Budget 2015-16 and you: Things to Know

Budget 2015-16 and you: Things to Know

The Budget 2015-16 has made great changes that have an effect on several aspects. Contribution to the National Pension Schemes (NPS) gets an additional deduction of up to 50,000 over and above the section 80 C limit of 1.5 lakh. The budget also increased the limit for contribution to pension plans, insurance pension, and annuity plans as well as NPS, from 1 lakh to 1.5 lakh. 

Here are some things you need to know as a taxpayer:

  • Existing tax slabs and income tax exemption limit continue unchanged.
  • Transport allowance, which is currently Rs 800 per month, has been increased to Rs 1600 per month.
  • For contribution to National Pension Scheme, exemption limit raised from Rs 10000to Rs 150000.
  • All contribution to Sukanya Samridhi scheme to be tax free.
  • Increase in tax-free health insurance limit.
  • For senior citizens, the limit has been increased to Rs 30000 from Rs 10000. For very senior citizens, who don’t qualify for health insurance, Rs 30000 in medical expenses will qualify for deduction.    

The good and bad about the budget 2015-16:

Good:

  • The government to absorb risk in the public-private partnership (PPP) model to encourage private investments.
  • Decentralization: more revenue passed on to states.
  • Fiscal deficit target for 2015-16 is 3.9% which is less than the last year fiscal deficit 4.1%.
  • Insurance scheme for poor called Suraksha Bima Yojna which offers insurance at Rs 12 per annum with coverage of Rs 2lakh.
  • Financial inclusion, 12.5 cr families under Jan Dhan Yojna.
  • Infrastructure moves could push GDP by 2-3 %. This year, GDP to grow 7.4%, 2015-16 GDP to see 8-8.5% growth.
  • Government to absorb risk in the Public-private partnership model to encourage private investments.
  • Micro-units development refinance agency with Rs 20,000 crore corpuses- Mudra Bank.  Lending priority to SC, ST entrepreneurs. This is to encourage more entrepreneurs from the scheduled cast and scheduled tribes categories.
  • Reduce corporate tax to 25% for four years from 30%. This is to help fuel corporate investments. Instead, tax exemptions will be removed. This will give clarity to tax regime.
  • Wealth tax to be abolished, and instead be replaced by a 2% surcharges on the super rich. This expected to garner Rs 9000 crore.
  • Tax saving of up to 24,596 for individuals with an annual income of up to 1 crore.
  • 50 lakhs new toilets constructed as part of Swach Bharat campaign.
  • GAAR deferred further by two years to gain time and clear issues. Secondly, it would not be retrospective. When implemented, GAAR rules will prospective, meaning it will only be applicable for transactions in the future.
  • Capex, infrastructure: Capex by PSU firms planned at Rs 3 lakh crore. This is up by over Rs 80,000 crore. Government capex up by Rs 70,000 crore. National Infrastructure Development Fund: Rs 20,000 crore provided by government. Help raises debt and liquidity in infrastructure finance companies like IRHB. Also announce tax free bonds in rail and road infrastructure.
  • Increase in limit of deduction of health insurance premium to Rs 25,000 from Rs 15,000. Rs 30,000 for senior citizens.
  • Rs 30,000 tax deduction for medical deduction for very-senior citizens and Rs 80,000 for serious diseases.
  • Pension limit increased to Rs 1.5 lakh from Rs 1 lakh earlier.
  • Additional deduction of Rs 50,000 for contribution to NPS under Section 80CCD. Takes total deduction to Rs 2 lakh.
  • Transport allowance doubled to Rs 1600 per month from Rs 800.
  • Tax payers can now benefit from total exemption up to Rs 4, 44,200 lakh. 
    This will leave more money in the common man's pockets. Indirectly, it could also help spur spending and thus stimulate the economy.
  • Bankruptcy law reform: Comprehensive rules in 2015-16 to help improve ease of doing business.
  • Custom duty on raw materials and intermediaries to be reduced.
  • Good progress in DMIC corridor and other infra-projects.
  • Hiding of income will face penalty of 300% of asset value.
  • All India Institute of Medical Sciences to be set up in J&K, Punjab, Tamil Nadu, Himachal and Assam.
  • Poor students get fund aid through PM scheme.
  • Rs 1,200 crore for fast track corridor between Ahmadabad and Mumbai.
  • Renewable energy target will be increased to 1, 75,000 MW.
  • Gold monetization scheme to replace deposit and metal loans. New scheme to help investors to earn interest on metal account.
  • Housing for all - 2 crore houses in Urban areas and 4 crore houses in Rural areas.
  • Basic facility of 24x7 power, clean drinking water, a toilet and road connectivity.

Bad:

  • Lack of serious big bag reform ideas in the Budget disappoints markets. Nifty, Sensex slip back into the red. They were earlier up 1% on GAAR, Corporate tax cut announcements.   

However, the Finance Minister has not changed the tax slabs; he has offered some additional deductions and exemptions to tax payers.