India Budget 2013 What matters most!

P Chidambaram budget speech is  known to induce dreams and elevate people to a euphoric state of mind but the fine print in the draft is known to always have a googly and take back more than what he has given…

This budget is insipid and worse it is subtly populist mainly to avoid a ratings downgrade and there is a big risk that the govt will bring in the populist measures like Food security act on the sly once it makes up its mind on going for elections. The budget does not seriously address concerns regarding pathetic growth and stagflation or the twin deficits that the Indian economy currently suffers from. The numbers are also suspect. Read MB , Read BDRead LM

The govt has already taxed us with High INFLATION which is well above 10.0% and Huge increase in Money Supply, both of which have increased price of gold and housing by 4 to 5 times during the current MMS /Sonia Congress/ UPA 1 &2 govt tenure.

This Budget has given a raw deal to the local Investor class. Equity IPOs , Government IPOs FPOs etc have given a huge negative returns . Equity & Debt  Mutual funds and fixed deposits have given negative returns post inflation in 5 yr period.

TAX FREE INCOME : NO CHANGE ..  😦

INDIVIDUALS: Upto 2,00,000 – Nil

INDIVIDUAL RESIDENTS 60 TO 80 Yrs: Upto 2,50,000 – Nil

INDIVIDUAL RESIDENTS 80 Yrs +: Upto 500,000 – Nil

TAX SLABS

I. Upto 5,00,0000  {10% of the amount exceeding Tax free Income}

II. Upto 10,00,000 –  {I + 20% of the amount over 500000}

III. Above 10,00,000 –  {I + II + 30% of the amount over 1000000}

Tax Credit of Rs 2000 for income upto Rs 500000

Surcharge of 10% on persons with income of over Rs one crore

Dividend Distribution Tax: Surcharge on Dividend Distribution Tax has gone up from 5% to 10%. This has an implication on those is the dividend mode in Debt MF schemes. They will not pay 14.16%, instead of 13.52%. Not much of an implication, though the net dividend would now be lower now.

Securities Transaction Tax The STT on MF/ETF done with the fund houses has been reduced from 0.25% to 0.001%. Similarly the STT on MF/ETF transaction done on the exchange, only the seller will need to pay STT of 0.001%. Again, from an individual investor view point, this may not be very significant as the percentages before and after as both low.

Commodities transaction tax on non-agriculture commodities futures contracts at the same rate as equity futures that is 0.01 per cent of the price of the trade

Investment and Deductions

  • First-time home loans up to Rs.25 lakhs  get extra Rs.1 lakh interest deduction (if not exhausted, the balance limit can be claimed next year)
  • Inflation-indexed Bonds and National Security Certificate to be introduced
  • Investment in RGESS need not be done in 1 year alone but can be done in 3 successive years. Income limit under RGESS raised from Rs.10 lakhs to Rs.12 lakhs
  • Surcharge on Dividend Distribution Tax increased from 5% to 10%. So it may be prudent to consider taking the returns in the form of capital gains if it works out better depending on one’s tax bracket
  • Reduction in STT on equity and MFs
  • Passengers will be allowed to bring in duty free gold jewellery of up to Rs 50,000 in case of men and Rs 1,00,000 in case of women.

………………………………………………………………………………………………………………………………

What goes up
Cigarettes, Cigars, Cheroots, High-end mobile phones,Imported luxury cars, High-end motor vehicles, Sports Utility Vehicles,Imported yatch and motorboats, Marbles for flooring, Set-top boxes, Dining in air conditioned restaurants, Silk clothes, Homes and flats, Parking fees.

What goes Down
Jewellery, Precious stones, Cotton garments,Branded apparels, Carpets, Textile floor, Agricultural testing procedures, Imported hazel nuts, Dehulled oat grain, Truck chasis, Sabudana, Ships and vessels, Cinema and films, Machinery for manufacturing of leather goods

………………………………………………………………………………………………………………………………

  • Investment Allowance of 15% for investment in plant & machinery exceeding Rs.100 crore will boost capital expenditure
  • Surcharge increased from 5% to 10% for companies with Rs.10 crore or more taxable income
  • Amnesty Scheme for Service Tax defaulters
  • No change in the peak rate of basic customs duty on non-agriculture products and rates of excise duty and service tax of 12 per cent.

 Inputs from Moneycontrol and ET

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One thought on “India Budget 2013 What matters most!

  1. I came across your blog, during one of my google searches regarding UTI bonds. Since I was little busy, I kept your blog “on” on one of the tabs and then when I was relaxing a bit, I started reading posts by you from beginning… really interesting one, specially about the finance. Sometimes I do not agree with few of your thoughts but then I believe in “agreeing to disagree”.

    It is really commendable that you have kept all important financial & technological events through blogging. same must be with trek related posts but finance and technology attracted my attention.

    Congratulations on your consistency and All the best for your future endeavors.

    Regards,
    Sheetal

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