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Budget 2015: Costs of upcoming airports to go up by 4% after govt withdraws service tax exemption

While the additional cost is small as a chunk of the total, it may worsen the already negative image India has for investment in infrastructure projects, including airports.

, ET Bureau|
Updated: Feb 28, 2015, 05.55 PM IST

MUMBAI: The government has withdrawn service tax exemption on construction of airports, a move that infrastructure company executives said will increase costs of upcoming airport projects by 4%.

“Exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port is being withdrawn,” India’s finance minister Arun Jaitley said Tuesday while proposing the budget for the next fiscal year starting April 1.

A senior executive at one of India’s top infra companies said: “Earlier there was an exemption on the service on the labout costs incurred during the construction of an airport. That has been removed.”

He added however that this will impact only greenfield and not brownfield projects.

So for example, the cost of the Rs 14,000 crore Navi Mumbai airport will go up by Rs 560 crore while the cost of the Rs 3,000 crore by Rs 120 crore, he said.

While the additional cost is small as a chunk of the total, it may worsen the already negative image India has for investment in infrastructure projects, including airports.

In a recent interview, Matthias Engler, project manager for global investments at German airport manufacturer Fraport said India needs to do a lot more to encourage global investments in airports.

Thomas Jacquot, senior director, corporate ratings, recently said Indian airports score below those in Sydney, Tokyo and Hong Kong in terms of regulatory environment and ease.

A report from Sydney’s Capa-Centre for Aviation last year said India accounts for just 1% of the total $385 billion worth of airport projects under way in the world.

Budget 2015: Top takeaways for the common man

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Tax exemptions

28 Feb, 2015
The limit of reduction of health insurance premium was enhanced from Rs 15,000 to Rs 25,000. For senior citizens this limit has been increased from Rs 20,000 to Rs 30,000.

"For senior citizen above the age of 80 years, not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure. Deduction limit of Rs 60,000 on expenditure on account of specified diseases is enhanced to Rs 80,000 in the case of senior citizens," Jaitley said.

Additional deduction of Rs 25,000 is allowed for differently-abled persons, increasing the limit from Rs 50,000 to Rs 75,000. It is also proposed to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of severe disability.

Jaitley also proposed to provide that investment in Sukanya Samriddhi Scheme will be eligible for deduction under section 80C of the income-tax and any payment from the scheme shall not be liable to tax.

Limit on deduction on account of contribution to a pension fund and the new pension scheme is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh.

Additional deduction of Rs 50,000 will be allowed for contribution to the new pension scheme u/s 80 CCD increasing from Rs 1 lakh to Rs 1.5 lakh.

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