BUDGET HIGHLIGHTS FISCAL YEAR 2013-14

BUDGET HIGHLIGHTS FISCAL YEAR  2013-14

Finance Minister P. Chidambaram presented one of the most highly anticipated Indian budgets of recent years on today (February 28, 2013), as the government looks to rein in a bloated fiscal deficit and restore confidence in Asia's third and world’s tenth -largest economy.

Below mentioned are some key points of the Budget proposed today in Parliament.

FISCAL DEFICIT

·         Fiscal deficit seen at 5.2% of GDP in 2012/13

·         Fiscal deficit seen at 4.8 % of GDP in 2013/14

SPENDING

·         Total budget expenditure seen at 16.65 trillion rupees in 2013/14

·         India's 2013/14 plan expenditure seen at 5.55 trillion rupees

·         Non-plan expenditure estimated at approx 11.09 trillion rupees in 2013/14

·         Revised estimate for total expenditure is 14.3 trillion rupees in 2012/13, which is 96% of budget estimate

·         Set aside 100 billion rupees towards spending on food subsidies in 2013/14

CURRENT ACCOUNT DEFICIT

·         India's greater worry is the current account deficit - will need more than $75 billion this year and next year to fund deficit

TAX

·         Proposes surcharge of 10% on rich taxpayers with annual income of more than 1 crore rupees

·         Propose to provide tax credit of Rs.2000 to every individual having taxable income up to 5 lakhs

·         To increase surcharge to 10% on domestic companies with annual income of more than 10 crore rupees

·         To continue 15% tax concession on dividend received by India companies from foreign units for one more year

·         Propose to impose withholding tax of 20% on profit distribution to shareholders

·         Propose to reduce securities transaction tax on equity futures to 0.01% from 0.017%

·         Time to introduce Commodities Transaction Tax (CTT)

·         CTT on non-agriculture futures contracts at 0.1%

·         Education cess to continue at 3%

CORPORATE SECTOR AND MARKETS

·         Plans to issue inflation-indexed bonds

·         Propose to provide an investment allowance of 15% to manufacturing companies that invests more than 100 crore in plant and machinery during the period 1.4.2013 to 31.3.2015.

·         FIIs can hedge Forex exposure through exchange-traded derivative. Our View: This will bring more liquidity in Currency Derivatives both in futures & options listed in MCX-SX & NSE.

·         Insurance, provident funds can trade directly in debt exchanges

·         Investor with less than 10 % stake in a company will be regarded as FII and more than 10% stake as FDI

·         Stock exchange regulator will simplify know-your-customer norms for reign portfolio investors

·         To implement quickly, recommendations of Financial Sector Legislative Reforms Commission (FSLRC)

BANKING

·         To provide 140 billion rupees capital infusion in state-run banks in FY13-14

·         Post offices will become part of the core banking solution and offer real time banking services

·         The government would set up India's first public sector women's bank with an initial capital of Rs 1000cr, proposed to get banking license by Oct this year.

DEFENCE

·         To allocate 2.03 trillion rupees to defence in 2013/14

AGRICULTURE

·         To allocate 801.94 billion rupees to rural development in 2013/14

·         Plan to allocate 270.49 billion rupees for agriculture in 2013/14

·         Rs 7 lakh cr targets fixed for agri-credit for 2013-14 compared to Rs 5.75 lakh cr in the current year.

INDIRECT TAXES

·         Customs duty on SUVs raised from 75% to 100%:

·         Service tax to be levied on all Air Conditioned restaurants.

·         6% tax hike on all mobile phones above Rs 2000.

·         Digital Set-top box import duty hiked from 5% to 10%

·         Duty-free limit for gold jewellery raised to Rs 50,000 for men and Rs 1, 00,000 for women.

Other Key Steps proposed by FM

·         Government targets 558.14 billion rupees from stake sales in state-run firms in 2013/14.

·         Govt to set up regulatory authority for road sector.

·         Debt funds for infrastructure would be encouraged and tax-free bonds up to Rs 50,000cr will be allowed in the new financial year.

·         Investment is a matter of faith. Doing business in India must be seen as easy, friendly and beneficial, says FM

·         Food Security Bill is a priority for UPA govt

Complied by Amit Daga with inputs from FM budget and Reuters.