Budget 2008 – What matters most

Overall this is a very populist budget balancing act- Lots of Waivers, subsidies go up, more things moving out of books. Read the Budget papers.

Personal income tax changes – 🙂 big changes in historical terms. 🙂

  • 150000 to 300000 – 10%
  • 300000 to 500000 – 20%
  • 500000+ 30%

Womens start – Rs 1,80,000 Senior Citizens start – Rs 2,25,000

No change in overall rebate structure or rebates U/s 80c. 😦

Postal Deposits and Senior Citizens Savings Scheme added to 80C rebate basket,. (not very useful until bank fd rates fall below 8%)

Mediclaim relief U/s 80 D – 🙂 for payments made other than in cash to

  • HUF / Individuals for self/ family members or dependents amt to Rs 15000,
  • to Children who pay premium for parents health care amt to Rs 15000 .
  • For Senior citizens above age of 65 it is RS 20000.

Banking transaction tax to be exempted

Nothing on low cost housing in cities which is desperately required – is disappointing. 😦

Markets 😦

ST Capital gains tax U/s 111a for STT paid transactions increased from 10 to 15%. Bad news because it has been done during a period of falling markets.

Nothing for the investor: No change in STT and DDT unchanged at 15%

  • Dividend of subsidiary company will be released from DDT
  • STT to be treated as a business deduction not set off.
  • Service tax on Stock exchanges, Clearing houses and AMC services for ULIP
  • CTT on Commodity transactions on lines of STT .

Expected tinkering in rates, Excise rates pared down from 16% to 14% in certain goods as an attempt to reduce prices of commodities in accounting the wpi index, which is key to inflation accounting.

  • Excise rates on 2 wheelers etc cut to 10%,
  • Cut in duty on small cars and eco cars and buses.
  • Excise duty of Rs 1.35/litre applied on unbranded petrol
  • Excise duty of Rs 4.6/litre applicable on unbranded diesel
  • Set top boxes: 100% exemption
  • 5% cut of customs duty on some bulk drugs
  • Central sales tax: Reduced to 2%

PAN requirement to be extended to all transactions in capital market subject to a threshold.

Announcement of creation of Transmission and distribution fund may be positive for Power Sector.

Massive Farmer loan waiver – to benefit four crore farmers incuring a liability of Rs 60,000 crores. Short to long term negative for PSU Banks as it is still unclear who will pay the bill and when. Overall this will also effect the ability of the banks to get repayment of loans as this step creates indiscipline and incentives es farmers to not pay back their loans or delay the installments.

PDS to get Rs 32,676 as subsidy

Overall i expect inflation might go up due to the grandiose plans, coupled with the recession fears.

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25 thoughts on “Budget 2008 – What matters most

  1. hmm im also disappointed
    i was about to put in ril but the minute he started talkg i said here we go again back to Indira times
    and just stopped purchasing

    relief over tisco for u

  2. hey thats a pretty quick round up on the budget
    and kind of crash course on it.
    thanks for the update! 😉
    now that we r talking investments. i invested in power grid on hope of budget rise but so far no gains and almost no losses. how i pray it doesn’t land up in red!!
    btw r u a regular investor in stocks?

    power grid – budget is neutral but with a positive hint
    however the global factors will influence the stock more than the budget and u will have to take a call if u r in it for the shortterm
    yes i do invest

  3. yes stcg will hit u – hope that corrects the mistake – man that was posted in a hurry

    though the clarification has come about the loan waiver and psu banks being compensated over 3 yrs but the fine print has to be looked into – plus overall it means PSU banks like PSU Oil are firmly under the control of fm.. not their directors

    plus global sentiment on this one will be negative, as govt is intervening more.

  4. //ankur u could book stuff as inventory and take benefit of booking ur house ac etc as part of business and claim expenses//
    plz explain…..
    u mean to say that i open up a trading company and transfer my holdings in its name… that way all the expenses (even lunches and periodicals etc would adjusted against its profits?

  5. no u dont have to open a company
    u can also do it as an indl
    u can also hold some shares as investments and some as stock in trade – how u account will be the key.
    if they look at ur books the ito will take a view that u trade and make u pay 30% so s to maximise the tax receipt
    not the st cap gains rate nyways as ur other inc is much higher than ur sal if im not mistaken

  6. now u confused me…..
    the stock market income is short terms capital gains right.. so won’t it be taxed at 15% (either in hands of individual or a company)?

    why 30% then?

    yes my stock market gambling income this year is higher than my salaired income.. so how does that change?

    how does a normal mumbai punter save taxes?

  7. because the itos have been given the discretion to evaluate whether u r an investor or a trader depending on the number of transactions and freq of transactions and nothing is clarified and u know what discretion means .. right
    plus as it is day trading derivatives etc account as business income if im not mistaken and get taxed at 30%

    but i am no expert go chk it out with a good CA.

  8. I think its only a election budget inspite of the fact that esembly election is on the cards mr. chidembrum only loking for votes not loking after the devlopment of the cuntry

  9. I am getting rather worried about what you are saying.
    This is the first year of my getting into the market, and I have yet to pay taxes for this…
    This sounds like an awful thing.

    dont worry doc it wont affect u – ur incomes are hardly anything in stocks in comparison to the income u earn through practice

  10. Short capital gains tax has increased, bad news for traders I guess! We tend to sell our shares in the short-term so this will impact us!

  11. I heard some big share market players say(not on the TV) the market would take 6-7 months to come out of the bear phase. Do you think so too?

    well it all depends upon the situation in the us , plus elections by 3rd qtr here in india is what i expect
    a lot of liquidity is sitting on the sidelines in the world it will pursue mkts it finds lucritive

  12. hey ,
    nice rundown – i kind of liked the budget … i feel a whole lot better after 🙂

    yes,
    populist budgets make u feel that way
    but with the current fm what he giveth
    he taketh from another way…
    nyways i also liked the tax scab increases
    welcome to my blog calamur 🙂

  13. now being a part of this nation, i really feel concerned about the people (mentioned above) who are surviving on leaves and bamboos, and the way they are fighting the diseases.
    but hey!!! what the budjet promises is something else… the story which they retail to everyone in ” the key features of the budget” seems to be completely fake and betrayal. i always believed in the current government, because they have given results and the best thing about them is that , they never compromise with the security of the nation, a basic and the most impotent thing which the other parties lack..
    but just tell me one thing… isn`t making our country free of hunger, a part of security too???
    isn`t making these people free of diseases and providing them the utmost facilities, a part of security too??
    is it their fault that they are born poor ???
    now being a part of this nation, i actually feel ashamed of being an INDIAN, because my country needs team effort and myself alone cannot turn the tide..

    THE BUDGET IS ALL FAKE, ITS LIKE A BEAUTIFUL PICTURE IN FRONT OF OUR EYES , BUT THE REALITY IS SOMETHING ELSE..


    I edited ur rather large semi spam comment if u wanted u should have added a link plus i corrected some spellings
    plus i view many ngos with suspect eyes including the one mentioned. plus rahul baba is visiting there and giving lip service to their plight

    yes it is very important for the state to make sure the country is free of hunger but the kind of socialism professed by the ruling coalition which wants to control everything promotes more hunger and black marketing and rotting grains in govt store houses. for them it is better to keep subjects hungry poor populous and uneducated – it gives more votes
    as i see it – it is no use to patch up from the outside, rather easy as it may be but finding long term solutions and thinking are more in need here.

    I Believe – don’t feed people – give them the skills to feed themselves and be responsible citizens
    i dont think it is useful being ashamed but if u feel so much u should act
    about this govt – it has neither given its citizens security – thanks to all the terrorism and naxalism and bomb blasts everywhere nor affordable food – thanks to all the price rise in grains and vegetables which have climbed 50 to 100% in their regime

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