22Jul

BRICS Development Bank Helps To Build The Financial Independence and Cut Out Western Dominance

The most awaiting, 6th BRICS Summit was held from 14 July to 16 July 2014. The host city was Fortaleza in Brazil, one of the member country out of five. It was hosted with Cristina Kirchner, Argentinian President as the special guest at the summit.

Some Basic Facts
BRICS consists of a group of major emerging economic countries – Brazil, Russia, India, China and South Africa.
It was previously known as BRIC, consist of four participating countries. South Africa is the newest among them to join the group and formed BRICS, which got its full membership in December 2010.
The main concern behind to form this group is to support each other on various issues like food crisis, world economy, growth, infrastructural development and so on.

Sixth BRICS Summit
This was the sixth and PM Narendra Modi’s first summit. This year it played a very important role to make the grouped countries financially independent by inaugurating the DEVELOPMENT BANK. The teamed countries were working on the same idea for few years. This year the site for headquarter and few different things were decided .

Joy and Disappointment of India
India miss the opportunity to set the headquarter on the choice between China’s Shanghai and India’s New Delhi. As Shanghai and New Delhi were the closest competitor. Shanghai has been decided to take the privilege of having the headquarter of the development bank. India has been granted presidency of the bank for the first five years, so the first president of the bank is from Indian origin. Also, BRICS bank having a rotating five-year presidency among the members countries.

About Development Bank
This bank is a $100 billion bank act as a reserve currency pool and help the nations involved in the Summit. This bank supports the BRICS countries infrastructural and sustainable development projects such as power stations and electricity supply grids, ports, roads, telecommunications networks, water and sewerage by lending money from the bank.
This BANK is a step towards cut out the influence of Western-based lending institutions like IMF and World bank as well as the dollar. The initial contribution of the BRICS countries is as follows –
Brazil : $18 billion
Russia : $18 billion
India : $18 billion
China : $41 billion
South Africa : $5 billion

There are plans to provide loans to other countries too in future depending on the growth and success of the step. This is really a big decision which will affect the value of dollar against various currencies which were influenced at the time when a country use to take loan from the institutions like IMF and World Bank, as both are situated in Washington thus having great influence at the time of negotiation.

The effect of this bank and its impact on the Indian currency can be seen in few days in the Indian currency market. Hoping for the best results.

19Jul

“Budget 2014-15 is a directional budget, we have laid down a roadmap” – Arun Jaitley

When there are chaos everywhere regarding the budget presented last week and mixed reactions are found on different channels of media it is interesting to know the views of the minister who prepared and presented it. Thus there are few interviews in a row after the budget session in which the minister explains about his perspective and planning for the whole financial year. The Finance Minister Arun Jaitley after presenting the budget in parliament turned to media and stated that, it is the best possible budget with the limited funds left by the previous government. All the measures taken for the uplift of the economic condition of the country.

In an interview Arun Jaitley said that, it is a directional and focused budget contains a roadmap which may lead our country to a successful future. When a question asked by the interviewer, “how volatile the budget is?”. He answered, when talking about policies it is volatile and unlimited but if look towards existing money and resources then it is quite limited.

He further explained the interpretation of the maneuverability as, when it is about policies it is unlimited due to implementation of new ideas and opportunities made by the new government. There are lots of things which are simplified and lots were modified for the convenience of common taxpayer. According to him, it is not easy and practical to pleased everyone at the same time but the government tried the best to cover every sector in the budget.

Also there are certain things which are left complicated by the UPA Government, he tried to resolve some of them by certain new ideas. As it were previously explained that the money in vault is limited for the execution, he use to try the optimum utilization of it.

He further added that, when the media go through the first part of his speech they will notice that, he denoted the budget as the directional one because the changes introduced are keeping the growth bar of 8% in mind. The government used to expect and working very seriously towards achieving that target.

On the question about tax policies and reforms he specified that, the new tax policies are very essential to increase the income and use it in the various fields like infrastructure development. If the basic manufacturing section is not growing, they insert some relaxation on the raw materials to increase the productivity and meanwhile consumption of the products. The government want the people will save as well as buy more with the present budget.

He joined in further interview that, most of the changes are inserted to support every class of the people. Tax slabs got increased to lessen the burden and provide relaxation in the saving schemes to increase the habit of secured investment among the people.

He stated to the interviewer that, “I have gone in that direction which I think is the correct direction and the beginning of the journey.” indicating towards the journey of growth.

17Jul

Budget 2014 – A Look At The Good And Bad Points Of The Budget By MODI Government

Here is an overview on the points of budget presented by the FM Jaitley, whether it is best or worst for the future of the economy of the country as well as for the uplift of the citizens. First start with the good ones which are followed by the bad one.

GOOD FOR US
Economy – The Budget announced could lead the economy back to the expected growth levels of 7-8% in the next three to four years. The government also aiming to strengthen the macro-economy with shortening degree of inflation, narrow fiscal deficit and a controllable current account deficit.

Fiscal Deficit – The government is going to retain the target of fiscal deficit target set in the interim budget as 4.1% of the Gross Domestic Product (GDP). GDP is the magnifier of the economy. The budget presented this year also set the targets for next financial years at 3.6% in 2015-16 and 2016-17 at 3% of the GDP. This is the indication of the wider view and futuristic approach of the government on fiscal consolidation.

Sanitation – The government supporting the ‘Swatchh Bharat Abhiyan’ scheme to cover every household with sanitation in the country (specially villages) by 2019. Year 2019 is the 150th birth anniversary year of Mahatma Gandhi.

Smarter Cities – PM Narendra Modi envisions creation of 100 smart cities as satellite towns in our country. For this purpose, the minister allocated Rs 7,060 crore in the Budget. This is a good news for infrastructure and real estate sector.

Irrigation – To improve access to irrigation, the minister has proposed to set aside a sum of Rs 1,000 crore under the scheme ‘Pradhan Mantri Krishi Sinchayee Yojana’.

Indirect Tax – The government implies taxes on industries for production of goods and services. It also charges an amount for import of goods. The government has reduced basic custom duties on certain items which are used as raw materials to encourage investment and domestic production. This tax cost is usually passed onto consumers. As a result, a change in indirect tax often leads to a rise or fall in retail prices of goods to end-consumers.

Demat Account – The finance minister announced a good news for the investors that they can now operate all their financial products through a single operating demat account. This might be possible through, Know Your Customer (KYC) norms which will be uniform all across the financial sector. This means, now one can access the fixed deposits and other investments through single demat account.
PSU banks – A committee of RBI had recommended that the government give greater autonomy to PSU banks to help in the improvement of their profitability. The government has consider this point and given its in principle nod.

Senior Citizen Pension – During its last term in office, the NDA government had introduced the Varishtha Pension Bima Yojana (VPBY) as a pension scheme for senior citizens. Under which a total number of 3.16 lakh annuitants are being benefitted and the corpus amounts to Rs 6,095 crore. The government proposed to revive the scheme for a limited period from 15 August, 2014 to 14 August, 2015 for the benefit of citizens aged 60 years and above. FM also proposed to set up a committee to try and use the large amounts lying in unclaimed PPF, Post Office and savings accounts for senior citizens.

Real estate – The sector is the biggest beneficiary of this year’s union budget. The finance minister proposed to increase foreign direct investment in real estate, especially in the area of low-cost housing.

Housing – In a bid to ease tax burden on the common man, the Budget also increased tax exemption on the interest payments on home loans by Rs 50,000 to Rs 2 lakh per annum. This could help fuel demand for real estate companies as well as home loans from banks.

Airports – A scheme for development of new airports in Tier I and Tier II cities will be launched for implementation through Airport Authority of India or PPPs to increase air connectivity.

Personal Tax – Finance Minister increased the minimum taxable income to Rs 2.5 lakh from Rs 2 lakh earlier. The same threshold for senior citizens has also been hiked by Rs 50,000 to Rs 3 lakh from Rs 2.5 lakh earlier.

Tax-exempt Investments – Their is certain tax exempted under the Section 80C of the Income Tax Act, so one can lower the taxable income by Rs 1 lakh by investing in financial instruments like insurance and mutual funds. This limit has been increased to Rs 1.5 lakh from Rs 1 lakh earlier. Thus, one can save more on the taxes.

Public-Provident Fund – PPF is one of the most common investment options used for tax-saving purposes. The government had earlier limited the annual tax-exempted amount to Rs 1 lakh. This has now been raised to Rs 1,50,000.

Tourism – To boost tourism in India, the facility of Electronic Travel Authorization (e-Visa) would be introduced in a phased manner at 9 airports in India where necessary infrastructure would be put in place within the next six months. The countries to which the Electronic Travel authorization facility would be extended would be identified in a phased manner. This would further facilitate the visa-on-arrival facility.

MSMEs – The micro, small and medium enterprises (MSMEs) sector found a mention in the budget. Highlighting the importance of the sector as the backbone of the economy, the finance minister proposed to appoint a committee with representatives from the Finance Ministry, Ministry of MSME and RBI to give concrete suggestions in 3 months on improving financing. He also proposed to establish a Rs 10,000 crore fund to act as a catalyst to attract private capital by way of providing equity, loans and other risk capital for start-up companies. Also, MSME will be reviewed to provide for a higher capital ceiling. This will help companies get funds easier.

Niche Banks – The finance ministry with RBI, creating a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks etc. are contemplated to meet credit and remittance needs of small businesses, unorganized sector, low income households, farmers and migrant work force. This would help encourage financial inclusion.

Roads – The government aiming to construct 8,500 km of roads in the current financial year with the investment in National Highways Authority of India and State Roads of an amount of Rs 37,880 crores, which includes Rs 3,000 crores for the North Eastern region.

Others
Rs 14389 crore for Pradhan Mantri Gram Sadak Yojana
MNREGA–Wage employment would be provided with more productivity led projects.
5 New IITs and IIMs in India
Rs 100 crore provided to the National Sports Academies in major parts of India for track and field events as well as for Sports University in Manipur.
In insurance sector composite FDI cap raised to 49% from 26%
20 new industrial corridors to be set up
Encourage entrepreneurship- Easy exit, incubation and accelerator programme set up
New Solar power projects in Rajasthan and Ladakh.
Introduction of uniform KYC norms across financial sector
Exemption limit higher for senior citizens to Rs 300,000

BAD FOR US

Tax Revenue – There is an urgent need to generate more resources to fuel the economy,for this purpose, the government increased the tax-to-GDP ratio through an increase in tax revenue. Decline in fiscal deficit from 5.7% of GDP in 2011-12 to 4.8% in 2012-13, so the desired one could be achieved by implementing the Goods and Services Tax (GST), which could be finalized by this year.

GAAR – The market is disappointed that retrospective taxation through the General Anti-Avoidance Rules (GAAR) announcement in the 2012-13 Budget has not been scrapped altogether. The BJP too had criticized the rules. The finance minister merely tried to reassure investors by reinforcing the government’s goal of an investment-friendly regime.

Sardar Patel statue – The budget has allocated Rs 200 crore to help the Gujarat government install a statue of Sardar Vallabhai Patel. At a time when the government is facing a wide fiscal deficit and slow economy, this allocation could have been avoided.

Disinvestment – The finance minister has not uttered the word disinvestment in the speech. This is one source of non-tax revenue that could have helped the government pay for the expenditure. There are indications of a sale of government stake in PSU banks to help them raise capital. The budget also expects that capital revenue receipts other than borrowings will be Rs 73,952 crore. This could be from disinvestment. However, there is no clarity on this issue.

Subsidies – There was a lot of talk about a prudent fiscal policy and the need to undertake bold reforms. This led to expectations of a cut in subsidies to help narrow fiscal deficit – the amount government borrows to fund the gap between expenditure and revenue. The government will review food and fuel subsidies and a committee would be formed, the finance minister said. This means the government has essentially delayed a decision on subsidies. Although, non-Plan expenditure a major portion of which is subsidies has risen marginally in this budget. Additional amounts have been provided for fertilizer subsidy and capital expenditure of Armed Forces.

For more details check out our budget express!

11Jul

Highlights of Budget 2014 – THE CURRENT ECONOMIC SITUATION AND THE CHALLENGES – Part 6

BUDGET ESTIMATES AND TAX PROPOSALS

BUDGET ESTIMATES

  • Mandate to be fulfilled without compromising fiscal consolidation.
  • Non-plan Expenditure of Rs. 12,19,892 crore with additional provision for fertilizer subsidy and Capital expenditure for Armed forces.
  • Rs. 5,75,000 crore Plan expenditure – increase of 26.9 per cent over actuals of 2013-14.
  • Plan increase targeted towards Agriculture, capacity creation in Health and Education, Rural Roads and National Highways Infrastructure, Railways network expansion, clean energy initiatives, development of water resources and river conservation plans.
  • Total expenditure of Rs.17,94,892 crore estimated.
  • Gross Tax receipts of Rs. 13,64,524 crore estimated.
  • Net to centre of Rs. 9,77,258 crore estimated.
  • Fiscal deficit of 4.1% of GDP and Revenue deficit of 2.9% estimated.
  • New Statement to separately show plan allocation made for North Eastern Region. Allocation of Rs. 53,706 crore for North East Regions.
  • Allocation of Rs. 50,548 crore under SCSP and Rs. 32,387 under TSP.
  • Allocation for women at Rs. 98,030 crore and for children at Rs. 81,075 crore.


TAX PROPOSALS

  • Ambitious Revenue Collection Targets in Interim Budget. Proposed tax changes factored in the Budget Estimates 2014-15
  • Measures to revive the economy, promote investment in manufacturing, rationalize tax provisions to reduce litigation, address the problem of inverted duty structure in certain areas. Tax reliefs to individual tax payers.

DIRECT TAXES PROPOSALS

  • Personal Income-tax exemption limit raised by Rs. 50,000/- that is, from Rs. 2 lakh to Rs.2.5 lakh in the case of individual taxpayers, below the age of 60 years. Exemption limit raised from Rs. 2.5 lakh to Rs. 3 lakh in the case of senior citizens.
  • No change in the rate of surcharge either for the corporates or the individuals, HUFs, firms etc.
  • The education cess to continue at 3 percent.
  • Investment limit under section 80C of the Income-tax Act raised from Rs. 1 lakh to Rs. 1.5 lakh.
  • Deduction limit on account of interest on loan in respect of self occupied house property raised from Rs. 1.5 lakh to Rs. 2 lakh.
  • Conducive tax regime to Infrastructure Investment Trusts and Real Estate Investment Trusts to be set up in accordance with regulations of the Securities and Exchange Board of India.
  • Investment allowance at the rate of 15 percent to a manufacturing company that invests more than Rs. 25 crore in any year in new plant and machinery. The benefit to be available for three years i.e. for investments upto 31.03.2017.
  • Investment linked deduction extended to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semi-conductor wafer fabrication manufacturing units.
  • 10 year tax holiday extended to the undertakings which begin generation, distribution and transmission of power by 31.03.2017.
  • Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains.
  • Concessional rate of 15 percent on foreign dividends without any sunset date to be continued.
  • The eligible date of borrowing in foreign currency extended from 30.06.2015 to 30.06.2017 for a concessional tax rate of 5 percent on interest payments. Tax incentive extended to all types of bonds instead of only infrastructure bonds.
  • Introduction of a “Roll Back” provision in the Advanced Pricing Agreement (APA) scheme so that an APA entered into for future transactions is also applicable to international transactions undertaken in previous four years in specified circumstances.
  • Introduction of range concept for determination of arm’s length price in transfer pricing regulations.
  • To allow use of multiple year data for comparability analysis under transfer pricing regulations.
  • To remove tax arbitrage, rate of tax on long term capital gains increased from 10 percent to 20 percent on transfer of units of Mutual Funds, other than equity oriented funds.
  • Income and dividend distribution tax to be levied on gross amount instead of amount paid net of taxes.
  • In case of non deduction of tax on payments, 30% of such payments will be disallowed instead of 100 percent.
  • Government to review the DTC in its present shape and take a view in the whole matter.
  • 60 more Ayakar Seva Kendras to be opened during the current financial year to promote excellence in service delivery.
  • Net Effect of the direct tax proposals to result in revenue loss of Rs. 22,200 crore.

INDIRECT TAXES PROPOSALS

  • To boost domestic manufacture and to address the issue of inverted duties, basic customs duty (BCD) reduced on certain items.
  • To encourage new investment and capacity addition in the chemicals and petrochemicals sector, basic customs duty reduced on certain items.
  • Steps taken to boost domestic production of electronic items and reduce our dependence on imports. These include imposition of basic customs duty on certain items falling outside the purview of IT Agreement, exemption from SAD on inputs/components for PC manufacturing, imposition of education cess on imported electronic products for parity etc.
  • Colour picture tubes exempted from basic customs duty to make cathode ray TVs cheaper and more affordable to weaker sections.
  • To encourage production of LCD and LED TVs below 19 inches in India, basic customs duty on LCD and LED TV panels of below 19 inches reduced from 10 percent to Nil.
  • To give an impetus to the stainless steel industry, increase in basic customs duty on imported flat-rolled products of stainless steel from 5 % to 7.5 % .
  • Concessional basic customs duty of 5 % extended to machinery and equipment required for setting up of a project for solar energy production.
  • Specified inputs for use in the manufacture of EVA sheets and back sheets and flat copper wire for the manufacture of PV ribbons exempted from basic customs duty.
  • Reduction in basic customs duty from 10 percent to 5 percent on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Exemption from SAD of 4 percent on parts and raw materials required for the manufacture of wind operated generators.
  • Concessional basic customs duty of 5 percent on machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).
  • Anthracite coal, bituminous coal, coking coal, steam coal and other coal to attract 2.5 % basic customs duty and 2 per cent CVD to eliminate all assessment disputes and transaction costs associated with testing of various parameters of coal.
  • Basic customs duty on metallurgical coke increased from Nil to 2.5 % in line with the duty on coking coal.
  • Duty on ship breaking scrap and melting scrap of iron or steel rationalized by reducing the basic customs duty on ships imported for breaking up from 5 percent to 2.5 percent.
  • To prevent mis-use and avoid assessment disputes, basic customs duty on semi-processed, half cut or broken diamonds, cut and polished diamonds and coloured gemstones rationalized at 2.5 percent.
  • To encourage exports, pre-forms of precious and semi-precious stones exempted from basic customs duty.
  • Duty free entitlement for import of trimmings, embellishments and other specified items increased from 3 percent to 5 percent of the value of their export, for readymade garments.
  • Export duty on bauxite increased from 10 percent to 20 percent.
  • For passenger facilitation, free baggage allowance increased from Rs.35,000 to Rs.45,000.
  • To incentivize expansion of processing capacity, reduction in excise duty on specified food processing and packaging machinery from 10 percent to 6 percent.
  • Reduction in the excise duty from 12 percent to 6 percent on footwear of retail price exceeding Rs. 500 per pair but not exceeding Rs. 1,000 per pair.
  • Withdraw concessional excise duty (2 % without Cenvat benefit and 6 % with Cenvat benefit) on smart cards and a uniform excise duty at 12 % .
  • To develop renewable energy, various items exempted from excise duty.
  • Exemption to PSF and PFY manufactured from plastic waste and scrap including PET bottles from excise duty with effect from 29th June, 2010 to 7th May, 2012.
  • Prospective levy of a nominal duty of 2 % without Cenvat benefit and 6 % with Cenvat benefit on such PSF and PFY.
  • Concessional excise duty of 2 percent without Cenvat benefit and 6 percent with Cenvat benefit on sports gloves.
  • Specific rates of excise duty increased on cigrettes in the range of 11 % to 72 % .
  • Excise duty increased from 12 % to 16 % on pan masala, from 50 – 55 % on unmanufactured tobacco and from 60 – 70 % on gutkha and chewing tobacco.
  • Levy of an additional duty of excise at 5 percent on aerated waters containing added sugar.
  • To finance Clean Environment initiatives, Clean Energy Cess increased from Rs.50 per tonne to Rs.100 per tonne.

Service tax

  • To broaden the tax base in Service Tax, sale of space or time for advertisements in broadcast media, extended to cover such sales on other segments like online and mobile advertising. Sale of space for advertisements in print media however would remain excluded from service tax. Service provided by radio-taxis brought under service tax.
  • Services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants brought under service tax.
  • Provision of services rules to be amended and tax incidence to be reduced on transport of goods through coastal vessels to promote Indian Shipping industry.
  • Services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India to be taken out of the tax net and Cenvat credit for services of rent-a-cab and tour operators to be allowed to promote tourism.
  • Service tax exempted on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled.
  • Services provided by the Employees’ State Insurance Corporation for the period prior to 1st July 2012 exempted, from service tax.
  • Exemption available for specified micro insurance schemes expanded to cover all life micro-insurance schemes where the sum assured does not exceed Rs.50, 000 per life insured.
  • For safe disposal of medical and clinical wastes, services provided by common bio-medical waste treatment facilities exempted.
  • Tax proposals on the indirect taxes side are estimated to yield Rs. 7525 crore.
  • 24X7 customs clearance facility extended to 13 more airports in respect of all export goods and to 14 more sea ports in respect of specified import and export goods to facilitate cargo clearance.
  • ‘Indian Customs Single Window Project’ to facilitate trade, to be implemented.
  • The scheme of Advance Ruling in indirect taxes to be expanded to cover resident private limited companies. The scope of Settlement Commission to be enlarged to facilitate quick dispute resolution.
  • Customs and Central Excise Acts to be amended to expedite the process of disposal of appeals.
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