Who gets what from the Union budget

Finance Secretary Arvind Mayaram described Arun Jaitley's maiden budget as a very balanced and forward looking one. But does the budget have something for everyone? We take a look at what various stakeholders in the Indian economy have received from the budget. Let's start with what it means to us, the salaried class.

 

The salaried class

 

The working class has reasons to rejoice from Arun Jaitley's budget. The finance minister has put more money in the hands of the working class by increasing the exemption limit from Rs 2 lakh to Rs 2.5 lakh. Senior citizens, on the other hand, will start paying tax after an earning of Rs 3 lakh.

 

The finance minister has also increased the tax benefit for investments that qualify under Section 80C to Rs 1.5 lakh from Rs 1 lakh. Investment limit in Public Provident Fund (PPF), which falls under the Section 80C purview has also been increased from Rs 1 lakh to Rs 1.5 lakh.

 

Further, for those having housing loan on self-occupied house, tax benefit on interest payment has been increased from Rs 1.5 lakh to Rs 2 lakh. For an employee with a salary of less than Rs 10 lakh the benefit works out to be around Rs 35,000 per annum.

 

The Aam Aadmi

 

Will the budget create new jobs is the big question in front of the general public. There are enough measures announced by the government to boost growth with special impetus for the small and medium enterprises, the main job creators. It is a gamble that the Finance Minister has taken that the budget initiatives will lead to growth.

 

Apart from a Rs 10,000 crore start-up fund and investment allowance for investments in plant and machinery above Rs 25 crore, the Finance Minister has announced incentive schemes for job creating sectors like textile, gems and jewellery, real estate and construction.

 

The government's focus on education, agriculture, health infrastructure and skill development will also benefit the Aam Aadmi. Further, there will be no burden as the food subsidy bill or the MNERGA targets have remained unchanged.

 

Corporate India

 

Although there is no tax break for corporate India, a big relief is that there are no new taxes. But tax was the least of the worries for corporate India. A big relief has been provided by way of obtaining an advance ruling in respect of tax liability. This is a win-win for both the government as well as the corporate sector which has nearly Rs 8 lakh crore locked in various litigations.

 

Growth stimulus is what corporate India was desperately seeking. Jaitley's budget to some extent addresses that by providing tax benefits for investment in plant and machinery and extending tax exemptions and holidays for infrastructure projects.

More importantly, the government has empowered banks to fund infrastructure projects by seeking long term loans and  giving CRR and SLR exemptions for funding to these sectors. A 27% increase in plan outlay by the government can kick start the much needed investment cycle.

 

The Economy

 

What has come as a relief is that the Finance minister has held on the current fiscal deficit target of 4.1% and has promised to bring it down to 3.6% in FY15-16. Though the subsidy element has increased (7% for fertilisers and 25% for food), Jaitley is hopeful that higher tax collection will help him reduce the deficit, which experts feel is a tight rope walk. The finance minister has also increased his divestment target from Rs 26,000 crore to Rs 58,425 crore.

 

Markets

 

There has been no changes in the tax structure for markets especially in the transaction tax front which the market was expecting. However, the finance minister has simplified rules for corporates to raise funds from the ADR/GDR markets. Extending withholding tax to all bonds is also expected to see FIIs flow in the debt market. Jaitley has ended the tax arbitrage enjoyed by debt mutual funds, allowed foreign fund managers to be stationed in India without compromising on tax benefits and introduced a single demat for all investments.

Market's mood on the budget can be summed up by Sunil Singhania, Head Equity Reliance Mutual Fund's quote where he said in a TV interview that all the ingredients of a structural bull run are in place.