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BUDGET 2012-13
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FM SPEAK
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Macros
GDP Trend & Forecast
GDP Growth Rate %
12.00% 10.00% 9.60% 8.00% 6.00% 4.00% 2.00% 0.00% 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 9.30% 8.40% 6.70% 8.40% 6.90% GDP%
Key Takeaways
The government expects GDP to grow 7.6% in FY13. High interest rates and slowing demand could be spoilers. Most economists feel a realistic figure could be around 7.2%. Corporate margins continue to be under pressure, and if inflation stays at elevated levels because of rising crude prices, interest rates will not come down. And that could have a spillover effect on demand in the economy.
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Macros
Fiscal Deficit
Fiscal Deficit %
4.80% 4.00% 3.00% 2.00% 1.00% 0.00% 2006-07 2007-08 2008-09 2009-10 2010-11 3.30% 2.50%
4.60%
2011-12
Key Takeaways
The target for FY13 is 5.1%, which appears to be a tall order giving buoyant crude prices and the governments reluctance to cut subsidies. The target for FY12 was 4.6%, which eventually turned out to be 5.9% because of a sharp increase in crude oil prices. The market is not convinced that the government will be able to stick to the FY13 target, because a slowing economy may result in a shortfall in tax collections.
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Macros
Revenue Receipts
Revenue Receipts as % of GDP
1000000 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 263813 305991 347077 434387 541864 540259 572811 788471 766989 Revenue Receipts (Rs in Cr) 935685
Key Takeaways
The government aims to raise Rs 30,000 through divestment in FY13; could
still be an ambitious target unless the market is good health and the government manages to get the pricing of the issues right.
For FY12, the government had budgeted for Rs 40,000 crore, and could
barely raise Rs 14,000 crore. And that too after arm-twisting LIC into participating in the ONGC share auction.
Standard excise duty has been hiked from 10% to 12% as government is
gradually rolling back the fiscal sops given in the aftermath of the 2008 global financial crisis. With no game plan to reduce expenditure, the government had no option but to look at ways to increase revenues.
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FEMALES
Exemption up to Rs 2 lakh for taxpayers. The upper limit of 20% tax slab raised to Rs 10 lakh. NOW POST BUDGET
TAX CALCULATOR
Use our tax calculator to find out your new tax structure. Click here
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PERSONAL TAX
Everything you need to know about personal taxes
Arnav Pandya, Financial Planner TIndividuals have a small amount of benefit on the tax front but the overall situation will end up being negative as higher expenses in the form of additional service and excise eats up a larger part of their household budget. At the same time there are also a lot of gains on the procedural front that should not be forgotten. Starting with the tax gain there is a small benefit that is available in terms of the rise in the basic exemption limit that has been increased to Rs 2 lakh for individuals. This means a savings of Rs 2,000 in tax for male individuals and a savings of Rs 1,000 for female individuals. There is no extra benefit for female taxpayers as the basic exemption limit for everyone stands at Rs 2 lakh so this difference has now been eliminated. The real benefit on the tax front is for anyone who has a higher amount of income as the 20 per cent tax slab has been increased from Rs 8 lakh to Rs 10 lakh. This will give a straight and flat tax relief to the extent of Rs 20,000 for anyone who has income in excess of Rs 10 lakh. Taken together with the earlier benefit the total figure for a male individual will go upto Rs 22,000 and for a female individual to Rs 21,000. There is a benefit that will be available for new investors into a scheme called Rajiv Gandhi Equity Saving Scheme. This will provide for a deduction of 50 per cent upto Rs 50,000 of investment made but there will be a 3 year lock in. Further details would come in due course and these will list out whether the conditions required to meet the qualification are easy enough to let many new investors take the benefit. What is also important is the manner in which the funds will be managed as investors want tax benefits with returns on the investment. There is a big relief on the administrative front as having to collect small details about interest on savings banks interest and then paying tax on this has been tackled. There is a deduction of Rs 10,000 for income earned as savings bank interest so most people will gain on this front and it will make the filing of the returns easier as there will not be any extra tax to be paid. The salaried will benefit the most as they need not pay any additional amount of tax when there is a full deduction on all the other income in the form of tax deducted at source. For complete article, Click here
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PERSONAL TAX
Infra bonds may no longer be tax-deductible
Arnav Pandya, Financial Planner If you were celebrating about some small tax saving gains due to the announcements in the Union Budget then you actually need to stop and see whether you will actually end up with some benefits at the end of the day. While there was a lot of talk about the increase in the basic exemption limit what nobody would have told you is that one of the investment benefits consisting of the deduction from investing in long term infrastructure bonds is no longer present in FY13. Nature of benefit: Two years ago there was an additional deduction introduced to encourage investors to put money into infrastructure bonds. This consisted of bonds with a 5 year lock in and the maximum benefit for the year was restricted to Rs 20,000 of investments. The benefit was a deduction which meant that this amount of eligible investment was reduced from the taxable income of the individual. The tax benefit depended upon the slab that the individual fell into so this could vary. The most important part of the entire action was this was an additional benefit as compared to the Rs 1 lakh investment limit under Section 80C so it was something extra. Devil in the detail: The manner in which this section was structured was that this was applicable initial for just one financial year and this was later extended for one more financial year which meant that the benefit was available for the financial year 2010-11 and 2011-12. Now there is no mention in either the explanatory statement to the budget or in the part of the budget that makes the changes to the income tax act about any change in this particular section. What this actually means is that the term of the section has not been extended and that it will end at the end of March 2012. Implications: The implication of this is that the individual investor will lose the opportunity of this additional investment in the next financial year. This is a huge blow to them because this will actually push up their tax burden which will eat into the savings that they would have made due to the rise in the basic exemption limit. Take the case of a male person who has an income of Rs 6 lakh and they are using this benefit. The savings that they would have earlier got was Rs 2,000 on account of the rise in the basic exemption limit to Rs 2 lakh but a higher tax of Rs 4,000 due to the end of this benefit means that they are actually in a negative impact to the tune of Rs 2,000.
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Whats Costlier
Air Conditioner Refrigerator GSM/PDA Mobiles
Gold
Cars/SUV
Cigarettes
Whats Cheaper
Laptops LCD Cinema & fares
School Eductaion
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RECOMMENDATIONS Higher tax will reduce the FY13/14 EPS by 10% Higher tax will reduce the FY13/14 EPS by 8% Exemption of Coal and LNG from customs duty positive for Adani Power and Tata Power Exit banking stocks, Tata Motors & Maruti Suzuki. Buy Nifty below 5200 levels. Cairn India, Bharti Airtel contrarian bets. Buy GMR Infra, GVK on 10-15% corrections says Baliga. Withholding tax on interest payments on ECBs reduced from 20% to 5% for 3 years. Positive for Tata Power. A 17% hike in defence budget to Rs 193407 Cr Positive for Bharat Electronics Provide weighted deduction of 150% on expenditure incurred for agri-extension services. Tax free infrastructure bonds has been raised to Rs 60,000 crore from Rs 30,000 crore
SBI
2227.9
(71.5)
Tata Power
105.65
(4.0)
1583.35 125.3
(42.7) (0.4)
IDFC
144.6
(0.2)
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SECTOR IMPACT
AUTO / 2 WHEELERS
PROPOSALS
- Basic excise duty hiked from 10% to 12% - Excise duty on large cars from 22% to 24% - No revision in taxes on diesel vehicles
IMPACT
REALTY
PROPOSALS
- ECB for low cost affordable housing projects - Retains 1% interest rate subsidy for loans towards affordable housing
IMPACT
TELECOM
PROPOSALS
- Emphasis on rural economy and inclusive growth. - Inclusion of telecom tower infra in the viability gap funding. - Exemption of customs duty on parts of mobile phone.
IMPACT Overall, a neutral to mildly positive impact is expected.
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SECTOR IMPACT
INFRASTRUCTURE
PROPOSALS
- Amount of tax free infra bonds doubled to Rs 60,000 crore - 8,800 km of road projects will be awarded in FY13 - Allowed FIIs to invest in long term infra bonds
IMPACT
Positive for L&T, GMR Infra, IRB Infra, IDFC, Sadbhav Eng
POWER
PROPOSALS
- Allowed to take ECB route for rupee-debt on their books - Additional depreciation of 20% - Thermal power plants allowed full customs duty exemption on imported coal for two years.
IMPACT - Positive for the power sector
AVIATION
PROPOSALS
- Direct import of aviation turbine fuel (ATF) - Airlines can raise funds $1 billion via ECBs toward working capital requirements - 49% FDI from foreign airlines is under active consideration
IMPACT Neutral impact on the aviation sector
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He has done it again, asked us to suspend our credulity. I did it last year and raised a placard to signal that I thought budget 2011 deserved a "GOOD" when Rajdeep asked me how I rated it for effort at the CNN IBN studios. Today though when I was asked the same question I raised a smaller placard that read "BAD". Last year I took the Finance Minister at his word. I had naively thought he would make policy to help achieve the ambitious targets he had set himself. Today I am afraid the record his Party has set in the last year worked against the Finance Minister, not just with me, but with all of us in that rather packed studio, and the pity is that most of us gave him a thumbs up on budget day last year. This year I wasn't looking for big reform. I wasn't looking for a statement of intent on FDI in retail or Aviation or Insurance. I wasn't looking for a for big bang divestment, all of which I understand are difficult to do with the Allies Mr Mukherjee has. I wasn't even looking for a roadmap for GST, I am one of those who thinks the Finance Minister has done his best here and can't give in to the demands of blackmailing state governments. I wasn't looking for that "big idea" that us TV anchor's love to ask our guests to identify in budgets. All I was looking for was some credibility in the numbers that were presented. As he began his speech I applauded his intent to keep the deficit down to 2% of GDP this year and to bring it down to 1.7 percent the next. It looked like he meant it when he said that it was time to get back to the targets that were set by the Fiscal Responsibility and Budget Management Act. Then came the refreshing candor, the admission that this year he had muffed his austerity test and the Fiscal Deficit would soar by over a fifth to 5.9% from the 4.6% he had budgeted for. This was followed by the reasonable estimate of the Fiscal Deficit for next year, 5.1% that was right at the upper end of street expectations, but seemed believable. But as the bewildering speech wore on the memory of that bright spot faded. What followed was hotch potch of various allotments to various ailing sectors of the economy with no clear strategy on how they would pull together. As it became clear that he had no road map to achieve his growth targets and we got first glimpses of the fine print, it became clear that the assumptions didn't add up. Right on top of the speech he had said growth that had dropped to 6.9% would move to 7.6%. For complete article, Click here
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