Union Budget 2013-14: FINANCE

1. Current years economic growth rate will be below Indias potential growth rate of 8 per
cent: Finance Minister P Chidambaram.
2. Average economic growth rate in 11th Plan period is 8 per cent, highest ever in any Plan
period: FM.
3. Economic space constraints due to high fiscal deficit, lower savings and investment and
tight monetary policy: FM.
4. Current account deficit continues to be high due to excessive dependence on oil, coal and
gold imports and slowdown in exports.
5. India does not have choice between welcoming and spurning foreign investment; it is an
imperative: Chidambaram.
6. Battle against inflation must be fought at all fronts: FM.
7. Faced with huge fiscal deficit, I have no choice but to rationalise expenditure: FM.
8. We have brought down headline WPI inflation to 7 per cent and core inflation to 4.2 per
cent. Food inflation is worrying: FM.
9. Plan expenditure in 12th Five Year Plan revised to Rs 14,30,825 crore or 96 per cent of
budgeted expenditure.
10. Budget expenditure is Rs 16,65,297 crore and Plan expenditure Rs 5,55, 322 crore: FM.
11. The revised expenditure target is Rs 14,30,825 crore or 96 per cent of Budget estimate for
this fiscal. In 2013-14, the budget estimate is Rs 16,65,297 crore.
12. One overarching goal to provide education and skills to youth for securing jobs in the
2013-14, says FM.
13. FM allocates Rs 41,561 crore for SC sub-plan; Rs 24,598 crore for tribal sub plan.
14. Additional sum of Rs 200 crore to Women and Child Welfare Ministry to address issues of
vulnerable women.
15. Rs 3511 crore allocated to Minority Affairs Ministry which is 60 per cent of the revised
estimates.
16. Rs 110 crore to be allocated to the department of disability affairs, says FM.
17. Rs 37,330 crore allocated for Ministry of Health & Family Welfare.
18. Rs 1069 crore allocated to Department of Aryush: FM.
19. Rs 4,727 crore to be allocated for medical education and research. Rs 1,069 crore to be
given to Department of Ayush.
20. Rs. 65,867 crore allocated to Ministry of HRD in 2013-14: FM.
21. Medical colleges in six more AIIMS-like institutions to start functioning this year; Rs 1650
crore allocated for the purpose.
22. Rs 5,284 crore to various Ministries for scholarships for SC/ST, OBC and minority
students.
23. Rs 13,215 crore to be provided for mid-day meal scheme.
24. Rs 17,700 crore provided for Integrated Child Development Scheme.
25. Rs 15,260 crore to be allocated to Ministry of Drinking Water and Sanitation.
26. Rs 80,194 crore allocation for Ministry of Rural Development in 2013-14. About Rs 33,000
crore for MGNREGA, says FM.
27. States which have completed Pradhan Mantri Gramin Sadak Yojana will be eligible for
PMGSY-II, others will continue with PMGSY-I.
28. Rs 14,873 crore for JNNURM for urban transportation in 2013-14 against Rs 7,880 crore in
the current fiscal, says FM.
29. Foodgrain production in 2012-13 will be over 250 million tons: FM.
30. Average annual growth rate of agriculture and allied services estimated at 3.6 per cent in
2012-13 when 250 MT foodgrains was produced: FM.
31. Rs 27,049 crore allocation to the Agriculture Ministry in 2013-14, says FM.
32. Rs 7 lakh crore target fixed for agricultural credit for 2013-14 compared to Rs 5.75 lakh
crore in the current year.
33. Eastern Indian States to get Rs 1,000 crore allocation for improving agricultural
production.
34. Rs 500 crore allocated for programme on crop diversification. PTI
35. Green revolution in east India significant. Rice output increased in Assam, Odisha,
Jharkhand and West Bengal; Rs 1,000 crore allocated for eastern states. SMI
36. Rs 5,387 crore to be allocated for integrated watershed programme for farmers in 2013-14,
an increase from Rs 3,050 crore in the current fiscal.
37. Indian Institute of Biotechnology will be set up at Ranchi.
38. Rs 10,000 crore set aside for incremental cost for National Food Security Bill over and
above food subsidy.
39. Four Infrastructure debt fund have been registered: FM.
40. Tax free bonds issue to be allowed up to Rs 50,000 crore in 2013-14 strictly on capacity to
raise funds from the market, says FM.
41. Rs 5,000 crore will be made available to NABARD to finance construction of godowns and
warehouses: FM.Government has decided to constitute a regulatory authority for the road
sector: FM.
42. Many manufacturing projects stalled due to regulatory process: FM.
43. A company investing Rs 100 crore or more in plant and machinery in April 1, 2013 to
March 31, 2015 will be allowed 15 per cent investment deduction allowance apart from
depreciation.
44. To provide appropriate incentives for semiconductors industry including zero customs
duty on plants and machineries.
45. Rajiv Gandhi Equity Scheme will be liberalised to allow first time investor to invest in
Mutal Fund and equity.
46. First housing loan up to Rs 25 lakh would get additional deduction of interest of up to Rs
1 lakh in 2013-14, says FM.
47. Govt to construct power transmission system from Srinagar to Leh at the cost of Rs 1,840
crore, Rs 226 crore provided in current Budget: FM.
48. DIPP and Japans JICA preparing plan for Chennai- Bengaluru Industrial corridor.
49. Two new major ports to be set up in West Bengal and Andhra Pradesh, says FM.
50. Oil and gas exploration policy will be reviewed and moved from profit sharing to revenue
sharing: FM.
51. Policy on exploration of shale gas on the anvil; natural gas pricing policy will be reviewed
and uncertainty removed: FM.
52. Government to set up Indias first womens bank as a public sector bank by October, says
FM.
53. Coal imports during Apr-Dec 2012 crossed 100 million tonnes and expected to go up to
185 million tonnes in 2016-17, says FM.
54. 5 million tons Dabhol LNG import terminal to be operate at full capacity in 2013-14.
55. FM asks State Governments to prepare financial restructuring plan for power distribution
companies at the earliest.
56. SIDBIs re-financing facility to MSMEs to be doubled to Rs 10,000 crore, says FM.
57. Incubators set up by companies in academic institutions will qualify for Corporate Social
Responsibility (CSR) activities, says FM.
58. Rs 500 crore would be allocated for addressing environmental issues faced by textile
industry: FM.
59. Concessional six per cent interest on loans to weavers.
60. Financial Sector Legislative Reforms Commission (FSLRC) to submit its report next
month, says FM.
61. Standing Council of Experts in Ministry of Finance to examine transaction cost of doing
business in India.
62. Rs 14,000 crore capital infusion into public sector banks in 2013-14, says FM.
63. PSU banks to have ATMs at all their branches by March 31, 2014.
64. Rs 6,000 crore to be allocated for rural housing fund in 2013-14.
65. All Regional Rural Banks and cooperative banks to be e-linked by this year-end.
66. Insurance companies will be empowered to open branches in Tier-II cities with approval
of IRDA.
67. National Housing Bank (NHB) to set up urban housing bank fund and Rs 2,000 crore will
be allocated in this regard, says FM.
68. Public sector general insurance companies to set up adalats to clear disputes related to
claims, says FM.
69. Rashtriya Swasthya Bima Yojana benefit will be extended to rickshaw pullers, auto and
taxi drivers and sanitation workers.
70. Comprehensive social security package being evolved by convergence of several
schemes run by various ministries, says FM.
71. Investor with stake of 10 per cent or less will be treated as FII; any stake more than 10 per
cent will be treated as FDI.
72. FIIs will be allowed to participate in exchange traded currency derivatives: FM.
73. We will evolve schemes for cities to take up waste to energy projects, says FM.
74. Small and medium companies to be allowed to listed on MSME exchange without making
a public offer, says FM.
75. Generation based incentives to wind energy projects reintroduced, Rs 800 crore provided
for the purpose to Ministry of New & Renewable Energy.
76. Constraints will not come in the way for providing additional funds for security of the
nation, says FM.
77. Rs 2,03,672 crore, including Rs 86,741 crore capital expenditure to Defence in 2013-14.
78. Grant of Rs 100 crore each to AMU (Aligarh), BHU (Varanasi) and TISS (Guwahati) and
INTACH.
79. National Institute for Sports to train coaches to be set up at Patiala at a cost of Rs 250
crore.
80. Rs 532 crore to make post offices part of core banking.
81. Rs 5,87,082 crore to be transferred to States under share of taxes and non plan grants in
2013-14, says FM.
82. Nirbhaya Fund of Rs 1,000 crore to empower women and provide safety in the wake of
the Delhi gang-rape incident.
83. 11 lakh beneficiaries have received benefit under Direct Benefit Transfer scheme: FM.
84. Plan expenditure pegged at Rs 555,322 crore.
85. Non plan expenditure pegged at Rs 11,09,975 crore for 2013-14.
86. Surcharge of 10 per cent for individuals whose taxable income is over Rs 1 crore.
87. Education cess to continue at 3 per cent.
88. Contributions made to central and state government health scheme eligible to tax benefit.
89. Eligibility conditions for life insurance policies of persons suffering disabilities to be
liberalised.
90. Investor Protection Fund set up by depositories will be exempt from tax: FM.
91. Transactions on immovable properties usually undervalued. TDS of one per cent on value
of properties above Rs 50 lakh. Agriculture land exempted.--- Shares of real estate companies
crashed on Friday on fears that demand for homes in metro cities will see a slowdown after
finance minister P Chidambaram proposed to levy 1 per cent tax deducted at source, or TDS, on
properties sold for over Rs 50 lakh. Anybody selling a home for Rs 50 lakh will have to pay Rs
50,000 to the government as TDS. This will increase the price of residential properties. Analysts
fear property transactions in national capital region, Delhi (NCR), and Mumbai may see a further
fall, hitting the already struggling sales. "The levy of 1 per cent TDS on property value
exceeding Rs 50 lakh will curb movement of black money within the real estate sector," said
Phillip Capital, a domestic brokerage, in a research note released on Friday.
92. Securities Transaction Tax (STT) reduced on equity future, mutual fund.
93. Fiscal deficit will be 5.2 per cent in current year and 4.8 per cent in the next fiscal.
94. Will redeem our pledge to reduce fiscal deficit to 3 per cent by 2016-17 and revenue deficit
to 1.5 per cent of GDP: FM.
95. Tax Administration Reform Commission to be set up to regularly review tax law
applications.
96. In 2011-12, tax-GDP ratio was 5.5 per cent for direct taxes and 4.6 per cent for indirect
taxes.
97. No change in slabs and rate for personal income tax.
98. Tax credit of Rs 2000 to be provided to every person to having income of up to Rs 5 lakh,
this will benefit 1.8 crore people: FM.
99. 5 to 10 per cent surcharge on domestic companies whose taxable income exceeds Rs 10
crore.
100. Commodities transaction tax levied on non-agriculture commodities futures contracts at
0.01 per cent: FM.
101. Modified GAAR norms to be introduced from April 1, 2016.
102. No change in peak rate of customs duty for non-agriculture products.
103. Import duty on rice bran oilcake withdrawn.
104. Series of concessions granted to Maintenance, Repair and Overhaul (MRO) business in
the aviation sector.
105. Import duty raised on set-top boxes from 5 to 10 per cent to safeguard interest of
domestic producers.
106. 10 per cent customs duty to be levied on unprocessed illuminate.
107. Import duty raised from 75 to 100 per cent on luxury vehicles.
108. Duty free limit on gold raised to Rs 50,000 in case of male and Rs 100,000 in case of
female.
109. No countervailing duty on ships and vessels.
110. Specific excise duty on cigarettes and cigars raised by 18 per cent.
111. Excise duty on SUVs to be increased to 30 per cent from 27 per cent, SUVs registered as
taxis exempted.
112. Vocational courses offered by state-affiliated institutes to be exempted from services
tax.
113. Duty on mobiles above Rs 2,000 raised from one to six per cent, based on their
maximum retail prices.
114. Service tax to be levied on all a/c restaurants.--- A day after the finance minister
announced a service tax of 12.36 per cent on all air-conditioned restaurants in the country,
leading restaurant and cafe chains such as KFC, Pizza Hut, Nirula's, Moti Mahal, Zambar and
Costa Coffee said they have no choice but to increases prices by 5-10 per cent, even though it
would impact consumption.
115. One time voluntary compliance scheme for service tax defaulters to be introduced.
Interest and penalties to be waived.
116. Direct tax proposals to yield Rs 13,300 crore, indirect tax proposal to give Rs 4,700 crore

View
{modi;s view]If you were looking for another example that illustrates the yawning disconnect
between the UPA government and the people of this country, then Budget 2013 is a good start.
This Budget is a piecemeal exercise, and it appears that the UPA somehow wants to play safe
and complete its period in office before it faces general elections in 2014.

This Budget reflects that desperation and, hence, has disappointed people at large. There is no
direction for improving the growth rate; nor is there any linkage of the Budget with the 12th
Five-Year Plan. This being their last executable Budget, UPA has lost this opportunity to do
something good for the country.

Today, India is facing a crisis; we are at a critical juncture. We are facing the threat of
downgrade in ratings, declining growth, dismal job creation, acute shortage of skilled workers,
high current account deficit and fiscal deficit, total lack of new projects and decrease in
investment in infrastructure.

But has the UPA Budget addressed any of these issues? Against the much-needed Rs 55 lakh
crore for infrastructure development, the Budget attempts to mobilise a meagre Rs 50,000 crore
through tax-free bonds and infrastructure debt bonds, and that too in the backdrop of policy
paralysis. This Budget has also failed to address one of the grave problems of shortage of skilled
workers, something that even US President Barack Obama has taken note of. The UPA
government has allocated a mere Rs 1,000 crore for skill development.

Contrast that with the Rs 800 crore that just one state, Gujarat, has allocated for skill
development. Moreover, there is no move to bring down the total outstanding debt from the level
of 40% of GDP.

The attempt to keep the fiscal deficit below 5.2% in current year and 4.8% in 2013-14 without
any clear measures to mop up tax revenues and increase the collection efficiency leads us to only
expect cuts in development spending. This would further affect the investments and, therefore,
the creation of jobs. Moreover, the Centre may resort to arbitrary cut in allocation to states.

The move to set up the 'world's first public sector women's bank' is a mockery of facts.
Cooperative banks, including those for women, are functioning for long in Gujarat. But it is
unfortunate that the UPA government is levying income tax on them, and making them unviable.
There are other issues like tax collection.

The states have been requesting the Centre to address the issue of deficit of trust that hinders the
creation of consensus on indirect tax reforms. It can be seen that CST compensation has been
budgeted at Rs 9,000 crore.

However, for Gujarat alone, the outstanding claims of compensation will be Rs 3,800 crore. This
provision, totally inadequate, will hinder the march towards GST. One cannot help wondering if
the announcement of PMGSY- II for mostly Congress-ruled states such as Andhra, Maharashtra,
Haryana and Rajasthan wasn't driven solely by political bias. To conclude, I would say that the
common man will continue to feel the pinch of price rise, the unemployment of the youth will
continue and investors will experience economic uncertainty.

Even where on paper some projects are shown and allocations done, given the poor record of
governance of the UPA and corruption that plagues this regime, it is doubtful whether these
measures will ever be implemented in the desired spirit. This Budget lacks vision and is devoid
of any strategy for growth of the nation or welfare of its people. But to its credit, a disconnected
and desperate UPA has been consistent in disappointing the country.
..
NEW DELHI: Finance Minister P Chidambaram in his budget 2013 speech made many
announcements that will impact the middle class. While some are meant to make investments
lucrative, others such as hike in excise duties will pinch pockets.
Here is a look at 12 important announcements that will impact the middle class:

1) You can look forward to more tax-free bonds in the coming days, as some institutions are expected to
raise around Rs 25,000 crore via tax-free bonds in 2012-13. The finance minister has also permitted
some institutions to issue tax free bonds in 2013-14 up to Rs 50,000 crore.

2) The hike in income threshold to invest in Rajiv Gandhi Equity Saving Scheme ( RGESS) is good news
for new investors to the stock market. Now, those with income of up to Rs 12 lakh can invest in (RGESS).
Earlier only those with income of Rs 10 lakh and less could invest in the scheme.

3) If you are taking a housing loan of less than Rs 25 lakh this year, you can claim additional tax break of
Rs 1 lakh on interest payment. This is in addition to Rs 1.5 lakh permitted currently.

4) If you have been worried about inflation eating into your long term savings, you should wait for
inflation indexed bonds and inflation indexed national security certificates. The details of these
instruments will be announced shortly.

5) If you are living in a tier II city and find it difficult to find an insurer near your place, the budget has
some good news for you. Insurance companies can open officers in tier II cities without prior
permission from Insurance Regulatory and Development Authority.

6) Union Budget 2013-14 has raised the eligibility cap on life insurance premiums to 15% for
policyholders with disabilities or specified ailments, noting that some policies meant for such individuals
exceed the existing limit of 10%. If policies do not meet the eligibility criterion, the amount of deduction
allowed will be restricted to 10% (15% in case of persons with disabilities) of the sum assured and the
maturity proceeds will be taxed.

7) The finance minister has announced a tax credit of Rs 2,000 for individuals with income of less than
Rs 5 lakh. In simple terms, if your tax payable amounts to Rs 10,000, your liability will be limited to Rs
8,000.

8) Securities transaction tax is reduced. STT on mutual fund (MF) and exchange traded fund (ETF)
redemptions at fund counters is slashed to 0.001% from 0.25%; STT on MF/ETF purchase and sale on
exchanges is reduced from 0.1% to 0.001%, only on the seller.

9) If you are derivative trader in the equities market, you should be happy as STT on futures has come
down 0.017% to 0.01 % and if you are derivative trader in commodities market, you have to pay CTT at
the same rate applicable to equity futures. There was no CTT earlier.

10) If you are going abroad, here is some good news for you. Duty-free shopping limit is hiked to Rs
50,000 for a male passenger and Rs 1 lakh for a female passenger.

11) Mobile phone prices to go up; the excise duty is hiked to 6% on handsets which costs more than Rs
2,000

12) If you are a service tax evader, you should make use of the new voluntary Compliance
Encouragement Scheme announced in the budget. You can file a declaration of service tax due since
1.10.2007 and make the payment in one two instalments before prescribed dates. You don't have to pay
interest and penalty and other consequences will be waived.
.
This year's budget has not changed the tax slab rates for taxpayers, implying zero savings as far
as the basic payment of income tax is concerned. The only exception to the rule is those who
earn annual income of up to Rs 5 lakh where the net tax saving would be Rs 2060 (including
education cess).

For other taxpayers, here are some the tax-saving avenues proposed in the Budget 2013...

Life Insurance Premium:

Section 80C of the I.Tax Act currently allows a deduction on premium paid on life insurance
policy only if the annual premium paid is less than 10% of the sum assured.

Budget Impact - For persons with disability or severe disability or suffering from diseases or
ailments specified in the Income Tax Act, the limit of 10% has been increased to 15%. Thus, for
these assesses, if the annual premium paid is up to 15% of the sum assured, the same can be
availed as a deduction under the Rs 1 lakh tax limit under section 80C.

Rajiv Gandhi Equity Savings Scheme:

Section 80CCG allows for tax deduction of a maximum of Rs 25,000 on amount invested in
equity shares under the Rajiv Gandhi Equity Savings Scheme (RGESS) provided the taxable
income of the person is less than Rs 10 lakh

Budget Impact - Now those earning income up to Rs 12 lakh will be eligible for deduction
under RGESS. Also, the new provision will allow the investor exemption for not only direct
investment in equity shares but also if the investment is made in the scheme of participating
equity mutual fund schemes.

Also, the tax deduction of 50% of the amount invested, subject to a maximum of Rs 25,000, has
been extended to three years instead of the current one-year.

This means that those eligible for deduction under this scheme can continue to invest up to Rs
50,000 per annum in equity or equity mutual funds for three consecutive years and avail an
additional deduction of Rs 25,000 each year over and above the Rs 1 lakh deduction available
under section 80C

Interest on Housing Loan:

Interest paid on housing loan for self-occupied property is allowed as a deduction up to a
maximum of Rs 1.5 lakh per annum
The rupee may depreciate beyond 55 level in the near term as the Budget for 2013-14 has no
major proposals to cut current account deficit and risks of rise in net borrowings have increased,
Goldman Sachs has said.

"With risks to the net borrowing requirement from the budget to the upside, and no major
proposals in the budget to reduce the current account deficit (CAD), we think there are
depreciation pressures for the INR in the near-term," Goldman Sachs Managing Director and
Chief India Economist Tushar Poddar said in a research note.
////////////////////////////////////////////
Never before has a finance minister rejected populist giveaways so decisively in an election year.
Never before has a finance minister sought to win the next elections not through tax breaks and
freebies, but by accelerating GDP growth and taming inflation through fiscal consolidation.

Palaniappan Chidambaram has gambled on good economics proving to be good politics too. This
is risky, but admirably bold. Stock markets crashed, fearing that fine print in the Finance Bill
implied capital gains tax on investors coming through Mauritius and other countries with which
India has a Double Taxation Avoidance Agreement.

However, finance ministry officials later clarified that capital gains through Mauritius would not
be affected. If so, stock markets should rise sharply on Friday. How has Chidambaram delivered
on his promise of fiscal prudence (restricting fiscal deficit to 5.2% of GDP this year and 4.8%
next year), yet provided for a 29% rise in Plan spending next year? By assuming very high tax
buoyancy.
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NEW DELHI/MUMBAI: Housing is one sector where it is not just industry players who are lobbying for
budgetary sops, finance minister P Chidambaram has also been getting requests from some of his
cabinet colleagues.

While developers are looking for sops like lower interest rates, infrastructure status, tax breaks and
easier external commercial borrowing (ECB) norms, the UPA government seems to be formulating plans
to use housing as a plank in the run up to the general elections next year by launching lakhs of houses
for the poor, tweaking the Rajiv Awas Yojana that again offers homes to the very poor, introducing the
next edition of the Jawaharlal Nehru National Urban Renewal Mission ( JNNURM) for urban
infrastructure projects and speeding up slum rehabilitation schemes.

"With infrastructure status, funds will flow into the sector, project financing will be relatively easier,
resulting in lower finance cost and overall expenses can come down, helping us keep affordable units
actually affordable," Lalit Kumar Jain, national president of the Confederation of Real Estate Developers
Associations of India (CREDAI), says.

Ajay Maken, the housing and urban development minister, has not only supported granting
infrastructure status to housing budget, but has also written to the finance ministry to extend income-
tax relief under section 80 IB (10) to developers building affordable housing projects beyond March
2013 and to projects approved after March 2008, and provide service tax exemptions.

Maken has also said that while housing loans up to Rs 25 lakh is treated as priority sector lending, a
separate sub group for loans up to Rs 5 lakh should be set up. "A mandatory requirement of 3 per cent
incremental bank deposits in housing stock should be exclusively directed only for the sub-group of
housing loans up to Rs 5 lakh," he said. India is estimated to be short of 18.7 million houses and around
90 per cent of this shortage is in the affordable housing segment. Jain of CREDAI says, "If we manage to
bridge this gap, it will arrest price rise as more supply will be in favour of consumers."
If the finance minister grants these wishes, it would benefit scores of
less-privileged Indians to buy their own houses.

Also easier ECB norms, infrastructure status and lower interest rates
will help builders raise funds at reasonable terms to complete their
pending projects, bringing relief to hundreds of homebuyers waiting
for delivery of their homes.

It could be good news for middle class people who find residential
prices just too high because loan rates may fall and even home prices
may soften as developers' cost of fund falls.

Geetambar Anand, CMD of ATS Infrastructure says the only formula
to rationalise prices is to unleash supply, which will benefit both
economically weaker sections and middle class.
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NEW DELHI: In an attempt to curb investment in gold, Finance Minister P Chidambaram on
Thursday announced three measures that will encourage the common man to invest in other
avenues.

While he announced making Rajiv Gandhi Equity Saving Scheme (RGESS) more liberalised,
Chidambaram also proposed introducing inflation indexed bonds.

"The Rajiv Gandhi equity saving scheme will be liberalised to enable the first time investor to
invest in mutual funds as well as listed shares and she can do so not in one year alone but in three
successive years," he said. "The limit for investors wanting to invest in RGESS has been raised
from Rs 10 lakh to Rs 12 lakh," he added.

In a move that will bring cheer to many prospective home-owners, Chidambaram announced
incentives for home loan borrowers. Chidambaram said that any person taking a first time home
loan up to Rs 25 lakh during the financial year 2013-14 will be allowed an additional tax
deduction of interest of up to Rs 1 lakh.

"A person taking a loan for his first home from a bank or a housing finance corporation up to Rs
25 lakh during the period 01-04-2013 to 31-03-2014 will be entitled to additional deduction of
interest of up to Rs 1 lakh," he said.

"This will promote home ownership and give a fillip to a number of industries like steel, cement,
brick, wood, glass etc. besides jobs to thousands of construction workers," he added.

On the issue of inflation-indexed funds, Chidambaram said, "In consultation with RBI, I propose

to introduce instruments that will protect savings from inflation especially the savings of the poor
and middle classes, these could be inflation-indexed bonds or inflation-indexed national security
certificates," he said.

The structure and tenure of the instruments will be announced in due course, he added.

Chidambaram started his speech by reiterating the resolve of his government to cut expenditure
and bring the Current Account Deficit back on track. He also pointed out how India is still the
third fastest growing economy amongst the bigger countries.

As the speech progressed, the FM went on to reiterate UPA's pet goal of inclusive development.
he subsequently announced many schemes & allocations for SC, ST, women, differently-abled
and other schemes such as Sarv Shiksha Abhiyan & provided additional allocation for the food
security plan.
India's savings rate has declined substantially from the highs of around 37 per cent to barely 30 per cent
in the last few years. This is visible in the faltering deposit growth and high interest rates of banks.

Simultaneously, savings in physical assets like gold and property have increased. On the one hand, the
country needs to lower gold imports to improve the precarious current account deficit.

We need to increase our savings and investments in order to revive GDP growth. Hence, from several
angles it would be appropriate for the budget to try and encourage financial savings and discourage
savings in gold.

Possible ways to do this would be to increase the limit for tax deductions in respect of financial
investments such as ELSS, equities and bank deposits. Also, banks may be allowed to issue tax-free infra
bonds.

Let's look at various sectors which could be impacted by the upcoming Budget 2013:

Banking

In general, the budget also always holds importance for banks from the point of view of the credible
fiscal deficit implications and corresponding implications for market borrowings by the government.

If, as expected by us, the budget this time around indeed credibly projects a lower fiscal deficit and
market borrowing programme, then it would be positive for banks from the point of view of lower
government bond yields and interest rates.

Secondly, coinciding with the budget, some clarity is possible in coming days on the issue of new bank
licenses, wherein if corporates are allowed, which is increasingly appearing likely, that would be a game-
changing event for the banking sector.

The FM may use the occasion of the budget to provide greater clarity on the likelihood and implications
on the economy of large capital investments in the banking sector by corporates.

Steel

The steel industry is reeling under pressure due to scarcity of raw materials. Hence, the industry would
wish the government to take measures for speedy forest and environment clearance.

Also, the industry would benefit if the railways expand capacity so that higher rates are available for
metal/ore transportation, given that transportation costs by roadways is getting expensive, especially
with diesel prices expected to go up over the coming 2 years.

Oil & Gas

Upstream and downstream companies would welcome a concrete subsidy-sharing formula for sharing
under-recoveries. Also, increase in gas prices would incentivize oil and gas majors to undertake new
exploration to increase gas production in the country.

IT sector

The Union Budget 2012-13 is likely to be a non-event for the Indian IT sector as the wish list remains
extremely small. In the last budget, MAT was continued on SEZ units.

As per media reports, industry body NASSCOM's wish list includes removal of MAT on SEZ units.
However, we do not expect any material change to the current tax structures. The budget can clarify
issues related to dual levy of VAT and service tax on licensing of software.

In addition, the Indian government has started focusing on e-governance lately, with its various
initiatives such as RAPDRP, UIDAI and Sarva Shiksha Abhiyan. This is also a space to look out for if the
government decides on increasing the outlay related to these schemes to move towards modernization.

Some of the Indian IT companies have bagged some crucial deals under these schemes and have started
setting up SBUs to tap the domestic market.

Also, increased emphasis on PPP in education and incremental allocation for ICT implementation in
schools would benefit companies catering to the K-12 segment, including Educomp Solutions and NIIT.
Overall, we expect the Budget to be neutral for the IT sector.

Automobile

1) Status quo on the excise duty front. Considering the fiscal consolidation drive that the government
has undertaken over the last few months, there are talks of a possible hike in excise duty by the
government. However, we believe that any hike in excise duty by the government at this juncture will be
detrimental for the sector as it will suppress the demand.

2) No additional duty on diesel vehicles.

3) Sustained focus on infrastructure development.

4) Higher spends on NREGA and increase in agriculture sector outlay.

5) Increase in income tax slabs.

Budget 2013: How the super-rich can escape
the surcharge
As one of the 42,800 official members of the hallowed super-rich club taxable income of Rs 1 crore
and above your tax will increase by 10%. Yet, with some nifty restructuring, there are ways to escape
this new surcharge.

Take a Company Car on Lease: Instead of buying a car from your income, ask your company to lease you
one as part of your compensation. Your taxable income reduces to the extent of the cost of the car.

"It (the alternative arrangement) will be treated as a perk and a small value (Rs 1,800-2,400 a month
depending on the size of the car) will be added to your income," says Sudhir Kaushik, co-founder of
Taxspanner.com. The same goes for your driver. Instead of you hiring a driver, and being compensated
by your company through your salary, ask your company to arrange for one.

You will shave off about Rs 10,000 a month from your taxable income and add just Rs 800 as a perk.
Invest in NPS: You can lower your taxable income further by asking your employer to invest in NPS on
your behalf.

Under the newly introduced Sec 80CCD(2), up to 10% of your basic salary is fully deductible if invested in
the NPS. And there is no cap on the amount of deduction you can claim via this route. Take a home loan:
If you take a home loan and give the house on rent, you can avail unlimited tax deduction for the
interest paid on the loan.

For instance, if you take a home loan of Rs 50 lakh and pay Rs 6 lakh interest on it every year, you can
claim deduction of only Rs 1.5 lakh a year in case of a self-occupied house.

But if you give it on rent, the entire Rs 6 lakh can be claimed as deduction. Sure, 70% of the rent will be
added to your income, but you will still be a net gainer. There are more ways.

Your employer can rejig the compensation package to include food coupons (maximum limit Rs 2,400),
conveyance allowance and books and periodicals, all of which are non-taxable, but only up to certain
limits.
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NEW DELHI: Attempting to woo the common-man, Finance Minister P Chidambaram on Thursday
announced a slew of measures that will cheer most in the country. Even though Chidambaram did not
tinker with the income tax slabs, a move that will be met with disappointment, many initiatives were
announced that will encourage savings.

ET takes a look at some measures that will get Chidambaram thumbs up from the common-man:

1) Additional exemption for home loans:

In a move that will bring cheer to many prospective home-owners, Chidambaram announced incentives
for home loan borrowers. Chidambaram said that any person taking a first time home loan up to Rs 25
lakh during the financial year 2013-14 will be allowed an additional tax deduction of interest of up to Rs
1 lakh.

"A person taking a loan for his first home from a bank or a housing finance corporation up to Rs 25 lakh
during the period 01-04-2013 to 31-03-2014 will be entitled to additional deduction of interest of up to
Rs 1 lakh," he said.

2) Tax credit: There will be no change in tax rates or slabs for FY14, Finance Minister P Chidambaram
said in his Budget speech. However, he announced a tax credit of Rs 2000 for Rs 2-5 lakh tax payers
bracket.

3) RGESS more attractive: "The Rajiv Gandhi equity saving scheme will be liberalised to enable the first
time investor to invest in mutual funds as well as listed shares and she can do so not in one year alone
but in three successive years," he said.

"The limit for investors wanting to invest in RGESS has been raised from Rs 10 lakh to Rs 12 lakh," he
added.

4) Inflation-indexed bonds

On the issue of inflation-indexed funds, Chidambaram said, "In consultation with RBI, I propose to
introduce instruments that will protect savings from inflation especially the savings of the poor and
middle classes, these could be inflation-indexed bonds or inflation-indexed national security
certificates," he said.

The structure and tenure of the instruments will be announced in due course, he added.

5) More houses in urban areas:

"In the last budget we provided Rs 4000 crore to the fund in consultations with RBI proposed to provide
Rs 6000 crore to the rural housing fund. Similarly it is proposed to start a fund for urban housing to
mitigate the huge shortage of houses in urban areas," Chidambaram said.

"I propose to ask National Housing Bank to set up the Urban Housing Fund and in consultation with RBI,
I propose to provide Rs 2000 crore to the fund in 2013-2014," he said.
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The Rajiv Gandhi Equity Savings Scheme (RGESS) has been officially notified and will be launched by
Finance Minister P Chidambaram this week. ET Wealth explains what you should consider before opting
for this tax-saving option available under Section 80CCG.

Who is eligible?

RGESS is available to all resident individuals whose gross total income is less than Rs 10 lakh and who are
investing in equity for the first time. A first-timer has been defined as the one who has not opened a
demat account as a 'first holder' before the notification date of 23 November 2012, even if his name
appears in a joint demat account opened before this date. The investor who has opened a demat
account as first holder before the notification date but has not bought any shares or traded in the
futures and options segment will also be considered as a first-time investor.

How can you get tax benefit?

To avail of tax deduction, an investor has to open a new RGESS designated demat account or designate
for this purpose his existing demat account, where no trading has taken place before 23 November. He
needs to submit a declaration in Form A, certifying that he has not traded before 23 November 2012, to
the depository participant, who in turn forwards it to the depository for verifying the status and
designate him a new retail investor. He can then start buying the eligible securities, which include stocks
from the BSE-100 or CNX 100 index. The listed shares of navratna, maharatna and miniratna public-
sector undertakings, and initial public offers (IPO) of PSUs, whose turnover is more than Rs 4,000 crore,
are also eligible for investment. One can avail of tax benefit by investing in the eligible mutual fund
schemes too.

What's the lock-in period?

Unlike other tax-saving schemes, the lockin period here is split in two. The first year is a fixed lock-in and
the investor cannot sell, pledge or hypothecate the shares. The next two years are flexible and he can
sell, but has to buy other eligible securities with the proceeds. All eligible securities in an RGESS
designated account are automatically subject to the lock-in periods. If an investor wants to buy more
designated shares and keep these outside the lock-in clause, he has to give a declaration in Form B
within a month of the transaction date. One can also keep other securities in this account without the
lock-in clause. The tax benefit under Section 80CCG is withdrawn if these conditions are violated, but if
the changes are due to involuntary corporate actions it's not affected.

What are your savings?

While there is no restriction on investment, only Rs 50,000 is considered for tax purposes. Of this, only
50%, or Rs 25,000, is allowed as deduction. Since RGESS is for people with income less than Rs 10 lakh,
they will fall in the 10% or 20% tax bracket. The maximum savings under this will be Rs 5,000 for people
in the 20% tax bracket and Rs 2,500 for those under 10% (beyond the Section 80C benefits). Besides, the
savings are only for the first year, not subsequent years. So, those who don't have enough money or
time to invest Rs 50,000 in 2012-13 should consider postponing it to 2013-14.

Stocks or mutual funds?

Since direct investment in equity needs expertise and first-time investors are unlikely to have it, they
should refrain from investing directly in the market. The risk is also high because Rs 50,000 is not
enough to create a well-diversified portfolio. A better option is to go through the mutual fund route. As
of now, several exchange traded funds (ETFs) have been declared as eligible securities and investors can
invest in these. Various mutual fund houses have also started filing offer documents for eligible schemes
with Sebi, while their new fund offerings (NFO) too are expected soon.
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Budget 2013: What the salaried class expect

As Finance Minister readies to present the last full budget of the UPA Government, investors wait with
baited breath for tax reliefs which could provide some cheer and leave more money in their hands to
beat inflation.

The expectations from the budget of the salaried class are...

Higher exemption Limit on Interest on Housing Loan

Even as real estate prices are soaring and interest rates continue to remain high the expense on housing
loan interest on which there is a tax exemption continues to be pegged at a meagre Rs 1.5 lakh annually.

There is in fact a clear case for raising this limit to not only make housing more affordable but to also
address the issue of piled up inventory in the residential segment as high property costs and interest
rates have kept investors at bay from investing in real estate.

House Rent Allowance or HRA

The current provisions of the income tax act allow rent paid by the employee as an expense exempt
from the income tax subject to a limit of...

50% of the annual basic salary (40% for non-metros) or

Actual HRA received from the employer or

Rent paid over and above 10% of the basic salary

(Lowest of the above three)

With soaring property prices and the rising cost of living, especially in the metros, rentals have also shot
up sharply in the past few years, which the current exemption limits on rentals has failed to capture.
Expectations are high that the finance minister may give due consideration to this long pending proposal
of enhancing the limit of HRA exempt from tax.

Higher tax-free medical reimbursement

Any medical allowance given to an employee, by an employer, is tax-free in the hands of the employee
to the tune of Rs 15,000 per annum. Considering the rising cost of medical expenses, the amount is too
low and needs to be reconsidered

Widening the scope of section 80C

The total deductions that a taxpayer can avail on investments have been restricted to Rs 1 lakh for quite
a while now. The section 80C basket even includes expenses such as eduction on children's education
and tuition fees under its bandwidth and also repayment of interest loan that has severely limited the
scope of deductions for taxpayers.

The finance minister may consider restricting Rs 1 lakh deduction under section 80C to core investments
and allowing separate deduction for expenses incurred for basic needs like education and repayment of
housing loan.
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Budget 2013 Impact: Service tax relief on
freight may ease pressure on prices of soaps,
tea, sugar
MUMBAI: There may be some good news for consumers finally. Essential food items like tea, coffee,
flour, sugar and edible oil, as well as discretionary products like premium soaps and deodorants, may
get a bit cheaper as a result of some service tax exemptions proposed in the Budget.

The Budget has exempted service tax on freight charges of foodstuff including flour, tea, coffee, jaggery,
sugar, milk products, salt and edible oil, which would result in savings for FMCG and food companies.
Also, the service tax of 12.36 per cent has been removed for alcohol-based soaps and deodorants, which
is also expected to benefit companies.

The service tax exemption on goods transport agency extended this year to food items, agricultural
produce and oilcakes, among other products, is a positive for the FMCG and food companies, helping
them to save at least 3 per cent of their transport and logistics costs.

Says Amit Mitra, director (indirect tax), Grant Thornton India, a tax and advisory firm, "The service tax
exemption will benefit FMCG and food companies which manufacture these items, as well as those
which use them as inputs. Companies will be able to save an estimated 2-3 per cent on their
transportation costs."

Most companies including Hindustan Unilever, NestleBSE -1.24 %, ITCBSE -1.42 %, General Mills,
Perfetti, Kelloggs and Adani Wilmar will be able to mop up savings due to these service tax
exemptions. Says Angshu Mallik, COO, Adani Wilmar, "Overall, for the industry, the impact will be quite
large. For edible oil, for 1 million metric tonnes of oil transported in a year, it will help to save Rs 5
crore." However, the savings for Adani Wilmar would not be much as the freight charges have gone up
this year. If average freight is Rs 2 per litre, then it would be calculated as 3 per cent on freight. The
savings are 6 paise per litre, he added.

Even a day after the Budget proposals were announced, consumer goods companies and food
companies are still assessing whether they would pass on the benefits to consumers. Savings made by
companies will partially offset the increase in transport cost due to the deregulation of diesel, experts
added.
Hindustan UnileverBSE 2.04 % declined to comment on the Budget implication.

As far as companies manufacturing alcohol-based deodorants, sprays and soaps are concerned, they
were being taxed twice. They were paying a state excise duty under the Medicinal and Toilet
Preparations Act, 1955, as well as a service tax of 12.36 per cent on processing charges. This anomaly
has been removed in the Budget. Companies like Nivea, Hindustan Unilever and WiproBSE 1.13 %
Consumer market their deodorants in the country.

Rakshit Hargavem, MD, Nivea India, said that there would be no impact on prices as the company will be
sourcing products from a third party manufacturer.

Says Rohit Jain, partner, Economic Laws Practice, "This is a welcome amendment which eliminates
double taxation on the same transaction."
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NEW DELHI: Sports utility vehicles, imported cars and motorcycles, high-end mobile phones, eating out
at air-conditioned restaurants and cigarettes will become costlier with Finance Minister P Chidambaram
deciding to impose higher taxes on these items.

On the other hand, there is good news for ladies as far as jewellery is concerned as they will be allowed
to bring more duty free gold items provided they have stayed out of India for more than year.

Moreover, branded apparels will become cheaper as there will be zero excise duty on the item. Carpets
and other textile floor coverings of coir or jute will also become less expensive as they have been fully
exempted from excise duty.
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On the other, top-end cars, bikes, yachts, apartments and cigars luxuries the rich like to indulge in
are now taxed more. Is this really as bad as it seems for super rich consumers? Of the two, higher
income tax will pinch rich consumers more than higher tax on luxury goods.

First, the tax surcharge may weaken their urge to splurge, but Chidambaram has promised this will go
away next year. That may give them some relief. And possibly even birth some innovative ways to
postpone income realisation to the next financial year! Second, higher taxes on luxury goods haven't
been much of a deterrent to rich consumers.
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New Delhi: The Finance Minister P Chidambaram on Thursday presented the most highly anticipated budgets of
recent years in the Parliament. Here are the highlights of what the budget carried for the common man.
BUDGET BUZZ






READ MORE
Budget: Chidambaram's 8th;
India's 82nd
FM offers minor sops to
income tax payers
FM has done commendable
job: PM
Nirbhaya Fund for women's
safety
India Inc calls
Chidambaram's budget
encouraging
List of products getting
costlier, cheaper
MHA gets Rs 59,241 crore in
budget
Opposition gives a thumbs
down to budget
14 pc hike in Defence
Ministry budget
Additional tax break on first
home
RAIL BUDGET:
HIGHLIGHTS


TAX SLAB UNCHANGED

WHAT WENT DEARER AND WHAT CHEAPER FOR YOU

THE MONEY GAME


BUDGET ALLOCATION ON SCIENCE TECHNOLOGY AND
ENVIRONMENT, SOCIAL SERVICES, GENERAL ECONOMIC
SERVICES, GENERAL SERVICES

BUDGET ALLOCATION ON COMMUNICATIONS,TRANSPORT,
INDUSTRY AND MINERALS, IRRIGATION AND FLOOD CONTROL

BUDGET ALLOCATION ON ENERGY,RURAL DEVELOPMENT AND
AGRICULTURE AND ALLIED ACTIVITIES

- See more at: http://post.jagran.com/UNION-BUDGET-20132014-AT-A-
GLANCE-1362060887#sthash.hii5Qzmd.dpuf
Five-year Plans more important than FM's
speech
Budgets rarely run according to Plans. Yet, they grab our attention because, let's face it, we all love
"breaking news". As the short term is more exciting than anything longer, the budget speech features
like a rock event, but the Five-year Plans go unsung.

Also, budgets give economists reasons to live for, just as riots help sociologists and quarterly reports,
hedge fund investors. Barely two months back, Montek Singh Ahluwalia released the 12th Plan
document, but who noticed it? Perhaps the prime minister did for he was chairing that occasion, but
with him you cannot always tell. The Plan called for "inclusiveness", but did that include the government
too?

In contrast to the reception of the 12th Plan, few of us could tear ourselves away from P Chidambaram's
2013 budget speech. It is not as if he took us over the rainbow into the future; rather it was his concern
with the immediate that made his performance so newsy. Nor is this the first time that it has happened;
when a budget is being announced, get your show off the air, it won't stand a chance.

The short term casts its spell over the corporate world too. Investment managers use quarterly reports
rather than long-term projections to lead the way. Shareholders don't care, but this is not how financial
assets are best valued in functioning capital markets. As Alfred Rappaport wryly commented, it was as if
companies were being lined up for a "Keynes Beauty Parade". In recent weeks, some hedge fund
operators have used snap judgments of short-term interests and thrashed Apple computers with it.

The budget too has the flavour of "quarterly reports" which is why it is such a hit every time. In fairness,
Chidambaram admitted, without losing a step that his budget could only have a short-term outlook; it
could neither reduce oil imports nor expand export orders. His "greater worry", as he confessed, was the
imbalance between export earnings and import expenditures. Nor did he really care how actual delivery
took place. Chidambaram said that the cap for that job fits the ministries better; it is they who must do
the monitoring.

If the budget is about balancing books, the Plan is about writing the book. This is why the excitement
surrounding the budget appears misplaced. Much of that should have been reserved instead for the
Plan documents. They take longer to construct and should leave a deeper impress upon our future. It is
the Plans again where big policy decisions are taken and projects audited, yet they sink like stones
without creating a ripple.

Nobody gets it right all the time, but budget speeches tend to have all the luck. Even when they go
wrong, they fall up and not down. The public is that hungry for them. Of course, the budget cannot cross
over as a five-year Plan, but in recent decades the two have barely brushed past each other. This is
where the problem lies and the planners should take guard. Ahluwalia made little of the differences
between him and the finance minister on this score, but the matter is fairly serious.

For example, the 12th Plan recommends the need to raise agricultural investment and help rainfed
farms and indebted farmers. Chidambaram is careful to acknowledge this, but what does he really do?
He sets aside a paltry Rs 5,387 crore for drought-prone small farmers and another miserable Rs 2,250
crore to mobi-lise agricultural investment.
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Budget 2013 proposals inscrutable for FIIs?
Presenting the Budget for 2013-14, finance minister P Chidambaram took pains to point out that India's
greatest worry is the current account deficit (CAD) and it has to find over $75 billion to finance it. He
then explained there are only three ways for India to achieve this objective: FDI, FII or external
commercial borrowings (ECB).

Finally, he stated in no unequivocal terms that India at present does not have a choice between
welcoming or spurning foreign investment. In fact, foreign investment is an imperative. After reading
the tax proposals in the Budget, foreign investors may wonder if they are loved or hated by India's fiscal
policy. The provisions that give rise to such feelings are discussed below:

Tax Residency Certificate (TRC): The concept of reliance on a TRC to satisfy the condition of tax residence
for the purpose of application of tax treaty was first enshrined in Circular No. 789, 2000, issued by the
Central Board of Direct Taxes (CBDT) in respect of Mauritius. Uncertainty on the Mauritius Tax Treaty
exemption again arose with the proposed introduction of Gaar in Budget 2012.

The Expert Committee headed by Dr Parthasarathi Shome in its report on Gaar has explicitly
recommended that where circular 789 with respect to Mauritius is applicable, Gaar provisions should
not apply to examine the genuineness of the residency of an entity set up in Mauritius.

In this backdrop, Budget 2013 proceeded to insert a provision that submission of TRC is a necessary but
not a sufficient condition for claiming benefits of a tax treaty. This naturally raised concerns about
continuing applicability of Circular 789 in respect of Mauritius and generally as the tax officer would get
powers to question the availability of a tax treaty regardless of the production of the TRC in any number
of cases.

After clarifying its intent, the government has come out with yet another clarification to reiterate that
Circular 789 still holds good and the intent behind this amendment is not to go beyond the TRC for the
purpose of treaty application. It is expected that further clarificatory amendments will be made before
the Bill is passed. This was an avoidable controversy. It would be better if the government simply
removes this proposed amendment.

Tax rate of royalty and fees for technical services (FTS): Under current domestic law, royalty and FTS
received by a non-resident is taxable at 10%. It is proposed to increase this rate to 25% on the basis that
a majority of tax treaties allow India to levy tax at rates ranging from 10-25%.

However, the reality is that in respect of countries generally exporting technology to India, i.e., US, UK
and Germany, treaty rates range from 10-15%. Since the position in law is that either the domestic law
or the treaty shall prevail, whichever is more favourable for the taxpayer, the applicable rates should
anyway remain in the range of 10-15%.

Distribution tax on buyback of unlisted shares: A new provision is introduced to provide for an additional
tax at 20% of the distributed income paid to the shareholder of an unlisted company by way of
consideration of buyback of shares as reduced by the issue price for such shares. Consequentially, the
shareholders will be exempt from tax on such buyback.

The stated purpose of introducing this tax is to catch hold of unlisted companies that are resorting to
buyback of shares instead of payment of dividend to avoid payment of dividend distribution tax
particularly where the capital gains arising to the shareholders are tax exempt.

In the Shome Committee report on Gaar, it has been explained that payment of dividends to
shareholders or buyback of shares is a business choice that a company is entitled to exercise at any
point of time. Thus, even though a treaty benefit by way of capital gains exemption may be available,
the decision of the company to accumulate profits for buyback of shares or distribution of dividend
cannot be questioned under Gaar.

Tax on indirect transfers: There was a lot of expectation from foreign investors that the Shome
recommendation on either rollback of retrospective amendment on indirect transfer or at least
clarifications on limiting the scope of the section would be introduced in this Budget. But there has been
no further amendment proposed to the retrospective amendment introduced in last year's Budget as a
result of which the prevailing clouds of uncertainty on cross-border mergers and acquisitions continue.
But, hopefully, the FM will script a happy finale to these provisions.
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P Chidambaram satisfied with the budget,
hopes RBI will take the cue, cut rates
NEW DELHI: Declaring the maths underpinning his Budget numbers to be beyond reproach and noting
that he had delivered on his fiscal promises, Finance Minister P Chidambaram has made a strong yet
subtle pitch to the monetary authorities to now do their bit to revive growth.

In an exclusive interview with ET NOW on Friday, Chidambaram said the government had stuck to its
promise of containing fiscal deficit at 5.2 per cent of GDP this year, and expressed confidence it would
be restricted to 4.8 per cent in the next fiscal. "I am sure that the ( RBI) governor has taken note of all
that I have said in the Budget speech... I am sure all this will weigh with the monetary policy advisory
committee... and the governor will take the right decisions," he said in the interview, his first since
presenting the Budget on Thursday.
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NEW DELHI: Whether you taxable income next year is just one rupee over Rs 1 crore or Rs 4.4 lakh more
will make no difference to your post-tax income. Similarly, whether it's one rupee more than Rs 5 lakh or
2,500 rupees more, you will take home the same amount.


How is this possible? That's because the finance minister has given tax relief in the form of a rebate up
to a certain income level and extracted more in the form of a surcharge above another level. Had he
changed tax slabs or tinkered with the rates instead this peculiar 'no-net-income zone' would not have
been created.

Here's how the logic works. At an income level of Rs 5 lakh, your tax liability is Rs 30,000 minus the
rebate of Rs 2,000, which is Rs 28,000. On this amount, there will be a further Rs 840 by way of
education cess, leaving you with a post-tax income of Rs 4,71,160.

Now add just rupee to the Rs 5 lakh and see what happens. You are now in the 20% tax slab and no
rebate is applicable. The tax liability is still Rs 30,000 since the 20 paise added on for the additional
rupee will disappear in the rounding off. But in the absence of the rebate and the cess, the total tax
payable becomes Rs 30,900. That should leave a post-tax income of Rs 4,69,101 or Rs 2,060 less than
what you would take home at Rs 5 lakh.

Thankfully, taxation principles ensure that such aberrations are taken care of and you don't have
situations where a higher pre-tax income leads to a lower post-tax one. So your net income will still
remain at Rs 4,71,160.

This problem of the Rs 2,000 rebate no longer applying leading to post-tax incomes being lower
than at the Rs 5 lakh level in the calculations continues all the way till you reach an income of Rs
5,02,600. At this level, your post-tax income finally reaches Rs 4,71,164. That's just three rupees
more than what it would be at Rs 5 lakh, but at least it is more.

At the Rs 1 crore level, where there is no rebate and the 30% tax bracket applies, the total tax
liability, including cess would be Rs 29,14,900 leaving you with a post-tax income of Rs
70,85,100. Add a rupee to this taxable income and you are in surcharge territory. The key thing
is that the surcharge applies not just to the tax liability on your income above Rs 1 crore but to
your entire tax liability.

This has a dramatic effect. The calculations show that the extra rupee adds Rs 2,91,490 to your
tax liability and would reduce you take home correspondingly, but for the principle mentioned
earlier. Once again, the extra tax liability due to the surcharge remains a problem all the way till
you reach an income of Rs 1,04,41,600. That is almost Rs 4.5 lakh more than Rs 1 crore. At this
level, the post-tax income reaches Rs 70,85,110. That is a mere Rs 10 more than what you would
have taken home at Rs 1 crore.