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BUDGET 2006-07February 28, 2006

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ompos on n ergo ng a ras cChange

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PERSONAL INCOME TAX

Current tax slabs:Upto Rs. 1 lac NIL1 lac to 1.5 lacs 10%1.5 lacs to 2.5 lacs 20%Above 2.5 lacs 30% (10% surcharge on

income above 10 lacs).2% education cess chargeable.

Proposals:No change proposed in these slabs

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Service Tax

Service tax increased from 10% to 12%

Service tax extended to 15 new categoriesof services (Registrar & share transfer

services, ATM operations, recovery agent,advertisement space other than printmedia, business support services, etc)

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Customs DutyPeak rate - non-agr. products reduced

from 15% to 12.5%Additional duty of 4% extended to allimported goodsAdditional Customs duty is modvatableagainst excise on manufactured goodsduty-various food processing items - NILduty on ready-to-eat packaged food and

instant food mixes reduced -16% to 8%

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Tax benefits to FIs

Amendments in the tax laws - offer taxbreaks to FIs merging with banks (withretrospective effect). This was beneficial toFIs that have got converted to banks

(IDBI and the like).

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Conversion into banking entity: The NBFCs - track record & net worth over Rs2 bn - convert into a commercial bank.Enable the FIs to access low cost deposits

and improve their margins.

90 day NPA norm: HFCs have shifted to the 90 day norm of accounting for NPAs - brought their riskappraisal system as per banks.

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Issues Pre Budget Expectations Post Budget Impact

Issue of preferenceshare capital

Exemptionfor savingsdeposit u/s 80

S/10(23G)income frominvestment ininfrastructurecompany

Banks notallowed toissueunder the

BRA, 1949

Currentlynot part of investments

Exempt

Allow theissuanceof perpetualpreferenceshares

Includesavings bankdeposits forexemption u/s80

No changeexpected

Amendmentto theBRA tabledbefore theParliament

FDs withmaturity of more thanfive yearsallowed

Exemptionwithdrawn

Positive forSector, forstate-ownedbanks.

Positive forSBI, PNB,Bank of India(BoI) andCanara Bank

Negative forIDFC(earnings todrop by15%), IDBIand ICICIBank

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INFRASTRUCTURE

Larger budgetary support (54% increase) toBHARAT NIRMAN programme.

Golden Quadrilateral project and planned 1000 Kmof access controlled Expressways

Provision of Rs.1,500 cr telecom industry & financialsupport to infrastructure for cellular telephonyin rural areas .

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Cascading EffectMore demand for steel, cement industry

Golden quadrilateral - boost demand Commercial vehicle

Higher disposable income in rural India boostconsumption of consumer products

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COAL MINISTRY UPSET-DERESERVATION PLAN

De-block coal reserves of 20 bn tonnes infavour of power projects after reserving

the blocks for CIL upto 2012

Coal production - taken up from 350 to

782 million tonne by 2025

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BUDGET CRITICS

Silent on further reforms in more difficultareas - FDI, PSU disinvestment, cuttingsubsidies, labour market reforms

Pharmaceuticals and healthcare sector.Nothing in the Budget to promote R&Ddespite specific demand from the industry

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FINANCIAL SECTOR

Net capital support to banking sector-Rs. 22,808 cr

Capital Market:Limit on FII inv. in Govt sec increased to$2 bn from $1.75 bn;In corporate debt - $1.5 bn from $0.5 bnCeiling on aggregate investment by MFs

in OSIs - raised to $2 bn from $1 bn

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Sensex zooms past 10500Benchmark indices surged nearly 2%-highest

ever closing levelsGains in auto, cement, metal, and tech shares.The budgets focus on rural economy, infra & power sector - controlling the fiscal deficit,

pegged at 3.8 per cent of GDP.BSE Sensex ended at 10565.47, up 195.23 pointsNifty ended at 3123.10, up 48.40 pointsMaruti Udyog and TaMo

new 52-week highs .

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THANK YOU!!!