Union Budget 2013-2014

February 28, 2013

Retail Research

Budget Estimates

Total Budgetary Expenditure at Rs 16,65,297 Cr Plan expenditure at Rs 5,55,322 Cr Non Plan Expenditure is estimated at Rs 11,09,975 Cr Fiscal Deficit for the current year contained at 5.3% and for the year 2013-14 estimated at 4.8%. By 2016-17 Fiscal Deficit to be brought down to 3%, revenue deficit to 1.5% and effective revenue deficit to zero %

Revenue Deficit for the current year at 3.9 % and targeted at 3.3 % for the year 2013-14
WPI inflation has been brought down to about 7 % and core inflation to about 4.2 % Allocation for Defence increased to Rs 2,03,672 Cr including RS 86,741 Cr for capital expenditure.

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Key Takeaways

An investment of USD 1 trillion or Rs 55 Lac Cr in infrastructure projected by the 12th Plan Tax Free Bonds worth Rs 50,000 Cr to be issued by select Institutions during FY 2013-14 Introduction of Inflation Indexed Bonds & National Security Certificates Two new major ports to be established in Sagar, West Bengal and in Andhra Pradesh Financial restructuring of Power Distributing Companies to restore the health of the power sector

New Companies Bill obliges companies to spend 2 % of average net profits for CSR purposes
Working capital and term loans at a concessional interest of 6 percent to handloom sector Nirbhaya Fund to be set up with Rs 1,000 Cr for empowerment and safety of women Additional provision of Rs. 10,000 Cr for National Food Security Act All cities having a population of more than 1,00,000 will be covered by private FM radio services Direct benefit transfer scheme will be rolled out throughout the country during the term of the UPA Government

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Banking & Insurance Sector

Rs 12,517 Cr earmarked to infuse additional capital into 13 public sector banks before the end of March, 2013, Further amount of Rs14,000 Cr for capital infusion in 2013-14. Proposal to set up Indias first Womens Bank as a public sector bank and with Rs 1,000 Cr as initial capital. All branches of public sector banks to have ATM by 31.3.2014. Insurance companies empowered to open branches in Tier II cities and below without prior

approval of IRDA.
All towns of India with a population of 10,000 or more to have an office of LIC and an office of at least one public sector general insurance company by 31.3.2014. Banks permitted to act as insurance brokers so that the entire network of bank branches will be utilised to increase penetration of Insurance. Banking correspondents allowed to sell micro-insurance products.

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Capital Market Sector

Proposal to amend the SEBI Act, to strengthen the regulator under consideration Designatged depository participants, authorised by SEBI, may register different classes of portfolio investors, subject to compliance with KYC guidelines An investor having a stake of 10 percent or less in a company to be treated as FII and an investor having a stake of more than 10 percent will be treated as FDI. FIIs allowed to participate in the exchange traded currency derivative segment to the extent of

their Indian rupee exposure in India.

FIIs will also be permitted to use their investment in corporate bonds and Government securities as collateral to meet their margin requirements. Small and medium enterprises, to be permitted to list on the SME exchange without being required to make an initial public offer (IPO) but the issue will be restricted to informed investors.

Stock exchanges to be allowed to introduce a dedicated debt segment on the exchange

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Direct Taxes

Tax credit of Rs 2000 to every person with total income upto Rs 5 Lacs Surcharge of 10 percent on persons (other than companies) whose taxable income exceed Rs1 Cr Contributions made to schemes of Central and State Governments similar to Central Government Health Scheme, eligible for section 80D of the Income tax Act. Additional deduction of interest upto Rs 1 lakh for a person taking first home loan upto Rs 25 lakh during period 1.4.2013 to 31.3.2014

Ceiling on income of assesses eligible for RGESS raised from Rs 10 Lacs to Rs 12 Lacs
Increase surcharge from 5 to 10% on domestic companies whose taxable income exceed Rs 10Cr In case of foreign companies who pay a higher rate of corporate tax, surcharge to increase from 2 to 5 percent, if the taxabale income exceeds Rs 10 Cr. In all other cases such as dividend distribution tax or tax on distributed income current surcharge increased from 5 to 10 %. Additional surcharges to be in force for only one year.

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Direct Tax

Donations made to National Children Fund eligible for 100 percent deduction. TDS at the rate of 1 percent on the value of the transfer of immovable properties where consideration exceeds Rs 50 Lacs. Agricultural land to be exempted. Proposal to increase the rate of tax on payments by way of royalty and fees for technical services to non-residents from 10 % to 25 %. Modified provisions of GAAR will come into effect from 1.4.2016.

Reductions made in rates of Securities Transaction Tax in respect of certain transaction.

Proposal to introduce Commodity Transaction Tax (CTT) in a limited way. Agricultural commodities will be exempted.

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Indirect Taxes - Excise Duty

No change in the normal rates of 12 % for excise duty Excise Duty relief to readymade garment industry, Handmade carpets and textile floor coverings of coir and jute, ship building industry, ships and vessels. Specific excise duty on cigarettes increased by about 18 %. Similar increase on cigars, cheroots and cigarillos. Excise duty on SUVs increased from 27 to 30 %. Not applicable for SUVs registered as taxies.

Excise duty on marble increased from Rs 30 per square meter to Rs 60 per square meter.
Excise Duty on mobile phones priced at more than Rs 2000 raised to 6 %. Proposals to levy 4 percent excise duty on silver manufactured from smelting zinc or lead.

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Customs Duty, Service Tax & GST

No change in the peak rate of basic customs duty of 10 % for non-agricultural products. Duty free gold limit increased to Rs 50,000 in case of male passenger and Rs 1,00,000 in case of a female passenger subject to conditions. Customs Duty increased on imported Set Top Boxes, raw silk and imported luxury goods. No change in the normal rates of 12 percent for service tax Proposals to levy Service Tax on all air conditioned restaurant.

For homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of Rs1 Cr or more,
which are high-end constructions, where the component of services is greater, rate of abatement reduced from from 75 to 70 %.

Voluntary Compliance Encouragement Scheme proposed to be introduced for Service Tax. Defaulters GST: A sum of Rs 9,000 Cr towards the first instalment of the balance of CST compensation provided in the budget.

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DISCLAIMER Tata Securities Limited

One Forbes, Dr V.B. Gandhi Marg, Fort, Mumbai 400 001 Tel: 91 22 6745 9000 Fax: 91 22 6610 6722 Web: www.tatasecurities.com SEBI Registration Number BSE INB010664150 INF011207954 NSE INB/F/E231288730 Portfolio Manager INP000003872 Depository Participant of CDSL: IN-DP-CDSL-450-2008 Depository Participant of NSDL: IN-DP-NSDL-298-2008 Merchant Banker INM 000011302 Compliance Officer: Mr. Umesh Maskeri : 022 - 61827805 email:umesh.maskeri@tatacapital.com Head- Retail Research: Sanjit Sen, B.Com (Hons), A.C.A Email id: Sanjit.Sen@tatacapital.com

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Thank You