Date: 07 July 2009
Thought for the day
“The quality of your ideas will be in direct proportion to the quantity of ideas you generate.”
1)Taking off from where he left in his interim budgetary exercise for 2009-10, Finance Minister Pranab Mukherjee on Monday sought to inject an adequate dose of sops for the middle class and blend it with a massive fiscal stimulus and rural spending programme to spur the economic growth on to a higher trajectory. Presenting the UPA government’s full budget for the current fiscal in the Lok Sabha after the elections, Mr Mukherjee chose to please the salaried middle class, farmers and others in rural areas by providing incentives – even at the expense of revenue and a consequent higher fiscal deficit at 6.8 per cent of the GDP – as a trade-off to combat the slowdown in the wake of the global financial crisis.
2)THE 2009-10 Budget has brought smiles, especially to people in the higher income strata. Finance Minister Pranab today raised the basic exemption limits for all income groups. For men and women, the basic exemption limit was hiked by Rs 10,000. For men, the hike by Rs 1.5 lakh to Rs 1.6 lakh. For women, the rise was from Rs 1.8 lakh to 1.9 lakh. For senior citizens, the limit was increased from Rs 2.25 lakh to Rs 2.4 lakh, a rise of Rs 15,000.
3)Though Finance Minister Pranab Mukherjee waxed eloquent on the need for more retail shareholding in public sector undertakings, the budget has provided for only Rs 1,120 crore from disinvestment in 2009-10. The Economic Survey for 2008-09, tabled in Lok Sabha late last week by Mukherjee, had talked of raising up to Rs 25,000 crore every year from disinvestment.
4)Hailing the Budget 2009-10 as “growth oriented”, the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, today said there would be no need for another stimulus in the current fiscal. “They (corporate) should be happy with removal of Fringe Benefit Tax (FBT). I don’t think that there is need for more stimulus in the current year,” he told reporters in New Delhi after the presentation of the Budget by the Finance Minister, Mr Pranab Mukherjee.
CORPORATE / INDUSTRY
6)LEADING private sector companies like Reliance Communications, Great Eastern Shipping, Sun Pharma, Bharti Airtel, Suzlon Energy and HCL Technologies may see their tax liabilities go up this year, though the burden could be lower in subsequent years. So would some their IT peers. Finance minister Pranab Mukherjee has proposed a five percentage point hike in the minimum alternate tax(MAT) paid on book profits, taking the effective MAT rate to around 17% from 11%.
7)PHARMACEUTICAL Companies heaved a sigh of relief as the finance minister decided to keep excise duty on drugs, pharmaceuticals and medical equipment unchanged at 4 per cent, while raising it to 8 per cent for many other items.
8)Automotive players who were looking forward to some relief from falling demand for cars, utility vehicles were disappointed today when Finance Minister Pranab Mukherjee made no announcement that would drive the customers back to the showrooms.
MONEY / BANKING
9)The rupee tumbled in tandem with a plunge in stocks and ended 65 paise weaker at a nearly two-week low of 48.54/56 against the US currency on fairly good dollar demand. Fears about capital outflows from equity markets after the Union Budget was presented weighed on rupee sentiment. It had closed at 47.89/91 a dollar on Friday.
10)The Budget for 2009-10 did not go down well with the insurance industry, which expected tax concessions on several schemes and a roadmap for raising the foreign direct investment cap to 49%.
11)NON-LIFE INSURANCE Companies will lose a big chunk of their investment income to the taxman. The decision could put an end to the rate war among non-life companies. Historically, state-owned companies
did not pay tax on investment gains as these were seen core to their operations. But recently, it became a grey area after the I-T department asked some companies to pay tax on investment income.
12)TO MAKE the New Pension Scheme more lucrative for both investors and fund houses, the finance minister today announced that the income of the NPS Trust would be exempted from income and dividend distri-
bution tax(DDT). Also, there will be no securities transaction tax (STT) on purchase and sale of equities and derivatives instruments.
13)BANKING, REALTY, AND metal shares crashed as key indices fell 6%, the sharpest on a budget day. Lack of a selloff schedule and robust map for FDI in insurance disappointed investors. The Sensex fell 869.6 points to close at 14,043.4 after touching 13,959.4. The Nifty ended at 4,165.7, down 258.55 points. Four stocks fell for every one that rose on BSE.
14)State-owned Oil India Ltd and National Hydroelectric Power Corporation (NHPC) will tap the capital market with their initial public offering(IPOs) in August/September this fiscal. This was stated by the Finance Secretary, Mr Ashok Chawla, at a post-Budget press conference today.
15)Though the Budget did not contain anything that directly pertains to mutual funds, the increase in disposable income in the hands of investors is likely to pave the way for increased investments in mutual funds in the long term, said fund managers. The thrust towards infrastructure is also likely to benefit certain theme-based funds, they said.
PERMANENT ACCOUNT NUMBER
16)IF YOU Don’t have a Permanent Account Number (PAN), your tax deducted at source(TDS) could be higher. The penal rate will be a minimum 20%. The proposed penal rate is seen as an attempt by the government to gradually make PAN mandatory for all transactions, and ensure that more people come under the TDS net.
17)SERVICE Providers have a reason to cheer, with the finance minister Pranab Mukherjee keeping the service tax rate unchanged at 10%. Any increase in rates could have affected consumption due to increased cost. The move to keep the rate unchanged is in line with the government’s plan to continue with the stimulus to ensure a stable recovery.
18)In a bid to expand commodity futures markets that has been reeling under the impact the repeated government interventions, Budget 2009-10 abolished the Commodity Transaction Tax(CTT) proposed in the previous budget, but stopped short of making any announcement on re-starting futures trade in many banned commodities or having a common regulator for all financial markets, including the commodities markets, under the Securities and Exchange Board of India as envisaged in the latest Economic Survey.
19)In a move that could give a fillip to recycling of gold and push up local prices hurting the gems & jewellery industry, the Budget 2009-10 Monday proposed to increase the customes duty on gold bars by Rs 100 per 10 gram and that on other forms of gold by Rs 250 per 10 grams.
20)Pepper futures on Monday declined marginally for want of buying support and in the absence of any incentives for boosting export of the commodity in the Union Budget 2009-10 when the Indian parity remained out-priced in the world market.
21)Following the announcement by the finance minister to raise Rs 1,00,000 crore for the development of the infrastructure sector by Infrastructure Finance Company(IIFCL) in Budget 2009-10,construction players feel that this is an indirect boom to the real estate sector as taking out finances will help free up capital in infrastructure. Meanwhile, top real estate developers are unhappy as they expected this year’s Budget to be aggressive and investment for the low and middle-income housing in metros and rural housing which was not addressed.
22)For the $50 billion Indian IT the formal extension of the 10-year tax holiday for the sector by one more year is a major relief. This is the second consecutive one year extension for the Software Technology Park of India(STPI) scheme under Section 10A of the Income Tax Act.
23)Setting the stage for implementation of the ambitious National ID card project, the Finance Minister, Mr Pranab Mukherjee, said on Monday that the first set of unique identity numbers would be rolled out in 12-18 months. A provision of Rs 120 crore is proposed for the project.
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Economic Times www.economictimes.com
The Financial Express www.financialexpress.com
Business Line www.businessline.in
Business Standard www.business-standard.com
The Times of India www.timesofindia.com
The Hindu www.hindu.com
Deccan Chronicle www.deccan.com
The New Indian Express www.newindpress.com
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