Union Budget 2014 e-book


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Union Budget 2014 e-book

  1. 1. “Compared to expectations, FM has delivered a mouse”Key TakeawaysSurcharge of 10 percent on those with a taxableincome of over Rs 1 crore. Surcharge oncorporates with income over Rs 10 crore raised to10 percent from 5 percent.Additional investment allowance of 15 per cent(over and above depreciation) for corporatesinvesting over Rs 100 crore in plant andmachinery.Amnesty scheme for those who have not beenpaying service tax. Of the 17 lakh service taxassesses, only 7 lakh have been paying taxes.Government to borrow Rs 6.3 lakh crore from themarket, while most players were expecting thisfigure to be around Rs 5.2 lakh crore.TDS of 1 percent on sale of immovable propertyvalued over Rs 50 lakh.Rupee denominated bonds introduced for NRIs toattract investments from this segment.Fiscal deficit for FY13 at 5.2 percent and FY14fiscal deficit seen at 4.8 percent.Commodity transaction tax of 0.01 percent onnon-agricultural commodities.For full article, Click here
  2. 2. How the Sensex moved to major announcements on Budget DaySensex at open: 19264.80, up 112.39 points Sensex at 11 am: FM begins Budgetspeech. 19286.72, up 134.31 points.Sensex at 11.46am: Extra investment allowanceof 15% for corporates investing over Rs 100crore in plant and machinery.Sensex at 12pm: Entry norms for FIIs to beeased further.Sensex at 12.11pm: Additional tax deduction ofRs 1 lakh for first time buyers of houses valuedup to Rs 25 lakhSensex at 12.16pm: Fiscal deficit for FY13at 5.2 percent and FY14 fiscal deficit seen at4.8 percent.Sensex at 12.21pm: Super Rich Tax - Surchargeof 10 percent on those with a taxable income ofover Rs 1 croreSensex at 12.30pm: TDS of 1 percent onsale of immovable property valued over Rs50 lakh.Sensex at 12.43pm: Government to borrow Rs6.3 lakh crore from the market.Sensex at 01.18pm: Disappointment fromthe Budget led to sell-off.Sensex at 02.59pm: Fresh bout of selling driftsSensex to fresh 3-month lowSensex at 3.30pm: Highest ever turnover ofRs 4.39 lakh crore, 18861.54, down 290 ptsMarket Commentary: Sensex nosedives 290 pts as Budget 2013 flopsTop Gainers I Top Losers I Most Active I Commodities I Global Indices
  3. 3. Sector: Auto Sector: FMCG Sector: Oil & GasExpectationsExtension of existing sunsetclause under section 80-IA.Exemption of applicability ofMAT.Re-introduction of taxdeduction under section 80-CCF for purchase of infrabonds.ExpectationsIncrease in excise duty oncigarettes.Expect the general excise dutyrate to be maintained at 12%.Clarity on implementation andtimelines of GST will bepositive.ExpectationsNELP blocks will be cleared.Shale gas exploration policy tobe formulated.New oil and gas explorationpolicy will be formulated onrevenue sharing.ProposalsExcise duty on SUVs up from27% to 30%.Increase in royalty tax from10% to 25%.Higher allocation to JNNURMleading to additional demand of10,000 buses augurs well forall commercial vehiclemanufacturers.ProposalsSpecific Excise Duty oncigarettes increased by 18%.Tax on royalty increased from10% to 25%.ProposalsImport duty on crude oil mightbe re-imposed.Cess on crude oil productionmight be increased fromcurrent levels of Rs 4,500/MT.Removal of 5% customs dutyon LNG and natural gas.ImpactNegative for M&M and TataMotors. Higher allocation toJNNURM positive for allcommercial vehiclemanufacturers.ImpactCigarette companies will passon the increase to thecustomers. This couldmarginally impact volumegrowth.ImpactPositive for the upstreamcompanies like Reliance,ONGC.
  4. 4. UDAY KOTAKKotak Mahindra BankSAMIR ARORAHelios CapitalMADHU KELAReliance CapitalThe Finance Minister has lived upto his promise on fiscal deficit.The Budget 2013-14 is good forcapital markets and investments.The Budget 2013-14 turned out tobe unexciting for equity markets.No direction changing movesannounced to revive markets.The Budget is encouraging as FMhas not thrown any negativesurprises. Fiscal deficit projectionof 4.8% looks credible.PAWAN GOENKAM&MKOUSHIK CHATTERJEETata SteelADI GODREJGodrej IndustriesDont agree with excise duty hikeon SUVs. Diesel tax not beingimplemented is good news. Iwould rate budget as 7.5/10.The focus would be on how moreefficiently coal can be mined. Ouraim is to increase mining withavailable reserves.FY14 Budget is a growth orientedone and the emphasis remains oninclusiveness. Expenditure andexecution is important.
  5. 5. ITC Coal India ONGCProposal: SED on cigaretteshiked by 18%. Negative for ITC.Proposal: To encourage PPPprojects for coal. Positive forCoal India.Proposal: To announce policyon Shale gas based on revenuesharing, Blocked NELP blockswill be cleared. Positive forReliance Inds, ONGC.ICICI Bank Tata Motors DLFProposal: 4% farm loan schemeextended to private sector banks.Negative for private sectorbanks.Proposal: Excise duty on SUVupped to 30% from 27. Negativefor M&M, Tata Motors.Proposal: House loans up to Rs25 lakh will be allowed anadditional deduction of interest ofRs 1 lakh. Positive for realty.SBI Sun Pharma JainIrrigationProposal: To provide Rs 14,000crore for public sector banksrecapitalisation. All Women’sBank to be set up via publicsector. Positive for public sectorbanks.Proposal: To allot Rs 37333crore for healthcare, familywelfare in FY14: Positive forpharma stocks.Proposal: Rs 27,049 croreallocated to Ministry ofAgriculture, up 22%. Positive forJain Irrigation, Monsanto,fertilisers and pesticides.
  6. 6. EducompSolutionsNTPC CenturyTextilesProposal: Rs 65,877 Cr hasbeen allocated to education, up17% from FY13. Positive foreducation stocks.Proposal: Extension of sunsetclause for profit-linked incentiveby one year: Positive for thepower sector.Proposal: Propose technologyupgrade scheme for textile sectorto Rs 2400 crore in FY14.Positive for Century Textiles,Alok, Arvind.SuzlonEnergySKS Micro SadbhavEngineeringProposal: Higher allocation forwind energy. Positive for Suzlon.Proposal: Bank correspondentscan sell micro finance products.Positive for SKS Micro.Proposal: 3000 km of roadprojects will be awarded in first 6months of FY14. Positive forSadbhav Engineering,construction companies.TriveniEngineeringMoschip SpecialityRestaurantsProposal: Allocation of Rs15,260 crore towards cleandrinking water & sanitation.Positive for Triveni Engineering,Va Tech Wabag.Proposal: No custom duty forplant, machinery for semi-conductors. Positive for Moschip,SPEL.Proposal: Finance Minister toimpose service tax on all ACrestaurants. Negative forSpeciality Restaurants.
  7. 7. Super Rich Tax: 10% Surcharge on income above Rs 1 crore.Tax credit of Rs 2000 for income between Rs 2-5 lakh.MALE: No change in tax slabs.TAX RATE NOW POST BUDGETNil 2 lakh 2 lakh10% 2-5 Lakh 2-5 Lakh20% 5-10 lakh 5-10 lakh30% Above 10 lakh Above 10 lakhFEMALE: No change in tax slabs.TAX RATE NOW POST BUDGETNil 2 lakh 2 lakh10% 2-5 lakh 2-5 lakh20% 5-10 lakh 5-10 lakh30% Above 10 lakh Above 10 lakhSENIOR CITIZEN: No change in tax slabs.TAX RATE NOW POST BUDGETNil 2.5 lakh 2.5 lakh10% 2.5-5 lakh 2.5-5 lakh20% 5-10 lakh 5-10 lakh30% Above 10 lakh Above 10 lakhVERY SENIOR CITIZEN: No change in tax slabs.TAX RATE NOW POST BUDGETNil 5 lakh 5 lakh20% 5-10 lakh 5-10 lakh30% Above 10 lakh Above 10 lakhClick here to use our tax calculator to find out your newtax structure.
  8. 8. Cigarettes SUVsSet Top Boxes Mobile phones (GSM)Yachts MarbleMP3 Players Passenger carsSilk MUVSDiamonds Imported JewelleryLeather Goods Electrical plantsReadymade Garments Handmade carpets
  9. 9. GDP Trend & ForecastKey TakeawaysThe government expects GDP to grow in 6.1-6.7 percent range next year.Wholesale price inflation is seen between 6.2-6.6 percent by March this year.Revival of investment in infrastructure is one of the key challenges before thegovernment.The Survey based on developments of FY13, draws out a rather cautious picture of theyear gone by, emphasizing the continued need for reforms in the coming months with anoutlook for the next fiscal pointing towards gradual improvements.9.6%9.3%6.7%8.6%9.3%6.2%5.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13GDP Growth Rate%
  10. 10. Fiscal DeficitKey TakeawaysThe Government will be able to achieve its fiscal deficit target of 5.3 percent for thecurrent year.Revenue collection target for FY13 is likely to be significantly below target.The Survey sees oil subsidies as a key fiscal risk, and that the government needs toraise diesel and LPG prices in line with global rates.There is limited room to grow exports, given adverse local and global factorsThe only way current account deficit can be kept in check is by reducing imports of goldand oil.3.3%2.5%6.0%6.5%4.8%5.7%5.3%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13Fiscal Deficit as % of GDP
  11. 11. Current Account Deficit Foreign Exchange ReservesAverage Exchange Rate Savings Rate as % of GDPInflation Rate FDI & FII Flows-2.8 -2.8-4.2-4.6-5-4-3-2-10% to GDP279.1304.8294.4 295.5260270280290300310Reserves(in USD Bn)47.4445.5647.9254.4739424548515457USDINR32.033.7 34.030.829303132333435Savings Rate % FII (USD Bn)
  12. 12. “No hike in passenger fares; freight revenues eyed”Key TakeawaysNo hike in passenger fares. Railways propose no hike in Reservation fee,tatkal charge.Freight charges on diesel, LPG, steel, iron ore,cement, urea up by 5.8%.Railways to launch 67 new express trains, 26new passenger trains.Railways to introduce AC coaches for Mumbaisuburban network in FY14.New system to enable booking of 7,200 ticketsper minute versus 2,000 now.FY13 railway losses seen at Rs 24,600 croreversus Rs 22,500 crore year ago.Railways to raise Rs 95,000 crore for the next 4years.Rail Budget – Full Speech I Analysis I Rail Budget Highlights – Full article
  13. 13. Coal India Bhel ACCProposal: Rs 4,000 crore hasbeen allotted for coal mineconnectivity projects.Proposal: Railways to set upelectromotive unit in Rajasthanin joint venture with BHEL.Proposal: Freight rates to goup by 5.8%, Negative forcement, steel, iron ore andurea companies.TitagarhWagonsTexmaco Rail GammonInfraProposal: To introduce ACcoaches for Mumbai suburbancoaches. Positive for TitagrahWagons, Texmaco Rail.Proposal: Railways to set upcoach manufacturing facility atHaryana; Positive forTexmaco, Titagarh, BEML.Proposal: Rs 9,000 crore hasbeen allocated for port andmine connectivity. Positive forGammon Infra, L&T, NCC.Suzlon KECInternationalSiemensProposal: Railways to set up75 MW windmill plants.Proposal: Railways to set upequipment signaling plant atChandigarh via PPP.Proposal: Railways tocomplete electrification of1,200 km.VerdictRailway Budget turned out to be a non-event. Railway Minister P K Bansal failed to deliver some bigticket announcements. Major railway stocks like Kalindee Rail, Kernex, Titagarh Wagons, Texmaco Railsaw a huge sell-off in trade.
  14. 14. Investors to face some small changes following Budget- Arnav Pandya, Financial PlannerInvestors will witness some incremental changes as far as theirinvestment plans are concerned in the coming financial year followingthe announcement of the Union Budget 2013-14. These will notmean a major deviation from their existing plans though they will beable to make use of some additional options in their investment mix.One bit of good news is that the investors will have a choice of taxfree infrastructure bonds for one more year as there has been a permission given for the issuance ofthese bonds. The individual can choose this as a long term option for parking their funds for 10 to 15years and this will not have an adverse tax impact because of the fact that the income will be tax free intheir hands.The Rajiv Gandhi Equity Savings Scheme (RGESS) has also witnessed some small changes wherein theincome limit for being eligible for the scheme has been raised to Rs 12 lakh. At the same time the benefitcan be claimed over a period of three years as compared to the one year time period that exists currentlywhich means that the investor can actually phase out their investments to suit their requirements. Thechoice of instruments in the scheme has also been increased as equity oriented funds have beenincluded in the eligible list of investments which will help the investor to choose a fund as per their liking.On the house property front there is an attempt to encourage first time investors through a higherdeduction that will be available for repayment of interest on housing loans. For a first time buyer if thevalue of the property is Rs 40 lakh or less and if the housing loan is Rs 25 lakh or lower then an additionaldeduction of Rs 1 lakh would be available over and above the existing Rs 1.5 lakh deduction. Once againthis can be easily claimed because of the fact that is can be taken over a two year time period.However the provision for a tax deducted at source at the time of sale of the house property if the value ofthis is Rs 50 lakh or higher would be a negative. This would increase the burden on the individual in termsof compliance and effort in deducting and depositing the tax with the government.There will also be a better option available for those who want to protect their real rate of return becausethere will be the introduction of inflation linked bonds and inflation linked National Savings Certificates.Conservative investors as well as senior citizens can make use of this opportunity when it becomesavailable. This will ensure that the interest rates earned by the investor moves along with the changes inthe overall interest rates and hence there is protection in times when inflation rises in the economy.
  15. 15. Why Chidus Lo-Cal budget is a flop-show-R. Jagannathan Editor, Firstpost at Network 18If Palaniappan Chidambaram’s eighth Budget has not set themarkets on fire, it can be easily explained: his first goal wasto avoid doing damage to investor confidence, which is whathis predecessor managed to do. And unlike his own 2008budget, which set the stage for the economy’s long-termslide and made inflation intractable, Budget 2013-14 hastaken the middle path of low ambition and low risk.There is thus nothing in it to excite anybody, not even hisown party. He has delivered on his promise of providing a “responsible” budget, which themarkets misunderstood to mean something that will send the adrenalin pumping. That was noton, and the FM restrained himself from any dose of excess populism.A lo-calorie budget is not meant to energise anybody. It is meant to get the fat down.If the markets are moping right now, with the Sensex and Nifty heading south, it’s becauseChidambaram has already given them enough room for optimism before the budget. The marketswanted more of the same, but he could not oblige.A lo-calorie budget is not meant to energise anybody. It is meant to get the fat down.Before we rush to condole those left out of accessing the meagre basket of goodies, it is worthsummarising the core proposals made in the budget. Chidambaram has raised Rs 18,000 croreof additional revenue through direct and indirect taxes, the former mostly by taxing companiesmore. Excise and customs remain more or less the same, with no changes in base rates.The concessions, both to populism and the middle classes, are minor: there is a token Rs 10,000crore additional provision for Sonia Gandhi’s Food Security Bill, some very small personal incometax reliefs, and an additional deduction of Rs 1 lakh for interest paid on first home loans (over andabove existing Rs 1.5 lakh). Plus there are promises on new savings instruments sold throughpost offices that will be inflation-indexed. But these will not be more than sideshows to the mainavenues currently available for savings.For full article, Click here
  16. 16. Budget: Chidambaram plays safe; market disappointed-Santosh Nair Editor, Moneycontrol at Network 18Much was expected of Finance Minister P Chidambaram in Budget2013 considering that he had marketed it aggressively to foreigninstitutional investors in the last few ways. To be fair, he hasdelivered on two key parameters: fiscal consolidation and a stabletax regime. But what the market was hoping from the architect of theDream Budget was some kind of a road map on how growth and theinvestment cycle could be revived in the near future. Also, on howsubsidies could be meaningfully lowered. And that is where he appears to have fallen short. It was nevereasy going to be raise taxes in a slowing economy, and to that extent, the status quo on key tax ratesshould come as a relief even if was only to be expected. The only other way out for the Finance Ministerhas been to cut back on expenditure, which has been doing aggressively over the past few months. Butinvestors and the industry are questioning the wisdom of achieving fiscal targets through cost-cutting. At atime when private investments have dried up, a cutback in government spending could further crimpgrowth near term. While he has promised on a fiscal deficit target of 4.8 percent for next year, how heachieves that will be the key. The current year’s target was achieved by trimming Plan Expenditure byaround Rs 1 lakh crore.On the positive side, the FM has not slashed Plan Expenditure for FY14 in a big way as many had feared.The estimate of Rs 5.5 lakh crore is about 29 percent higher than the revised estimate of Rs 4.29 lakhcrore for FY13.Additional provision for the Food Security Bill at Rs 10,000 crore was much lower than what the markethad feared. The subsidy bill for fuel, fertiliser and food together for FY14 is estimated at Rs 2.31 lakhcrore, lower than the revised subsidy bill of Rs 2.57 lakh crore for FY13. But market may take the subsidyestimate for FY14 with a pinch of salt, considering that the revised estimate for FY13 was about 35percent higher than the initial estimate.The FM said that current account deficit was a bigger problem than fiscal deficit. But the Budget did nothave anything specific on how oil and gold imports will be curbed.There has been a sharp increase (46 percent) in allocation to the Rural Development ministry, and thatwas only to be expected considering that general elections are due in barely a year. The FMCG industrymust be hoping that a pickup in rural consumption should add to their bottomlines.For full article, Click here
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