Union Budget 2015: FM puts education sector on high growth path, says EY

The newly created Skill Development and Entrepreneurship Ministry proposes to launch a program viz the National Skills Mission. This mission proposes to consolidate and regularise skill initiatives started by various ministries and Sector Skill Councils.

Youth employment

Considering that the rural population constitutes 70% of India’s population, focussing on the employment of the rural youth would be critical. Keeping this objective in mind and to give a boost to employment of students in the rural areas, the Deen Dayal Upadhyay Gramin Kaushal Yojana was launched in September 2014 and Rs 1,500 crore has now been allocated to the scheme. This scheme focusses on employment of youth between 18-35 years of age, especially in the rural areas.

Based on the given scheme, funds would be disbursed to the eligible student’s bank accounts directly.

Student aid

The FM proposes to set-up a fully IT-based Student Financial Aid Authority to administer education loans and scholarships to poor and middle class students for pursuing higher education. This is proposed to be implemented through the Pradhan Mantri Vidya Lakshmi Karyakram.

New institutes for higher education

The FM has given a stimulus to the spread of higher education by proposing to establish the following institutes:

In addition, the following institutions are proposed to be upgraded:

Key direct tax amendments that could impact the education sector are as follows:

Deduction for individuals/ Hindu Undivided Families

A small deposit scheme viz the Sukanya Samriddhi Scheme was launched in January 2015 as part of the Beti Bachao Beti Padhao' campaign. This scheme was launched for the welfare of the girl child. An investment in a deposit account of this scheme has been made eligible for deduction under Chapter VI-A of the Income Tax Act, 1961 (‘Act’). Interest accruing on such deposit would also be exempt from tax under the new clause 11A of Section 10.

Amendments in charitable purposes

Earlier, Section 2(15) of the Act mentioned that the undertaking of any other activity of general public utility shall not be a charitable purpose if it involves the carrying on of any activity/ rendering of any service in the nature of trade, commerce or business, except if the total receipts from such activities do not exceed Rs 25 lakhs.

The Budget has amended the above provision and has done away with the limit of Rs 25 lakhs. Such receipts would be exempt if the following conditions are satisfied:

a) Such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

b) The aggregate receipts from such activity/ies, do not exceed 20% of the total receipts of the trust/ institution during the year.

Rationalisation of provisions of Section 11 of the ActWhile any trust/ institution can accumulate 15% of its total receipts during the year indefinitely, the balance 85% of its receipts, if cannot be applied during the year, could be carry forward to be applied in the subsequent 5 years. The Budget now clarifies that in order to be eligible to carry forward the receipts in excess of 15%, the trust/ institution would be required to file the prescribed Form ie Form 10 on or before the due date for filing its return of income.

The setting up of additional central education institutes such as IITs, AIIMS, and IIMs combined with financial aid to students directly will not only benefit the young population of the country which wants better education but will also benefit India Inc as the quality of our work force will improve significantly with such measures.

Author is tax partner at EY(Mustansir Diwan and Ashish Herkal, Senior Tax Professionals EY also contributed to the article)The views expressed in this article are personal to the author