Union budget 2009-10

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Views on the Indian Government's Budget for 2009-2010

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Union budget 2009-10

  1. 1. Union Budget 2009-10<br />
  2. 2. The “Budget” simplified<br />J.Karthikeyan<br />Director – Research & Consulting<br />Finerva Financial Solutions Pvt Ltd<br />
  3. 3. The Menu!<br /><ul><li>Jargon, De-Jargonised
  4. 4. Fiscal Policy
  5. 5. Key Features of Budget 2009-10
  6. 6. Effects on the Indian Economy: A Perspective</li></li></ul><li><ul><li>The budget of a government is a summary or plan of the intended revenues and expenditures of that government.
  7. 7. Annual report of the Government’s performance</li></li></ul><li>Components of Budget<br /><ul><li>Revenue receipts
  8. 8. Capital receipts
  9. 9. Revenue expenditure
  10. 10. Capital expenditure</li></li></ul><li>Revenue Receipts<br /><ul><li>Receipts: From taxes and other sources
  11. 11. Taxes: Income tax, Corporate Tax, Indirect taxes etc
  12. 12. Interest on lending, dividends from PSU’s, fees etc</li></li></ul><li>Revenue Expenditure<br /><ul><li>Day to day running of the government
  13. 13. “anything that does not result in creation of assets.</li></li></ul><li>Capital Budget<br />Capital receipts: Loans, T-bills, Divestment income, Provident Fund<br />Capital Expenses: On assets. Land, Machinery, Loans to states<br />
  14. 14. Taxes<br />
  15. 15. Taxes<br />Meaning : Non quid pro quo transfer of private <br />income to public coffers by means of taxes.<br />1. Direct taxes- Corporate tax, Div. Distribution Tax, Personal Income Tax, Fringe Benefit taxes, Banking Cash Transaction Tax<br />2. Indirect taxes- Central Sales Tax, Customs, Service Tax, excise duty<br />
  16. 16. Plan and Non Plan<br />Plan: Discussion between Ministries and Planning Commission<br />Non-Plan: Comes from Interest payments, subsidies, salaries, social services, defense spending ,etc., <br />
  17. 17. Fiscal Policy-Meaning<br />The word fisc means ‘state treasury’ and fiscal policy <br />Refers to policy concerning the use of ‘state treasury’ or the <br />govt. finances to achieve the macroeconomic goals.<br />“any decision to change the level, composition or timing of <br />govt. expenditure or to vary the burden ,the structure or <br />frequency of the tax payment is fiscal policy.”G.K. Shaw<br />
  18. 18. Fiscal Policy And Macroeconomic Goals<br />Economic Growth: By creating conditions for increase in savings & investment.<br />Employment: By encouraging the use of labour-absorbing technology<br />
  19. 19. Contd..<br />Stabilization: fight with depressionary trends and booming (overheating) indications in the economy<br />Economic Equality: By reducing the income and wealth gaps between the rich and poor.<br />Price stability: employed to contain inflationary and deflationary tendencies in the economy.<br />
  20. 20. Budgetary surplus and deficit<br /><ul><li>“A budget is a detailed plan of operations for some specific future period”
  21. 21. Keeping budget balanced (R=E) or deficit (R<E) or surplus (R>E) as a matter of policy is itself a fiscal instrument.</li></li></ul><li>Numbers 2009-10<br />Fiscal deficit 6.5% of GDP<br />Expenditure: Rs 10 Lakh Crore<br />Plan Expenditure- up by 34%<br />Non Plan Outlay- up by 37 %<br />Tax receipts: 6.41 lakh crore<br />Fiscal Deficit – 35.9% of the expenditure.<br />
  22. 22. Effects on the Economy<br />Interest rates<br />PSU Disinvestment<br />Debt<br />Industry<br />
  23. 23. Industry wise affects<br />
  24. 24. Citizens’ Angle on Budget 2009-10 <br />
  25. 25. Personal Finance Today<br />Predominantly Tax Planning<br />Investment in Section 80C Instruments and taking a Housing Loan<br />Goal Based Planning hardly heard of<br />Budget awaited for tax benefits<br />
  26. 26. Personal Finance - Scope<br />Goal Term <br />Long Term<br />Short Term<br />Mid Term<br />
  27. 27. Contd..<br />Cash Flow<br />Investment<br />Debt<br />Income Tax<br />Asset Management<br />Pension<br />Estate Planning<br />
  28. 28. Budget Angle for Students<br />Student Loans Interest get tax benefit under Section 80E for all types of higher education. <br />
  29. 29. Budget Angle for Salaried Class<br />Marginal Benefit from Higher Slab for Taxation<br />Rs.10,000 increase in Base Slab (Rs.15,000 for senior citizens > 65 years of age)<br />Benefit to those earning >Rs.10 lakhs from surcharge removal<br />New Pension Scheme to remain in the EET regime. But tax benefits on its income and transactions are a plus.<br />
  30. 30. Budget Angle for Salaried Class<br />Wealth Tax limit raised to Rs.30 lakhs from Rs.15 lakhs<br />Section 80C Instruments remain unchanged<br />ULIPs and ELSS for the youth most beneficial <br />Stay away from Housing Loan for tax benefit purpose; as it creates negative cash flow. <br />Retired Defence personnel get benefits under One Rank One Pension Scheme.<br />
  31. 31. Budget Angle for Salaried Class<br />Fringe Benefit Tax removed. Better and Meaningful perks can be expected.<br />
  32. 32. Budget Angle for Small Business & Entrepreneurs<br />Presumptive Tax Scheme for turnover <Rs.40 lakhs.<br />Income @8%<br />Exempt from maintaining books of accounts<br />Tax Pay-Out only at the time of Tax Returns Filing<br />
  33. 33. The Take Aways<br />Budget alone should not influence Personal Finance Decisions<br />Goal Based Planning and Implementation required<br />Maximise Benefits from Tax Breaks; But don’t Break Yourselves Doing It<br />Wealth Creation ≠ Tax Planning<br />

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