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Analysis of union budget 2012
1. ANALYSIS OF UNION BUDGET 2012
Harsh Tiwari
MBA (GEN)”A”
Roll no:-43
The Union Budget of 2012, pronounced on 16 th March, 2012 by the finance
minister Pranab Mukherjee. He presented his 7th union budget in parliament.
The finance minister has increased the tax slabs and given relief to the common
man. Especially for the people in the below 10 lakh slab. The budget has provided
the biggest news for those people who earn between 8 lakh and 10 lakh, now they
have moved from the slab of 30% to the new slab of 20%. Now the minimum tax
slab has been increased form Rs.180000/- to Rs.200000/- .Here is some of the key
points regarding tax issues:-
Income up to Rs.2 lakh -0
Rs.2- 5 lakh - 10%
Rs.5- 10 lakh- 20%
Above Rs.10 lakh -30%.
• It should also be noticed that there is no change in corporate tax rate.
• The copyright relating to cinematography in the film industry has
exempted form service tax.
• 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.
• Securities Transaction Tax (STT) reduced from 0.125 per cent to 0.1 per
cent.
• Standard excise duty hiked to 12%.
• Excise duty on big cars hiked to 24%.
• Import of equipment for fertilizer plants fully exempt from customs duty
for three years.
• Excise duty on handmade and semi-mechanised matches reduced from 10
to 6 per cent.
• Customs duty on bicycles and parts increased.
• Oil cess on domestic crude raised to Rs 4,500 per ton from Rs 2,500 per
ton.
• Import duty on large cars, MUVs, SUVs enhanced.
2. The Union budget pledged to cut fiscal deficit from 5.9% this year to 5.1% next
year. The budget has also aimed to raise the GDP growth to 7.6% .The finance
minister has tried to please all the sectors of the economy. The budget has affected
all the sectors either positively or negatively. The first time external commercial
borrowing (ECB) has been permitted in India. This will help in development of
national highways, and power generation and would help resolve critical funding
issues for the sector. The capital markets will also get a boost form the reduction
in the security transaction tax (STT) and incentives for the small investors.
The rise in the excise duty will affect the pocket of consumers because this will be
passed on the consumers. High excise duty will raise prices of the products from
cars to cigarettes. This could increase the inflation level. Now consumes have to
pay at least 2% more on almost every services. The tax will also be imposed on all
the cash transactions for buying the gold. The seller will collect 1% tax from the
buyer if the deal exceeds Rs. 2 lakh. Tax has to be paid even if the seller is not a
trader or a jeweller.
Conclusion:-
The finance minister had to juggle a lot of conflicting issues as he
set out to present the union budget for the year. But this budget will affect the
wallet of common man very high. Raising taxes in the budget will add to inflation.
The finance minister has tried to cut the fiscal deficit. While presenting the Budget
for 2012-13, the Finance Minister Pranab Mukherjee will have to do a balancing
act, by raising taxes on some items such as cars, consumer goods, Gold, Diamond
and cement to raise revenue and give incentives to boost business confidence
including match box, Soya products, iodized salt LED, and Solar devices. The
budget will affect some sectors in following ways:-
• Education:- a Credit Guarantee Fund will be set up to ensure better
flow of credit to the students. For 2012-13, Rs 25,555 crore provided
for RTE-SSA representing an increase of 21.7 per cent over 2011-12.
• Housing sector:-ECB would be allowed for low cost housing
projects, and the credit guarantee trust fund will also be set up.
• Infrastructure:-The budget has allowed tax free bonds of Rs.60000
crore for financing the infrastructure projects.
• Power and coal:-The budget has put a positive impact on power
sector with allowing ECB. Oil and gas sector are negatively
impacted The Budget has also directed Coal India to sign fuel
supply agreements with power projects to give a boost to energy
generation.
• Financial sector:-The budget has allowed Rajiv Gandhi Equity
saving scheme for income tax deduction of 50% to new retail
investors.
The finance minister has also concentrated to raise the fund from disinvestment
police. Rs.30000 crore would be raised from the disinvestment.
3. Thus we can say this is a reasonable and pragmatic budget which is
unlikely to have a major impact on markets in either direction. We will see healthy
investment inflows, with inflation.