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Impact of BUDGET on Individuals

Budget 2010-2011. Impact of BUDGET on Individuals. Summary. A Budget with a focus on fiscal consolidation; development of infrastructure and curb on non-plan expenditure. With 46% of the total plan allocation being made for infrastructure – both in rural and urban areas.

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Impact of BUDGET on Individuals

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  1. Budget 2010-2011 Impact of BUDGET on Individuals

  2. Summary • A Budget with a focus on fiscal consolidation; development of infrastructure and curb on non-plan expenditure. • With 46% of the total plan allocation being made for infrastructure – both in rural and urban areas. • Step towards preparing individuals for Direct Tax Code by offering relief in personal taxes. • Concerns on inflation have not been addressed fully and higher revenue is assumed to come through growth which may or may not happen. • No significant reforms announced. Ventura Securities Ltd

  3. Key Highlights • The Indian GDP expected to grow around 8.5% with a full recovery breaching the 9% mark in 2011-12. • Steps to control Fiscal Deficit @ 5.5% • Target for Fiscal Deficit @ 4.8% and 4.1% in 2011-12 and 2012-13 respectively. • Low Government borrowing at INR 3.45 tn as compared to estimate of INR 3.98 tn • Partial roll-back of stimulus (excise duty hike of 2%) • Extremely positive surprise for individuals due to sharp reduction in tax slabs Ventura Securities Ltd

  4. Key Highlights • The proposed changes in tax slabs would result in (maximum) savings of Rs. 58,710 • New direct tax code / GST to be implemented as per plan from 1 April 2011 • Deduction of Rs 20,000/- has been proposed for investments made in notified long term infrastructure bonds. This is in addition to the deduction available under section 80C. • Increase in petrol/diesel prices

  5. Economic Report Card Source: Economic Times Ventura Securities Ltd

  6. Income from Investments • Short Term Capital Gain (STCG): Capital Gains on redemption of units held for a period of LESS than 12 months from the date of allotment. • No change (present rate of 15% for equity to continue) • Long Term Capital Gain (LTCG): Capital Gains on redemption of units held for a period of MORE than 12 months from the date of allotment. • No change (present rate of NIL for equity to continue) • Dividend Distribution Tax (DDT): Tax charged on dividend in declared in non equity scheme by Mutual Fund House. • No change • However, reduction in Corporate surcharge from 10% to 7.5% will reduce DDT burden on investor. Ventura Securities Ltd

  7.  Dividend Distribution Tax (DDT) As surcharge on corporate has reduced from 10% to 7.5%. The effective Dividend Distribution Tax (DDT) will also reduce. 27 February 2010 Ventura Securities Ltd 7

  8. What’s Costlier and What’s Cheaper Car Tobacco Petrol / Diesel Medical equipments Ventura Securities Ltd

  9. What’s Costlier and What’s Cheaper Mobile phones Jewellery Watches Microwave oven Ventura Securities Ltd

  10. Service Tax – Enlarged Scope • Service tax to GDP Ratio is at 1% • Rate of tax on services retained at 10% • Impact of new services added to service tax: 27 February 2010 Ventura Securities Ltd 10

  11. Service Tax – Enlarged Scope 27 February 2010 Ventura Securities Ltd 11

  12. Moderation in Income Tax Slabs Ventura Securities Ltd

  13. Tax Saving New slabs will SAVE tax of an individual maximum upto Rs. 58,710. Income Rs. 400,000… savings will be.. Click Here Click here for Tax Saving Calculator Income Rs. 800,000…savings will be.. Click Here Income Rs. 12,00,000…savings will be.. Click Here Note: Assumed max. deduction of Rs. 1,00,000 under section 80C & Rs. 20,000 under section 80CCF Ventura Securities Ltd

  14. Taxation of Overseas Individuals • The Income Tax Act applies to all persons who earn income in India, whether they are Resident or Non-Resident. • Resident as well as Non-Resident are eligible for section 80CCF deduction of upto Rs. 20,000 for investment in Infrastructure bonds. • Budget proposes to tax non-residents for interest received effective June 1, 1976 Ventura Securities Ltd

  15. Tax Structure at a Glance ** Capital Gains on redemption of units held for a period of more than 12 months from the date of allotment. Ventura Securities Ltd

  16. Budget Terminologies • Appropriation Bill: This bill is like an approval to the withdrawal of money from the Consolidated Fund to pay off expenses. It is an instrument that Parliament clears after the demand for grants has been voted by the Lok Sabha. • Deficit/Surplus: When our spending exceeds income, there is a deficit and to fulfill the deficit we may borrow; faced with similar kind of deficit situation by the government; it can either borrow or print money. Surplus is exactly opposite of deficit, it is that economic phenomenon when revenue is more than expenditure. • In a Fiscal budget there are four types of deficits which are as follows: • i. Revenue Deficit: It arises when the revenue expenditure exceeds revenue receipts. • ii. Budget Deficit: It is excess of total expenditure over total receipt, wherein total receipts includes current revenue and net internal and external receipts from the government. Ventura Securities Ltd

  17. Budget Terminologies • iii. Fiscal Deficit: It arises when Total Expenditure exceeds Revenue Receipts. Fiscal deficit gives the signal to the government about the total borrowing requirements from all sources. • iv. Primary Deficit: It is a nothing but Fiscal deficit minus interest payment. • Current account: This shows the difference between the nation's exports and imports and the import being higher than exports shows deficit and export being more than import shows surplus. • Expenditure: • The expenditure is classified as : Revenue and Capital Expenditure and further as planned and Non planned. • i. Revenue Expenditure: It is incurred for the normal functioning of the government departments and various other services such as salaries to government employees, subsidies, interest payment made to service debt etc. Ventura Securities Ltd

  18. Budget Terminologies • ii. Capital Expenditure: Long-term in nature they are used for acquiring fixed assets such as land, building, machinery and equipment. Other items that also fall under this category include loans and advances sanctioned by the Centre to the State governments, union territories and public sector undertakings etc. • iii. Plan Expenditure: As the name implies, it is incurred in connection with all expenditures which fall under the purview of Country’s Five year plan. • iv. Non-plan Expenditure: It consists of Revenue and Capital Expenditure on interest payments, Defense Expenditure, subsidies, postal deficit, police, pensions, economic services, loans to public sector enterprises and loans as well as grants to State governments, Union territories and foreign governments etc. • Gross Domestic Product (GDP): Total market value of the goods and services manufactured within the country in a financial year. Ventura Securities Ltd

  19. Budget Terminologies • GDP Growth rate: It measures the growth of the GDP of the economy compared to the last year. This is a measure of the progress of the economy and is an important economic indicator. • Receipts: Receipts are classified into Revenue&Capital Receipts: • Revenue Receipts: Revenue comes from 2 sources: 1. Tax revenue 2. Non Tax revenue • Tax Revenue: Tax revenue refers to funds raised through taxes paid by Public & Corporate Entities. Taxes are of two types Direct & Indirect tax. Direct taxes are Income tax, Wealth tax and Gift tax while Indirect Tax includes Custom Duty, Excise Duty, Service tax etc. • Non Tax Revenue: As the name suggests, Non Tax Revenue is raised through sources other than taxes. This revenue emanates from Public Sector Undertakings (PSUs), State undertakings like railways, State Transport, Telecom, etc. Revenue from social services like education & Public health. Voluntary aid to Government charitable trust /institution, Revenue from public properties etc. Ventura Securities Ltd

  20. Budget Terminologies • Capital Receipt: It includes loan raised by Government of India from public at large, borrowings from RBI (through sale of Treasury bonds) as well as external borrowings International institution like (IMF, World Bank etc) recoveries from loans granted to states/Union territories, savings invested in PPF. • Per Capita Income: The national income of a country divided by its population. • Subsidies: Financial aid provided by the Centre to any entity to be competitive or to restrict price for the buyer. • Inflation: Inflation rate is the percentage rate of change in the price level of a commodity. Ventura Securities Ltd

  21. Ventura Securities Limited. • Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai – 400079 • This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation. Disclaimer Ventura Securities Ltd

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