non-Plan expenditure estimates for the Financial Year estimated at Rs 13,12,200 crore. Plan expenditure is estimated to be Rs. 4,65,277 crore, which is very near to the R.evenue expenditure of 2014-15.

In the proposed budget, tthe total Expenditure has accordingly been estimated at Rs. 17,77,477 crore. The requirements for expenditure on Defence, Internal Security and other necessary expenditures have been adequately provided.

In the proposed budget, Gross Tax receipts are estimated to be Rs. 14,49,490 crore. Devolution to the States is estimated to be Rs. 5,23,958 crore. Share of Central Government will be Rs. 9,19,842 crore. Non Tax Revenues for the next fiscal are estimated to be Rs.2,21,733 crore. With these estimates, fiscal deficit will be 3.9 per cent of GDP and Revenue Deficit will be 2.8 per cent of GDP.

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

The Finance Minister went on to emphasise that the country needs to match this transformative piece of legislation in indirect taxation with transformative measures in direct taxation. The basic rate of Corporate Tax in India at 30% is higher than the rates prevalent in the other major Asian economies, making our domestic industry uncompetitive. Moreover, the effective collection of Corporate Tax is about 23%. A regime of exemptions has led to pressure groups, litigation and loss of revenue. It also gives room for avoidable discretion. I, therefore, propose to reduce the rate of Corporate Tax from 30% to 25% over the next 4 years. This will lead to higher level of investment, higher growth and more jobs, Jaitley announced adding this process of reduction has to be necessarily accompanied by rationalisation and removal of various kinds of tax exemptions and incentives for corporate taxpayers, which incidentally account for a large number of tax disputes.

These changes, Jaitley told Parliament, will start from the next financial year. Our stated policy is to avoid sudden surprises and instability in tax policy. Exemptions to individual taxpayers will, however, continue since they facilitate savings which get transferred to investment and economic growth.

Certain broad themes that have guided Jaitely in finalisinbg his tax proposals include:

A. Measures to curb black money;

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

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

D. Benefits to middle class taxpayers;

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

F. Stand alone proposals to maximise benefits to the economy

To effectively deal with the problem of black money which eats into the vitals of our economy and society, Jaitley said, A major breakthrough was achieved in October, 2014 when a delegation from the Revenue Department visited Switzerland and the Swiss authorities agreed to (a) provide information in respect of cases independently investigated by the Income-tax Department; (b) confirm genuineness of bank accounts and provide non-banking information; (c) provide such information in a time bound manner; and (d) commence talks with India for Automatic Exchange of Information between the two countries at the earliest. Investigation into cases of undisclosed foreign assets has been accorded the highest priority, resulting in detection of substantial amounts of unreported income. For strengthening collection of information from various sources domestically, a new structure is being put in place which includes electronic filing of statements by reporting entities.

Announcing the Government’s decision to enact a comprehensive new law on black money to specifically deal with such money stashed away abroad. Jaitley proposed to introduce a Bill in the current Session of the Parliament.

some of the key features of the proposed new law on black money are

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

• this offence will be made non-compoundable;

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

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

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

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

(4) Beneficial owner or beneficiary of foreign assets will be mandatorily required to file return, even if there is no taxable income. (5) Abettors of the above offences, whether individuals, entities, banks or financial institutions will be liable for prosecution and penalty.

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

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

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

(9) The Foreign Exchange Management Act, 1999 (FEMA) is also being amended to the effect that if any foreign exchange, foreign security or any immovable property situated outside India is held in contravention of the provisions of this Act, then action may be taken22 for seizure and eventual confiscation of assets of equivalent value situated in India. These contraventions are also being made liable for levy of penalty and prosecution with punishment of imprisonment up to five years.

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

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

Extending benefits to middle class tax payers, the Finance Minister announced the following proposals: ¾ Increase in the limit of deduction in respect of health insurance premium from `15,000 to `25,000. o For senior citizens the limit will stand increased to `30,000 from the existing `20,000.

For very senior citizens of the age of 80 years or more, who are not covered by health insurance, deduction of Rs. 30,000 towards expenditure incurred on their treatment will be allowed. ¾ The deduction limit of Rs. 60,000 towards expenditure on account of specified diseases of serious nature is proposed to be enhanced to Rs. 80,000 in case of very senior citizens. ¾ Additional deduction of Rs. 25,000 will be allowed for differently abled persons under Section 80DD and Section 80U of the Income-tax Act. ¾ The limit on deduction on account of contribution to a Pension Fund and the New Pension Scheme is proposed to be increased from Rs.1 lakh to `1.5 lakh. ¾ To provide social safety net and the facility of pension to individuals, an additional deduction of Rs. 50,000 is proposed to be provided for contribution to the New Pension Scheme under Section 80CCD. This will enable India to become a pensioned society instead of a pensionless society. ¾ Investments in Sukanya Samriddhi Scheme is already eligible for deduction under Section 80C. All payments to the beneficiaries including interest payment on deposit will also be fully exempt. ¾ Transport allowance exemption is being increased from Rs.800 to Rs.1,600 per month. ¾ For the benefit of senior citizens, service tax exemption will be provided on Varishta Bima Yojana. 126. Madam Speaker, I am giving these concessions to individual taxpayers despite inadequate fiscal space. After taking into account the tax concession given to middle class tax payers in my last Budget and this Budget, today an individual tax payer will get tax benefit of Rs.4,44,200

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