Union Budget Simplified

Conceived–Developed by:

PKS Management ConsultantsBangalore

Service Tax Regd. No. AYMPS8310HSD001

Index

1. What is a Union Budget2. What are the important parameters of Budget 3. Various stakeholders of the Budget4. Philosophy of Budget5. Preparing the Budget6. Reading the Budget7. Salient features8. Going ahead

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1. Union Budget

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Union Budget

• Annual financial statement of Govt. of India• Presented on the last day of February every

year• Has to be passed by the house• It can come into effect from April 1

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Budget Season

• Railway Budget• Economic Survey• Union Budget

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Railway Budget

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Economic Survey 2013-2014

• GDP growth seen at 5.4-5.9 pc in 2014/15• Growth rate of 7-8 pc can occur after 2015/16

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Interim Budget

• Budget of the government which is passing through transition

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2. Important parameters of

Budget

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GDP

• Gross domestic product (GDP) is – Market Value – Of all officially recognized final goods and services – Produced within a country– In a year

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Inflation

• A general increase in prices – and – fall in the purchasing value of money

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Fiscal Deficit

• Fiscal deficit is the difference – between the government's expenditures – and its revenues (excluding the money it's

borrowed).

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Current Account Deficit

• A measurement of a country's trade in which– the value of goods and services it imports – exceeds – the value of goods and services it exports.

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FDI (Foreign Direct Investment)

• Is a direct investment into production or business– In a country – By an individual or company of another country, – Either by buying a company in the target country

or – By expanding operations of an existing business in that country.

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FII (Foreign Institutional Investor)

• An investor or investment fund– That is from or registered in a country– Outside of the one in which it is currently

investing.

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Disinvestment

• The action of an organization or government selling or liquidating an asset or subsidiary

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Subsidy

• A form of financial or in kind support extended to an economic sector

• Example 3F : Fuel, Fertilizer and Food

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Infrastructure

– The basic physical and organizational structures and facilities (e.g. buildings, roads, power supplies)

– Needed for the operation of a society or enterprise.

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Direct Tax

• A tax, such as income tax – Which is levied on the income or profits of the

person who pays it,– Rather than on goods or services.

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In-direct Tax

• An indirect tax (such as sales tax, service tax )– Is a tax collected by an intermediary– From the consumer.

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Jargons in

BudgetS 20/101

Reforms

• Refers to policies directed to achieve improvements in economic efficiency

• Economic reforms were started in 1991 in India.

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GST

• Goods and Service Tax - step towards a comprehensive indirect tax reform

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Retrospective Tax

• Old proceedings are being taxed as per the new rules

• Example : Vodafone case

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GAAR

• GAAR is an acronym for General Anti-Avoidance Rules – which are framed to minimize tax avoidance

• Example: siphoning off profits to tax havens.

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Core Sector

• Eight Core Industries – Coal– Crude oil– Natural Gas– Petroleum Refinery Products

– Steel– Cement– Fertilizer– Electricity

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Infrastructure Sector

• Roads• Railways• Ports• Airports• Buildings

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PPP

• A public–private partnership (PPP) is a - government service or private business venture

- which is funded and operated through a- partnership of government and - one or more private sector companies.

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3. Stakeholders of

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Consumer

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Business

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Taxpayer

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Social

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Political

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Economy

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Market

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4. Philosophy of

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Low Inflation

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Low Fiscal Deficit

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Higher FDI / FII

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Industrial Growth

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Agricultural Growth

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Service Industry Growth

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Higher Employment Generation

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Ultimately

For 1.27 Billion peopleS 44 /101

5. Preparation of

BudgetS 45/101

Ministry of Finance

• Finance Ministry has overall responsibility of framing the budget

• With inputs from…

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Planning Commission

• Sets overall targets for ministries

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Comptroller and Auditor General (CAG)

• Keeps a tab on accounts

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Administrative Ministries

• State their requirements and plan priorities

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Other stakeholders

• Various representation from– Industry– Political parties– Economist &– Civil society groups

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6. Reading of

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Part A

• Broad outlays of money for different Sectors• Introduction of new Schemes• Priorities of the Government and focus areas

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Part B

• Taxation proposals

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Speech of FM

Adobe Acrobat Document

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Part A

I. STATE OF THE ECONOMYII. PLAN & BUDEGTARY ALLOCATIONSIII. AGRICULTUREIV. INDUSTRY

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Part A continued..

V. INFRASTRUCTUREVI. FINANCIAL SECTORVII. DEFENCE & INTERNAL SECURITYVIII. CULTURE & TOURISMIX. OTHER PROPOSALSX. BUDGET ESTIMATES

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Part B :

XI. TAX PROPOSALS

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7. Salient Features of

Budget 2014-15S 58/101

Comes from – Goes to

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Impact on Investors• Life made easy for Foreign Portfolio

Investors(FPI)• Cobwebs on various tax issues cleared• Money FPI make, will be deemed as capital

gain not as business income. - Less tax• One KYC One Demat• KYC norms eased – one

verification is enoughS 60 /101

Impact on Infrastructure • 8,500 Kms of Highways in fiscal• 100 smart cities – 7,060 Cr. allocated• Tax holiday for power projects• 500 Cr. On solar power

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Impact on Defence• FDI upto 49 % allowed

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Impact on Finance & Banking• 49 % FDI in Insurance sector • Public may buy shares of PSU banks• Promoting consolidation of subsidiary banks• 6 new Debt Recovery

Tribunals

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Impact on Emerging Business• 10KCr+ for startups

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Impact on Taxpayer • Basic Tax exemption raised from 2 to 2.5 Lakhs• For senior citizens limit raised from 2.5 to 3

Lakhs• Home loan interest deduction enhanced from

1.5 lakhs to 2 Lakhs.• Section 80c deductions

enhanced from 1 to 1.5 Lakhs

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Impact on Consumer

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Cheaper

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Cheaper

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Cheaper

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Cheaper

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Cheaper

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Cheaper

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Cheaper

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Cheaper

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Cheaper

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Cheaper

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Cheaper

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Cheaper

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Costly

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Costly

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Costly

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Costly

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Costly

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Costly

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Costly

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Impact on Direct Tax • Status quo on retrospective taxation• Lowering tax disputes• Investment allowance limit lowered• Transfer pricing rules eased (arms-length

principle for cross border transaction with related entities)

• Dividend Distribution tax raised from 14 to 17%

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Impact on Indirect Tax • Signal about rollout of GST soon• Private companies can ascertain their tax liability before

hand. – Predictability• Service tax on online / Mobile ads / marketing of

products for foreign companies• No excise duty on the discounts offered to customers• Custom duty on Computer and TV components lowered• Education cess on imported electronic products• Excise duty on branded petrol reduced.

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Impact on Economy• Forming of Expenditure Management

Commission• Revamp FCI, make PDS more efficient• New Indian Accounting standard• E-Biz portal • Setting up of National Corridor Authority

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Fiscal Prudence • Fiscal deficit target of 4.1 %• To reduce to 3.6% and then to 3.0% by 2016-

17• 58,425 crore disinvestment target• 10% in CIL and NHPC, 5 % in SAIL,ONGC,PFC

and REC• IPO of HAL is on cards

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Impact on Social Sector

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Skill India

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A house for everyone by 2022

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Mission Ganga

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Free Drugs, Free Diagnosis for All

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5 New IIT / IIM, 4 New AIIMS

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Social sector … continued

• Minimum pension of Rs. 1000 – 20 Lakhs to benefit

• Mandatory wage ceiling for EPF raised to 15,000 - 50 Lakhs to benefit

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100 crore club• 28 different schemes - Digital India- Virtual class room- Beti Bachao, Beti Padaho

- Madarasa modernization

- Van Bandhu …

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8. Going forward

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Keeping tab on

• Newspapers• Magazines• TV Discussions• Internal discussions• Google about various topics

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An artefact of

PKS Management Consultants+91 – 97411 94285

# 9, Site No. 14/15 B, 1st Vivekanda LayoutOuter Ring Road, Marathalli

Bangalore -560037

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