Highlights of Economic Survey 2014-15

The Press Information Bureau, Government of India, Ministry of Finance has published a information on 27.02.2015 that the Economic Survey 2014-15 shows that decline in Inflation and reduction of current account deficit has made India an attractive investment destination on the occation of Pre-Budget 2015.  The major effect shows as under :

  • A Growth Rate of over 8 Per Cent Expected for the Coming Year
  • A Double-Digit Economic Growth Trajectory is now a Possibility
  • Such a Growth Could Help in ‘Wiping Every Tear From Every Eye’ and Realizing
  • Aspiration of India’s Youth
  • There is Political Mandate for Reform and Benign External Environment now, says the Economic Survey
  • There is Scope for Big Bang Reforms now

Indian Economy is looking-up with brighter prospects amongst the world’s major economies today. The Economic Survey 2014-15 presented by the Finance Minister Shri Arun Jaitley to the Parliament today indicates that a clear political mandate for reform and a benign external environment now is expected to propel India on to a double digit trajectory. It states that Indian economy appears to have now gone past the economic slowdown, persistent inflation, elevated fiscal deficit, slackening domestic demand, external account imbalances and oscillating value of the rupee.

The Economic Survey taking into consideration the change of base year by the Central Statistics Office of the National Accounts series from 2004-05 to 2011-12, states that growth at market prices for 2015-16 is expected to be 8.1-to 8.5 per cent.

The growth rate in GDP at constant (2011-12) market prices in 2012-13 was 5.1 per cent, which increased to 6.9 percent in 2013-14 and it is expected to further increase to 7.4 per cent in 2014-15 (According to advanced estimates). The change in methodology by the Central Statistics Office has also introduced the concept of Gross Value Added (GVA) at the aggregate and various sectoral levels. The Economic Survey says that expectation for such a growth rate is also due to a number of reforms that have already been undertaken and more that are being planned for. The Survey enlist various reform measures like de-regulation of diesel price, taxing energy products, replacing cooking gas subsidy by direct transfer on national scale, passing an Ordinance to reform the coal sector via auctions, increasing the FDI caps in defence, etc.

The Survey report also commended the far reaching changes brought about on the issue of sharing of revenues between the Centre and States as recommended by the 14th Finance Commission. The Survey says that decline in inflation by over 6 percentage points since late 2013 and also reduction of current account deficit from a peak of 6.7 per cent of GDP in the third quarter of 2012-13 to about one (1) per cent in the coming fiscal year has made India an attractive investment destination well above most other countries.

The expected high growth rate in the coming year in the favourable economic environment has created a historic movement of opportunity to propel India into a double-digit growth trajectory to attain the fundamental objective of “wiping every tear from every eye” of the vulnerable and poor people of the country, the survey says. It also gives an opportunity to the increasingly young, middle-class and aspirational India to realize its full potential. As the new Government is to present its first full year budget, the Economic Survey states that it appears that India has reached a sweet spot and that there is a scope for Big Bang reforms now.

The growth estimates of over 8 per cent for the current year is on expectations that the monsoon will be favourable, as it was forecast to be normal, compared to last year. However the growth rate in Gross Value Added (GVA) at basic prices in agriculture is projected to decline from 3.7 per cent in 2013-14, an exceptionally good previous year from the point of view of rainfall, to 1.1 per cent in 2014-15, the current year with not-so-favourable monsoon.

The Economic Survey has also drawn our attention to certain other stagnating or declining elements of the economy in the recent past.

It says that the growth in 2014-15 is largely driven by domestic demand. There is hardly any external support to growth in 2014-15, as the growth in exports is projected to be only 0.9 per cent and the growth rate of imports, around (-) 0.5 per cent. The deceleration in imports owe substantially to the sharp decline in international oil prices in the current year that compressed the oil import bill.

It also says that there has been a decline in the rate of gross domestic saving, from 33.9 per cent of the GDP in 2011-12 to 31.8 per cent in 2012-13 and further to 30.6 per cent in 2013-14, caused majorly by the sharp decline in the rate of household physical savings.

Further it states that investment rate over the past years, as measured by Gross capital formation (GCF) as a percentage of GDP declined from 38.2 per cent in 2011-12 to 36.6 per cent in 2012-13 and furtherto 32.3 per cent in 2013-14. On investments the Survey had significantly commented that while private investment must remain the primary engine of long-run growth, the public investment, especially in the railways, will have to play an important role at least in the interim, to revive growth and to deepen physical connectivity.

This Economic Survey prescribes, what its calls, a golden rule of fiscal policy saying that governments are expected to borrow over the cycle only to finance investment and not to fund current expenditures. It urged the government to aim at bringing down the centre’s fiscal deficit down to 3 per cent of GDP.

The Economic Survey made some interesting comments saying that price subsidies do not appear to have had a transformative effect on the living standards of the poor, though they have helped poor households to weather inflation and price volatility. It says that a close look at price subsidies, which are estimated to be about 3,78,000 crore rupees, about 4.24 per cent of GDP, reveal that they may not be the government’s best weapon for fighting poverty. Dwelling upon various subsidies to the poor, the Survey even stated that price subsidies are often regressive. It said, an analysis of current subsidy scheme indicates that rich households benefit more from the subsidy than a poor household. Among various examples that it had dwelt upon the Survey said that subsidy on electricity can only benefit the relatively rich. The Survey, however, concluded that eliminating or phasing down subsidies is neither feasible nor desirable. It said that by adopting what it called the JAM Number Trinity-Jan Dhan Yojana, Aadhaar and Mobile numbers would allow the State to deliver the subsidies to poor in a targeted and less distorted manner.

The Economic Survey had expressed a serious concern that several projects have been stalled and such a tendency is increased over the past years. In the same breath the Survey report expressed happiness that such stalling of projects seems to have plateaued. It suggested revitalizing public private partnership model of investment.

Dwelling upon the issue of manufacturing versus services for the growth of the economy the Survey says, both are equally important in the Indian context. Similarly, “Skilling India” is no less important and deserves an equal attention as the other important goal of “Make in India “.

In a Chapter on a Common National Market for Agricultural Commodities the Survey without making any conclusions suggested that there may be a Constitutional provision used to regulate trading in specified agricultural commodities to create a National Common Market.

In an exclusive Chapter relating to the Fourteenth Finance Commission(FFC) the Economic Survey quoted both Pt. Jawahar Lal Nehru, the first Prime Minister of the country and the current Prime Minister Shri Narendra Modi and said that adoption of the recommendations of the FFC and the creation of Niti Ayog earlier would further take forward the Government’s vision of cooperative and competitive federalism
Pre-Budget - Key Expectations from the Budget 2015-16

Pre-Budget - Key Expectations from the Budget 2015-16
1. Tax Incentives to the manufacturing sector
The Modi Government seeks to boost Indian manufacturing with a "Make in India" campaign. So, one can expect tax incentives for the manufacturing sector in the forthcoming Union Budget. The tax incentives are more likely to be by way of investment-linked incentives rather than profit-linked incentives. Therefore, amendment may be made in the following sections of the Income-tax Act to boost manufacturing sector:
(a Section 32AC (Investment Allowance): The Finance (No. 2) Act, 2014 amended section 32AC to allow investment allowance of 15% to manufacturing companies who have made investment in new plant and machinery in excess of Rs. 25 Crores during previous year. The threshold of Rs. 25 Crore is pretty high for micro and small enterprises. So, one can expect the threshold limit of investment to be lowered even further to say Rs. 5 crores so that micro and small enterprises would be able to avail the benefits under section 32AC.
(b Section 32(1)(iia) (Additional depreciation): On similar lines of section 32AC, Section 32(1)(iia) provides additional depreciation at the rate of 20% on new plant and machinery acquired and installed by an assessee engaged in the business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power. It is quite possible that to incentivize investments and simplify matters, additional depreciation of 20% may be scrapped and merged in investment allowance and total investment allowance of 35% may be allowed. Read More
2. Need clarity on taxability of capital gains in development agreements
In development agreement ('DA'), the land owner hands over the vacant possession of the land to the developers and also assigns the development rights to the developers. In return of giving up the land, the land owner receives an agreed share in the developed property. The taxability of transactions resulting from DA has been contentious issue since a long time. A few of those issues are mentioned as under:
(a)  Year of taxability of capital gains, i.e., year of entering into DA or the year of allowing of actual possession or the year of receipt of developed property;
(b)  Non claiming of deductions under section 54EC or section 54 in absence of receipt of money where taxability is fixed in the year of entering DA;
(c)  Consideration for transfer of capital asset i.e. value of land transferred or value of developed property received.
The Budget, 2015 should come up with clear provisions regarding year of taxability of capital gains arising from transactions resulting from DA along with a proper computation mechanism. The difficulty faced in claiming exemption under sections 54 and 54F of the Act should also be kept in mind while making such provisions. Read More
3. Electronic Maintenance of books of account
Section 128 of the Companies Act, 2013 allows companies to keep books of account and other relevant papers in electronic format. In contrast, Section 2(12A) of the Act requires maintenance of books of account in written format or print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device.
Thus, in current scenario, when Government of India is taking holistic approach for e-Governance plans, it is recommended that the Income-tax Act should permit electronic maintenance of books of account in line with Companies Act, 2013.
4. Is investment in name of relatives valid for Sec. 54, 54B and 54F exemptions
Whether an assessee who makes investment in the name of his relative would be entitled to claim exemption under section 54, 54B and 54F or not is a big question that needs to be clarified in the forthcoming budget because judiciary differs on this question.
It is recommended that a proviso may be inserted suitably prohibiting the assessee from making a claim in respect of investments made in an altogether different name or in the name of distant relative. Insertion of this proviso should also clarify that exemption would not be denied merely because the name of spouse and/or son /unmarried daughter/blood relative is added in the new investments as a precautionary measure and not otherwise. Read More
5. We are all equal - All forms of discrimination should be abolished
Although the disallowance provisions under Sections 40(a)(ia) and 40(a)(i) are same, irrespective of tax residence, an exemption has been provided to cases involving payments to residents.
It has been provided under Section 40(a)(ia) that where payment has been made without deduction of tax, no disallowance can be made for Indian taxpayer if the resident recipient of such income takes into account such receipt while computing its taxable income, and files the income-tax return in respect of such income. However, for similar cases in case of payments to non-residents under Section 40(a)(i), there is no corresponding exemption.
This provision (i.e., Section 40(a)(i)) is clearly a case where a discrimination (although for the resident payer), is made for deductibility of payments in the hands of the resident, solely because of the fact that the recipient is a non-resident. The Hon'ble Finance Minister should consider the above aspect and make an amendment to remove this anomaly. Read More
6. Whether transfer of undertaking by way of exchange of shares is taxable as 'Slump Sale'?
'Slump sale' is defined so as to mean the transfer of one or more undertakings as a result of sale for a lump sum consideration without valuesbeing assigned to the individual assets and liabilities in such sales. The tax law provides for taxing the slump sale under Section 50B.
Whether exchange of assets against transfer of undertaking is taxable as slump sale under Section 50B has been a matter of dispute. The Bombay High Court in case of CIT v. Bharat Bijlee Ltd [2014] 46 taxmann.com 257 (Bom) heldthat the transaction of exchange is different in species from the transaction of 'slump sale', which is merely a sale against monetary consideration and, thus, the provisions of section 50B are not applicable to such transactions of 'exchange'.
The ensuing budget might provide clarity on the provisions of slump sale by taking into consideration various possible manner of transfer of undertakings. Read more
7. Whether interest is payable on interest on refund?
Section 244A of the Act starts with the expression 'Where refund of any amountbecomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon……'
The words used by the Legislature in section 244A are 'any amount' which is much wider and broader than the 'tax amount'. Therefore, the words 'any amount' would not only include the tax amount within its ambit but also the interest element, which has accrued and is payable on the date of the refund.
But this position was reversed as a result of decision of the Hon'ble Apex Court (Larger Bench) in CIT v. Gujarat Fluoro Chemicals (Supra) which held that assessee is entitled only to statutory interest and therefore interest (second degree) on delayed interest (first degree and statutory) cannot be paid.
Therefore, it is recommended that the expression 'amount due' should be clarified by incorporating anExplanation in Section 244A to the effect that amount due would include interest on refund if such interest is not paid along with the refund, provided delay in granting interest is not attributed to the assessee. Read More
8. Whether deferred receivable is an independent 'international transaction'?
The Central Government is all set to announce budget. Expectations are high. Amongst wishes of rate cuts, tax holidays and taxpayer's friendly budget, there is a desire to have clarity on some of the troubling areas of dispute. One such issue is imputation of interest on delay in realising receivables from associated enterprises.
The ITAT in case of Goldstar Jewellery Ltd. v. Jt. CIT [2015] 53 taxmann.com 353 (Mumbai – ITAT)held that delay in realization of dues from the associated enterprise is an international transaction, however, for the purpose of determining the ALP, the same has to be clubbed or aggregated with the sale transactions with the AE. This contentious issue would continue to haunt the taxpayers. Thus, it is expected that forthcoming budget would provide clarity on this issue. Read More
9. Applicability of TP provisions on shares issued to overseas AE
The term 'International Transaction' as defined in Section 92B of the Act has been an area of wide litigation under the transfer pricing provisions. One of the controversies which has evolved in the recent past is that whether issue of shares by an Indian company to its overseas subsidiary/associated enterprise would qualify as an international transaction or not?
Although the Bombay High Court in the case of Vodafone India Services Private Limited v. Union of India [2014] 50 taxmann.com 300 (Bombay) which was held in favour of assessee has been accepted by the Government but still a clarificatory amendment may be made in the Act to avoid controversy.Read More
10. Depreciation on 'Goodwill'
Goodwill' can be described as 'premium' paid for acquiring a company or business. When one company acquires another company, purchase price paid over the net book value is termed as 'Goodwill'.
Goodwill, to a layman, appears be a term of positive connotation but this term is riddled with prolonged litigation in tax parlance. While the taxpayer has been arguing that Goodwill is eligible for depreciation, tax authorities term it as a mere book entry which does not fall within category of an 'Intangible asset' eligible for depreciation under Section 32.
The Supreme Court in the case of CIT v. Smifs Securities Ltd. [2012] 24 taxmann.com 222 (SC) has put the above controversies into rest by ruling that Goodwill, being difference between amount paid and cost of shares, is an asset eligible for depreciation under Section 32 of the Act. The Supreme Court applied the principle of ejusdem generis and classified Goodwill as 'commercial rights of similar nature' in order to be eligible for depreciation.
Although judgment of the Supreme Court is considered as rule of land, but it is recommended that 'Goodwill' should specifically be classified as an intangible asset under the Act.
Computation of Actual Cost or written down value of 'Goodwill' in case of amalgamation or demerger is another issue which needs consideration. In the case of Chowgule & Company (P) Ltd. v. ACIT [2011] 10 taxmann.com 224 (Panaji), it was held by the tribunal that depreciation is not available on goodwill as its cost is nil.
In order to facilitate tax friendly corporate re-organisations and to remove all ambiguities surrounding the above issue, it is desirable that specific amendments are made to clarify the position beyond doubt. A decision to allow depreciation claim on the amount of goodwill recognised as per accounting norms will also ensure harmony between the accounting and tax norms.Read More
11. What is "Substantially financed by Government"?
Clauses (iiiab) and (iiiac) of Section 10(23C) provides an exemption from tax to educational institution or hospitals which is wholly or substantially financed by the Government. The CBDT has notified 50% as the limit for determining substantial funding by Government for the purposes of such provision.
In spite of CBDT's notification, the issue regarding expression substantially financed by the Government has always been confusing and debatable. In the recent past in the case of CIT v. Indian Institute of Management [2014] 49 taxmann.com 136/226 Taxman 301 (Kar.) where it was held that initial contribution and contribution in kind should also be considered for determining "Substantially Financed by Government". Thus, it seems that the term "Substantially Financed by Government" is yet to be defined and resolved. It is important that distinction is drawn between the initial land and funding provided by the Government and the annual grant received from the Government. Read More
12. Marketing Intangibles – The Conundrum Continues…
"AMP" expenses refer to Advertising, Marketing and Promotional expenses incurred by a group or entity to promote its products and identity. In marketing terminology, such identity is called a 'brand'.
World over, tax authorities opine that a distributor of MNE products must be adequately compensated for the promotional activities undertaken by them. While the larger question is whether such expenditure incurred in India by an Indian entity and paid to un-related parties for brand development be tested for ALP under the TP provisions, there is increasing litigation as regards whether routine expenses be considered as part of brand development thereby enhancing the TP addition. This, certainly, is an unwelcome litigation for the assessee in India.
The Special Bench inLG Electronics India ltd. v. ACIT [2013] 29 taxmann.com 300 (Delhi – Trib.) has made it very clear that AMP expenditure is subjected to TP provisions in India. Arguing on the legality of determination of ALP of such expenditure would certainly not find favour with any court in India. World over, the trend is towards determination of ALP using Bright Line Test or any other suitable method. However, the least that can be expected is putting certainty on what can be considered as AMP expenses. Segregation of AMP expenses into routine and non-routine and the basis of such bifurcation must be clearly brought out as an explanation in the definition of international transaction. Read More
13. Exempting carbon credit can help 'Swatchh Bharat' Mission
Carbon credit is an incentive for industries reducing CO2 emission by investing in energy efficient technology. For example, if a factory uses wind or solar power, instead of fossil fuels, like coal it would be entitled to carbon credits.
There is no clarity on carbon credits in tax law. The Department considers amount received from sale of carbon credits as revenue receipt, fully liable to tax.
Whereas, various courts and tribunals have held that the carbon credits are in the nature of an entitlement to improve world atmosphere and environment, reducing carbon, heat and gas emissions. Therefore, the amount received for carbon credit sale could not be taxed and the same should be considered as capital receipts.
As neither the legislature nor Supreme Court has ruled that carbon credits are not taxable, the Budget is expected to ensure that carbon credits would no longer be mired in tax dragnet and, therefore, Section 10 should be amended to exempt income from sale of carbon credits, unequivocally.Read More
14. Sale of 'listed shares' by NR to be taxed at 10% after giving impact to 1st proviso to Sec. 48
The first proviso to section 48 provides relief from exchange fluctuations to foreign companies and other non-residents purchasing shares of Indian companies in foreign exchange. Second proviso to section 48 provides for the benefit of indexation while computing the long term capital gain. Indexation relief is not available to assessees covered by first proviso.
As per section 112, tax on long term capital gains is levied at 20% (plus applicable surcharge and education cess). However, in case of transfer of listed securities, proviso to section 112 provides for concessional rate of tax (i.e., 10%) without giving benefit of indexation under the second proviso to section 48.
The issues arises whether a non-resident (which sells listed shares of an Indian company otherwise than on stock exchange) which is entitled to the benefit of the first proviso to section 48 can also have the benefit of 10% tax rate on capital gains?
The income-tax authorities have been disputing this issue in spite of the various judicial precedents wherein such benefit of concessional tax rate was allowed to such non-residents. It is recommended that the Finance Bill, 2015 should clarify this situation and allow concessional rate of tax of 10% to non-resident/foreign companies who are covered by first proviso to section 48. Read More
15. Section 6 should clarify meaning of 'Going abroad for the purpose of employment'
As per section 6(1)(c) an individual is said to be resident in India in any previous year, if he was in India for a period or periods amounting in all to 365 days or more in four years immediately preceding that year and is in India for a period or periods amounting in all to sixty days or more in that year This restriction of short stay of 60 days or more is not applicable to an Individual, leaving India for the purposes of employment during the previous year as he can avail benefit of bigger window of 182 days.
Unfortunately, the term leaving India for the purposes of employment is subjective and prone to multiple interpretations.In view of majority judicial views on the interpretation of the term 'leaving for the purposes of employment', the reasonable and logical conclusion is that employment includes self-employment. The only relevant test for determining residential status of individuals in India is their physical presence in India for the stipulated number of days and visit and stay abroad should not be for other purposes other than employment/business. Read More
16. Meaning of education under section 2(15) for Charitable Institutions
The word 'education' has not been defined under the Act and meaning thereof always remained a subject matter of debate in India for the purposes of income-tax assessment and exemptions.
In the case of Sole Trustee, Loka Sikshana Trust v CIT [1975] 101 ITR 234, the Supreme Court held that the word 'education' in section 2(15) has been used to denote systematic instruction, schooling or training which led to the understanding that only institutions affiliated to boards and universities providing schooling which resulted in a degree or diploma are deemed to be institutions engaged in educational facility.
Courts have held that institutions allied to educational institutions which were providing normal schooling were also educational in nature. For example, institution conducting exams for diploma and degree courses were also treated as educational.
We have witnessed divergent views of judiciary in the recent past as regards meaning of the term 'education', thus, it is recommended that the forthcoming budget should provide clarity on meaning of this term under Section 2(15). Read More
17. Capital gains in case of retirement of partner from a firm without distribution of asset
Section 45(4) provides that the profit and gains arising from transfer of a capital asset by way of distribution of capital asset on the dissolution of a firm shall be chargeable to tax as the income of the firm in the previous year in which the said transfer takes place. But, the controversy arises when retirement of any partner may not necessarily results in distribution of capital assets of firm, which is the pre-condition to tax the capital gains under Section 45(4).
While dealing with the above controversy, various Courts have held that where retiring partner took cash towards value of his share in partnership firm and there was no distribution of capital assets among partners then it could not be said to be a case of transfer of capital asset so as to attract section 45(4).
Therefore, it is recommended that Section 45(4) should clearly specify whether any capital gain would arise on retirement of a partner from the partnership firm which does not result in distribution of any asset. Further, if capital gain arises on such retirement of partner, whether partnership firm or the partner shall be liable to pay on such capital gains? Read More
18. No TDS from payment of stake money to race horse owners
Prize money paid to the owners of winning horses, namely, for those horses who won or placed second, third, fourth and fifth in the race is called as 'Stake Money'.
The Karnataka High Court in the case of Bangalore Turf Club v. UOI [2014] 52 taxmann.com 290 (Karnataka)thwarted attempts of the AO who wanted to tax 'stake money' as 'winning from race horses' and, thereby, making payment thereof subject to TDS provisions under Section 194B and imposing a flat rate of tax at 30%.
It was held by the High Court that stake money is an income from owning and maintaining of race horses which cannot by any stretch of imagination fall in the definition of 'card game or other game of any sort' found in section 194B.
It is recommended that the Finance Bill, 2015 should clarify the above position in confirmation with the High Court judgments in Bangalore Turf Club case (Supra) Read More.
19. Sec. 221 penalty to be levied for default in payment of interest
Section 221 of the Income-tax Act ('the Act') levies penalty on taxpayer when he has defaulted in payment of taxes. Whether such provision also covers the situation where taxpayers default in payment of interest or penalty has been matter of dispute. Thus, recovery of these sums has become difficult for the Department. It is expected that Section 221 may be amended to include 'any sum due and payable under the Act'. This would have a deterrent effect on defaulting taxpayers who refused to pay the interest and penalty. Read More
20. Is it fair to tax retention money even if attached liability is not extinguished?
Contracts with 'retention clause' gives right to the customer to keep some of the contract price until all requirements of the contract are met. The money so kept by the customer is called as 'Retention Money' and receipt thereof is contingent upon fulfilment of certain conditions.
The year in which retention money shall be taxable is the contagious issue being faced by the taxpayers.
Dept. tends to tax retention money even when it is coupled with liability, whereas, various High Courts have taken a stand that the retention money shall be taxed in the year in which it is receivable to the contractor as per the terms of the contracts.
So, it is recommended that necessary amendment should be made to clarify that the retention money shall be taxable in the year of receipt only Read More.
21. Adjustment of TDS in case of cancellation of insurance policy during 'Free Look' period
IRDA allows policyholders to cancel the policy during the free look period (currently set to 15 days from the date of receiving the policy document). Policy holder is allowed to cancel only life and health insurances during such free look period. However, recently, IRDA has taken away free look period from health insurance policies having tenure of less than one year.
In case of cancellations of insurance policy during free look period, the commission income accrued/paid to agents is reversed or recovered. The Finance Bill, 2015 should provide a mechanism to adjust the taxes already deducted under section 194D and paid to the Central Government.
Following mechanism may be devised to adjust the TDS on commission which is no longer income of insurance agent:
(a)  Refund may be granted of tax deducted from commission paid on insurance policies which are subsequently cancelled during free look period
(b)  Carry forward of the TDS in ITR form to adjust it against tax liability of subsequent year*.
* This mechanism has been introduced in New ITR Forms for Assessment Year 2014-15. In new ITR forms, taxpayer can disclose the unclaimed TDS brought forward and TDS being claimed this year from amount brought forward.
22. Unsold flats of a Real Estate Developers should not be taxable
A real estate developer generally owns and holds unsold flats for the purpose of his business. He does not enter into the business of letting out properties on hire. Yet, in a number of cases, he has been asked to pay tax on the notional Annual Letting Value (ALV) of the unsold flats as income taxable under the head "Income from House Property".
Imposition of tax on the ALV of such unsold flats/properties causes unnecessary hardship in his case. The Finance Bill, 2015 should grant relief to Real Estate Developers wherein certain specified period should be allowed for selling out the flats after they are ready.
23. Measures to monitor functioning of an Electoral Trust
Electoral Trust is a Section 25 Company or a non-profit company created in India for orderly receipt of the voluntary contributions from any person and for distributing the same to the political parties.
At present, the measures contained in the Act are not adequate to monitor the functioning of an electoral trust; for examples, it does not contain any provision requiring an electoral trust to apply for and obtain registration under the Act or for cancelling registration of an electoral trust or any provision requiring it to submit its Return of Income.
It is hoped that forthcoming budget would contain necessary proposals to tackle such shortcomings in legislation in respect of income of political parties and electoral trusts.
24. Is there a need to define term "Month"?
The term 'month' has witnessed series of litigation between the assessee and the revenue but till date no definition has been provided for it under the Act.
Predominantly, the assessee have contended that the term 'month' has to be understood as a calendar month as defined under the General Clauses Act, whereas Revenue has contended that the term 'month' has to be understood as 30 days.
It is recommended that Finance Ministry should come out with an amendment by adding a definition to section 2 to the effect that the term 'month' means month as defined under section 3(35) of the General Clauses Act, 1897. Alternatively, if the Finance Ministry is of the view that the term 'month' should be restricted only to 30 days then an appropriate definition to that effect be introduced. Read More
25. Power of ITAT as regards stay of tax recovery beyond 365 days
The first proviso to section 254(2A) empowers the Tribunal to pass an order of stay of any proceedings relating to an appeal filed before it. However, third proviso to said section, restricts such power by providing that the period of stay allowed shall not in any case exceed 365 days.
So, as the Tribunal does not have the power to allow stay of tax recovery beyond 365 days even in cases where the delay in disposing of the case is not attributable to the assessee, the only two options left with assessee are as follows:
(a)  Option 1- File writ petition before the High Court to extend the period of stay; or
(b)  Option 2- Pay tax and wait for the final order of the Tribunal. But, this option would block working capital of the assessee.
Therefore, it is recommended that the third proviso to section 254(2A) must contain a rider that the order of stay shall stand vacated after 365 days only where the delay in disposing of the case is attributable to the assessee. Where the delay is not attributable to the assessee, the stay of the Tribunal must be available without any time limitation.
Alternatively, the Tribunal must be compelled to dispose of the case within the time limit by means of amendment to section 254 because every taxpayer cannot file a writ before the High Court for extension of order of stay against tax recovery. Read More
26. Is conversion of interest into share capital eligible for deduction under Section 43B?
As per Section 43B, certain specified expenditure, inter-alia, interest on loan payable to financial institution / banks is allowed as deduction only in case of actual payment of the same to the lender.
The Indian Legislature, in order to bring greater clarity on the nature of permissible deductions under section 43B, inserted two Explanations viz Explanation 3C and 3D wherein it was clarified that interest converted into a loan or borrowing shall not be deemed to have been actually paid.
Still there is no clarity on availability of deduction of interest when it is converted into equity shares of the borrower. Thus, it is recommended that Section 43B should be amended to clarify whether the interest converted into share capital would amount to actual payment of interest under Section 43B? Read More
27. Whether order of SetCom could be interfered with by the High Court or the Supreme Court?
There has been an increase in disagreement of the Income-tax Dept. with the decisions of SetCom particularly with reference to an interpretation given to a particular document. The result is that more and more decisions of ITSC are sought to be reviewed by the Income tax department.
In various judicial precedents it was held that the High Court or the Supreme Court could interfere and/or review an order passed by SetCom only if there is fault in decision making process, and not with decision itself. Thus, the forthcoming budget is expected to provide clarity on finality of decision passed by SetCom. Read More
28. Application for Advance Ruling should be allowed even after filing of return of income
The Authority for Advance Ruling does not allow the application if the question raised in it is already pending before any income-tax authority as provided in proviso1 to section 245R(2). Now, the moot question arises when the case would be deemed to be pending before an income-tax authority: (a) on filing of return of income; or (b) on issue of notice under Section 143(2) for scrutiny assessment?
The Supreme Court in the case of Sin Oceanic Shipping ASA Norway v. AAR [2014] 41 taxmann.com 444 (SC) affirmed the ratio laid down in the Mitsubishi Corporation, Japan, In re [2013] 40 taxmann.com 335 (AAR - New Delhi) that question raised in application for Advance Ruling will be considered as pending for adjudication before Income-tax Authorities, only when issues are shown in return and notice under Section 143(2) is issued. Thus, application for Advance Ruling is to be admitted which is filed after filing of return but prior to issue of notice under section 143(2).
Accordingly, it is expected that a clarification may be inserted in Section 245R to affirm the above.
29. Permit larger time-limit for payment by employer of employee's contribution to PF/ Superannuation funds
There are two streams of contributions to provident funds, ESI or other superannuation funds. First is the employer's contribution which is regulated by Section 43B of Act and second is the employee's contribution which is regulated by Section 36(1)(va) of the said Act.
Section 43B allows deduction of employer's contribution in relevant financial year if such contribution is deposited by employer in relevant fund by the due date of filing of return of income for such financial year.
In contrast, section 36(1)(va) allows deduction of employee's contribution to the employer only when employer remits such amount to the relevant fund by the due dates prescribed in the relevant statutes.
So, the controversy that arises is that Act does not allow deduction of employee's contribution on the same line as in case of employer's contribution.
Several courts have taken a view that the employee's contribution should also be allowed to be deducted if employer remits such contribution to the administrator of the funds before the due date of filing of return.
Therefore, it is recommended that necessary amendment to section 36(1)(va) be carried out to recognize the view taken by the several Courts that section 43B would also regulate the time limitation for payment of employee's contribution by the employer to the respective superannuation funds.
30. Service tax applicability on services provided by airline operators
Airline Operators collect Passenger Service Fee (PSF) and User Development Fee (UDF) on behalf of Airport Authority of India (AAI) from passengers. Service Tax Department demands service tax on such PSF/UDF from Airline Operators.
However, Airline Industry, as a whole, has taken a position that PSF/UDF collected on behalf of AAI is subject to Service tax at the hands of AAI and not Airline operators as service of maintenance and security at airport to passengers is provided by AAI and not by Airline operators. Even various Tribunals have granted stay on collection of Service tax and waiver from pre-deposit of Service tax demanded, pending adjudication of Appeal, on this ground.
It is recommended that Government must clarify the taxability of PSF/UDF by excluding it from value of taxable services of Airline Operators Read more.
31. Cenvat used solely in dutiable goods must be allowed while making reversal for exempted goods
The formula prescribed under Rule 6(3A) segregates CENVAT credit attributable to exempted goods and services. For this purpose, the formula uses 'total CENVAT credit taken'. The question arises whether this expression connotes credit common to exempted and taxable goods/services only or credit being total of 'credit pertaining to exempted and taxable goods/services' and 'credit exclusively attributable to taxable goods/services'.
In the case of Chennai Petroleum Corporation Ltd., In re[2012]286 ELT 467, it was held that Rule 6 is only for common inputs and input services. However, recently, in Thussenkrupp Industries (I) (P.) Ltd. v. CCE [2014] 52 taxmann.com 418 (Mumbai – CESTAT), it was held that while making reversal, total credit (including that relating exclusively to taxable goods/services) will be used.
It is recommended that Government must clarify the situation and make formula under rule 6(3A) expressly for common credit Read more.

Detailed Highlights of Railway Budget-2015

Union Railway Minister Suresh Prabhu on Thursday presented his maiden Rail Budget in Lok Sabha. The key themes of the Budget were in line with Prime Minister Narendra Modi's initiatives - Swachch Bharat Mission, Make in India and Digital India. Here are the key highlights from Rail Budget 2015:

  1. The most-expected part about this year's Railway Budget - there is no increase in passsenger rail fares.
  2. Rs.8.5 lakh crore will be invested in Railways in next 5 years.
  3. Operation 5 mins', wherein passengers travellling unreserved can purchase a ticket in 5 minutes.
  4. Bio toilets and airplane-type vaccum toilets in trains.
  5. Surveillance cameras in select coaches and ladies compartments for women's safety without compromising on privacy.
  6. Rail tickets can now be booked 120 days in advance.
  7. Speed on nine railway corridors to go up to 200 km per hour.
  8. Wi-Fi in more stations, mobile phone charging facilities in all train compartments.
  9. Facility of online booking of wheelchair for senior citizens.
  10. Satellite railway terminals in major cities.
  11. Centrally managed Rail Display Network is expected to be introduced in over 2K stations over the next 2 years.
  12. All india 24/7 helpline - 138 from March 2015 ; Toll free No.182 for security.
  13. 917 road under-bridges and over-bridges to be constructed to replace 3,438 railway crossings; at a cost of Rs. 6,581 crore.
  14. Four Railway Research Centres to start in four universities.
  15. Details about new trains and increased frequency will be announced later in this session of Parliament after review.


  1. Indian Railways to become prime mover of economy once again
  2. Resource Mobilization for higher Investments
  3. Decongestion of heavy haul routes and speeding up of trains: emphasis on gauge conversion, doubling, tripling and electrification
  4. Project delivery
  5. Passenger Amenities.
  6. Safety
  7. Transparency & System Improvement.
  8. Railways to continue to be the preferred mode of transport for the masses.
  9. Sustainability.

Four goals for Indian Railways to transform over next five years:

  • To deliver a sustained and measurable improvement in customer experience.
  • To make Rail a safer means of travel.
  • To expand Bhartiya Rail's capacity substantially and modernise infrastructure.: increase daily passenger carrying capacity from 21million to 30 million: increase track length by 20% from 1,14,000 km to 1,38,000 km: grow our annual freight carrying capacity from 1 billion to 1.5 billion tonnes.
  • Finally, to make Bhartiya Rail financially self-sustainable. Generate large surpluses from operations not only to service the debt needed to fund our capacity expansion, but also to invest on an on-going basis to replace our depreciating assets.

Execution strategy to have five drivers:
Adopting a medium-term perspective:
          Railway Budget part of trilogy of documents viz. the White Paper placed today, Budget 2015-16 & a Vision-2030 document which will follow. Budget proposals to mark beginning of a Five Year Action Plan to transform the Railways.

ItemAmount (Rs in crore)
Network Decongestion (including DFC, Electrification, Doubling including electrification and traffic facilities)199320
Network Expansion (including electrification)193000
National Projects (North Eastern & Kashmir connectivity projects)39000
Safety (Track renewal, bridge works, ROB, RUB and Signalling & Telecom)127000
Information Technology / Research5000
Rolling Stock (Locomotives, coaches, wagons - production & maintenance)102000
Passenger Amenities12500
High Speed Rail & Elevated corridor65000
Station redevelopment and logistic parks100000
Building Partnerships:
          This will require partnering with key stakeholders: States, PSU's, partner with multilateral and bi-lateral organizations & other governments to gain access to long term financing and technology from overseas, the private sector to improve last mile connectivity, expand fleet of rolling stock and modernize our station infrastructure.

Leveraging additional resources:
          IR envisages investment of Rs. 8.5 lakh crore in next five years to be mobilized from multiple sources to cater to funding i.e Multilateral development banks, pension funds.

Revamping management practices, systems, processes, and re-tooling of human resources:

  • Targeted operating ratio for 2015-16 at 88.5% against 91.8%in 2014-15: best in the last 9 years.
  • IR to speed up decision making, tighten accountability, improve management information systems: training and development of human resource.

To set standards for Governance and Transparency

Eleven major thrust areas of Action Plan: Quality of life in journeys:

Cleanliness:-Swachh Rail Swachh Bharat, new department for cleanliness, integrated cleaning b y engaging professional agencies and training our staff, 'waste to energy' conversion plants, new toilets covering 650 additional stations compared to 120 stations last year. Bio-toilets.

Bed linen: NIFT to design; online booking of disposable bed rolls:

Help-line: 24X7 helpline number 138;toll-free number 182 for security related complaints.

Ticketing: operation five minutes for issuing unreserved tickets, hot buttons, coin vending machines, single destination teller, concessional e-tickets for differently abled travelers, developing a multi-lingual e-portal, crediting of refunds through banks, unreserved tickets on Smart phones, proliferation of automatic ticket vending machines with smart cards and currency options, integrated ticketing system on the lines of rail-cum-road tickets, Defence Travel System developed for elimination of Warrants .

Catering: e-catering to select meals from an array of choices. Ordering food through IRCTC website at the time of booking of tickets; integrating best food chains into this project; setting up of Base Kitchens in specified Divisions to be run by reputed agencies for serving quality food; expansion of water vending machines.

Leveraging technology: Hand-held terminals to Travelling Ticket Examiners (TTEs) for verification of passengers and downloading charts; possibility of extending facility of SMS on mobiles as a valid proof of travel for PRS tickets; integrated customer portal as a single interface to access different services; Introduction of a centrally managed Railway Display Network in over 2000 stations in next two years; "SMS Alert" service to inform passengers in advance of the updated arrival/departure time of trains at starting or destination stations.

Surveillance: surveillance cameras provided on a pilot basis in selected mainline coaches and ladies' compartments of suburban coaches without intruding into privacy.

Entertainment: project for introducing on-board entertainment on select Shatabdi trains on license fe basis launched; Mobile phone charging facilities to be provided in general class coaches & increased in sleeper class coaches.

Station facilities: 200 more stations to come under Adarsh Station scheme; Wi - Fi to be provided at B category stations ; facility of self-operated lockers to be made available at stations; provision of concierge services through IRCTC at major stations; online booking of wheel chair on payment basis for senior citizens, patients and the differently-abled passengers through IRCTC on select stations.

Train capacity: capacity in identified trains be augmented to run with 26 coaches; more General class coaches be added in identified trains;

Comfortable travel: NID approached to design user friendly ladders for climbing upper berths; increasing quota of lower berths for senior citizens; TTEs be instructed to help senior citizens, pregnant women and differently-abled persons in obtaining lower berths; middle bay of coaches to be reserved for women and senior citizen; NID to develop ergonomically designed seats; introduction of train sets; Provision of Rs. 120 crore for Lifts and escalator which is 76% higher; newl y manufactured coaches will be Braille enabled; building wider entrances for the ease of differently-abled passengers; allocation for passenger amenities up by 67% Y-O-Y. Corporate houses & MPs to be requested to invest in improving passenger amenities at Railway stations through CSR & MPLAD funds; Divisional Committees in each Railway to be chaired by Members of Parliament.

Station Redevelopment
Station redevelopment policy to be revamped and processes simplified by inviting open bids; present stations be available for development on "as is where is" basis, to exploit the space and air rights on concession basis; Zonal and Divisional offices be empowered for quicker decision making;Land will not be sold; Development of 10 Satellite Railway terminals in major cities with twin purpose of decongesting the city and providing service to n suburban passengers.

Capacity Augmentation

Network expansion:

  • Decongesting networks with basket of traffic generating projects priority; priority to last mile connectivity projects ; fast track sanctioned works on 7,000 kms of double/third/fourth lines and commission 1200 km in 2015-16 at an investment of Rs. 8686 crore, 84% higher Y-O-Y.
  • Commissioning 800 km of gauge conversion targeted in current fiscal.
  • 77 projects covering 9,400 km of doubling/tripling/quadrupling works along with electrification, covering almost all States, at a cost of Rs. 96,182 crore which is over 2700% higher in terms of amount sanctioned.
  • Traffic facility works a top priority with outlay of Rs. 2374 crore.
  • In the North East States, Meghalaya brought on the Railway map of India and direct connectivity to Delhi provided. Barak Valley to be connected on BG.
  • Award of 750 km of civil contracts and 1300 km of system contracts in 2015-16 on Dedicated Freight Corridor; 55 km section of Eastern DFC to be completed in the current year. Preliminary Engineering cum Traffic Survey (PETS) for four other DFCs in progress.
  • Acceleration of pace of Railway electrification: 6,608 route kilometers sanctioned for 2015-16 ,an increase of 1330% over the previous year.

Expansion of freight handling capacity

  • Transport Logistics Corporation of India (TRANSLOC), to be set up for developing common user facilities with handling and value-added services to provide end-to-end logistics solution at select Railway terminals through Public Private Partnerships.
  • For the benefit of our farmers, a state of the art Perishable Cargo Centre under completion at the Azadpur Mandi with a scientific banana-ripening Centre; air cargo sector to be developed to facilitate and integrate the movement of air cargo between ICDs and the gateway airports.
  • Policy for Private Freight Terminals (PFT) to be revised.
  • Automatic Freight Rebate Scheme for traffic to be expanded
  • Long haul freight operations to be used extensively; construction of long loop lines to be expedited. Distributed power system for multi-loco haulage to be accelerated.

Improving train speed

  • Speed of 9 railway corridors to be increased from existing 110 and 130 kmph to 160 and 200 kmph respectivel y so that inter-metro journeys like Delhi-Kolkotta and Delhi-Mumbai can be completed overnight.
  • Average speed of freight trains in empt y and loaded conditions, will be enhanced to 100 kmph for empty freight trains and 75 kmph for loaded trains; loading density on all major freight bearing routes to be upgraded to 22.82 tonne axle loads.

Bullet train

  • Feasibility study for High Speed Rail between Mumbai-Ahmadabad is in advanced stage and report expected by the mid of this year. For other high speed routes on the diamond quadrilateral, studies are being commissioned.

Upgrading manufacturing capability

  • Creation of job opportunities by upgrading the manufacturing capability.
  • Functioning of Indian Railways Production Units and Workshops would be reviewed to provide them a cutting edge; measures for technological upgradation and enhancing productivity be undertaken to make them self-sustaining.


  • Action plan being prepared for areas where accidents occur: five-year corporate safety plan b y June 2015 indicating annual quantifiable targets; Pending recommendations made by High Level Safety Review Committee headed by Dr. Kakodkar Committee to be examined by April 2015.
  • RDSO to develop a suitable device with reliable power supply system based on theft-proof panels/batteries in consultation with Indian Space Research Organization, using geo-spatial technology for providing audio-visual warning to road users at unmanned level crossings; radio based signal design project been taken up with IIT Kanpur for warnings at unmanned level crossing.
  • 970 ROB/RUBs and other safety-related works to eliminate 3438 level crossings at a total Railway expense of Rs. 6,581 crore have been sanctioned which is 2600% higher than the previous year covering most States.
  • Train Protection Warning System and Train Collision Avoidance System to be installed on select routes at the earliest.
  • Modern track structure consisting of sleepers and heavier rails being used while carrying out primary track renewals. Better welding techniques being promoted; digital type machines to replace analogue type machines.

Technology upgradation

  • Constituting an innovation council called "Kayakalp" for business re-engineering and introducing a spirit of innovation in Railways.
  • Technology portal being constituted to invite innovative technological solutions.
  • Strengthening of RDSO into an organization of excellence for applied research; four Railway Research Centers to be set up in select universities for fundamental research; 'Malaviya Chair' for Railway Technology at IIT (BHU), Varanasi to be set up.
  • Consortium of Ministry of Railways, Ministry of Human Resource Development, Ministry of Science And Technology and Industries on to take up identified Railway projects for research.
  • IT vision to be unveiled: information on latest berth availability station navigation system, bar coded/RFID tracking of parcels and freight wagons, automated parcel warehouses. Integration of train control and asset management applications.
  • Mechanize integrated track maintenance.

Partnerships for development

  • PPP cell to be revamped to make it result oriented.
  • Projects for rail connectivity to many ports and mines being developed under participative models; simplification of procedures and consistency of policy to be ensured.
  • "Foreign Rail Technology Cooperation scheme" to be launched.
  • MUTP III for Mumbai to be taken up.
  • Joint ventures to be set up with States for focused project development, resource mobilization, land acquisition, project implementation and monitoring of critical rail projects.
  • JVs to be set up with major public sector customers for meeting requirements of new lines.

Improvements to Management Processes and Systems

  • Delegate, de-centralize, de-regulate & simplify to be the new mantra.
  • Systems audit to be conducted for review of all processes and procedures.
  • Global benchmarks for key operating and maintenance activities.
  • Improve appraisal mechanism for the selection of projects and introduce simulation tools for project planning and decision-making; introducing EPC system of contracting.
  • Constitution of a working group to modify present system of accounting, to ensure tracking of expenditure to desired outcomes.
  • Train operations to be audited.
  • Paperless working in material management system to be expanded; Vendors to be integrated through Vendor Interface Management System to provide single window interface to vendors.

Resource Mobilisation

  • Plan Budget up by 52% from Rs. 65,798 crore to Rs. 1,00,011 crore in 2015-16. Support from the Central Government 41.6% of the Plan and Internal generation 17.8 %; setting up of a Financing Cell in the Railway Board.
  • Setting up an infrastructure fund, a holding company and a JV with an existing NBFC of a PSU with IRFC, for raising long term debt from domestic as well as overseas sources, including multilateral and bilateral financial institutions. Monetisation of assets rather than selling them.
  • Digitized mapping of land records and responsibility fixing for encroachments.
  • New strategy to tap latent advertising potential, including offering stations and trains for corporate branding.
  • Coastal Connectivity Program. Railways in partnership with ports will deliver rail connectivity to Nargol, Chharra, Dighi, Rewas and Tuna.
  • Projects worth Rs 2500 crore through BOT/ Annuity route. These include Wardha- Nagpur 3rd line, Kazipet-Vijaywada 3rd line, Bhadrak -Nargundi 3rd line and Bhuj- Nalia Gauge Conversion.
  • Scrap disposal policy to be reviewed for speedier scrap disposal.

Human Resources

  • Human Resource Audit to be undertaken. Focused Human Resource strategy to raise employee productivity in line with global standards. Separate accounting head for HRD. ERP based Human Resource Management System.
  • Special training module on soft skills for frontline staff so that our customers feel welcomed.

Training in yoga.

  • Setting up a full-fledged University during 2015-16.
  • Improved delivery of health services to employees: Upgradation of four Holiday Homes.

Energy and sustainability

  • Environment Directorate to be constituted in Railway Board to give increased focus and thrust on environment management.
  • Detailed energy audit for energy saving.
  • Procure power through the bidding process at economical tariff from generating companies, power exchanges, and bilateral arrangements. Initiative likely to save at least Rs. 3,000 crore in next few years.
  • Solar Power as part of the Solar Mission of Railways. 1000 MW solar plants will be set up by the developers on Railway/private land and Railway buildings with subsidy/viability gap funding support of Ministry of Non-Renewable Energy in next five years.
  • Water conservation mission including water audit and expansion of water harvesting systems.
  • Accreditation for environment management to be extended.
  • 100 DEMUs to be enabled for dual fuel - CNG and diesel. Locomotives running on LNG are also currently under development.
  • Noise levels of locos to be at par with international norms; concerns related to wildlife to be addressed.
  • Investing in Indian Railways necessary for our ecological sustenance mainly due to efficiencies of fuel consumption.

Transparency and Governance initiatives

  • System of on-line applications introduced for two categories of recruitment as a pilot project- to be extended.
  • All possible solutions be explored to address menace of corruption.
  • E-procurement value chain being expanded.
  • Constituting a mechanism for making regulations, setting performance standards, determining tariffs & adjudicating disputes among licensees/private partners and the Ministry, subject to review in appeal.

Social initiatives

  • Infrastructure like stations and training centers to be made available for skill development. Indian Railways personnel and their services also available for this national cause.
  • Promotion of products made by Self Help Groups, consisting mainly of women and youth on the model of Konkan Railway.


  • Incredible Rail for Incredible India to be launched; Promotion of training of auto-rickshaw and taxi-operators as tourist-guides on the model of Konkan Railway.
  • Coaches in select trains connecting major tourist destinations to travel agencies may be offered on a revenue sharing model.
  • IRCTC to work on promoting the Gandhi circuit to attract tourists to mark the occasion of 100 years of the return of Mahatma Gandhi to India from South Africa; IRCTC will work on Kisan Yatra, a special travel scheme for farmers for farming & marketing technique centres.


  • Net reduction in Gross Traffic Receipts by Rs 917 crore compared to the BE of Rs 1,60,165 crore.
  • Growth in Ordinary Working Expenses (O.W.E) scaled down to 11.7% as against BE of 15.5% y-o-y. Taking into account the likely savings accruing from drop in prices of HSD (high speed diesel) for traction partly offset by higher requirements under certain heads for maintenance, safety and cleanliness activities, the budgeted O. W. E. of Rs 1,12,649 crore decreased in the RE 2014-15 to Rs. 1,08,970 crore i.e. by Rs 3,679 crore.
  • Appropriation to the Pension Fund has been increased to Rs. 29,540 crore in RE.

Internal resource generation also improved and accordingly the appropriation to DRF has been scaled up to Rs 7,975 crore in RE from the BE 2014-15 provision of Rs 7,050 crore.

After taking into account the above, "Excess" of receipts over expenditure stands at Rs 7,278 crore in RE 2014-15 reflecting better financial management.

Plan size for 2014-15 increased from Rs 65,445 crore in the B.E to Rs 65,798 crore in the Revised Estimates i.e. by Rs 353 crore with higher provisions under internal resource component and market borrowings for rolling stock requirement.

Budget Estimates for 2015-16.

  • The intention is to capture increased revenues and ensure appropriate investments so as to de- congest the system and enhance line-capacity.
  • Passenger earnings growth pegged at 16.7% and target budgeted at Rs. 50,175 crore.
  • Freight traffic is pegged at an all time high incremental traffic of 85 million tonnes, anticipating a healthier growth in the core sector of economy; Goods earnings proposed at Rs. 1,21,423 crore which includes rationalisation of rates, commodity classification and distance slabs.
  • Other coaching and sundries are projected at Rs. 4,612 crore and Rs. 7,318 crore.
  • Gross Traffic Receipts estimated at Rs 1,83,578 crore , a growth of 15.3%.
  • Ordinary Working Expenses proposed to grow at 9.6% over RE 2014-15. Traction fuel bill anticipated to shrink further.
  • Higher provisions made for safety maintenance and cleanliness. Lease charges, interest component of the current and previous market borrowings, at a growth of 21%.
  • Appropriation to Pension Fund proposed at Rs 35,260 crore and appropriation to DRF at Rs 8,100 crore. Appropriation of Rs 7,616 crore proposed to be made to Capital Fund for payment of principal component of lease charges to IRFC.

Plan Outlay 2015-16

  • Gross Budgetary Support of Rs 40,000 crore for the Railway's annual Plan. Rs 1,645.60 crore has also been provided as Railway's share of diesel cess from the Central Road Fund. Market borrowing under EBR projected at Rs 17,655 crore, an increase of about 46.5%. Balance Plan outlay includes Rs 17,793 crore from Internal Resources and Rs. 5781 crore from PPP. Significantly, we are allocating large amounts towards Doubling, Traffic Facilities, Electrification and Passenger Amenities.
  • Given the huge shelf of project and ensuring proper funds flow for the same with a view to completing them on target, a new financing approach to expand EBR has been projected. This EBR, presently named EBR (Institutional Finance) would be based on institutional investments in railway projects through Railway/ PSUs. This element is projected at Rs 17,136 crore and is aimed at accelerating completion of capacity augmentation projects. Works proposed to be financed through this mode are listed in the Budget documents.
  • Plan Outlay is Rs 1,00,011 crore, an increase of 52% over RE 2014-15. It is anticipated that the Plan size will get higher once resources from institutional bodies are formalized during the course of the ensuing financial year.


  • Complete the review of speed restrictions soon.
  • All critical initiatives to be pursued in mission mode under designated senior officials in the

Ministry of Railways as Mission Directors; similar structure replicated in all Zonal Railways.