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BUDGET
2015 - 2016
UNION BUDGET
2015 - 2016
INDEX
Key Highlights
Tax Rates
Market movements:
Equity & Debt
Economic update:
-
Budget summary
Revenue snapshot
Expenditure snapshot
Sector updates
Mutual Funds
1
UNION BUDGET, 2015 - 2016
KEY
HIGHLIGHTS
Though the Union Budget is essentially a Statement of Account of public finances, it has
historically become a significant opportunity to indicate the direction and the pace of
Indias economic policy. At a time when the International Monetary Fund (IMF) has
downgraded its earlier forecast of global economic growth by 0.3%, and the World Trade
Organization has revised its forecast of world trade growth from 5.3% to 4%, the
forecasts for India have either been upgraded, or have remained the same, without any
downgrades.
With this in the background, we present the key highlights of Union Budget 2015-16.
Economy
90% increase in non-debt capital receipts pushes total receipts growth to 4.6%
Budget picks most of low hanging fruits: removes inverted duty structure, brings further
clarity and simplifies on tax reforms, boosts investment in infrastructure
Jump in capital expenditure growth a big positive though Budget lacks serious effort in
rationalization of food subsidy
Tax free infrastructure bonds announced in the rail, road and irrigation sectors
2
UNION BUDGET, 2015 - 2016
KEY
HIGHLIGHTS
Direct Taxes
Limit of deduction of health insurance premium increased from Rs 15,000 to Rs
25,000; for senior citizens, limit increased from Rs 20,000 to Rs 30,000
Limit on deduction on account of contribution to a pension fund and the new pension
scheme increased from Rs 1,00,000 (One Lakh) to Rs 1,50,000 (One Lakh Fifty
Thousand).
Additional deduction of Rs 50,000 for contribution to the new pension scheme (NPS)
u/s 80CCD.
Transport allowance exemption increased from Rs. 800 p.m. to Rs. 1,600 p.m.
Payment to the beneficiaries including interest payment on deposit in Sukanya
Samriddhi Scheme (SSS) to be fully exempt.
Wealth-tax replaced with additional surcharge of 2 per cent on super rich with a
taxable income of over Rs 1 crore annually
Donation made to National Fund for Control of Drug Abuse (NFCDA) to be eligible
for 100% deduction u/s 80G of Income-tax Act.
Proposal to reduce corporate tax from 30% to 25% over the next four years, starting
from next financial year.
General Anti Avoidance Rule (GAAR) to be deferred by two years. GAAR to apply to
investments made on or after 01.04.2017, when implemented.
Positive. The increase in the limit of deduction of health premium, increased
transport allowance exemption, the additional deduction allowed for contribution to
the NPS, the payments made under the SSS being exempted and the donations
made to NFCDA to be eligible for 100% exemption are all positives for
investors/individuals/savers. The benefits will accrue on account of tax saved as well
as help create a corpus for the future.
3
UNION BUDGET, 2015 - 2016
KEY
HIGHLIGHTS
Miscellaneous
The finance minister has proposed to allow tax pass-through for alternate investment
funds.
Rationalisation of capital gains regime for the sponsors exiting at the time of listing of
the units of REITs and InvITs. The rental income arising from real estate assets
directly held by the REIT is also proposed to be allowed to pass through and to be
taxed in the hands of the unit holders of the REIT.
The distinction between foreign portfolio investments and foreign direct investments
has been done away with and replaced with composite caps.
The finance minister has allowed foreign investments in Alternate Investment Funds
The government will introduce Gold Monetization Scheme, Sovereign Gold Bonds
and gold coins with Ashok Chakra to cut demand for gold coins from overseas.
Service tax plus education cess increased from 12.36% to 14% to facilitate transition
to GST
Generation of black money and its concealment to be dealt with effectively and
forcefully.
Bill for a comprehensive new law to deal with black money parked abroad to be
introduced in the current session.
Benami Transactions (Prohibition) Bill to curb domestic black money to be
introduced in the current session of Parliament.
4
UNION BUDGET, 2015 - 2016
MARKET
MOVEMENT
Equity Market
Markets were very volatile throughout the trading day, but ended in green towards
the end of the trading session on the Budget Day.
Markets opened with positive sentiments and Sensex opened 191 points up from its
previous close. Sensex was trading up by almost 400 points higher from its previous
close in the early trade before the announcement of the Union budget.
However, markets see sawed throughout the day as the Finance Minister went about
presenting the Union Budget.
At the end, the Sensex closed at 29,361 levels with gains of 141 points or 0.5%.
Among the sector indices consumer durables lost more than 4% while Power lost
almost 1.5%. Realty, Capital Goods and Metal Indices were down by 0.9%, 0.26%
and 0.22% respectively. Banking sector index was up by more than 3%,while
Healthcare and Auto went up by 2.03% and 1.08% respectively.
Among Sensex stocks, Axis Bank (8.15%), Sun Pharma (3.62%),Tata Motors
(3.15%) & ICICI Bank (3.15%) were the top gainers while ITC (-8.27%), BHEL (3.21%) and NTPC (-1.64%) were among the major losers.
Debt Market
Bond markets were closed on Saturday on the day Budget was announced.
The finance minister sought an additional year to meet its medium-term fiscal deficit
target with the additional fiscal space going towards funding infrastructure
investments.
5
UNION BUDGET, 2015 - 2016
ECONOMIC
UPDATE
Fiscal deficit target set at 3.9% as total receipts constrained by increased tax revenue
transfer to states
ECONOMIC
UPDATE
FY16 fiscal math assumes; 42% tax transfer to states, Nominal GDP growth of 11.5%,
increase in tax buoyancy and savings on subsidy outgo
% YoY
FY15 RE FY16 BE
FY14 A FY15 RE
Rs. Trillions
FY14
A
FY15
RE
FY16
BE
Revenue Receipts
Capital Receipts
10.15
0.42
11.26
0.42
11.42
0.80
11.0%
0.9%
1.4%
90.0%
Total Receipts
10.57
11.69
12.22
10.6%
4.6%
Expenditures
15.59
16.81
17.77
7.8%
5.7%
Revenue Expenditure
Capital Expenditure
13.72
1.88
14.89
1.92
15.36
2.41
8.5%
2.5%
3.2%
25.5%
Fiscal Deficit
Revenue Deficit
Primary Deficit
5.03
3.57
1.29
5.13
3.62
1.01
5.56
3.94
1.00
1.9%
1.5%
-21.3%
8.4%
8.8%
-1.7%
4.61
4.98
4.86
8.0%
-2.3%
GDP
Nominal GDP Growth Rate
113
12.2%
127
11.5%
141
11.5%
4.4%
3.1%
1.1%
4.1%
2.9%
0.8%
3.9%
2.8%
0.7%
0.81
0.87
0.86
0.68
1.38
0.50
7
UNION BUDGET, 2015 - 2016
ECONOMIC
UPDATE
Rs. Trillions
FY14
A
FY15
BE
FY15
RE
FY16
BE
11.39
13.65
12.51
14.49
9.9%
15.8%
92%
Income Tax
Corporation Tax
Excise
Customs
Service Tax
Direct Tax
Indirect Tax
2.43
3.95
1.70
1.72
1.55
6.38
4.97
2.84
4.51
2.07
2.02
2.16
7.35
6.25
2.79
4.26
1.85
1.89
1.68
7.05
5.42
3.27
4.71
2.30
2.08
2.10
7.98
6.48
14.7%
8.0%
9.0%
9.7%
8.6%
10.5%
9.1%
17.5%
10.5%
23.9%
10.4%
24.8%
13.2%
19.5%
98%
94%
90%
94%
78%
96%
87%
8.16
9.77
9.08
9.20
11.4%
1.3%
93%
Non-Tax Revenues
o/w Dividends
Telecom receipts
1.99
0.90
0.40
2.13
0.90
0.45
2.18
0.89
0.43
2.22
1.01
0.43
9.5%
-1.8%
7.6%
1.8%
13.4%
-0.7%
103%
98%
10.15
11.90
11.26
11.42
11.0%
1.4%
95%
0.42
0.29
0.74
0.63
0.42
0.31
0.80
0.70
0.9%
6.7%
90.0%
121.7%
57%
49%
10.57
12.64
11.69
12.22
10.6%
4.6%
92%
0.81
1.47
0.86
1.38
Revenue Receipts
Capital Receipts
o/w Disinvestments
Total Receipts
Tax buoyancy
Increase in
service tax rate
from 12% to 14%
% BE
FY15
RE
Includes Rs 285
bn from SUTTI
and others
% YoY
FY15 RE FY16 BE
FY14 A FY15 RE
Higher excise on
petrol and diesel
Revenues buoyed by additional excise collection from petroleum products and higher
Service tax collections
8
UNION BUDGET, 2015 - 2016
ECONOMIC
UPDATE
Jump in capital expenditure growth a big positive though Budget lacks serious effort in
rationalization of food subsidy
Lower Assistance to State Plans pursuant to increase in devolution of taxes to States
Rs. Trillions
% YoY
FY15 RE FY16 BE
FY14 A FY15 RE
7.8%
5.7%
3.2%
-0.6%
-44.3%
37.3%
146.5% -26.4%
% BE
FY15
RE
94%
81%
80%
82%
Expenditures
Plan
Central Plan
Assistance to State Plans
FY14
A
15.59
4.53
3.40
1.13
FY15
BE
17.95
5.75
2.37
3.38
FY15
RE
16.81
4.68
1.90
2.78
FY16
BE
17.77
4.65
2.60
2.05
Non-Plan
Subsidies
o/w Food
Fertilzer
Petroleum
Interest
Defence
Salaries + Pensions
11.06
2.65
0.92
0.67
0.85
3.74
1.24
1.46
12.20
2.61
1.15
0.73
0.63
4.27
1.34
1.65
12.13
2.67
1.23
0.71
0.60
4.11
1.40
1.63
13.12
2.44
1.24
0.73
0.30
4.56
1.52
1.76
9.7%
0.8%
33.3%
5.4%
-29.4%
9.9%
12.9%
11.7%
8.2%
-8.6%
1.4%
2.8%
-50.2%
10.9%
8.4%
7.9%
99%
102%
107%
97%
95%
96%
104%
99%
Revenue Expenditure
Capital Expenditure
13.72
1.88
15.68
2.27
14.89
1.92
15.36
2.41
8.5%
2.5%
3.2%
25.5%
95%
85%
Expenditure Elasticity
0.87
1.12
0.68
0.50
9
UNION BUDGET, 2015 - 2016
ECONOMIC
UPDATE
Sources of financing fiscal deficit: Despite higher fiscal deficit, net market borrowings
largely remains flat
Cash drawdown of Rs. 120 bn. and short-term borrowings resorted to keep Market
borrowings lower in the face high redemptions in FY16
Rs. Bn.
Debt receipts to finance fiscal deficit
FY13
FY14
FY15 RE
FY16 BE
4,674
4,536
4,469
4,564
534
77
512
301
External loans
72
73
97
112
86
124
333
224
109
98
100
100
Other receipts
(63)
313
(228)
136
(510)
(192)
(157)
120
906
950
-151
1,388
-63
1,436
5,580
5,637
5,920
6,000
Market loans
Short term borrowings
Repayments
Switch
Gross Borrowings
10
UNION BUDGET, 2015 - 2016
SECTOR
UPDATES
Sector
Autos
Banking &
Financial
Services
Cement
Increased spending on infrastructure/ housing and plans to Positive: Industry would benefit from
revitalize PPP mode of infrastructure
higher volume growth
11
UNION BUDGET, 2015 - 2016
SECTOR
UPDATES
Sector
Capital
goods
FMCG &
Retail
Impact
12
UNION BUDGET, 2015 - 2016
SECTOR
UPDATES
Sector
Impact
Negative: Amusement park operators
No impact for Exhibitors
Metals/ Mining
Media
13
UNION BUDGET, 2015 - 2016
SECTOR
UPDATES
Sector
Impact
Power
Realty
14
UNION BUDGET, 2015 - 2016
MUTUAL
FUNDS
Unit holders will now have tax neutrality upon consolidation or merger
of mutual fund schemes provided that the consolidation is of two or
more schemes of an equity oriented fund or two or more schemes of a
fund other than equity oriented fund.
15
UNION BUDGET, 2015 - 2016
EQUITY
MARKET
OUTLOOK
AND STRATERGY
The Union Budget 2015-16 was presented in the backdrop of high expectations from
a market which had pinned high hopes on the BJP led NDA government which had
the strongest electoral mandate in the last three decades.
The Budget puts forward the pro-growth focus of the government, while at the same
time maintaining fiscal credibility in the medium term.
The Budget is a step in the right direction with a push towards infrastructure, steps to
ease doing of business, encourage financial savings and rationalise subsidies.
The Indian economy is poised to grow at a healthy rate when most of the larger
economies are facing downgrades in their GDP growth.
Equity market valuations are also reasonable when compared to their long term
Price to Earnings (P/E) averages
16
UNION BUDGET, 2015 - 2016
DEBT
MARKET
OUTLOOK
AND STRATERGY
The government relaxed the fiscal deficit target for FY 16 and FY 17 to 3.9% and
3.5% respectively in return for additional infrastructure spending. The medium term
fiscal deficit target of 3% has been pushed to FY 18.
Government is likely to borrow Rs.6 lakh crores in FY16 compared to Rs.5.92 lakh
crores for this fiscal. The budgeted target for borrowing in current fiscal was Rs.6
lakh crores, but the government will raise only Rs.5.92 lakh crores from markets.
However, the net borrowings in 2015-16 will be Rs.4.56 lakh crores, after
considering repayments of past loans and interests. It was Rs.4.53 lakh crores in
current fiscal.
Despite the slightly higher than expected fiscal & revenue deficit target, net
borrowing of Rs.4.53 lakh crores is reasonably lower.
RBI in its last monetary policy review had hinted that future course of interest rates
would be dependent on inflation and fiscal consolidation intent of the government.
With inflation within RBIs target (CPI at 6% for Jan 16) and with the government
outlining the fiscal roadmap, the onus now shifts to RBI on the monetary policy front.
Yields are likely to be range bound in the near term. However, we are positive from a
medium to long term perspective with a pro-active inflation targeting RBI and a
credible govt. at the Centre.
Long Term Income & Gilt and Dynamic Bond Funds can be recommended with
an investment horizon of 18 to 24 months.
The Budget also announced allocation for tax free infrastructure bonds. This will
result in fresh primary supply of these bonds. Details about the names of state
organisations and coupon on these tax free bonds are still awaited.
UNION BUDGET, 2015 - 2016
17
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18
UNION BUDGET, 2015 - 2016