Your Blogging Tips: Budget Highlights: Key Points from Budget 2012

Indian Budget 2012-13 has been provided today (i.e. 16-Mar-2012) by our Finance Minister – Pranab Mukherjee. I have provided Budget 2012 Highlights, its effects, reactions of various communities & final verdict. Also, check out Pranab Mukherjee in Recorded Live Action during his speech in the Parliament.

Key Budget 2012 Highlights

		Budget Paper – Key Highlights – sector by sector in bullet points.

Actual Budget Paper presented in Parliament by Hon. Pranab Mukherjee

A. New Tax Slabs: 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. Greater news for those earning between 8 Lakh and 10 lakh, they move from a slab of 30% to a new slab of 20%. The minimum tax slab has been increased from Rs.180000/- to Rs. 200000/-.

Tax Slabs Range	% Tax Rate
Upto Rs. 200,000	Exemption
Rs. 200,000 to 500,000	10%
Rs. 500,001 to 10,00,000	20%
Above Rs. 10,00,001	30%

B. Exemption to Homeowners: The homeowners of apartments can enjoy tax exemption of Rs. 5000/. Spent on maintenance. This exemption level has been increased from Rs.3000/- to Rs. 5000/-.

C. Capital Gains:

The Capital Gains Tax will not be applicable for people who use the amount generated from the sale of their houses as an equity investment in small and medium businesses.
Reduction in securities transaction tax by 20% on cash delivery transactions to 0.01%

D. Health Exemption: Exemption permitted upto Rs. 5,000/- for expenses incurred on Preventive Health Check up

E. Income from Other Sources: Exemption of Rs. 10,000 on interest earned from Savings Bank deposits for people with income upto Rs 5 Lakh

F. Invest in Equity and get tax exemption - Rajiv Gandhi Equity Saving Scheme will get 50% income tax deduction. This will be applicable only to the New Retail Investors investing directly into equity up to Rs. 50,000/, with a lock in period of three years. The annual income of the investor should be less than Rs. 10,00,000/-. Changes have been made in the IPO guidelines in order to ensure the participation from small towns.

G. Profits & Gains from Business/Profession:

Main points for Business- Service tax up from 10% to 12 %
Standard rate of excise duty to be raised from 10% to 12%
No change proposed in the peak rate of customs duty of 10% on non-agricultural goods.
Introduction of negative service tax list to widen service tax net.
Viability Gap Funding- The FM has proposed to extend the Viability Gap Funding to improve Capital Infusion in irrigation, dams, Fertilizer Sector. Fertilizer, oil and Gas, LNG, Pipelines, fixed Network for telecom etc. will help improve these sectors.
Flight Charges to fall and services to go up- ECB for the welfare of the Airline Industry for a year is limited to be 1 billion USD and allow 49% from foreign airlines. This will make travel tickets cheaper and passengers can expect better services.
Agriculture: Agriculture will continue to be the priority Sector. The FM has announced 18% increase in outlay for agriculture. The Agriculture credit is up by one lakh to Rs. 5.75 crores. The food prices are expected to ease over a long term.
Small Businesses likely to receive benefits: Entrepreneurs, especially the SMB sectors who have started SBM exchanges in Mumbai are to be benefited. The FM has forced the government to source up to 20% of its purchases from micro and small industries. The small business units are expected to be benefited out of this.
More number of Super malls to come up: The FM has said that multi-brand retail will be supported so we can expect more number of Malls and Super Malls in the country.
Power, Housing, and Road Construction: External Commercial Borrowing to be allowed for Power, Housing, and Road Constructions. This will improve the rationalization of these Industries.

H. Miscellaneous:

Budget Estimates for Plan Expenditure and Non-Plan Expenditure: The Budget Estimates for Plan Expenditure will be 969,900 Crores instead of 816,182 Crores and Non - Plan Expenditure will be 521,025 Crores instead of 441,547 Crores.
Disinvestment Estimates: For 2012-13, Rs 30,000 crores to be raised through disinvestment.

Budget 2012 Interpretations

Pharma sector be affected by increase in excise duty rates.
Duty rate hikes to adversely affect common man.
Excise hike on beedi, other tobacco products; positive for ITC.
LNG exempt from customs duty; positive for GAIL and other gas distribution cos., power cos. and fertilizers companies.
Basic exemption limit for individuals increased; savings to the extent of Rs. 22,000 on income on Rs 10 lakh.
Introduction of negative service tax list to widen service tax net.
STT reduced to 0.01%; positive for IIFL, JM, Edel, Motilal.
Cascading effect of dividend distribution tax removed; to benefit Indian MNCs.
Exemption limit for individuals increased by Rs 20,000 to Rs 2 lakh.
GST network rollout from Aug 2012 positive for retail sector.

Budget Reactions (by MoneyControl)

ARUN MAIRA | Member | PLANNING COMMISSION
“I rate this Budget as 10 on 10. We are expecting solutions to a large number of substantial problems, structural problems in the Budget. The Budget is not going to be the vehicle to solve those problems.”

R K ARORA | CMD | SUPERTECH

“The Proposed Budget 2012-13 has allowed borrowing from overseas for affordable housing projects is a welcome step. It will definitely bring fund flow and can also boost the affordable housing segment.”

VINITA SINGHANIA | MD | JK LAKSHMI CEMENT

“Removal of custom duty on import of coal is a welcome step. However, the increase in excise duty specially coming after the recent substantial hike in the rail freight would result in considerable increase in the cost of delivered cement which will have a cascading effect on the cost of construction and hence can have adverse impact on the infrastructure growth.”

ASHUTOSH PRABHUDESAI | Controller & Director Finance | FUJITSU CONSULTING INDIA

“The rationalization of tax slabs for non corporate income taxes is also a step towards the implementation of Direct Taxes Code. However the excise duty increases and Service tax rate increase would mean higher costs for the Industry”

VARUN GOEL | Head Equity (PMS) | KARVY PRIVATE WEALTH

“The provisions for fuel and fertilizer subsidies look inadequate and the fiscal deficit number would be closer to 5.5% in absence of meaningful hikes in auto fuel prices.”

A MAHENDRAN | MD | GODREJ CONSUMER PRODUCTS

“The tax proposal will be welcomed by the masses as it is expected to make wallets heavier with more disposable income. However the excise increase may offset this consumer jubilation.”

JAIDEEP GHOSH | Partner | KPMG Advisory

“The Union Budget 2012 has a neutral to mildly positive impact on the Indian telecom sector. Overall emphasis on strengthening the rural economy and inclusive growth will have a positive trickle down impact on rural penetration of telecom services. Inclusion of telecom tower infrastructure in the viability gap funding and incentives for solar power is a positive move towards strengthening of rural telecom infrastructure; however considering that impact of USO to enhance rural tele-density has been fairly limited so far, the real impact of the measures announced will be keenly observed.Exemption of customs duty on parts of mobile phone memory cards is unlikely to result in a significant reduction in device prices and penetration, and likely to have a neutral impact on device penetration. There were no major announcements on broadband services, which the industry was expecting. However many of these areas are likely to be addressed by the forthcoming National Telecom Policy.”

SACHIN MENON | Head (Indirect Tax) | KPMG

“The increase of service tax and excise duty by 2% would translate into 2% to 2.5% higher price for goods and services across the board, for the common man. This can potentially fuel inflation and we have to wait for some more time for RBI reversing R”

PRANAV SAYTA | Partner, Tax & Regulatory Services | E&Y

“The introduction of Advance Pricing Agreements (APAs) is a step in the right direction for bringing about certainty in transfer pricing disputes, an area which has plagued the IT industry for a long time now.”

HEMAL ZOBALIA | Partner | KPMG

“To address the issue of indigenous coal scarcity, power plants have been granted customs duty exemption on coal for two years. Additionally to boost funding, it has been allowed to raise Rs 10,000 crs from Infrastructure Tax Free Bonds.”

RAVI MAHAJAN | Partner, Tax & Regulatory Services | E&Y

“Provisions relating to Advance Pricing Agreements (APAs) which have now been introduced, in advance of the DTC, will assist in reducing pricing disputes in the IT industry.”

VIVEK MISHRA | Leader – Indirect Tax | PWC

“The movement of service tax to a 'negative list', where every service will be taxed with limited exemptions is extremely significant. It could deepen the service tax base and simplify the tax.”

SANDEEP NANDA | CIO | BHARTI AXA LIFE INSURANCE

“The net borrowing figure of Rs.4.8 trillion is almost 10% higher than last year. The gross borrowing of Rs Rs 5.7 trillion is higher by 12% than last year. This would negatively impact government bond yields.”

PARESH PAREKH | Partner – Retail | E&Y

“Increase in service tax rates and excise duty from 10% to 12% is likely to have an adverse impact on the already wafer-thin margins of retail companies, especially since service tax is not offset-able against VAT.”

UDAY VED | Head of Tax | KPMG

“IPO in electronic form compulsory in certain cases is a welcome move as it would reduce the complexities and costs associated with IPO process and help companies to tap the retail base more effectively.”

SHASHWAT SHARMA | Partner | KPMG

“The preventive health check-up deduction may result in product innovation like inclusion of payment for preventive health check-ups in health insurance premium, reduction in insurance premium for individuals who go for regular preventive health check”

VIKRAM BAPAT | Executive Director | PWC India

“The provisions for fuel and fertilizer subsidies look inadequate and the fiscal deficit number would be closer to 5.5% in absence of meaningful hikes in auto fuel prices.”

SUNIL DUTT | MD | RIM (INDIA)

“The proposed full exemption on mobile phone parts may further make the smartphone affordable to larger section of the masses and basis the direct taxes, the increase in disposal income will further enhance the penetration of smartphones.”

MICHAEL PERSCHKE | Head | AUDI INDIA

“The increase in excise and customs duty on large cars in this Budget is very surprising. This increase comes at a time when the Indian automotive industry was finding favour with customers looking for better and efficient cars.”

UDAYAN MUKHERJEE | Managing Editor | CNBC-TV18

“CNBC-TV18's managing editor Udayan Mukherjee says, the Budget has no big ideas and is not a reformist Budget. "It is a non-event for the market," he adds. The market is flat and the bond market has gone up to 8.4% plus the yield. According to him, no significant repair has happened to the fiscal barring some statements on directions in terms of cutting expenditures. "Expenditures are actually not been cut," he adds. He further says, fuel and fertilizer subsidies are not touched. "There is no direction there barring a small mention of targeting," he asserts. On taxes he says, there is no timeline on GST or DTC. Income tax has been cut very modestly, very small changes. "Excise duties and service taxes have gone up and there no mention of FDI as well," he adds. All in all, he says, there is no big announcement in this Budget. "I don't know whether this will lift corporate sentiment dramatically, but to me it appears like a big non-event from a market's perspective. Barring small positives, like the Rajiv Gandhi Equity Scheme, the minor STT cut only on deliveries. But, otherwise, there is no big idea in this Budget," he states.”

UDAY KOTAK | MD | KOTAK MAHINDRA BANK

“The important effect on current account is the increase on import duty on gold from 2% to 4%.It’s a smart move because it removes the pressure of smuggling and reduces the import of gold.”

ADI GODREJ | Chairman | GODREJ INDUSTRIES

“Adi Godrej of Godrej Industries is not too happy with Budget 2012-13. Speaking to CNBC-TV18, he says that he is disappointed with the fact that there has been no indication in the FM's speech to a possible timeline for implementation of GST. Announcements with regard to infra, power and agricultural sectors are encouraging, but the excise duty hike that has been announced will usher in an inflationary situation, he opines. Godrej is not pleased with fiscal deficit target of 5.1% for FY13 or the divestment target of Rs 30000 crores.”

VIKRAM DOSHI | Tax Partner | KPMG

“Union Budget 2012 proposes increasing the tax deduction period for in-house research and development facility for five years. The industry had demanded this given that innovation has become an imperative in today's economy without which the industry.”

HIMANSHU PAREKH | Partner | KPMG

“It has been a lackluster Budget for the M&E Industry. On the indirect tax front, the advent of GST is likely to allay some of the major concerns of the industry.”

CHANDA KOCHHAR | MD & CEO | ICICI Bank

“FY13 fiscal deficit target is high, but it is pragmatic. It is believable and credible. The FM has talked about capping the subsidies to 2% of GDP. We have to really watch how this is going to be done. But, it is a positive.”

Final Verdict – A Quick Take

ECB limit of USD 1 bn for airline cos. allowed only for one year: Subir Gokarn
Subir Gokarn sees liquidity gap narrowing to Rs 60,000-70,000 cr by April
Subir Gokarn says Budget managed to address supply bottlenecks that had worried RBI
Budget seems credible, realistic and is sincere attempt to achieve fiscal consolidation, says Mirae Asset
Budget had doses of good intentions for long-term growth but lacked short-term punch to get growth going: TCS CEO N Chandrasekaran
So without any big ticket announcement in Budget, it was left to master blaster Sachin Tendulkar to grab the headlines with his 100th century.
Sachin Tendulkar has scored his 100th century. So looks like its not the FM alone who will grab the front pages in tomorrow's papers.
Two-way fungibility for IDRs will allow StanChart's India shareholders convert shares into underlying London stock and vice versa.
Standard Chartered IDR closed up at 20% upper limit as investors were excited by
Budget proposal of two-way fungibility for IDRs.
Fiscal Deficit is projected at higher than expected 5.1% of GDP in FY13, but don't see much room for slippage, says Nomura's Sonal Varma.
Economics triumphed politics in the Budget for FY13, says Sonal Varma of Nomura
Sensex ends down over 200 pts. Clearly the market was disappointed with the Budget, which was a non-event to many
ITC shrs hit 52-wk high at Rs 225 on NSE earlier in the session, now corrected to 215.60, still up 3%
Excise hike on cigarettes works out to 15-16%, say analysts. But no worries for ITC as it has pricing power.
Not much in the Budget for IT, not enough focus on skill building incentives, says Zensar Tech CEO