by

Rajesh Goyal

Union Finance Minister, Mr P Chidambaram presented the Budget for the FY 2013-14 on 28th February, 2013.   Some of the major highlights of the said budget are summed up below.  I will be providing a separate more detailed  article covering proposal wise impact of the Union Budget, which will be more useful for forthcoming exams and understanding the overall impact of the budget   (Click Here : Union Budget 2013-14 Diagnosed ) : -

(A) Direct Tax - Personal Tax  :  There is no change in the Slabs and Rates for personal income tax, except two minor adjustments.  (i) Tax credit of Rs2,000/- will be provided to all those persons who have income upto Rs 5 lakh.  According to FM, it will provide relief to 1.8 crore people;  (ii) It is proposed to introduce 10% surcharge on rich tax payers with annual income of more than Rs 1 crore a year.

(B) Direct Taxs - others :  (i) To increase surcharge of 10% on domestic companies with annual income of more than Rs 10 crores; (ii) For foreign companies, who pay the higher rate of corporate tax, the surcharge will increase from 2% to 5%;   (iii) To continue 15% tax concession on dividend received by India companies from foreign units for one more year;  (iv) Proposal to impose withholding tax of 20% on profit distribution to shareholders;

(C) Service Tax  and Transaction tax etc.: (i) Amnesty on service tax non compliance from 2007. (ii) Commodities Transaction Tax (CTT) on non-agriculture future contracts proposed at 0.01%; (iii) Reduce the Securities Transaction Tax on equity futures from 0.017% to only 0.01%;

(D) Fiscal Deficit : India is faced with huge fiscal deficit and thus in last few months GoI has tried to rationalise expenditure.   (i) For FY 2012-13, the Fiscal Deficit is seen at 5.2% of GDP;  (ii) For FY 2013-14, it is pegged at 4.8% of GDP.

(E) Borrowings : (a) Gross market borrowing seen at Rs 6.29 trillion in 2013-14;  (ii) Net market borrowing seen at Rs4.84 trillion in 2013-14;  (iii) Proposed to buy back Rs 500 billion rupees worth of bonds in 2013-14;

(F) Subsidies : (a) In 2013-14, major subsidies bill is estimated to be at Rs 2.48 trillion (up from Rs 1.82 trillion); (b) Petroleum subsidy seen at Rs 650 billion in 2013-14; (c) Estimated Rs 9000 billion spending on food subsidies in 2013-14;

(G) Spendings : (a) Total budget expenditure seen at Rs 16.65 trillion in 2013-14  -  out of which Rs 11.10 trillion to be Non Plan expenditure  and Rs5.55 trillion to be Plan expenditure;

(H) Revenue : Expects Rs 133 billion through direct tax proposals in 2013-14, and Rs 47 billion through indirect tax proposals.  There is a target f Rs 558.14 billion from stake sale in state run firms during the FY. There is expectations of revenue of Rs 408.5 billion from airwave surchage, auction of telecom spectrum, licence fee during the year.

I) Current Account Deficit : According to FM this is the greatest worry.  There is need of more than $7500 crore  this year and next year to fund deficit;

(J) Banking : (a) To provide Rs 14000 crores capital infusion in state run banks in 2013-14; (b) Woman bank with a initial capital of Rs 1000 crores;  (c) ATM at all branches of PS Banks by 31/03/2014

(K) POWER AND ENERGY SECTOR :  (a)  Zero customs duty for electrical plants and machinery;  (b)  Move to revenue-sharing from profit-sharing policy in oil and gas sector;  (c)  To equalise duties on steam and bituminous coal to 2 point customs duty and 2 point cvd (countervailing duty)

(L) FOREIGN TRADE :  (a) To cut duty on exports of precious and semi-precious stones to 2 point from 10 point; (b)  No duty on import of ships, vessels

(M) Inflation : It is a worrying factor.  Will take steps to augment supply side;

(N)  : DEFENCE :  To allocate Rs. 2.03 trillion rupees to defence in 2013-14

(O) AGRICULTURE :  To allocate  Rs 801.94 billion to rural development in 2013-14;  Plan to allocate  Rs 270.49 billion for agriculture in 2013-14

(P) Corporate Sector and Capital Market : (a) proposed to issue inflation indexed bonds; (b) Prposed capital allowance of 15% to comapnies on investment of more than Rs. 1 billion.; (c) Insurance, Provident Funds can trade directly in debt segments of stock exchanges; (d) FIIs can use investments in corporate, government bonds as collateral to meet margin requirements; (e) Investors with less than 10% stake in a company will be regarded as FII, more than 10% stake as FDI ; (f) Stock exchange regulator to simply KYC norms for foreign portfolio investors  (g) The recommendaions of financial sector legislative reforms commission to be quickly implemented