Friday, 16 March 2012

Union Budget 2012-13 : Highlights

Union Budget 2012 - highlights:

Highlights of the Budget as it was presented.

The Finance Minister Mr. Pranab Mukherjee has outlined the country’s future with his Budget speech and presentation on March 16, 2012. What does the future hold for the nation? A lot of proposed reforms, not many investor-friendly moves, minor increase in IT exemption limit for personal income tax – here they are all.

®    Good news for investors -  New equity scheme aiming to reduce tax on short-term capital gains for new investors!
®    Use of PAN in both direct and indirect taxes as a preparation towards GST rollout. Will improve regulation.
®    Fund of around Rs. 15,800 crore set aside for capitalisation of PSU Banks. With bad loans lent to those like Kingfisher, much needed breather for banks, isn't it?
®    Boost to capital markets? Investment of Rs 50,000/- a year in equities with three year lock-in period will be exempt from tax.
®    Withholding tax on power, airlines, road and brides,ports and shipyard, fertilisers, dams and affordable houses lowered to 5% from 20% for 3 years.
®    Does the Finance Minister's speech indicate a probable proposal for FDI in Airlines? Hope hope hope :)
®    Direct import of aviation fuel allowed. Aviation fuel makes up about 40% of an airline's operating expenses plus the need to pay exorbitant sales tax (around 30%) makes import cheaper.
®    To fund the growing medium, small & micro enterprises industry in India, a Rs. 5,000 crore opportunity fund channeled through SIDBI. Will the MSME sector at last be considered a priority-lending area?
®    More respite for the likes of Vijay Mallya? External Commercial Borrowings (ECB) to the extent of $ 1 billion to be allowed for aviation sector for next year.
®    Existing 1% interest subvention scheme extended: 1 per cent on housing loans extended to housing loan up to Rs 15 lakh, where the cost of the house does not exceed Rs 25 lakh.
®    Rs 10,000 crore to NABARD for refinancing regional rural banks. Much needed capital subsidy and refinance.
®    Interest subsidy for women Self Help Groups up to Rs 3 lakh at 7 per cent; 3 percent more for those that repay promptly.
®    Credit Guarantee Fund for loans to students - In case there happens to be a default on the education loan, the respective bank can dip into this CGF pool instead of jus adding up to the Non-Performing Assets' stack..
®    Dedicated cell to track black money to be setup.
®    NO CHANGE in corporate tax rates
®    Change in personal income tax exemption limits
o       Income up to Rs 2 lakh - Nil
o       Rs 2-5 lakh - 10%;
o       Rs 5-10 lakh - 20%
o       Rs 10 lakh and above - 30%
®    Dividend repatriation for foreign companies extended by a year
®    Exemption on interest from savings bank accounts up to Rs 10,000
®    Securities Transaction Tax reduced to 0.15% - No significant dent to Government's coffers as already, on almost all transactions, short-term and long-term gains tax is imposed.
®    Service Tax rates go up by 2% from 10% to 12%. Education sector, however, is exempt.
®    Boost to retail stocks as FM assures maximum efforts to bring in multi-brand FDI
®    Venture capital funds to be allowed to invest across sectors
®    Customs duty on gold and platinum doubled to 4%, for jewellery doubled to 10%.  Negative impact - increase in customs duty will only adversely affect cost of manufactured jewelry.
®    Cascading effect of dividend distribution tax removed – to benefit Indian MNCs
®    Cars, bicycles, tobacco products to cost more.
®    Compulsory reporting requirement for companies with assets abroad.
®    Entertainment business gets service tax exemption on copyright and on recording
®    LNG exempted from import duty. With soaring crude oil and coal prices, shift to natural gas is inevitable, and concessions are welcome relief for consumers of various sectors.
®    Aircraft tyres exempted from basic Customs and excise duty.
®    12% general excise duty and service tax – means you pay more for household items
®    Tax exemption of up to Rs 5,000/- for health insurance for annual preventive health checkup.
®    Capital gains tax on residential property exempted if sale proceeds used for SMEs.
®    Corporates - IPO equity offer above Rs 10 crore will have to be made electronically in capital market reforms.

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