Budget 2015: Beyond infrastructure, there is nothing new other sectors, says Saurabh Mukherjea

The one negative surprise was the FM’s indication that all exemptions from the standard corporate tax rate will gradually be phased out from FY17.

Updated: Mar 01, 2015, 07.16 AM IST

Budget 2015: Beyond infrastructure, there is nothing new other sectors, says Saurabh Mukherjea

By Saurabh Mukherjea

The finance minister’s second Budget was a relative improvement over his first outing, with the acceptance of the 14th Finance Commission recommendations creating a fiscal drag of 1% of GDP on the Centre’s finances. The Budget opted for some key changes: an upward shift in indirect tax rates, outlining a road map for corporate tax rate reduction, curtailing total expenditure growth and postponing the achievement of fiscal deficit of 3% of GDP.

There is no compelling vision or agenda emerging from these. If you want to revive the economy via government capex, your outlay won’t do it. On the other hand, if you want to show fiscal rectitude (especially since you are not embarking upon a major capex plan), then slipping on your selfstated fiscal deficit target of 3.6% for FY16 and 3% for FY17 does not make sense.

If you want to signal to India Inc that you are on their side, then it is perplexing why the corporate tax was not cut immediately. We see the Budget as being a relatively neutral event.

The FM spoke about focusing on infrastructure, and for once, there was some substance in the government’s commitment to the sector. Yet, large listed private sector infrastructure companies are unlikely to benefit. The main beneficiaries are likely to be the smaller companies and public sector entities with strong balance sheets and a willingness to build for modest return on equity. Beyond infrastructure, it is difficult to see any material news for any other sector.

However, the one negative surprise was the FM’s indication that all exemptions from the standard corporate tax rate will gradually be phased out from FY17. This would appear to suggest that corporates who currently pay minimum alternate tax could end up paying higher taxes post FY17. However, since many of these MAT beneficiaries are locked in tax disputes, it is unlikely they will be materially disadvantaged by the gradual abandonment of corporate tax exemptions.

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Budget 2015: Top takeaways for the common man

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The limit of reduction of health insurance premium was enhanced from Rs 15,000 to Rs 25,000. For senior citizens this limit has been increased from Rs 20,000 to Rs 30,000.

"For senior citizen above the age of 80 years, not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure. Deduction limit of Rs 60,000 on expenditure on account of specified diseases is enhanced to Rs 80,000 in the case of senior citizens," Jaitley said.

Additional deduction of Rs 25,000 is allowed for differently-abled persons, increasing the limit from Rs 50,000 to Rs 75,000. It is also proposed to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of severe disability.

Jaitley also proposed to provide that investment in Sukanya Samriddhi Scheme will be eligible for deduction under section 80C of the income-tax and any payment from the scheme shall not be liable to tax.

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 Rs 1.5 lakh.

Additional deduction of Rs 50,000 will be allowed for contribution to the new pension scheme u/s 80 CCD increasing from Rs 1 lakh to Rs 1.5 lakh.