This is the first complete budget announced by Narendra Modi’s led
BJP government and in summary we give thumbs up to this budget to set
the right tone for development. Not every thing was done to please the
masses, but on a macro front, it ticked many boxes. Our analysis is
focused on a few of such right boxes :
1. Bringing off shore fund managers to India – Financial services tends to be amongst the highest pay masters and also attracts the best brains. Unfortunately most of the Indian brains get drained towards our western counterparts. This budget has provided them the necessary tax relief which will potentially reverse the brain drain in favour of India by changing the Permanent Establishment norms in Income Tax. The geographical presence of a fund manager in India would not attract adverse tax consequences.
2. For Salaried employees – Transport allowance has been increased from Rs. 800 to Rs. 1600 per month. Choice has been given to invest PF amount in either EPF (Employee’s Provident Fund) or NPS (New Pension Scheme). Option has been given to employees below a threshold salary to avoid deduction towards PF without limiting employer’s contribution. Additional 10,000 Rs. deduction has been given towards payment of health insurance premiums. – ALL good steps.
3. Pension, Social Security & Insurances – This was desperately needed for Indian masses who are having no financial security and where the concept of insurance is not known. Providing budgetary allocation in this direction will go a long way in securing the livelihood of the Indian masses.
4. Wealth Tax replaced by a higher Surcharge – People having over 30 lacs of wealth were subject to 1% wealth tax. While this was not strictly enforced, the tax liability was always looming. This has now been replaced with a 10% additional surcharge for super rich people (having income over 1 crore).
5. REIT (Real Estate Investment Trusts) – Budget has rationalised the taxation around the creation REITs which will now facilitate creation of REITs and help retail investors to take part in the India’s real estate story. Units of REITs could be bought by investors who seek returns from the real estate sector without directly buying real estate. You could relate this some what to a Gold ETF where in you invest in units of Gold ETF and get exposure to Gold. The budget has also made investments in REITs attractive by making their taxation similar to Equity shares listed on stock market. This would possibly be a big boost to the liquidity strapped real estate market.
6. Corporate Tax reduced to 25% – Indian Corporates are known to have amongst the highest tax in the world. This budget has reduced the tax from 30% to 25% for 4 years starting from 2016 onwards. A very welcome step for promoting ‘Make in India’ slogan.
7. Bankruptcy Code – This would help in creating the right business environment in parallel to our western counterparts. Such a law will facilitate smoother operations of business for entities facing excessive debt positions.
8. Crack Down on Black Money – a comprehensive law will be enacted to check black money menance which will make hiding of black money in foreign assets a punishable offence with upto 10 years of jail. Amongst list of measures, a key measure includes avoiding payments in cash for over 20,000 Rs. for all real estate transactions and quoting of PAN for all transactions over 1 lac. However, we feel that it will be still difficult to curb the cash transactions and would be interested to see the next series of steps being taken on track and curb the flow of cash.
9. India’s Gold Pot – New gold deposit schemes will be announced to provide gold depositors with interest on their gold deposits. In addition, Gold Sovereign Bonds will be launched. Such bonds will bear interests and could be regarded as an alternative investment in Gold Metal.
10. Service Tax Hike to 14% – Amongst the list of negatives, the biggest drag is the increased Service Tax rate from 12.36% to 14%. Being an indirect tax, this will impact each individual buying services such as telephone bills, internet, travel, restaurants, etc.
No changes in the direct tax rates have been announced for this year and the taxation rates of last year will prevail.
A. For individual or HUF upto 60 years of age, the following slabs apply
B. For individual within 61-80 years of age, the following slabs apply
C. For individuals beyond 80 years of age, the following slabs apply
1. Bringing off shore fund managers to India – Financial services tends to be amongst the highest pay masters and also attracts the best brains. Unfortunately most of the Indian brains get drained towards our western counterparts. This budget has provided them the necessary tax relief which will potentially reverse the brain drain in favour of India by changing the Permanent Establishment norms in Income Tax. The geographical presence of a fund manager in India would not attract adverse tax consequences.
2. For Salaried employees – Transport allowance has been increased from Rs. 800 to Rs. 1600 per month. Choice has been given to invest PF amount in either EPF (Employee’s Provident Fund) or NPS (New Pension Scheme). Option has been given to employees below a threshold salary to avoid deduction towards PF without limiting employer’s contribution. Additional 10,000 Rs. deduction has been given towards payment of health insurance premiums. – ALL good steps.
3. Pension, Social Security & Insurances – This was desperately needed for Indian masses who are having no financial security and where the concept of insurance is not known. Providing budgetary allocation in this direction will go a long way in securing the livelihood of the Indian masses.
4. Wealth Tax replaced by a higher Surcharge – People having over 30 lacs of wealth were subject to 1% wealth tax. While this was not strictly enforced, the tax liability was always looming. This has now been replaced with a 10% additional surcharge for super rich people (having income over 1 crore).
5. REIT (Real Estate Investment Trusts) – Budget has rationalised the taxation around the creation REITs which will now facilitate creation of REITs and help retail investors to take part in the India’s real estate story. Units of REITs could be bought by investors who seek returns from the real estate sector without directly buying real estate. You could relate this some what to a Gold ETF where in you invest in units of Gold ETF and get exposure to Gold. The budget has also made investments in REITs attractive by making their taxation similar to Equity shares listed on stock market. This would possibly be a big boost to the liquidity strapped real estate market.
6. Corporate Tax reduced to 25% – Indian Corporates are known to have amongst the highest tax in the world. This budget has reduced the tax from 30% to 25% for 4 years starting from 2016 onwards. A very welcome step for promoting ‘Make in India’ slogan.
7. Bankruptcy Code – This would help in creating the right business environment in parallel to our western counterparts. Such a law will facilitate smoother operations of business for entities facing excessive debt positions.
8. Crack Down on Black Money – a comprehensive law will be enacted to check black money menance which will make hiding of black money in foreign assets a punishable offence with upto 10 years of jail. Amongst list of measures, a key measure includes avoiding payments in cash for over 20,000 Rs. for all real estate transactions and quoting of PAN for all transactions over 1 lac. However, we feel that it will be still difficult to curb the cash transactions and would be interested to see the next series of steps being taken on track and curb the flow of cash.
9. India’s Gold Pot – New gold deposit schemes will be announced to provide gold depositors with interest on their gold deposits. In addition, Gold Sovereign Bonds will be launched. Such bonds will bear interests and could be regarded as an alternative investment in Gold Metal.
10. Service Tax Hike to 14% – Amongst the list of negatives, the biggest drag is the increased Service Tax rate from 12.36% to 14%. Being an indirect tax, this will impact each individual buying services such as telephone bills, internet, travel, restaurants, etc.
No changes in the direct tax rates have been announced for this year and the taxation rates of last year will prevail.
A. For individual or HUF upto 60 years of age, the following slabs apply
|
Income Slab (in INR) |
Tax Rate |
|
0 – 250,000 |
NIL |
|
250,000 to 500,000 |
10% |
|
500,001 to 10,00,000 |
20% |
|
Above 10,00,000 |
30% |
B. For individual within 61-80 years of age, the following slabs apply
|
Income Slab (in INR) |
Tax Rate |
|
0 – 300,000 |
NIL |
|
300,000 to 500,000 |
10% |
|
500,001 to 10,00,000 |
20% |
|
Above 10,00,000 |
30% |
C. For individuals beyond 80 years of age, the following slabs apply
|
Income Slab (in INR) |
Tax Rate |
|
0 – 500,000 |
NIL |
|
500,001 to 10,00,000 |
20% |
|
Above 10,00,000 |
30% |
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