29 February 2008
Union Budget 2008-09
Farmers rejoice, individuals better off, Corporate skipped
The Union Budget 2008-09 was expected to be populist, given the fact that this is the last full budget of the current UPA government. Accordingly, greater thrust on agriculture and focus on inclusive growth was highlighted. But the big surprise was the Rs 60000 crore waiver to four crore farmers. The effective reduction in the personal income tax for all assesses, coupled with general cut in excise duty from 16% to 14% augurs well. Perhaps, India’s growth story was powered by domestic consumption and surging investments, and the Finance Minister has tried to make more disposable income with the country men. Increase in short term capital gains is an irritant As regards irritants, the Corporate had expected removal of surcharge on income tax, which has not materialized. From market perspective, the increase in short term capital gains from 10% to 15%, is a big irritant, as substantial portion of the market participant’s tax incidence will go up. Also, investment companies tax incidence will go up as Securities Transaction Tax (STT) which was hitherto allowed as a rebate against tax liability will now be deductible as expenditure against business income. DDT incidence to come down On the positive side, the Corporate got some relief as the budget proposes to allow a parent company to set off the dividend received from its subsidiary company against dividend distributed by the parent company for calculation of dividend distribution tax (DDT), provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company. Also, cut in excise duty from 16% to 14%, and CST from 3% to 2% and no general overall cut in peak customs duty together is positives that the Corporate can bank on. Who will foot the Rs 60000 crore bill? But the market is more worried about how and who will foot the Rs 60000 crore bill. Perhaps, the Finance...