Highlights of Budget 2009

DIRECT TAXATION

Ø IT Return forms to be more user friendly

Ø Centralised tax processing centre at Bangalore

Ø Share of direct taxes gone up by 56%

Ø New direct tax code in 45 days

Ø To introduce GST by April 1^st, 2010; to be dual in nature

Ø No changes in Corporate Tax

Ø Personal income tax exemption limit hiked by Rs.15,000 for senior citizens

Ø Exemption limit hiked by Rs.10,000 for women and all other categories

Ø Removal of 10% surcharge on personal income tax

Ø Fringe Benefit Tax to be abolished

Ø Tax holiday for exporters increased till 2011

Ø MAT rate to be increased to 15% v/a 10% of book profit

Ø Carry Forward MAT Tax Credit extended to 10 yrs from earlier 7 years

Ø Abolition of Commodity Transaction tax (CTT)

Ø Sec 80DD to be hiked

Ø National pension Scheme exempt from STT

INDIRECT TAXES

Ø To maintain overall customs and excise duty

Ø CD on LCD panels cut from 10% to 5%

Ø 2.5% cut in CD for wind power equipments

Ø CD on small bulk drugs reduced by 5%

Ø CD on set top boxes hiked by 5%

Ø Customs Duty on gold reimposed; excise duty exemption on branded gold jewellery

Ø Excise duty on man made fibre and yarn to be maintained

Ø Excise duty on petrol and diesel blended with bio diesel scrapped

Ø Sec 801B benefit extended to Natural gas

Need more

Pranab Mukherjee might not win any popularity contest with the stock market investors today but then, it was not the investors who voted the UPA back to power. The Govt obviously had to reward rural India for their victory and hence, the whole budget was directed towards them only. Farmers and poor were a priority and not the markets. A populistic budget, it was more social than when the Left was in the Govt.

The markets expected too much and that is the reason why it slipped down sharply today. The market expected announcements on PSU disinvestment, fuel policy and major FDI policies. There was no word on any of these. Lack of focus on key fiscals and completely ignoring the fiscal deficit did the market in.

The market was spooked by the way in which the Govt was increasing allocations without really chalking out anything on how it planned to raise money. The fiscal deficit was at 6.8% of the GDP for FY10 as against the target of 5.5% was viewed.

But then at the beginning of the speech itself, Pranab Mukherjee stated that the Union Budget cannot be the only instrument to bring about a change. He has presented us with a very broad roadmap and that is what the market did not like, it wanted more specific measures.

The Budget has not tinkered around much with the excise and customs duties. There has been a token hike in Income Tax exemption slabs. But what it has attempted to do is stimulate domestic demand. The focus is on stimulating demand within India, especially from rural India. This is expected to help the country tide over the ill effects of the global slowdown, rising crude prices. The Budget, predictably so, has been good for power sector, infrastructure companies, pharmaceuticals, healthcare companies, transmission and distribution companies, textiles. But the biggest beneficiary is undoubtedly, as usual, the companies in the agricultural sector. The disinvestment target of Rs.100 crore is pitiably low.

The strong message which this Budget also sends home is that rural India is where all the growth will happen. So companies aiming to grow big, have to necessarily go rural. Thats the only key to success.

The bright side to this Budget – this is a great buying opportunity. For all those who felt that they had missed the bus earlier, this is maybe the right time.

ECONOMICS….

Ø Fiscal deficit up from 2.75% to 6.2% of GDP in 2008-09

Ø Fiscal deficit at 6.8% of GDP for FY10 v/s target of 5.5%

Ø Ensure 4% agriculture growth, sustain momentum in exports

Ø Growth rate target at 9% pa , GDP growth has sipped to 6.7% in FY09

Ø Share of trade doubled to 38.9% ; Share of goods and services at 37%

Ø Rs.10.21lakh crore expenditure in FY10;

Ø Expenditure for the first time has crossed Rs.10 lakh core

Ø FY10 Plan expenditure up 34%; interest payment is a third of the total expenditure

Ø FY10 defence spend at Rs.1.42 lakh core