Highlights of Interim Budget 2014 (Vote-on-Account) – What it Means for the Educated Middle Class
Union government presented an Interim Budget. The budget is a vote-on-account because the government seeks to Lok Sabha’s sanction (voting) to spend for immediate expenditures until a full budget is presented.
Once the norms in the budget are in force, educated middle class people can get things at cheaper prices than before.
Following are a few good things and concerns that are likely in the months to come.
The Interim Budget 2014 has brought a few good things for middle class people.
- No hike in Income tax rates: This is good news for middle class professional people.
- Soaps, TVs, fridge, mobile phones are going to be cheaper. (Excise tax to be reduced to 7.5% from 12%)
- Cars are to be cheaper. The excise taxes on automobiles are reduced for the period up to 30.06.2014 as follows:
- Small Cars, Motorcycle, Scooters and Commercial Vehicles – from 12 % to 8%
- SUVs – from 30% to 24%
- Large and Mid-segment Cars – from 27/24% to 24/20%
- Excise tax on mobile handsets will be restructured.
- The rate of duty is to be 6% with CENVAT credit, or 1% without CENVAT credit.
- In 2013, excise tax on mobile phones priced at more than Rs. 2000 was 6%.
- Students who have taken study loans before 31 March 2009 are to benefit: relaxation in time period (they can pay later) or waiver.
- Capital goods from are to be cheaper as excise duties are to be cut down from 12% to 10%. This might be useful for small business owners.
- ‘Super Rich’ people with annual income more that Rs. 1 crore will be charged a surcharge at 10%.
- Factory gate taxes to be reduced to 10% on capital goods and consumer durables.
(The factory gate tax is levied on factory gate price. Factory price is the sum of direct costs such as labor, raw materials, and energy, and indirect costs such as interest on loans, plant maintenance, or rent, and it does not include profit.)
- The loading and un-loading, packing, storage and warehousing of rice is exempted from Service Tax.
- Promises one million jobs.
- India’s current account deficit (CAD) is estimated at $45 B for this financial year. A large CAD means a high outflow of foreign exchange for purchasing energy (petroleum), and its negative consequences.
- A high inflationary pressure seems to be next year. This is because the budget wants to cut oil subsidy from Rs 85,480 crore this year to Rs 63,427 crore. The next year’s figure includes Rs 35,000 crore postponed from the current year. The oil subsidy next year will be cut heavily, which is likely to cause rise in prices.
- As far expenditure, there is no proposal for rasing plan expenditure, which means no finances for development. Nonplan expenditure stands at Rs.12.08 trillion.
- For 2013, it was Rs. 11.09975 trillion. (1 trillion = 1 lakh crore).
- Nonplan expenditure goes for paying salaries, pensions, subsidies, interest on loans, etc.)
- The budget proposes to build industrial corridors in which Hyderabad does not get a place.
- The Budget rejects the argument of policy paralysis.