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Key Aspects of Union Budget for 2015-16
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- Reduction in Corporate Tax rate from 30% to 25% over the next 4 years, with likely rationalization of exemptions in the corporate tax structure
- GAAR deferred by two years and to be implemented only prospectively from 2017.
- Service tax rate including education cess raised from 12.36% to 14% but exemptions to warehousing and senior citizens.
- Income Tax on Royalty Fees to be reduced to 10% from 25%
- MAT Rules to be rationalized for FII’s
- GST to be implemented from April 2016
- Wealth tax is abolished, with additional 2% tax on super rich (>Rs. 1 cr taxable income)
- No changes in personal taxation, but increase in deduction on account of medical insurance, transport expenses, additional deductions for senior citizens etc.
- Significant reform in the FEMA, Benami Transactions Act and reporting of cash transactions to reduce the generation of black money
- Formalising inflation target at 6% for RBI , and providing for a Monetary Policy Committee
- To set up public debt management agency
- Proposal to merge commodities regulator with SEBI
- Distinction between FPI’s and FDI’s to be removed
- Foreign fund manager can be located in India without attracting permanent establishment provisions
- Rationalization of Capital Gains from REIT’s and Investment Trusts
- Foreign investment allowed in alternative investment funds and tax pass through allowed for the same
- Changes to bankruptcy law
- A bold move on monetizing gold investments with a move to set up a sovereign gold fund and print sovereign gold coins
- EPF will become optional for employees
- Plug and play projects for roads, ports and infrastructure to encourage public private partnership
- Proposed: 5 ultra mega power plants for 4000 mw each
- Incremental investment in infrastructure sector to reach Rs. 700 bn during f y 2015
- Job creation, rural housing and infrastructure, irrigation likely to be thrust areas for expenditure
- FM also proposed a national agri market, microfinance for small entrepreneurs and universal social security net with life/ accident insurance of 2 lacs
The budget is expected to have a positive impact on macro economy, with specific measures for infrastructure development, rationalization of taxes and improvement in business environment to attract foreign investment. The increase in indirect taxes is intended to discourage imports and encourage manufacturing activity as part of Make India campaign. Tinkering with direct taxes is kept to the minimum, with measures to encourage savings and investment. Incremental policy measures have toned down the expectation for big-bang economic reforms.
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