finance budget 2009 - 2010 highlights

the finance budget 2009 is expected to balance between social orientation and growth; as well as fiscal prudence. finance budget 2009 Greater allocation to infra, healthcare and education spending is likely to continue. Considering the large capital requirements going forward, opening up of several sectors to attract FDI / FII investment can be expected. 2% hike in excise and service tax is expected post 4% cut in excise through Stimulus I and II.

10% surcharge on personal Income Tax removed

Key Features of Budget 2009-2010

budget speech full text

income tax proposals budget 2009 2010

finance budget 2009 highlights

• Government plans to bring back the economy to a high growth of 9%
• GDP growth dipped to 6.7% in FY '09
• FM to make pre-budget talks with state FMs an annual affair
• Fiscal deficit up from 2.7% to 6.8% of GDP
• Return to fiscal prudence at the earliest
• "Aam admi" is focus of all programmes and schemes
• IT exemption limit raised; Rs50,000 for senior citizens
• Limit raised by Rs10,000 for tax payers, including women
• 10% surcharge on personal income tax scrapped
• Fringe Benefit Tax abolished
• No change in corporate tax
• Defence gets Rs1,41,703 cr, up 34%
• Total fiscal stimulus in 2008-09 amounts to Rs1,86,000 crore
• IIFCL to evolve mechanism for increased infrastructure funding
• IIFCL to re-finance commercial bank loans up to 60% in critical projects through PPP to the tune of Rs1,00,000 crore
• Allocations for highways being stepped up by 23%
• Funds for housing, amenities for urban poor, up Rs3,973 crore
• Funds for JNNURM up 87% to Rs12,887 crore
• Assistance for storm-water drainage project up by Rs300 crore
• Farm credit target up at Rs3,25,000 crore from Rs2,87,000 crore
• Interest rates incentive to farmers to repay loans on time
• Additional Rs1,000 crore for accelerated irrigation scheme
• Export Credit Guarantee scheme extended till March 2010
• 2% interest subvention (IS) scheme extended till March 2010
• IS scheme to cover seven job-oriented sectors, including textile, handicrafts and handlooms.
• Commodity Transaction Tax abolished
• New pension system trust exempted from STT; DDT
• Minimum Alternate Tax hiked to 15% from 10%
• Tax holiday on petroleum sector extended to natural gas
• 100% tax deduction on political donations
• Stimulus for print media for another six months
• Fertiliser subsidy to be nutrient-based, not price-based
• Expert group to form viable pricing for imported petroleum goods
• Banks and insurance firms to remain in the public sector
• Rs100 crore one-time grant to expand banks in unbanked areas
• Government committed to providing Rs100 per day as wages under NREGA
• * Allocation of Rs39,100 crore to be made for NREGA
• NREGA coverage increased to 4.74 crore households in FY '09
• Work National Food Security scheme has begun
• Allocation for Bharat Nirman being raised by 45%
• Rs2,000-crore rural housing fund under National Housing Bank

Some benefits in finance budget 2009 for personal income tax, increase in exemption limit of home loan interest and finance budget 2009 for schemes to divert investment into infrastructure, are also expected. A tax amnesty scheme could be considered in the finance budget 2009 to address fiscal deficit. We anticipate the Finance Minister to indicate a clear way ahead that will lead to sustainable economic growth. finance budget 2009 for The fiscal deficit is cause for concern and should be reigned in. While the Union finance budget 2009 2009 might appear to have several disappointments, it is finance budget 2009 for expected to be a healthy one for the long term. Across the key sectors, our expectations are as follows:

finance budget 2009 highlights expected

Agriculture Revisions are expected in the urea policy to attract new investments. The government should increase focus on rural infrastructure by increasing RIDF corpus and other rural schemes. Focus on irrigation is likely to continue by bringing more land under irrigation and increasing outlay.
finance budget 2009 highlights expected in auto

Auto Roll back of additional charge of Rs. 15,000 to Rs. 20,000 on utility vehicles/cars above 1500 cc. Some benefits are anticipated under income tax for product development/capex.

finance budget 2009 highlights expected in cement

Cement Uniform excise duty should be levied on cement. Some changes have already been undertaken during last year and we expect the government to maintain status quo on other factors. Import duty on coal, pet coke and gypsum saw no change and continues to attract 5% duty which the industry wishes should be abolished.

finance budget 2009 highlights expected in engineering

Engineering & capital goods Easy access to fund, increase in import duties on equipments for the benefit of local players, faster implementation of ongoing projects and those in pipeline, tax incentives to private sector players to encourage private sector participation and an increase in the ad valorem rates from 8% to 10% with exceptions in generation and transmission equipment; are also very likely to be announced, in our opinion.

finance budget 2009 highlights expected in financial services

Financial services Exemptions are likely to be granted to bring down cost of fund for infrastructure projects, raising of agri-credit targets, measures to channelise credit to export oriented units should be undertaken.

finance budget 2009 highlights expected in fmgc

FMCG The government should increase tax incidence on filtered cigarettes and alcohol beverages, continue development spending for rural India and increase allocation to social programs to boost consumption. We also anticipate that the 2010 timeline for implementation of GST should be maintained and the multiple tax system should be replaced.

finance budget 2009 highlights expected in it/ites

IT/ITES The industry anticipates the extension of tax benefits available to Indian IT/ITES companies to be extended further given the weakness in the end markets for the sector by around 3-5 years. However, we do not expect any substantial tax benefits. It would benefit mid Tier IT companies/ITES players in a more meaningful manner.

finance budget 2009 highlights expected metals

Metals Import duty on steel is likely to be increased. No imposition of export duty is expected on iron ore. The industry expects anti-dumping duty of 25% on steel, but we re of the view that anti-dumping duty may not be imposed. If imposed then it not likely to be more than 15%.

finance budget 2009 highlights expected in pharma

Pharma Healthcare sector is likely to be granted infrastructure status. It is also likely that the sector will see an extension of EOU benefits for another three years. Greater allocation on healthcare infrastructure and National Rural Health Mission can be expected. We also believe that excise duty on formulation and bulk drugs will be maintained at current level.

finance budget 2009 highlights expected in power

Power The industry anticipates several much awaited measures and incentives in this sector and reflecting the same sentiment we too anticipate the policy frame work to encourage private participation in power distribution. A roadmap to expedite various clearances required for approval of power projects and extension of 80 IA benefit up to 2017 for power projects, is much awaited.

The finance budget 2009 for 2008-09 attributed the buoyancy in direct tax revenues to the stable and moderate tax regime coupled with a tax administration that showed no fear or favour.

This was carried forward in 2008-09 through changes in personal income tax slabs and rates conferring a minimum relief of Rs 4,120 and maximum relief of Rs 45,320 per annum per taxpayer. No change was made in corporate income tax.

The finance budget 2009 also raised short-term capital gains under Section 11A of the Income Tax Act to 15% to establish parity with dividends.

A commodities transaction tax with features on the lines of securities transaction tax on option and futures was introduced and the banking cash transaction tax was abolished.

Overall, the tax proposals on direct taxes were revenue neutral and a loss of Rs 5,900 crore (Rs 59 billion) was estimated on the indirect taxes side. The finance budget 2009 for 2008-09 also effected a reduction in Central sales tax (CST) to 2% with effect from April 1, 2008 with a mechanism for compensation for losses to states.

The finance budget 2009 expressed satisfaction over the considerable progress made in preparing the road map for the goods and services tax, proposed to be operationalized with effect from 01 April 2010.

Gross tax revenue was initially finance budget 2009ed to grow by 16.3% in 2008-09 over its level of Rs 593,147 crore (Rs 5,931.47 billion) in 2007-08.

In the event, the provisional actual for 2008-09 was Rs 609,705 crore (Rs 6,097.05 billion) which represents a modest growth of 2.8% over the level in 2007-08.

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