Feb 28, 2013

Highlights of the Union Budget – 2013

The Budget presented by Chidambaram did not have any big bang reforms; however, it was a responsible one from a government which has only a year left to prove its mettle. Similar to his road shows in which he had marketed India well, the Budget also had enough measures which will send a clear message to both domestic and foreign investors that the government is serious about bringing the economy back into a growth trajectory. The government’s resolve to do everything possible to bring down inflation, especially food inflation, should be of some comfort for Subbarao and team. The emphasis on infrastructure will be a big boost to this sector which has been lagging for a long time. We also believe that the measures suggested to enhance savings into the financial sector is a step in the right direction, however North Block could have done a bit more to tap this potential into the capital markets.

Highlights of the Union Budget – 2013
  • Leather products to get cheaper. Dinning out, cigarettes, SUVs, motorbikes, set-up boxes get expensive. Excise duty on cigarettes raised by 18 per cent 
  • Mobile Phones, SUVs to get more expensive: On mobile phones priced at more than Rs. 2000, excise duty hiked to 6%. Excise duty on SUVs raised from 27% to 30%

  • Duty free limit for Gold raised to Rs. 50,000 in case of a male passenger and Rs. 1 lakh for female passengers
  • Tax Administration Reforms Commission to be set up to review tax laws 
  • But will give some tax relief of Rs. 2000  for every person who has an annual income of up to Rs. 5 lakh 
  • Rs. 1000-crore Nirbhaya Fund announced for the empowerment of women (Read) 
  • All Regional Rural Banks and cooperative banks to be e-linked by this year-end 
  • National Housing Bank (NHB) to set up urban housing bank fund and Rs. 2,000 crore will be allocated in this regard 
  • Standing Council of Experts in Ministry of Finance to examine transaction cost of doing business in India 
  • Rs. 14,000 crore capital infusion into public sector banks in 2013-14 
  • PSU Banks to have ATMs at all their branches by March 31, 2014 
  • Rs. 6,000 crore to be allocated for rural housing fund in 2013-14 
  • Defence allocation increased to Rs. 2.03 lakh crore  
  • Coal imports during Apr-Dec 2012 crossed 100 million tonnes and expected to go up to 185 million tonnes in 2016-17 
  • Simpler SEBI rules - To simplify procedures for foreign portfolio investors 
  • Two new ports to be set up in West Bengal and Andhra Pradesh to add 100 million tonnes handling capacity
  •  Gas handling terminal at Dabhol in Maharashtra to be fully operational during 2013-14 
  • State governments urged to sign restructuring plans with electricity discoms 
  • Tax-free infrastructure bonds of Rs.50,000 crore to be issued 
  • Textile ministry allocated Rs.50 crore for establishing apparel parks 
  • Handloom sector allocated Rs.96 crore to benefit 150,000 weavers 
  • Infrastructure debt funds to be encouraged 
  • Regulator to be appointed for road projects; 3,000 km of road projects to be awarded in first six months of 2013-14 
  • Incentive allowance of 15 percent over and above permitted depreciation to those investing over Rs.100 crore in infrastructure projects 
  • Rajiv Gandhi Equity Scheme to be liberalized 
  • Seven new cities identified along Delhi-Mumbai Industrial Corridor 
  • Preliminary work begun on Bangalore-Mumbai Industrial corridor
  • Food-grain production during 2013-13 estimated at 250 million tonnes 
  • Household to be incentivized to save in financial instruments rather than gold. Person taking a home loan for his first home during the period 2013-14 will be entitled to an additional deduction of Rs. 1 lakh. 
  • Re-financing capacity of SIDBI increased to Rs. 10,000 crore from Rs. 5,000 crore for Ministry of Small and Medium Enterprises 
  • Rs. 27,049 crore allocation to the Agriculture Ministry in 2013-14 
  • Rs. 7 lakh crore target fixed for agriculture credit for 2013-14 compared to Rs. 5.75 lakh crore in the current year. 
  • Eastern Indian states to get Rs. 1,000 crore allocation for improving agricultural production 
  • Infrastructure Development Funds will be encouraged 
  • Funds to raise resources for the development 
  • Govt committed to food security bill. 10,000 crores set apart for expenditure likely under the act 
  • Rs. 37,330 crore allocated for Ministry of Health & Family Welfare 
  • Rs. 110 crore to be allocated to the department of disability affairs 
  • Rs. 3511 crore allocated to Minority Affairs Ministry which is 60 per cent of the revised estimates 
  • Additional sum of Rs. 200 crore to Women and Child Welfare
  •  Ministry to address issues of vulnerable women 
  • Rs. 37,330 crore allocated for Ministry of Health & Family Welfare
Tax Announcements
  • The total tax changes will earn government Rs 13,300 crore from direct taxes, and Rs 4,700 crore from indirect taxes. That’s Rs 18,000 crore in all. Finance Minister calls for voluntary compliance to ensure all service tax payers to start filing returns. 
  • The current Income Tax slabs were introduced last year. Hence no case of for revising them this year 
  • Rates of taxes 10-20-30 percent won’t be changed. Level of tax-free threshold to be raised: for 2-5 lakh bracket, tax credit of Rs 2,000 to be given. Rs 3,600 crore revenue loss on account of this.
  • DTC – direct taxes code – to be introduced before end of budget session. 
  • Companies with more than Rs 10 crore profits to pay additional surcharge of 10 percent. Surcharge on dividend distribution doubled from 5 to 10 percent. This will tax companies, not rich or less rich equity holders. 
  • TDS at 1 percent on properties being sold for more than Rs 50 lakh. 
  • STT rates cut from 0.017 to .01 percent for equity futures. Small cuts for mutual fund and derivatives too. Commodity transaction tax coming up only on non-agricultural commodities. Stock markets should be happy, but not commodity markets. 
  • 42,000 people with incomes of over Rs 1 crore. Additional surcharge of 10 percent for them. 
  • Tax administration reform commission to be set up. Will raise tax-GDP ratio 11.9 percent.

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