After a long hyped up wait, the Finance Minister Mr. P. Chidambaram delivered his 2013 budget speech in the Parliament yesterday. Motivated by expectations of a positive budget, the Indian Stock Market surged over 100 points during the start of the trading session. But, as the Finance Minister continued his speech, more and more news came in that affected investors negatively. As a result, the stock market ended the day, deep in RED. The Markets closed down by around 2%. BSE Sensex closed down by 291 points (1.52%) and NSE Nifty closed down by 104 points (1.79%).
Based on the Investor reaction, you would've guessed by now that the budget did not bring much good news to people. However, there are a lot of things that you need to know about this budget because most of them will have a direct or indirect bearing on you and your finances this year. So, make sure you read this article carefully...
Highlights of the Union Finance Budget 2013 - That Will have little to No Impact on most of us:
The following are some of the highlights of the Union Finance Budget 2013 that will have little to No Impact on most of us:
1. Rs. 1000-crore Nirbhaya Fund announced for the empowerment of women
2. Rs. 14,000 crore capital infusion into public sector banks in 2013-14
3. PSU banks to have ATMs at all their branches by March 31, 2014
4. Defense allocation increased to Rs. 2.03 lakh crore
5. Securities and Exchange Board of India to simplify procedures for foreign portfolio investors
6. Tax-free infrastructure bonds of Rs.50,000 crore to be issued
7. No change in basic customs duty rate of 10% and service tax rate of 12%
8. Insurance companies can open branches in Tier II cities without prior approval from IRDA
9. KYC of banks will be sufficient to acquire insurance policies, banks to act as brokers
10. Securities Transaction Tax (STT) cut on equity futures to 1 bps from 1.7 bps
11. Duty free limit for Gold raised to Rs. 50,000 in case of a male passenger and Rs. 1 lakh for female passengers
Highlights of the Union Finance Budget 2013 - That Will have A Direct Impact on most of us:
Did you think for a moment that the Stock Market tanked close to 300 points after this? Unfortunately, this is not the entire list. The following are some of the highlights of the Union Finance Budget 2013 of India that will have a Direct Impact on Most of us:
1. No Change in Tax Slabs
There was no change in tax slabs. The Finance Minister Mr. P Chidambaram said that the changes to the Tax Slabs were made just last year and it was not possible for any increase this year. So, the Tax Slabs that were defined last year apply for this financial year 2013-14 as well. The following Two Articles were written in March Last Year after last year’s budget. As the Tax Slabs have been left untouched for most of us (Unless your taxable income is above 1 crore) they will be useful to you now as well. To refresh your memory you can read them by clicking the links below:
Budget 2012 - Income Tax Slabs Revised in India
India Budget 2012 - How the Change to Tax Slabs Affect Us
2. Changes to Individual Tax Policies
Though the Tax Slabs were not changed, a few slight modifications were made this year. They are as follows:
Additional 10% Surcharge imposed on people whose taxable income is above 1 crore.
A tax credit of Rs. 2,000 to every person with an income of up to Rs. 5 lakh per annum.
3. RGESS first time investors income limit increased to 12 lakhs.
Earlier, RGESS scheme was only available to those investors whose taxable income is below 10 lakhs, but now it’s increased to 12 lakhs. So, this can be considered sort of a good news. To know more about this RGESS scheme I suggest you read the article titled "Rajiv Gandhi Equity Savings Scheme – RGESS" in our blog by Clicking Here
4. Additional Incentive for First Time Home Buyers
If you are planning to buy a home and take a home loan of less than Rs 25 lakhs, this is your lucky year. You can claim an extra deduction of Rs 1 lakh in interest, over and above the 1.5 lakhs, but only for the next financial year 2013-14. Another point to note is that this benefit is applicable only for Fresh Home Loans and not existing loans. Remember that this benefit is available only for one year and not every year. Nonetheless 1 lakh is not a small amount of money and is a sizeable good news for most people because, excepting Metro's you can still get a decent sized apartment/house with a loan of around 25 lakhs isn’t it?
5. Excise Duty hiked to 6% on Mobile phones worth more than Rs. 2000/-
Excepting those basic black and white display mobile phones, almost all mobile phones these days are above this Rs. 2000/- limit set by our finance minister. So, if you are planning on changing your mobile phone after March 2013, you will end up paying a few hundred rupees more for the same phone because of this hiked Excise Duty.
6. Excise duty on SUV's hiked from 27% to 30%
Are you a fan of SUVs and are planning to buy an SUV after March 2013? If so, this news will come as a shocker to you. The Excise duty on SUV's is hiked by 3% and so, plan on shelling out a few thousands more on the same SUV that you were planning. Mahindra and Mahindra, the Nation’s top SUV Maker went down by close to 30 rupees yesterday as a direct result of this news.
7. Import duty on luxury cars hiked to 100 % from 75 %
Are you an aficionado of luxury cars like BMW or Ferrari? Although only a handful of people in India can actually afford such luxury cars, the fact is that the Finance Minister has increased the Import Duty by 25%. So, expect luxury cars to be costlier by a few more lakhs this year.
I can hear you mumbling. What difference does it make for me if a Ferrari costs 1.5 crores now instead of 1.4 before? It doesn’t affect me anyways!!!
8. Import duty on luxury two-wheelers hiked to 75 % from 60 %
Well, if you dream of riding a luxury two wheeler like a Suzuki Hayabusa or a Ducati Desmosedici or a Harley Davidson, your dream is about to get costlier because the Finance Minister has increased the import duty on such luxury bikes by 15%
9. Service Tax on Bungalows and Luxury Apartments Hiked
Those buying homes of carpet area over 2000 sq. ft. or of value 1 crore or more will pay service tax on 30% of the value of the property. Others however, will continue to pay Service Tax at the existing 25% of the value rate.
10. TDS of 1 % on Real Estate Transactions over Rs. 50 lakh
For any Real estate transaction (other than Agricultural land), the seller has to pay the TDS of 1% on the transaction amount if it’s more than 50 lakhs. So if you are selling your flat that is worth Rs. 75 lakhs, you will have to pay a TDS of 75,000/-
11. Specific excise duty on cigarettes increased by 18 %
This news may not affect you unless you are a Smoker but nonetheless, as with every year, the Finance Ministry has hiked the excise duty on Cigarettes that would make Cigarettes costlier than what they are currently...
12. Import duty on set-top boxes hiked from 5 % to 10 %.
Of Late, the craze to install a Set Top Box at home and watch TV in HD has picked up heavily in India and to take advantage of the Same, the Government has hiked the Import Duty on Set Top Boxes. So, expect to pay a few hundred rupees more on them if you buy after April.
13. Service tax to be levied on AC restaurants of all kinds
Earlier, service tax was applicable only on those AC restaurants which served liquor, but now service tax is applicable on all kind of AC restaurants. So, your next eating out is going to be more costly.
14. Customs Duty levied on all Coal Imports
The Finance Minister has imposed a 2% customs duty on all Coal Imports. Though India produces/mines a significant portion of its Coal Requirements, we still import a large amount of Coal. So, this duty may not affect us directly or should I say immediately but this might result in a slow/indirect hike in price of products that are produced using Coal as the Fuel.
I can hear you mumbling... Already the price of Petrol and Diesel are skyrocketing and now this??
My Thoughts on the Budget reflect the Market Sentiment. I am highly disappointed. Some measures to help the common man combat the skyrocketing cost of living in India were expected but were nowhere to be found. If the Finance Minister feels that the Tax Slabs were revised only last year and do not warrant a revision this year, what about the constant revision of petroleum prices which is resulting in an almost monthly rise in price of essential commodities? Items like Rice, Wheat, Dhal etc. are getting costlier by the day simply because manufacturers and distributors are passing on the additional cost of transportation (which is a direct result of hike in petrol/diesel prices) to the customer. The cost of living in the country has gone up when compared to last year but most of our income hasn’t. So, it would've been good if the Finance Minister had taken that into consideration and given some sort of benefits to the Tax Payers.
What am I supposed to do with Rs. 2000? It won’t be enough to fund my petrol expenses on my Two-Wheeler that I would take to office daily is the reaction that an ordinary Indian Citizen would give.
Though I welcome the measures to tax the super-rich, the number of people in India who actually declare their actual income and pay taxes to be considered as "Crorepatis" is much lower than what it should be. Many businessmen don’t declare all their income and hence the government may not be able to realize as much tax revenue as they would ideally through the 10% extra taxes.
Similarly, hiking the duty on luxury cars or two wheelers or hiking the service tax on luxury homes does not affect the common man because they are far out of our reach anyways.
All in All, I personally feel that this budget hasn’t done much to help the "Common Middle Class" Indian Citizen. Only time will tell how effective it would be in controlling the country's inflation and fiscal deficits...
Please feel free to leave your comments about the budget 2013 in the comments section below.