1. Budget Highlights – February 2013
Economy Assessment:
Taxes:
Growth:
Clarity in tax laws, a stable tax regime, a non-adversarial
Getting back to potential growth rate of 8% is the tax administration, a fair mechanism for dispute
challenge facing the country. resolution and independent judiciary for greater
Slowdown in Indian economy has to be seen in the assurance was underlying theme of tax proposals
context of slowing global economic growth from
3.9% in 2011 to 3.2% in 2012. Target to achieve 11.9% of tax GDP ratio
However, no reason for gloom or pessimism. Of the
large countries of the world only China and Direct Taxes - Individual & Corporate:
Indonesia growing faster than India in 2012-13. In
2013-14, only China projected to grow faster than
No change in Slab Rates for personal income tax.
India.
o No tax up to Rs. 2 lakh;
Inflation:
o 10% tax on 2 lakh to 5 lakh;
o 20% on 5 lakh - 10 lakh;
Headline WPI inflation to 7% and core inflation to 4.2%.
Food inflation is worrying but all possible steps to be o 30% on 10 lakh and above
taken to augment the supply.
Tax credit of Rs 2000 to be provided to every person
to having income of up to Rs 5 lakh, this will benefit
Fiscal & Current Account Deficit:
1.8 crores people.
Fiscal deficit will be 5.2% in current year and
4.8% in the next fiscal. Surcharge of 10 per cent for individuals whose
Revenue deficit for the current year at 3.9% and taxable income is over Rs 1 crores.
for the year 2013-14 at 3.3%. Increase surcharge from 5 to 10% on domestic
FM pledged to reduce fiscal deficit to 3% by companies whose taxable income exceed 10 crores.
2016-17 and revenue deficit to 1.5% of GDP. In case of foreign companies who pay a higher rate
In 2011-12, tax-GDP ratio was 5.5 per cent for of corporate tax, surcharge to increase from 2 to 5
direct taxes and 4.6 per cent for indirect taxes. %, if the taxable income exceeds 10 crores.
Foreign investment in an imperative in view of In all other cases such as dividend distribution tax or
the high current account deficit (CAD). FII, FDI tax on distributed income, current surcharge
and ECB three main source of CAD Financing. increased from 5 to 10 %.
Foreign Additional surcharges to be in force for only one
year.
Education cess to continue at 3 per cent.
Plan & Budgetary Allocations
‘Eligible date’ for projects in the power sector to avail
benefit under Section 80-IA extended from
Revised Estimates (RE) of the expenditure in 2012- 31.3.2013 to 31.3.2014
13 at 96 per cent of the Budget Estimates (BE) due Concessional rate of tax of 15 percent on dividend
to slowdown and austerity measures. received by an Indian company from its foreign
During 2013-14, BE of total expenditure of subsidiary proposed to continue for one more year.
16, 65,297 crores and of Plan Expenditure at Parity in taxation between IDF-Mutual Fund and IDF-
5, 55,322 crores. NBFC.
Plan Expenditure in 2013-14 to grow at 29.4% over
Revised Estimates for the current year.
2. A Category I AIF set up as Venture capital fund
allowed pass through status under Income-tax Act.
Impact on Retail Investor:
TDS at the rate of 1 % on the value of the transfer of
immovable properties where consideration exceeds Securities Transaction Tax (STT) reduced on
50 lakhs. Agricultural land to be exempted. equity future, mutual fund.
A final withholding tax at the rate of 20 % on profits Rajiv Gandhi Equity Scheme will be liberalized
distributed by unlisted companies to shareholders to allow first time investor to invest in Mutual
Fund and equity (income threshold increased
through buyback of shares.
from 10 lakhs to 12 lakhs).
Proposal to increase the rate of tax on payments by
way of royalty and fees for technical services to non- Rajiv Gandhi Equity Saving Scheme to allow for
income tax deduction of 50 % to new retail
residents from 10 percent to 25 %.
investors, who invest upto Rs. 50,000 directly in
equities and whose annual income is below Rs
10 lakh to be introduced. The scheme will have
a lock-in period of 3 years.
Indirect Taxes First housing loan up to Rs 25 lakh would get
additional deduction of interest of up to Rs 1
No change in basic customs duty rate of ten per cent lakh in 2013-14.
and service tax rate of 12 %. Tax free bonds issue to be allowed up to Rs
No change in peak rate of customs duty for non- 50,000 crores in 2013-14 strictly on capacity to
agriculture products. raise funds from the market.
Import duty raised from 75 to 100 % on luxury Contributions made to central and state
vehicles. government health scheme eligible to tax
Import duty raised on set-top boxes from 5 to 10 %. benefit.
Duty free limit on gold raised to Rs 50,000 in case of Eligibility conditions for life insurance policies of
male and Rs 100,000 in case of female. persons suffering disabilities to be liberalized
Specific excise duty on cigarettes and cigars raised TDS of one per cent on value of properties
by 18 per cent. above Rs 50 lakh. Agriculture land exempted.
Excise duty on SUVs to be increased to 30 per cent
from 27 per cent, SUVs registered as taxis
exempted Capital Markets Reforms:
Duty on mobiles above Rs 2,000 raised from 1 to
6%, based on their maximum retail prices. Investor with stake of 10 % or less will be
Service tax to be levied on all a/c restaurants treated as FII; any stake more than 10 % will be
One time voluntary compliance scheme for service treated as FDI.
tax defaulters to be introduced. Interest and FIIs will be allowed to participate in exchange
penalties to be waived. traded currency derivatives
Out of nearly 17 lakh registered assesses under FIIs will also be permitted to use their
Service Tax only 7 lakhs file returns regularly. A investment in corporate bonds and Government
onetime scheme called ‘Voluntary Compliance securities as collateral to meet their margin
Encouragement Scheme proposed to be introduced. requirements.
Defaulter may avail of the scheme on condition that SEBI to prescribed requirement for angel
he files truthful declaration of Service Tax dues investor pools by which they can be recognized
since 1st October 2007. as Category I AIF venture capital funds.
Modified GAAR norms to be introduced from
Direct Taxes Code (DTC) bill to be introduced in April 1, 2016.
current Parliament session. Small and medium enterprises, to be permitted
to list on the SME exchange without being
A sum of 9,000 crores towards the first installment of required to make an initial public offer (IPO).
the balance of CST compensation provided in the Stock exchanges to be allowed to introduce a
budget. dedicated debt segment on the exchange.
Work on draft GST Constitutional amendment bill Commodities transaction tax levied on non-
and GST law expected to be taken forward. agriculture commodities futures contracts at 0.01
per cent
3. Industry & Sectors: However the market was disappointed that the Budget
didn’t throw out specific steps to spur growth into the
Need of new and innovative instruments to economy. The increase in surcharge may impact the
mobilize funds for investment in infrastructure Sensex earnings by 1-1.5%.
sector. Measures such as:
o Infrastructure Debt Funds (IDF) to be We feel going forward investors will now focus on
encouraged, earnings growth and global news flow.
o Infrastructure tax-free bond of 50,000
crores in 2013-14. Government bonds fell to their lowest in more than two
o Raising corpus of Rural Infrastructure
Development Fund (RIDF) to 20,000 weeks after the finance ministry announced a gross
crores market borrowing target that was well above
o 5,000 crores to NABARD to finance expectations. The government is planning to borrow 6.29
construction for warehousing. trillion rupees in the fiscal year starting April, higher than
o 3000 kms of road projects in Gujarat, the 5.6-5.7 trillion rupees for the current fiscal year.
Madhya Pradesh, Maharashtra,
Rajasthan and Uttar Pradesh will be
Overall, the government has budgeted a fall in the
awarded in the first six months of 2013-
subsidy burden from 2.6% of GDP in FY13 to 2% of
14.
GDP in FY14. The government expects gross market
o Two new major ports to be set up in
borrowing of INR 6.3 trillion and net borrowing of INR 4.8
West Bengal and Andhra Pradesh
trillion with around INR 0.5 trillion crores of bond
Oil and gas exploration policy will be reviewed
buybacks.
and moved from profit sharing to revenue
sharing.
Policy on exploration of shale gas on the anvil;
natural gas pricing policy will be reviewed and
uncertainty removed. Disclaimer
Guidelines regarding financial restructuring of
DISCOMS have been announced. Certain information contained in this document is
Govt to set up India's first women's bank as a compiled from third party sources. Whilst Mirae Asset
public sector bank by October. Global Investments (India) Private Limited has to the
Compliance of public sector banks with Basel III best of its endeavour ensured that such information is
regulations to be ensured. 14,000 crores accurate, complete and up-to-date, and has taken care
provided in BE 2013-14 for infusing capital. in accurately reproducing the information, it shall have
PSU banks to have ATMs at all their branches no responsibility or liability whatsoever for the accuracy
by March 31, 2014. of such information or any use or reliance thereof. This
Insurance companies will be empowered to document shall not be deemed to constitute any offer to
open branches in Tier-II cities with approval of sell the schemes of Mirae Asset Mutual Fund. Mirae
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use of this document.
We believe the Budget is a Balanced and Prudent
Budget which is taking the economy on path of
Fiscal Consolidation. Mutual funds are subject to market risks,
read all scheme related documents
Facing the ire of rating agencies and investors alike, the carefully.
finance minister delivered his promise of fiscal
consolidation, projecting a fiscal deficit at 4.8% of GDP
for FY14, in line with consensus expectations. The
revised estimate of the FY13 fiscal deficit is 5.2% of
GDP, better than the revised budget target of 5.3% of
GDP.