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BudgetHighlightsSubsidies to be kept under 2% of

GDP in 2012-13. Aim to lower it

to 1.75%.

Fiscal deficit for 2012-13 pegged

at 5.1% of GDP.

Rajiv Gandhi Equity SavingScheme launched. The limit for

tax free infra bond issues to be

raised from 30K cr to 60K cr.

Divestment target for FY13 at Rs

30,000 cr.

Securities Transaction Tax (STT)

reduced by 20% on cash

delivery transactions.

Excise and service tax rates up

by 2% to 12% each. No change

in corporate tax.

Exemption limit for individual

taxpayers enhanced from Rs

1,80,000 to Rs 2,00,000.

Govt.s borrowing target for

FY13 at Rs 4.79 lakh cr.

BUDGET 2012-13

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COMPANY PRICE CHANGE RECOMMENDATIONS

Sun Pharma 545.1 (41.6) Higher tax will reduce the FY13/14 EPS by10%

Cadila Healthcare 711.9 (40.1) Higher tax will reduce the FY13/14 EPS by 8%

Adani Power 73 (2.65) Exemption of Coal and LNG from customs

duty positive for Adani Power and Tata

Power

SBI 2227.9 (71.5) Exit banking stocks, Tata Motors & Maruti

Suzuki. Buy Nifty below 5200 levels. Cairn

India, Bharti Airtel contrarian bets. Buy GMR

Infra, GVK on 10-15% correction.

MARKET TAKE ON THEBUDGET

Vallabh

Bhanshali

ENAM

FM has proved to

be a greater friend of the economy.

The focus has been on promising

growth and the Budget has

provisioned for actual delivery.

Uday Kotak

Kotak Mah

Bank

The political

challenges

prevent the announcement of a

reformist Budget. However, it has

provided direction in a broader

reality.

Samir Arora

Helios Cap

I am a bit

disappointed,

but not a lot

because I think the Finance

Minister has basically put

everything down on credibility.

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New Tax Slabs

MALESExemption up to Rs 2 lakh for

taxpayers. The upper limit of 20% tax

slab raised to Rs 10 lakh.

TAX RATE NOW POST BUDGET

Nil 1.8 lakh 2.0 lakh

10% 1.8 5 lakh 2 5 lakh

20% 5 8 lakh 5 10 lakh

30% Above 8 lakh Above 10 lakh

FEMALESExemption up to Rs 2 lakh for

taxpayers. The upper limit of 20% tax

slab raised to Rs 10 lakh.



10% 1.9 5 lakh 2 5 lakh

20% 5 8 lakh 5 10 lakh


SENIOR CITIZENS

(60 80 YRS)The upper limit of 20% tax slab raised

to Rs 10 lakh.



10% 2.5 5 lakh 2.5 5 lakh20% 5 8 lakh 5 10 lakh


VERY SENIOR CITIZENS

(80 YRS & ABOVE)The upper limit of 20% tax slab raised

to Rs 10 lakh.


Nil 5 lakh 5 lakh

20% 5 8 lakh 5 10 lakh30% Above 8 lakh Above 10 lakh

TAX CALCULATOR

Use our tax calculator to find out your new tax structure. Click here
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Personal Tax

Arnav Pandya, Financial Planner

Benefits for individuals in the current budget

The issue of taxation of gains from equity shares provides the

benefit of a lower tax liability for the investor. Long term capital

gains for shares traded on a stock exchange have a zero rate of

taxation while the short term capital gains tax is 15 per cent. What is

important in the entire effort is the actual procedure that is adopted

for determining the holding period for shares in a demat account.

The actual calculation could well change the entire picture and lead

to a different position on the tax front than what was actually expected. Here is a look at how this

aspect works.

FIFO method: The main point in the entire aspect of taxation as far as the investor is concerned is that

the holding period is calculated on a specific basis and this method will guide how things are actually

concluded. So the process that is adopted here is known as the First In First Out (FIFO) method and this

is applicable for the demat shares that are held by the investor. When the shares are held in demat

form there is no way to distinguish one from the other as these are just merely numbers unlike the

position in the physical form where they have different distinguishing certificates and distinctive

numbers. Hence it is assumed that the first shares that come in are the ones that are sold first and then

they follow this similar format.

Easier to handle: Once this overall format is known then the entire process becomes easier to handle.

Take for example a case where a person has bought 200 shares of Reliance in January 2011 at a rate of

Rs 850 and then another 200 in February 2011 at the rate of Rs 790. If he sells 100 of these shares in

December 2011 at a rate of Rs 810 then even though he might want to say that there is a small gain on

these shares because these have been sold from the second lot that has been bought recently this

argument will not hold when it comes to the calculation of the tax. This will happen because under the

FIFO method that has to be adopted the shares will be considered to have been sold from the first lot

and hence there will be a capital loss that is suffered here. This could lead to a position where the entire

planning could have to be reworked.

Part demat: Since this is the position that has been clearly outlined the impact of this can also be severe

and might even be different from the position on the ground. Consider a situation where the individual

has bought 200 shares in the demat form a couple of years ago of HUL.

For complete article, Click here
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Whats Costlier

Air Conditioner Refrigerator GSM/PDAMobiles

Gold Cars/SUV Cigarettes

Whats Cheaper

Laptops LCD Cinema & fares
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SECTOR IMPACT

AUTO / 2 WHEELERS

PROPOSALS

- Basic excise duty hiked from 10% to 12%- Excise duty on large cars from 22% to 24%- No revision in taxes on diesel vehicles

IMPACT

Negative for the sector. Expect price hikes.

REALTY

PROPOSALS

- ECB for low cost affordable housing projects- Retains 1% interest rate subsidy for loans towards affordablehousing

IMPACT

Negative for the sector

TELECOM

PROPOSALS

- Emphasis on rural economy and inclusive growth.- Inclusion of telecom tower infra in the viability gap funding.- Exemption of customs duty on parts of mobile phone.

IMPACT

Overall, a neutral to mildly positive impact is expected.
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SECTOR IMPACT

INFRASTRUCTURE

PROPOSALS

- Amount of tax free infra bonds doubled to Rs 60,000 crore- 8,800 km of road projects will be awarded in FY13- Allowed FIIs to invest in long term infra bonds

IMPACT

Positive for L&T, GMR Infra, IRB Infra, IDFC, Sadbhav Eng

POWER

PROPOSALS

- Allowed to take ECB route for rupee-debt on their books- Additional depreciation of 20%- Thermal power plants allowed full customs duty exemption onimported coal for two years.

IMPACT

- Positive for the power sector

AVIATION

PROPOSALS

- Direct import of aviation turbine fuel (ATF)- Airlines can raise funds $1 billion via ECBs toward workingcapital requirements- 49% FDI from foreign airlines is under active consideration

IMPACT

Neutral impact on the aviation sector
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Editorial Column

R. Jagannathan Editor, Firstpost at Network 18

Tinkerer Pranab has missed the bus - sowhat's new?

Mountains of expectations always deliver a mouse. And so it was

with Pranab Mukherjee's make-or-break budget. He neither made

much of the opportunity nor broke anyone's back by trying to do too

much.

The net verdict is this: Revenue has been beefed up, but

expenditures are not quite in check. Thus, fiscal consolidation is still one-sided. Big reforms have been

given the go-by. Small crumbs have been thrown at the middle class in terms of tax relief, but the price

increases due to the raising of excise and service taxes will more than neutralise this gain.

The macro numbers first: the big thing that was expected from Mukherjee was a sharp drop in the fiscal

deficit, which he delivered, by bringing it down from 5.9 percent in 2011-12 to 5.1%. A big drop by 0.8%

is good news, but the devil will be in the detail: how did he achieve it?

The chances are he will miss the target once again because the cut is being achieved through raising

taxes - the net additional taxes from customs, excise and service taxes will be Rs 45,940 crore while the

crumbs on direct tax concessions equal Rs 4,500 crore. The net tax gain for Mukherjee: Rs 41,440 crore.

The question is: in a period of slowing growth, will his revenue projections really live up to expectations?

When last year he missed almost all targets?

The big money (at least, what is planned) is coming from an across-the-board two percent hike in excise

and service taxes to 12 percent, and the extension of service tax to every nook and cranny of the

economy - only 17 services are exempt. Revenues will certainly go up.

The concessions are fleabites: an increase in the tax-free exemption limit to Rs 2 lakh - that's a Rs 2,000

tax relief per individual. Rs 10,000 of interest earned from banks will be tax-free, but this is more a sop

to banks - who are screaming about tax-free bonds and high payments on post-office schemes that are

taking away customers. Senior citizens have been spared the payment of advance tax - but this is l ike

making life easier, not about providing more money in the pocket.

The salaried and the old can say thanks, but no thanks.

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Editorial Column

Santosh Nair Editor, Moneycontrol at Network 18

Pranab Mukherjee's cautious gamedisappoints market

The good thing for Pranab Mukherjee was that few people had any

big expectations from the Budget, given the political compulsions of

the UPA government. Still the market was hoping to hear

something positive on subsidy cuts, lowering expenditure,

improving capital investments, and a roadmap on the Goods and

Services Tax (GST) and Direct Tax Code (DTC). The finance minister has disappointed on all these counts.

But the bigger worry for the market now is that inflation could increase further in the coming months

because of the proposal to hike service tax, excise duty and widen the number of taxable services (all

but 17). The companies will mostly likely pass it on to consumers. Bond yields climbing to 8.4% already

reflect those concerns, and there is a saying that if the bond market and equity market gives conflicting

signals, always believe the bond markets.

Some economists have been pointing to the worsening quality of India's growth (even if in relative terms

it ranks among the best growing economies) where consumption is the driving factor rather than

investment in capital assets. And with no concrete proposal to address supply side problems by

improving infrastructure, there is every reason to believe that inflation will only worsen going ahead.

And we have not yet taken into consideration higher fuel and power prices, two areas where thegovernment is reluctant to act fearing political opposition. The Budget has guided for a fiscal deficit

target of 5.1% for FY13, and gross borrowing figure of Rs 5.69 lakh crore. Market does not appear to be

taking both numbers seriously, even though the fiscal deficit number is something it was hoping to hear.

The reason for the indifference is clear: the government overshot both the estimates for FY12 by a wide

margin. There is little reason to hope that same won't be the case in FY13 given rising crude prices,

volatile capital flows because of turbulent global markets and the government's inability to take hard

decisions that will be seen as politically unpopular.

It will be interesting to see how the Reserve Bank of India (RBI) makes of the Budget. In the last couple

of policy review meets, the RBI made it clear that it will not lower rates unless it the governmentreduces the fiscal deficit by curbing wasteful expenditure. At its credit policy meet a couple of days back,

the central bank further gave enough hints that it would not cut rates in a hurry given high crude prices

which could further stoke inflation. The Budget may not have been as populist as some players feared it

to be, but then neither does it say much about addressing some of the serious problems, mainly

subsidies.

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8/2/2019 Budget 2012 e Book01

11/11

Editorial Column

Arjun Parthasarthy, Editor, investorsareidiots.com

Despite Budget, equity, bonds & currencies willhave a ball

The optics from the Union Budget 2012-13 are positive for markets

with higher growth, lower inflation and lower fiscal and current

account deficits. GDP growth is estimated at 7.6% for 2012-13 against

6.9% for 2011-12. Inflation, expected at 6.5% for 2012-13, is below

the average of 9.1% seen in 2011- 12. Fiscal deficit is pegged at 5.1%

of GDP, down from 5.9%, while the current account deficit (overseas earnings less expenses) is

estimated to come in below 3.6% of GDP seen in 2012-13.

Indian equities, bonds and currencies should react positively to the budget expectations in theory.

However, the fact that the government has overshot its 2011-12 budget targets by a wide margin will

make the markets circumspect on the latest forecasts of the finance minister.

GDP growth came off from forecast levels of 9% last year, while fiscal deficit was higher by 1.3% against

budget estimates for 2011-12. Current account deficit was a percentage point higher while inflation

trended much higher than expectations in fiscal 2011-12. Markets are unlikely to move on the back of

projections of the union budget 2012-13.

The outlook for equity and currency markets will depend on whether there is continued risk appetite

amongst global investors leading to foreign institutional investor (FII) flows continuing their positive

trend seen in calendar year 2012. FIIs have pumped in over US$ 7 billion into Indian equities in the

calendar year to date and, given the liquidity unleashed by central banks across the world, indications

are that the flows will continue.

The ECB (European central Bank) has pumped in over euro 1 trillion into the system through LTRO (Long

Term Refinancing Operations) while the US Fed has pledged to keep policy accommodative well into

2014.

The Indian rupee (INR) is down by over 12% in fiscal 2011-12 largely on the back of FII flows turning

negative and the current account deficit rising by over 1 percent on the back of the trade deficit goingup by USD 70 billion over levels seen in 2011-12.

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