Personal Finance

Highlights: Union Budget 2013-14

With the backdrop of UPA Government’s mool mantra ‘Higher growth leading to inclusive and sustainable development’, Mr. P Chindambaram has presented the budget drawing picture of three faces that represent the vast majority of the people of India. The first is the face of the woman – She is the girl child, the young student, the sportswoman, the homemaker, the working woman, and the mother. The second is the face of the youth – He is impatient, she is ambitious, and both represent the aspirations of a new generation. The third is the face of the poor who look to the government for a little help, a scholarship or an allowance or a subsidy or a pension.

As per the Union Budget 2013-14, the fiscal deficit is expected to be 4.8% of the GDP for the fiscal year 2014.

Below is the summary of key highlights of the Union Budget 2013-14 as tabled in the Lok Sabha earlier today:

1. Infrastructure debt funds to be encouraged

2. Regulatory authority for Road sector to be set up

3. Instruments like inflation indexed bonds/ savings certificates to be introduced to protect against inflation

4. Micro, Small & Medium Enterprises – to encourage them to grow – non-tax benefits will stay for 3 years after they graduate to higher category

5. Funds paid to approved Technology Incubators will qualify as CSR under the new Companies Bill

6. India’s first All-Womens’ Bank to be set up as a Public Sector Bank by October 2013 with a Rs 1,000 crore allocation

7. Insurance companies can open branches in Tier II cities without IRDA approval. Penetration of insurance companies to be increased

8. Banks to be permitted to act as insurance brokers

9. Group insurance schemes to be extended to homogenous markets

10. Insurance and Pension (PFRDA) bill hoped to be passed by the Parliament

11. Insurance, Pension Companies allowed to directly trade in debt segment subject to Regulator approval

12. KYC norms to be simplified for foreign investors

13. Where investor has stake of 10% or less in a company will be treated as Foreign Institutional Investor (FII) and if more, than as foreign direct investor (FDI)

14. SME exchange – Small and medium enterprises will be allowed to list without public offer

15. Waste to Energy projects through PPP projects to be encouraged

16. Generation based incentives for wind sector

17. 9 million people to be skilled through various skill development activities

18. Defense allocation to increase

19. National Institute of Sports Coaching to be set up at Patiala

20. ‘Nirbhaya Fund’ of Rs 1,000 crore for various initiatives has been proposed for women safety and dignity

21. National Skill Development Corporation to set up curriculum and any institution can provide training

22. Direct Fund Transfer mechanism which has 11 lakh beneficiaries will be rolled throughout the country

23. KYC of banks will be sufficient to acquire insurance policies

24. Proposal to amend SEBI Act under consideration

25. SEBI to simply procedures for FIIs, unify categories of FIIs

26. DIPP and Japan’s JICA preparing plan for Chennai-Bengaluru Industrial corridor

27. 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

With the underlying theme “clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance”, Mr. P Chidambaram has made following tax proposals, both on the direct taxes side and on the indirect taxes side.

Direct Taxes

28. No change in rates of personal tax. However, a tax credit of Rs 2,000 is provided to taxpayers in the bracket of Rs 2 lakh to Rs 5 lakh

29. Additional surcharge of 10% is proposed to be levied on individual having income in excess of Rs 1 crore

30. Surcharge for domestic company has increased from 5% to 10% and in respect of foreign company, it has increased from 2% to 5%

31. This additional surcharges is proposed to be levied only for 1 year

32. It is propose to allow first home buyers an additional deduction of interest of Rs 100,000 to be claimed in AY 2014-15 where the loan does not exceed Rs 25 lakhs

33. Premium rate for certain life insurance policies allowed to go up from 10% to 15%

34. 100% deduction would be available in respect of donation to National Children Fund

35. Power sector holiday increased by 1 year

36. Investment allowance of 15% in addition to current rates of depreciation for high value investments of Rs 100 crore or more in 2013 to 2015

37. Parity between Infrastructure Debt Fund -Mutual Fund and Infrastructure Debt Fund-NBFC

38. Cateogory I – Alternative Investment Funds and angel investors will enjoy pass through status

39. Rajiv Gandhi Equity Scheme for first time investors to be liberalised to cover mutual funds and cover a period of 3 years. Additionally the income of the investor has increased from existing 10 lakhs to 12 lakhs

40. Immoveable property transfer – TDS at 1% on value of transfer where consideration exceeds Rs 50 lakhs (agricultural land exempt)

41. Withholding tax in respect of payment of royalties and Fees for technical services is increased from 10% to 25%, subject to benefit of Double Taxation Avoidance Agreement

42. Commodities Transaction tax on non-agricultural commodity futures. CTT to be allowed as deduction if income forms part under the head ‘Profits and Gains from business or profession’

43. Direct tax code to be based on international best practices

44. Securities transaction tax (STT) on redemptions of mutual fund (MF)/ exchange traded funds (ETF) at fund counters has reduced to 0.001%. Further, the STT on purchase/ sale of MF/ ETF has also reduced to 0.001% and that will be levied only on the seller

45. Buy backs by unlisted domestic companies subject to a final withholding tax of 20%

Indirect Taxes

46. No change in basic customs duty rate of 10% and service tax rate of 12 %

47. No change in peak rate of customs duty for non-agriculture products

48. Tobacco products, SUVs and Mobile Phones to cost more

49. Custom duty on imported motor vehicles hiked; import duty on luxury cars increased from 75% to 100%

50. Gold duty free limit raised to Rs 50,000 for men and to Rs 1 lakh for women travelers

51. All AC restaurants will have to pay service tax whether or not they serve alcohol

52. ‘Voluntary Compliance Encouragement Scheme’ launched for recovering service tax dues. Interest/ penalty and other charges is proposed to be waived under this scheme

53. Rs. 9,000 crore earmarked as the first installment of balance of CST compensations to different States/Union Territories

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