My observations on union budget 2009-10

06July09: Union budget 2009-10 presented by Mr. Pranab Mukherji

Things that matter to our lives
The income tax deduction has been increased from 1,50,000 to 1,60,000. So we save some Rs 1000 of money. SARAL – II forms are also to be introduced shortly.

Surcharge on various direct taxes to be phased out; in the first instance, by eliminating the surcharge of 10 percent on personal income-tax. I am not sure if this was needed (its pro-poor ‘symbolic value’ was there at least) doing this, given that the education cess of 3% still very much remains there. Anyways, simplification is welcome!!

There are recommendations all over to buy stocks like Reliance Industries, L&T, BHEL, SBI, ICICI Bank etc, as a) BSE Sensex has sharply ‘corrected’ (down 870 points) and b) the budget is being touted as being pro-infrastructure.

GDp growth rate was 6.7% during 2008-09 and is ‘expected’ to be back at 9%. The sentiment (and it natters!!) appears clearly upbeat.

Rs 120 cr allocated for unique ID; first set expected in 18 months

Interesting to observe though not affecting my life directly!!
The threshold limit for wealth tax has been doubled to Rs 30 lakh (wealth tax rate is 1% of net wealth exceeding Rs 30 lakh now). This translates into a saving of upto Rs 15,000 a year.

Rs.2,113 cr allocated for IITs and NITs, which includes a provision of Rs.450 cr for new IITs and NITs

Increase in Non-plan expenditure is mainly due to implementation of Sixth Central Pay Commission recommendations, increased food subsidy and higher interest payment arising out of larger fiscal deficit in 2008-09

Fiscal deficit is projected at 6.8%of GDP

Structural changes in direct taxes to be pursued by releasing the new Direct Taxes Code within the next 45 days and in indirect taxes by accelerating the process for the smooth introduction of the Goods and Services Tax (GST) with effect from 1st April, 2010

FBT (Fringe Benefit Tax), CTT (Commodities Txn Tax) abolished

Customs duty on LCD Panels for manufacture of LCD televisions to be reduced from 10% to 5%

Somebody else noted that 6.8% fiscal deficit may see some downgrades from rating agencies.

As per ministry document, “Tax proposals on direct taxes to be revenue neutral. On indirect taxes, estimated net gain to be Rs.2,000 cr for a full year.”

Udyan Mukherji sums up: “The market is disappointed as there is nothing on the fuel policy, foreign direct investment, and disinvestment roadmap. Two things seem to have spooked the markets. One, the fact that fiscal deficit is seen at 6.8% versus 6.2% in the interim budget. And second, the hike in Minimum Alternate Tax to 15% from 10%.”

SP Tulsian says: He further adds that some of the major disappointments from the budget were no fiscal deficit control (no big ticket reforms), no indication for divestment & increase in MAT from 10% to 15%. He feels this is a buying opportunity for investors in the market as the weakness would not last more than 1-2 days.

References
http://www.moneycontrol.com/india/news/budget-news/udayan-mukherjee-sums-upbudget/404745

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