Journal of FInance Vol 15

1 BETTING ON THE BUDGET
Union Budget 2008-09
As another budget looms, here is a good new: India’s fiscal situation has improved beyond the
expectations of most people. Further, the improving trend is set to continue. It doesn’t matter that
subsidies are on the rise and the Sixth Pay Commission’s impact will have to be factored in. India’s fiscal
turnaround is remarkable because it is overwhelmingly the result of booming revenues and very little
expenditure compression. This is quite unlike the experience of many other economies.
It is also remarkable because it has happened without any big contribution from disinvestment. It is time
to bid goodbye to fiscal pessimism. This does not mean tax giveaways. India’s tax-to-GDP ratio is lower
than that of many developed and developing economies. Tax efforts must continue. But the improved
fiscal position certainly gives room for stepping up public investment, which has languished for long.
Fiscal 2008-09, according to finance minister, should be a year of consolidation and effective
implementation of programmes already launched. The focus would be on implementation of the flagship
programmes in letter and spirit.
Starting with farmers, don’t leave out a single vote bank. Give Sonia Gandhi the option of going for an
early election this year. This is the unstated agenda that finance minister has come up with the Budget that
can be called intelligent populism – combining populist sops with sensible measures to stimulate growth,
through wide-ranging tax cuts and big outlays on infrastructure and knowledge developments.
A slowdown in global and US economies has made the finance minister flag off the gravy train for
consumers. The 204 million-odd Indian households can buy cheaper soaps, detergents, motorbikes, small
cars, direct-to-home satellite TV connections and medicines.
Finance minister has, at one go, addressed the objectives of inflation control as well as spurring consumer
demand, which has been sluggish in a host of sectors for the past one year. His tax proposals should push
up consumer confidence. As he said, consumption drives production and that in turn drives investment.
The 13-million middle-class households (annual household income between Rs 2 lakh and Rs 10 lakh),
many of who pay income tax, would get significant tax relief. While a good amount of the extra income
will end up as savings, a happy and confident consumer is likely to splurge as well.
1. FINANCIAL ADVISORS:
Weigh impact on investors
Betting on budget
In 1990, a young stock trader bet big on what the then finance minister, Madhu Dandavate, would do in
the budget. His bets paid off and suddenly, Dalal Street had a new star, now referred to as the Big Bull.
Come February, every year, thousands of investors begin building up positions in the hope that one of
them may end up as the next big-bull.
But, there are chances for an investor will lose some of their hard-earned money, because a detailed
analysis of the market (Sensex) reveals that betting on the budget is a bad idea. The study of market
returns for the period ‘03-07 found that the returns in the month of February were lower than the average
of other monthly returns for all years barring ’06. Experts argue that every year, budget punters build up
unrealistic expectations of the budget and when disappointment strikes, the market takes a beating.
Betting on budget... 2
2. WEALTH MANAGERS
Map out the details to translate into benefits
Capital market
(1) Pan Indian market for securities
Finance minister added that our stock exchanges provide national electronic trading platform for
securities transaction. Yet, we do not have a seamless national market for securities because of differences
among States on the scope and applicability of rates of Stamp duty. Hence, I propose to request the
Empowered Committee of State finance ministers to create a truly pan Indian market for securities that
will expand the market base and enhance the revenues of the State Governments.
(2) Exchange-traded market for corporate bonds
In the budget speech of 2006, Finance minister had informed the house that, on the basis of R.H. Patil
Committee Report, he will take steps to create an exchange-traded market for corporate bonds. Both BSE
and NSE have created platforms for trading in corporate bonds. Hence, he proposes to:
• Take measure to develop the bond markets with appropriate safeguards, and exempt from TDS
corporate debt instruments issued in demat form and listed on recognised stock exchanges; and
• Enhance the tradability of domestic convertible bonds by putting in place a mechanism that will
enable investors to separate the embedded equity option from the convertible bond and trade it
separately; and
The development of a deep and vibrant corporate bond market will ensure that Indian companies raise
money locally and do not look overseas for raise funds.
(3) Currency and derivatives markets
Finance minister proposes to take measure to develop bond, currency and derivatives markets that will
include launching exchange-traded currency and interest rate futures and developing a transparent credit
derivatives market with appropriate safeguards.
Finance minister P Chidambaram has taken another step towards capital account convertibility. The
proposed measures to deepen capital markets like bonds, currency and derivatives will help Corporate
India raise money at a finer rate and cover risks from currency and interest rate fluctuations.
(4) Classification of market products
Finance minister proposes to encourage the development of a market-based system for classifying
financial instruments based on their complexity and implicit risks.
Against the backdrop of the pain inflicted on financial markets due to the subprime crisis and complaints
pouring in on misselling of products, the government has put its weight behind a proposal featuring
classification of capital market products as highly complex, complex or simple. The aim is to guide
investors, especially retail, and ensure that the right products are sold to the right people. Credit rating
agency Crisil, will role out this initiative soon.
3. FINANCIAL PLANNERS
Value unlocking for all stakeholders
Farmers meet
A large number of farmers were given audience with Ms Sonia Gandhi at her residence in a bid to give
her an opportunity to directly understand their problems. Ms Gandhi assured them that “she would talk
to PM and FM” about their concerns.
The Congress exercise to have farmers meet Ms Gandhi ahead of the budget appears to be aimed at
drumming up a tempo to the announcements, which can then be used for campaigning during the election
year by the UPA government. Farmers demanded loan waivers, reduction in rate of interest on farm
loans, remunerative prices of crops, packages for rehabilitation and resettlement, introducing of crop
insurance at the village level and health insurance for the poor.
The Budget waived Rs 60,000 crore of loans for 40 million farmers, wooing the biggest vote bank.
However, Mr Chidambaram has made no budget provision for the write-off, and says he will find ways to
provide additional liquidity of Rs 60,000 crore to banks over three years. Starting with farmers, but don’t
leave out a single vote bank. Wages will rise by 50% for 1.8 lakh anganwadi workers, a new vote bank.
Special schemes in education, insurance and area development are targeted at a variety of traditional vote
banks – women, senior citizens, minorities, dalits, tribals and other backward castes.
Farm loan waiver
The loan waiver package which will cover four crore farmers – three crore small and marginal and one
crore others – will be completed by June 30, 2008. This was designed to help farmers clean up their debts
before the next Kharif season when they would need to raise loans again.
Since most of these loans, Rs 60.000 crore had already turned into bad loans; the government waiver
package would help clean up accounts of the banks. While the banks will write off the loans at one go, the
government will have the comfort of making the payout to the banks in instalments over a three-year
period without incurring an interest burden on it.
Finance minister P Chidambaram believes that the RS 60,000-crore farm debt-waiver and debt-relief
packages will strengthen the banking system and that the central bank would back the government in
implementing the scheme. He reiterated PM’s view that banks would be compensated as and when loans
came due and the scheme would be funded through government revenue. He added that government; RBI
and banks would work in a manner that the goals and objectives of the scheme are achieved.
The RBI governor said that RBI is fully geared to support the government in implementing the scheme in
a manner that the banking sector will be strengthened, not weakened. The banking sector will be
compensated in a way that the banks will not be constrained at all.
The governor added that the RBI would work closely with the government and the banks to ensure that
the loan waiver scheme was implemented within the announced time frame to serve the interest of
farmers. Steps would be taken to improve credit flow while subserving the interest of the banking system.
4. INCLUSIVE CEOs
Innovative responses to problems
Path of power
The Congress appears to have concluded that path to power is paved with large spending and populist
measures. A pre-budget memorandum said the government should delay the implementation of FRBM Act
for wiping out revenue deficit by another three years. With rural distress, spiraling price rise and rising
unemployment mauling the government’s popularity, Congress leaders are of the view that budget should
demonstrate the government’s commitment to that famous category – the aam admi. The finance minister
has been arguing against wasteful expenditure and unworkable schemes. But his views do not have many
takers. A majority of the party’s economic policy-making body considers the budget is a political
wardrobe that can enhance the ruling side’s appeals.”
Election-year promises are peppered across all vote banks in the Union Budget 2008-09. The wooing of
Muslim vote bank is note-worthy. Special development plans for 90 minority concentration areas gets Rs
3,780 crore and 544 bank branches will be opened in districts with a substantial Muslim population.
Central Para-military forces will hire additional Muslim candidates. Muslims will get pre-metric
scholarships worth Rs 80 crore and another Rs 45 crore for madrassas modernisation.
To woo the middle class, the Budget raises the exemption limit for income tax from 1.1 lakh to Rs 1.5
lakh and widens the tax slabs, gifting every taxpayer at least 4,000 more in his pocket. The middle class –
as well as Indian industry – will benefit from the cut in cenvat from 16% to 14%, and further duty
reductions for small cars, two-wheeler, paper and pharmaceuticals.
So, despite giveaways galore, the Budget has cut fiscal deficit to just 2.5% of GDP, below the FRBM
target of 3%. Mr Chidambaram leaves headroom for meeting the higher wage and pension obligations
that will flow from the imminent Pay Commission award. Also, his calculations exclude under-recoveries
of fertiliser and oil marketing companies, which could exceed 2% of GDP, and will be only partially
offset by the issue of bonds. So, fiscal window-dressing cloaks the sad fact that FRBM targets have
become meaningless in practice.
5. RISK MANAGEMENT CONSULTANTS

Educate – Engineer and Enforce
Rich-poor divide
Even as the government flaunts the impressive growth rate, its Left allies are ranting that the
beneficiaries are a few millionaires. As the economy grew, the lion’s share flowed into the coffers of a
small section on the top, leaving a vast majority of our people high and dry. Never has there been such
shocking disparity between the rich and poor. Millionaires have grown into billionaires. The claim of the
prime minister on GDP growth lacks ethical merit when a vast majority of people lives in poverty. Their
standard of living is among the lowest in the world.
The party has published a booklet listing out names of billionaires and millionaires whose wealth added
up to Rs 1,232,135 crore. For the CPI, the ‘who gets what’ list is a picture of ‘shocking disparity’. The
63-page booklet of the CPI, at the outset, asks “what is the benefit derived by the common man?’
It ends up by saying that the India, which is shining, belongs to a small minority while another India is
steeped in poverty, hunger, unemployment, illiteracy and disease. “This is unacceptable. We have to fight
for an India where economic growth is combined with distributive justice, where people benefit from all-
round growth. Only that can mean the development of the country.”
The Budget leaves corporate tax untouched, and makes no mention at all of extending the corporate tax
exemptions for software parks, export-oriented units or industries set up in Uttarakhand and Himanchal
Pradesh. If these are allowed to expire, they will give corporation tax collections a boost in the country in
the coming years.
The flagship programmes of the government aimed at the Aam Aadmi, all get big increase in outlays. The
National Rural Employment Guarantee Schemes will now cover all 596 rural districts in India, and the
outlays will rise from Rs 12,000 crore to Rs 16,000 crore. Bharat Nirman, the rural programme, will get
Rs 31,280 crore against Rs 24,603 crore in 2007-08. Education spending will rise 20% and similar
increases are provided for the missions for rural health and drinking water.
Unorganised workers will get an increased health insurance scheme (Rastriya Swasthya Bima Yojana)
cover of Rs 30,000 per family. The Aam Aadmi Bima Yojana will provide life insurance cover to an
additional one crore poor families.
And the Indira Gandhi National Old Age Pension Scheme will now benefit 157 lakh people against 87
lakh earlier. Another promising innovation is the use of smart cards to deliver government funds directly
to the beneficiaries. Haryana and Chandigarh have agreed to a pilot programme. This has the potential to
eliminate leakages and give beneficiaries the full benefit of food subsidies.
6. FINANCE PROFESSIONALS
Developing alternative credit delivery models
Advancement of due date of filing of return
Section 139 of Income-tax Act provides for filing of income by certain categories of assessees. Due dates,
for filing such return on income in respect of different categories of assesses, have been provided in
Explanation 2 to sub-section (1) of this section.
The due date has been prescribed as 31st day of October of the AY for the certain categories of assessee
like a company, a person (other than a company) and a working partner of a firm whose accounts are
required to be audited under the Act or under any other law for the time being in force. It is proposed to
amend, so as to provide that the due date for filing of return of income for the above categories shall be
30th day of September of the assessment year.
Similarly the due date of return of fringe benefits is also proposed to be advanced from 31st day of
October of the assessment year to 30th day of September of the assessment year in the following
categories of assessees – a company; or a person (other than a company) whose accounts are required to
be audited under this Act or under any other law for the time being in force.
There is no change in the due date of filing of returns in the case of all other categories of taxpayers.
These amendments will take effect from 1st April 2008.
7. CREDIT COUNSELORS
Resolve convertibility and recompensation issue
Notice of assessment
Sub-section (2) of section 143 of the Income-tax Act provides that the notice under this sub-section shall
be served on the assessee within a period of twelve months from the end of the month in which the return
is furnished. Further, the service of such notice must be affected in a manner laid down in sections 282,
283 and 284 of the Income-tax Act, read with General Clauses Act.
Instance s have come to the notice of the department, where notices, though issued by registered post
within 12 months as prescribed have been held ‘invalid’ on the ground that the notice was actually
received by the assessee after the limitation date. This is notwithstanding the fact that the assessee has
attended the assessment proceedings in response to the notice served on him. Instances have also come to
notice where the orders of the assessing officer is being quashed on the ground that there is no evidence of
issue or service of notice, even though the assessee have attended the hearing before the AO during the
assessment proceedings. Further, the design of the limitation period with reference to the end of the
month leads to administrative inconvenience in as much as the last day of every month becomes a time
barring date.
In order to address these issues and to reduce litigation, it is proposed to insert a new section 292BB in the
Income-tax Act to provide that where an assessee has appeared in any proceeding or cooperated in any
inquiry related to an assessment or reassessment, it shall be deemed that any notice under any provision of
this Act has been duly served upon him in time in accordance with the relevant provisions of the Act.
Further, such assessee shall be precluded from taking any objection in any proceeding or inquiry under
this Act that the notice was – (a) not served upon him; or (b) not served upon him in time; or (c) served
upon him in an improper manner. Similar amendment is also proposed in the Wealth-tax Act.
Advancement of the period of notice
Further, it is also proposed to amend clause (ii) of sub-section (2) of section 143 to provide that the notice
under sub-section (2) of section 143 shall be served on the assessee within a period of six months from the
end of the financial year in which the return is furnished. This amendment will take effect from 01/04/08.
8. TECH SAVVY PROFESSIONALS

Take first step to ensure efficient and reliable system
Use of Information Technology in tax administration:

Initiatives taken in the last budget:
Better tax administration has been high on the FM’s agenda. So, a large part of what he sought to achieve
in the last Budget has moved forward. However, while some initiatives have taken off successful, others
have been slower to get off the ground.
Annual Information return: At present, the I-T department gets data on seven transactions under the
AIR. The idea behind the AIR is mainly aimed at expanding the tax base and preventing tax evasion.
However, the CBDT has not notified any new transactions so far.
Large taxpayer unit: The other major initiative large taxpayer unit (LTU), which is aimed at making life
easy for corporate taxpayers, is yet to gain traction. Besides the Bangalore LTU, the tax department has
not been able to introduce this in other centres, though LTUs are likely to be set up in Chennai, Delhi and
Mumbai soon.
E-payment & e filing: The government has made e-payment and e-filing mandatory for certain assessees.
E-payment for indirect taxes like service tax, custom and excise has also been taken off.
Refund Banker Scheme: The scheme is to ensure that assessee receives their income-tax refunds in time.
The scheme, after being tested in Patna and Delhi, has been extended to more cities and it is only a matter
of time when the whole country gets covered. This essentially involves outsourcing of tax refunds to
banks, primarily SBI, instead of the IT department directly sending tax refunds.
At present processing of returns takes four months to one year. This is primarily because there is no
equitable distribution of the processing work. In some jurisdictions, assessing officers are saddled with
the processing of 60,000 to 70,000 returns. On the other hand, officers in smaller jurisdictions have just
5,000 returns to handle. After introducing e filing, the government is now set to revolutionise processing
of returns. Jurisdiction-free processing of income-tax returns could be reality soon, with the finance
minister authorising the government to introduce such a scheme. The move is aimed at expediting the
processing of returns and thereby quickening the issue of refunds.
9. ONE-STOP-SHOPS
Dedicated to offer related services under a roof
Centralised processing of return
Generally, tax administration across the countries adopts a two-stage procedure of assessment as part of
risk management strategy. In the first stage, all tax returns are processed to correct arithmetic mistakes,
internal inconsistencies, tax calculation and verification of tax payments. At this stage, no verification of
the income is undertaken. In the second stage, a certain percentage of the tax retunes are selected for
scrutiny/audit on the basis of the probability of detected tax evasion. At this stage, the tax administration
is concerned with the verification of the income.
In India, the scheme of summary assessment being in force since the 1st day of June, 1999 does not
contain any provision allowing for prima facie adjustment. The scope of the present scheme is limited
only to checking as to whether taxes have been correctly paid on the income returned. Under the existing
provisions of section 143(1), there is no provision for correcting arithmetical mistakes or internal
inconsistencies. This leads to avoidable revenue loss.
With the objective to reduce such revenue loss, it is proposed to amend the section to provide that the
total income of an assessee u/s 143 (1) shall be computed after making the following adjustments to the
total income in the return –
(a) any arithmetical error in the return; or
(b) an incorrect claim, if such incorrect claim is apparent from any information in the return.
“An incorrect claim apparent from any information in the return” shall mean such claim on the
basis of an entry, in the return –
a) Of an item, which is inconsistent with another entry or some other item in such return,
b) In respect of which, information required to be furnished to substantiate such entry, has not been
furnished under this Act; or
c) In respect of a deduction, where such deduction exceeds specified statutory limit which may have
expressed as monetary amount or percentage or ratio or fraction.
Further, these adjustments will be made only in the course of computerised processing without any human
interface. In other words, the software will be designed to detect arithmetic inaccuracies and internal
inconsistencies and make appropriate adjustments in the computation of the total income.
For this purpose the Department is in the process of establishing a system for Centralised Processing of
Returns.
To facilitate this, it is also proposed that –
a) The Board may formulate a scheme with a view to expeditiously determine the tax payable by, or
refund due to, the assessee;
b) The Central Government may issue a notification in the Official Gazette, directing that any of the
provisions of this Act relating to processing of returns shall not apply or shall apply with such
restrictions, modifications and adaptations as may be specified in the notification. However, such
direction shall not be issued after 31st March 2009.
c) Every restriction shall be laid before each House of Parliament as soon as such notification is
issued.
Along with the notification, the scheme referred above is also required to be laid before each House of
Parliament.
Similar amendments have also been proposed in section 115WE of the Income-tax Act, relating to fringe
benefits.
These amendments will take effect from 1st April 2008.
Authentication of documents/notices/letters
It is proposed to insert a new section 282A in the I-T Act to provide that any notice or other document is
required to be issued, served or given; it shall be deemed to have been authenticated if the name and
office of a designated income tax authority is printed, stamped or otherwise written thereon.
It is also proposed to provide that for the purpose of this section, a designated I-T authority shall mean
any I-T authority authorised by the Board for this purpose. The amendment will take effect from the
01/06/08.
10. GLOBAL OUTLOOK

Foreign currency exchangeable bonds (FCEBs)
The government allowed firms to issue FCEBs to unlock the value of their holding in-group companies.
The norms governing tax treatment and eligibility of FCEBs are on the lines as foreign currency
convertible bonds (FCCBs). In the case of FCCBs, bonds can be converted to equity of the issuing firm.
While in the case of FCEBs, bonds can be converted into equity of a group companies. The new
instrument would provide corporate groups more flexibility to raise funds as they can leverage value of
holding of a company in group firms too.
FCEB is a bond expressed in foreign currency with the principal and interest payable in foreign currency.
Foreigners, NRIs and overseas entities are eligible to subscribe to these bands, which can be converted
into equity shares of a group company (called the ‘offered company’). The ‘issuing company’ shall be
part of the promoter group of the ‘offered company’ and shall hold the equity shares being offered at the
time of issuance of the bond. The ‘offered company’ should be a listed company engaged in a sector
eligible for FDI and is eligible to issue or avail of FCCBs or ECBs. The investment under the scheme
shall comply with the FDI and ECB policy requirements. Funds raised through FCEBs cannot be invested
in the capital market, but can be used for overseas expansion.
No capital gains on transfer of FCEBs
In 1992, the Government allowed established Indian companies to issue foreign currency convertible
bonds (FCCB), with special tax regime for non-resident investors, so as to encourage the flow of foreign
exchange in India. The Government has now allowed established Indian companies to issue foreign
currency exchangeable bond (FCEB). With a view to providing a level playing field to FCEBs, it is
proposed to provide that the conversion of FCEBs into shares or debentures of any company shall not be
treated as a ‘transfer’ within the meaning of Income-tax Act. Further it is also proposed to provide that the
cost of acquisition of the shares received upon conversion of the bond shall be the price at which the
corresponding bond was acquired. These amendments will take effect retrospectively from 1st April 2008,
and will accordingly apply in relation to assessment year 2008-09 and subsequent assessment years.
11. CONTINUING LEARNING CENTRES

Take informed decisions
Unified goods and Service Tax (GST)
The proposed GST regime could spell an end to various kinds of exemptions enjoyed by the corporate
sector. These include area-based exemptions and sectoral tax breaks. Finance minister P Chidambaram
had proposed the introduction of GST from April 1, 2010 in the last budget. He had asked the empowered
committee of state finance ministers to prepare a road map. The Planning Commission has already
endorsed the finance ministry’s view on launching GST from 2010 in the approach paper to the 11th Pan.
The empowered committee has accepted the report on GST submitted by the joint working group and has
favoured adoption of dual GST – central GST and state GST. The penal has suggested levies like excise
and service tax into a single federal GST. States would need to merge value-added tax and local levies
into a state-level GST. The report of the joint working group has called for doing away with areas or
industry-based exemptions. It has suggested that, if at all some incentive is to be given; it should be in the
form of direct subsidy. This will help in keeping the GST rate low by expanding the tax base. Moreover,
the emphasis is on keeping the derivation minimum and having a common exemption list.
Taxpayers will be given PAN-based taxpayer identification number, with two extra digits to distinguish
between central and state GST. The attempt to keep the rates uniform would remain unfulfilled to quite an
extent in the value-added tax regime. Set-off would however be available against tax paid on inputs at
both, the central and state levels. In case of taxation of services working group has recommended a
destination-based taxation, implying that tax would be collected in the state where the service is
consumed. Also, both the Canter and States would fix a uniform turnover limit, below which no GST
would be levied. At present, there are vast differences. The excise exemption threshold is Rs 1.5 crore, for
services tax Rs 8 lakh and for VAT ranges from Rs 2 lakh to Rs 10 lakh.
CST and a Roadmap towards GST
Following an agreement between the Central Government and the State Governments, the rate of Central
Sales Tax was reduced from 4% to 3% in this financial year. It is now proposed to reduce the rate to 2%
from April 1, 2008. Consultations are underway on the compensation for losses, if any and once
agreement is reached the new rate will be notified. I am also happy to report that there is considerable
progress in preparing a roadmap for introducing the GST with effect from April 1, 2010.
12. ISSUES OF THE PRESENT

Freedom to get & fail in the system of free enterprise
In the post-budget interactive session with industry chambers, the finance minister P Chidambaram said
the government was prepared to intervene further in sectors where growth is flagging. Addressing
industry leaders, he emphasised the “basic philosophy” of the budget will stay. However, the government
was ready to revisit the budget proposals if anything had crept in inadvertently. “We are not infallible”.
There is always scope for correcting something, which has come in inadvertently. But there is no case for
revisiting the philosophy of the budget.
He asserted that focus on agriculture sector was a deliberate decision, defending the farm loan waiver and
rejecting the criticism that the budget had ignored the corporate sector. While the industry and service
sectors are growing, he said only farm sector had been left out. The rising food prices were a concern.
One of the reasons why inflation a threat is the food prices in India. After a long gap, India has become
marginal importer of food grains, which is a dangerous omen. Because we are dependent on import, we
are subject to world prices. No country with a large population as in India can be dependent on foodgrain
imports. Since April ‘07, prices of wheat in the global market have risen by 88% and that of rice by 15%.
Hold the priceline
FM asked industry to hold priceline and refrain from exploiting temporary mismatches in demand and
supply to rein in inflation. Pointing out the manufacturing sector’s contribution to inflation; he asked
sectors such as pharma, auto, paper, and others that have enjoyed deep fiscal cuts to hold prices. “There is
a lesson for the manufacturing sector. You have to become more competitive and hold the priceline”. He
said the industry would hurt itself in the long run if it exploits short-term supply-demand mismatches.
When there are pressure bought on by growth and high commodity, oil and food prices world over
coupled with a slow down in consumption; industry should rise to the occasion and become more
competitive and more efficient to hold the priceline. He said Budget proposals to cut excise duties,
specific Custom duty and central sales tax would make industry more competitive, while income tax
measures and increase in government expenditure would spur demand.
Cartelisation
Referring to oligopolistic tendencies in some industries as flagged off in the Budget speech; the finance
minister said Monopolies & Restrictive Trade Practices Commission (MRPTC) has come out with two
judgments on the cement industry, pointing out that the cement firms are acting like a cartel. He said, “A
year ago, when I tried to persuade the cement industry to reduce prices, they reacted with a sense of
injured innocence. Since then, there have two MRPTC decisions finding them guilty of cartelisation.
Home loan
Finance minister P Chidambaram said: “He agrees that housing loan borrowers of less than Rs 20 lakh
should be incentivised by lower interest rates”. I made a number of efforts to impress upon bankers in this
regard. It is a constant effort that I will have to make. Bankers will have to take a call; RBI will have to
take a call. Already these loans have less risk weight than those above Rs 20 lakh and, therefore, bankers
have incentives to lend to these borrowers at lower interest rates.
Growth during 2008-09
Finance minister said he wanted to complete his innings with a batting average of 8.8% growth per year. I
am extremely bullish about growth during 2008-09. The industry should rise to the demand by producing
goods and services. “I have said that my batting average is 8.8% in four years. I have no intention to close
my innings with a lower batting average.”
2 PRIMARY MARKET
Struggling IPOs
The problems experienced by some of the recent IPOs have exposed the flaws in the way primary issues
are being sold. At one level it is simply a case of investors, spooked by a falling market, suddenly taking
closer look at valuations. But there are structural weaknesses need to be fixed. Sebi would do well to look
at the whole process and in particular the price band-based book building process.
Some recent IPOs have become akin to an end-season sale. A company makes an offer, which it thinks is
attractive, but on not finding enough takers announces a discount. When that doesn’t work, it extends the
date for which the offer is open. The point is that these IPOs are often more expensive than their listed
peers. A small premium in IPO is justified – because a large number of shares are available at a fixed
price to institutional investors. The strong institutional demand, meanwhile, ensures a good listing and
often large short-term profit for retail investors. A secondary market purchase of a reasonably priced
alternative would not yield such short-term gains to retail investors. This game, however, lasts only in
strong markets. The sharp correction in the secondary market warranted an equally sharp reduction in IPO
premiums, which is what has happened and why IPOs are suddenly struggling.
The core issue is the price band-based book building. The price band is decided by the interested parties,
merchant bankers and the company. It is not a discovered price, which was the idea behind book building.
What is needed is free bidding for the QIB portion with 100% margin requirement. The discovered price
could become the basis for a fixed-price offering to retail investors. Yes, there is a risk of aggressive
bidding in exuberant times. But a 100% margin-based bidding should serve as a check, as bidders would
be exposed to the risk of getting large allotments at high prices.
(1) Wockhardt Hospitals to call off IPO
The turbulent market has claimed its first high-profile casualty. Lead managers decided to call off the
issue after the QIB portion was undersubscribed. This is the first time that a leading group has been forced
to withdraw an IPO due to poor investor response. The signs were ominous from the beginning, with the
issue opening for subscription a day later than stipulated. With the secondary market in a bear grip, the
issue price band had to be lowered to Rs 225-260 from Rs 280-310 initially. Wockhardt was the first
company to revise its price band downwards.
With the market remaining volatile, the QIB and the non-institutional portion of the issue remain
unsubscribed till almost Day 5. Therefore, Wockhardt Hospitals sought regulatory approval to extend its
subscription process by two days. However, the extension did not help matters for the company.
Interestingly, the best response came from retail investors, usually the most risk averse class of investors.
(2) Investor apathy forces Emaar- MGF to call off IPOs
Emaar-MGF becomes the second high-profile casualty of the worsening IPO market. Wockhardt
Hospitals was the first company to revise its price band downwards, and was soon followed by Emaar
MGF. It has extended its bid process by three days. The company also revised its price band at the lower
end by Rs 10. This is the first time two equity offerings have been called off within such a short span.
Primary Market... 13
There is a now big question mark on the future of the IPO market in the near term. All eyes are now on
the Reliance Power listing on February 11. It could be a make or break for the primary market in general.
If the stock lists below Rs 550, HNI and other leveraged investors who have borrowed money to bet on
Reliance Power will take a hit. (Here, the funding cost works out to around Rs 125 a share).
(3) Listing of Reliance Power IPO
On Monday, the 11th of February ’08, Anil Ambani becomes richer by about Rs 25,000 crore. But
countless investors who helped make that happen aren’t so lucky. After Reliance Power – the stock that
made Mr Ambani wealthier – slipped into a discount. Investors, who a month ago went into a frenzy to
get a slice of the offerings, rushed to offload the stock which tumbled to an intra-day low of Rs 355.05,
before closing at Rs 372.50, down by 17% over the issue price of Rs 450.
While there have been many issues in the last couple of years that closed below the issue price on the first
day, none of them match Reliance Power either in terms of size or pedigree. Not long ago, the Rs 11,700-
crore Reliance Power IPO created history by attracting cumulative bids worth a massive Rs 752,000 crore
(around $ 180 billion). It was the highest-ever demand generated by any IPO so far in the country.
(4) Listless Street leaves grey market in tatters
With companies withdrawing their public issues, coupled with the R-power debacle, the once bustling
primary market has slipped into coma. As direct fallout of this development, activities in the grey market
have come to a standstill. A grey market exists whenever there is a strong response for a public issue.
Investors, who want a certain number of shares, but know that they are unlikely to be allotted that
quantity because of the strong demand, turn to grey market brokers. These investors are mostly high net
worth individuals, market operators, reputed brokers and often merchant bankers to the issue.
Chances are that the coming days could be listless for the gray market brokers, who connect buyers and
sellers in this thriving unofficial market for IPOs. Once the trade is ‘legalised’ by putting it through the
trading terminal, the differential is settled in cash between the buyer and the seller. The days after R-
power listing have been quite tough for them, as many HNI who had bought R-power shares at inflated
prices in the gray market, were threatening to renege on their commitments. Though the buyers will
eventually pay up; they have nowhere to go, says gray market brokers, but it is a needless headache
chasing them to cough up the money.
(5) R-power mulls bonus issue to woo investors
In an unprecedented move, R-power will give bonus shares to all its shareholders to compensate the
losses they suffered when the company was listed a week ago. In the face of previous disappointment
among investors, group chairman Anil Ambani is believed to have taken the unique step to win over the
investors and give a message that shareholders would not lose in his company. The move will reduce the
cost of acquisition of shareholders. The promoter group would accept the dilution of their stake due to the
issuance of bonus shares. Prior to the over 10% equity dilution in R-power through IPO, Anil Ambani and
his group company Reliance Energy were the equal stake holders.
Primary Market... 14
R-power’s decision to grant free bonus is the kind of bold out-of-the-box move which the late Dhirubhai
Ambani would have approved of. However, R-power will have to show Dhirubhai-like levels of
implementation if the scrip is to perform in the long run. It plans to set up 28,200 MW of Greenfield
Generating Capacity over eight years. Of this only 7,060 MW are in a reasonably advanced stage in terms
of fuel linkages. And substantial part of its offtake will be to SEBs with the attendant payment problems.
The company had a net worth of around Rs 14,000 crore, and assuming a debt-to-equity ratio of 1:3 it
should be able to raise around Rs 42,000 crore of debt – enough to fund around 14,000 MW. To finance
the planned 28,000 MW it would need to invest Rs 112,000 crore, assuming it takes Rs 4 crore to build
one MW. It might thus have to go back to the market again. Bonus shares are a short-term palliative. In
the medium term, several projects need to be up and running to sustain investor interest.
(6) R-power sets 3:5 bonus
R-power announced that it will offer three bonus shares for every five held by shareholders. The bonus
shares will be issued to all shareholders, except the promoter groups, Reliance Energy and Anil Ambani’s
personal investment vehicles.
Mr Ambani also said he will transfer 2.6% of his personal stake in Reliance Power worth Rs 4,700 crore
to Reliance Energy in order to compensate the company for the dilution of its stake in R-power. This
move is to ensure that Reliance Energy’s shareholding remains unchanged at 45% in R-power though it
declined to accept the bonus issue. The dual move is expected to reduce the acquisition cost of the R-
power stock substantially – 40% for retail shareholders to Rs 269 per share and 37% to Rs 281 for others.
It will also bring down Mr Ambani’s R-Power stake by 5% to 40%.
(7) Well-priced PSU issues
The response to the Rural Electrification Corporation (REC) issue subscription signifies the fact that
irrespective of general market conditions, well priced issues of companies with strong fundamentals are
accepted by investors. Even more significant, investors feel a lot safer to invest in issues where
government is the promoter. And to the delight of investors, about 75 closely-held government companies
and banks have evinced interest in diluting their equity and going public. If all goes well, the year 2008
would see a host of PSU public issues hitting the Indian capital market.
3 SECONDARY MARKET
Budget rally
Where do we go from here?
With the savage correction in January, a substantial part of the valuation froth in the system seems to have
been evaporated. With around 20% earning growth expectations over the next two years still not in doubt,
now there is a case for the market to find investment support. This is, however, subject to the foreign
investor not pulling out from the Indian market in a big way.
1st week of February ’08 – Glooms all around

• Renewed indications of a US recession;
• Failure of Wockhardt IPO despite a two-day extension;
• Forecast indicating a slowdown in the Indian economy in 2007-08;
• Failure of Emaar MGF IPO after Wockhardt IPO;
• Inflation soars to 5-month high of 4.11% in the week ended January 26;
Daily review 01/02/08 04/02/08 05/02/08 06/02/08 07/02/08 08/02/08

Sensex 18,242.58 417.74 2.84 (523.67) (612.56) (62.04)
Nifty 5,317.25 146.25 20.40 (161.35) (189.30) (12.90)
Weekly review 01/02/08 08/02/08 Points Percentage

Sensex 18,242.58 17,464.89 (777.69) (4.26%)
Nifty 5,317.25 5,120.35 (196.90) (3.70%)
2nd week of February ’08 – Continuing gloom

• IIP plunges to 7.6% in December’07 from 13.4% in the corresponding month of ‘06;
• The cumulative industrial growth rate (April-Dec’07) slipped to 9% from 11.2% a year ago;
• Reliance power listed at 17% discount.
• French bank Societe Generale, hit by the US credit crisis;
• Warnings by G7 leaders that the credit turmoil could destabilise the world economy;
• Petrol price hiked by Rs 2, Diesel price hiked by Rs 1 from February 15.
Bush signs economic plan: US President George W Bush signed a $ 152-billion plans to fortify US
economy against a recession. Passed by Congress with unusual speed, the measures are mainly designed
to put more spending money in US consumers’ pockets. Bush said at the White Hose signing ceremony
on Wednesday: “I know a lot of Americans are concerned about our economic future. The bill is large
enough to have an impact. Individuals will get the bulk of the one-time income tax relief – rebate cheques
this year of up to $ 600 for singles, $ 1200 for married couples, plus $ 300 per child.
Daily review 08/02/08 11/02/08 12/02/08 13/02/08 14/02/08 15/02/08

Sensex 17,464.89 (833.98) (22.90) 341.13 817.49 348.62
Nifty 5,120.35 (263.35) (18.75) 91.20 272.55 100.90

Sensex 17,464.89 18,115.25 650.36 3.72%
Nifty 5,120.35 5,302.90 182.55 3.57%
Secondary Market... 16
3rd week of February ’08 – Fed lowers growth forecast
The Fed lowered its projection for economic growth this year, citing damage from housing slumps and
credit crunch. Under its new economic forecast, the Fed said that it now believe the GDP will grow
between 1.3% and 2% this year as against previous forecast to be between 1.8% and 2.5%. It added that
the US economy could continue to weaken, even after their aggressive interest rate cuts in January. And it
also expects higher unemployment and inflation.
The markets registered a 4% fall in thin volume during the week with investors’ confidence at its low.
Retail investors preferred to sit on the fence as they remained clueless about the market’s future direction.
Investors, however, pinned their hopes on the Union Budget scheduled to be presented on February 29.
Daily review 15/02/08 18/02/08 19/02/08 20/02/08 21/02/08 22/02/08

Sensex 18,115.25 (67.20) 27.61 (458.06) 117.08 (385.61)
Nifty 5,302.90 (26.00) 3.90 (126.35) 37.35 (81.05)

Sensex 18,115.25 17,349.07 (766.18) (4.22%)
Nifty 5,302.90 5,110.75 (192.15) (3.62%)
4th week of February ’08 – derivatives contract expires on February 28, a day ahead of the budget on 29.
Dalal Street saw it as patently unfair. The hike in short-term capital gains tax and scrapping of rebate on
securities transaction tax have hurt local investors but left FIIs unscathed. The Sensex shed 246 points to
close at 17,579 while Nifty recorded 62 points to close at 5,223.
Roughly Rs 57,000 crore was shaved off the market cap on the B-day. Ironically, this is close to the Rs
60,000 crore of farm loans waived by the FM. Also sluggish global markets kept bulls on the back foot,
and an uninspiring Budget kept them away from rallying around.
Daily review 22/02/08 25/02/08 26/02/08 27/02/08 28/02/08 29/02/08

Sensex 17,349.07 301.50 155.62 19.80 (1.51) (245.760
Nifty 5,110.75 89.95 69.35 (1.65) 16.70 (61.60)

Sensex 17,349.07 17,578.72 229.65 1.32%
Nifty 5,110.75 5,223.50 112.75 2.20%
Monthly review on last Friday

Month 31/08/07 28/09/07 26/10/07 30/11/07 28/12/07 01/02/08 29/02/08
Sensex 15,318.60 17,291.10 19,243.17 19,363.19 20,206.95 18,242.58 17,578.72
Points Base 1,973.20 1,952.07 120.02 843.76 (1,964.37) (663.86)
Secondary Market... 17
Union Budget: Capital market
The market behaves like a voting machine in the short run and weighing machine in the long run, said
legendary investor Warren Buffett once. The saying appears relevant in the context of Dalal Street’s
reaction to the Budget. The Budget may be short on path-breaking reforms, but it is long on stability.
(1) 50% increase in tax on short-term capital gains:
The move will impart stability to the market in the long run by encouraging investors to stay invested for
the long term. But the move is expected to tighten liquidity in the short run. The rate of tax on short-term
capital gains being increased to 15% from 10% is a short-term negative.
(2) Scrapping of income tax rebate on securities transaction tax:
The move is expected to hit day traders, a key source of liquidity in the market, hard. Earlier, these traders
could adjust STT against their income-tax obligations. But with this facility gone, it will squeeze their
profit margins by increasing their tax liability. But that should not much of a concern to long-term
investors. According to tax professionals, the current practice adopted by big operators and day traders is
to add the STT amount to the total income, including income from trading activity and other income, and
subsequently, work out the payable tax. Under Section 80E, they are entitled to get tax rebate and can pay
only the surplus of total tax over STT at the end of the year. However, this benefit of setting off income
tax against STT would not be available once the new proposal comes into effect.
The government is aware of the practice that some market savvy investors have been taking advantage of
loopholes in the STT law to avoid paying legitimate tax on business income from speculative stock trades.
These investors ‘purchase’ STT for a “fee” from other broker/traders who will not be able to claim
income-tax rebate on STT beyond a point. But the tax authorities find it difficult to nail down offenders as
all the transactions are legal and STT has actually been paid to the government.
(3) Chang in the methodology of STT calculation on option contracts
Currently, STT is charged at the rate of 0.125% on delivery-based buy-and-sell transactions and 0.025%
only on non-delivery based sale transactions. The rate is 0.017% on F&O sale transactions. The FM has
decided to keep these rates unchanged. He, however, has given a boost to traders in F&O segment by
changing the methodology of STT calculation on option contracts. At present, option contracts attract an
STT on the entire notional value of the contract. This is going to change after the Budget proposals come
into effect, as STT will be charged on the option premium where the option is not exercised, and the
liability will be on the seller. However, in case where the option is exercised, the levy will be on the
settlement price and the liability will be on the buyer.
(4) Service tax on stock exchanges and clearing houses
Finance minister P Chidambaram proposed to bring services provided by stock exchanges and clearing
houses under the service tax net will not have any impact on brokers who are already paying service tax
as they can claim rebate.
4 INDIAN ECONOMIC SURVEY 2007-08
If you wish me to sum up in one phrase the outlook for 2008-09, I would say ‘optimism, but with caution
as the watchword’. There are a number of things going in favour of India. We need to capitalise on these
opportunities while at the same time responding to the evolving situation in the global economy in a
manner that our growth story is not affected. Given the high level of food, oil and other commodity prices
in international markets, the risks to inflation remain. There are, also downside risks to growth arising
from the slowdown and possible recession in the global economy.
Turn right for reforms
Please dump the Common Minimum Programme and opt for radical reforms if you want India to grow at
9% in the Eleventh Plan. This is implied rather than openly stated by the pre-budget Economic Survey.
The survey lists the reforms as options rather than recommendations. The key reform options are:
• Privatise old coal mines to enhance coal recovery, and allow the private sector free entry into new
mines. Similarly, sell old oilfields to private companies for enhanced recovery.
• Decontrol sugar, fertiliser and pharmaceutical segments.
• Allow 100% FDI in Greenfield rural-agricultural banks.
• Allow 51% FDI in rural insurance covering health, weather and such insurance. Allow 49% FDI in
all other insurance.
• Amend the Factories Act to extend the workweek from 48 hours to 60, and increase the daily working
hours limit to 12 hours, to facilitate peak use of labour in seasonal industries.
• Enact a new bankruptcy law to enable quick exit or management change of sick enterprises.
• Introduce multi-application smart cards to empower recipients of a wide range of government

schemes from employment to public distribution system and public housing. Recipients can receive
remittances directly into their bank accounts via smart cards, with no leakages or corruption.
• Freely allow the entry of A-grade foreign universities, and encourage B and C-grade foreign
universities, subject to tighter regulation. Allow private certification of skill development, besides
government certification.
• Allow foreign equity in all retail trade, and 100% FDI in branded speciality chains.
• Permit corporate investment in nuclear power. This, in turn means going ahead with 123 nuclear
agreement with the US.
• Make open access in electricity a reality through credible cross subsidies and free permission of
distribution to connect by wire to government electricity pillars.
• Allow free entry of private and joint venture freight companies into new freight corridor being built
by Railways.
Economic Survey... 19
Outlook finance
Primary market:
a) With a vibrant capital market, the Indian corporates would step up their access to the primary market
to raise resources both through equity and debt issues.
b) Alongside, the overseas issues (ADR/GDR) too are expected to gain in importance to supplement the
domestic resource mobilisation by the corporates.
c) The government’s efforts to streamline the regulatory framework and to bring business transparency
may enhance activity in the primary capital market in terms of increase in the number of debt and
equity issues as well as larger participation of investors, particularly retail investors.
Secondary market:
a) The performance of Indian stock prices in the secondary market hinges broadly on long-term and
short-term factors.
b) Going forward, despite the possible subdued global growth, the strong fundamentals of the Indian
economy in tandem with higher growth would help in sustaining the interest of domestic and foreign
investors in the Indian market.
Foreign investors:
a) In the long run, strong world output growth is important to sustain the investment activity across the
globe. Since India’s growth performance is relatively better among the emerging economies, the
country would continue to attract significant cross-boarder portfolio investments.
b) In the short-term, expectation of higher relative returns from investment in India, favourable risk
perception of investors and improved global liquidity would help the country in being an attractive
destination for investment.
Domestic investors:
a) Domestically, corporate earnings are expected to remain encouraging. Strong projected economic
growth and supportive policy initiatives would enhance investors’ preference to invest in financial
instruments, such as equity and debt papers.
b) If the recent pick-up in the amount of resource mobilisation by mutual funds and the assets they
manage are any indication reflecting increased preference for investment in the capital market via
mutual funds, the resources available with the Indian financial institutions would increase.
Banking sector:
a) As the Indian economy has entered a higher growth trajectory, the investment demand is expected to
remain strong in the short to medium term. The banking sector is equipped to meet the growing
demand for resources.
b) It is, however, necessary that credit expansion is non-inflationary and the productive sectors receive
adequate credit at a reasonable cost. This may call for the banking sector to review the spreads
suitably, thereby ensuring that credit offtake by productive sectors is maintained facilitating the
growth momentum.
Economic Survey... 20
Outlook inflation
a) Overall inflation is likely to remain moderate in the coming months, as the policy measures taken
during the course of the year work their way through the system.
b) The behaviour of agricultural prices, including essential consumption items, will be critical, given
falling poverty and rapid rising per capita income.
c) Global prices are having a more pronounced impact on domestic prices as the ability to meet
shortfall at affordable prices is being eroded by global shortages and rising prices.
d) We will continue to depend on enhancement of supplies through higher productivity and efficient
supply management. Domestic supply management is, therefore, critical to stabilising inflation
expectations. The parts of the economy characterised by market competition, such as manufacturing,
have responded to the increase in demand through higher investment and capacity creation. The
supply side pressures are likely only in sectors like agriculture that suffer from structural problems.
e) Monetary policy needs to address the inflationary expectations triggered by sub-sectoral price flare-
ups arising from demand and supply. Monetary policy also has to manage the stress arising from
continued increase in capital flows and the consequential changes in the exchange rate, exchange
reserves and liquidity. This is particularly challenging in a period of stagnancy or decline in
production of durable consumer goods and deceleration in global demand of our exports.
The Union Budget 2008-09 aims at combating the impact of the global slowdown by stimulating domestic
consumption through lower excise duties, central sales tax and personal income tax.
Since an appreciating rupee has affected exports and made imports cheaper, the finance minister has put off
import duty cuts to Asean levels, as earlier promised. This postponement will ensure a larger marketshare
for domestic producers during a global slowdown that could hit some sectors badly.
OUTLOOK AGRICULTURE
a) The agriculture, forestry and fishing sector is estimated to grow at 2.06% during 2007-08, as against
the previous year’s growth of 3.8%. Besides the weather induced fluctuations, output of this sector
has been affected due to reduced capital investment and plateauing of yield levels in major crops.
b) Any deceleration in the growth of this sector is translated into a lower overall GDP growth.
Acceleration of growth of this sector will not only push the overall GDP growth upwards, it would
also make the growth more inclusive. This necessitates working out the forward and backward
linkages that enhance productivity through balanced allocation and better utilisation of available
resources at all levels of implementation and quantifying output per unit of resource used.
c) The long-term policy framework at broad sectoral level needs to be strengthened and focused on
improving inter and intra-sectoral linkages. In addition, there is a need to build an outcome oriented
perspective in the implementation of public programmes in the area of irrigation, fertilisers, use of
high-yielding varieties of seeds, extension support for facilitating adoption of improved practices,
and market access. While investment in agriculture may not have kept place with the requirements of
the sector, food and fertiliser subsidies have supported the agriculture sector.
5 TAX UPDATES
Finance Bill 2008
(1) 2% cut in General Cenvat rate
The manufacturing sector is the backbone of any economy. It is consumption that drives production and it
is production that drives investment. Having carefully studied current trends of production and
consumption, finance minister believes that there is a need to give a stimulus to the manufacturing sector.
Hence, he proposes to reduce the general CENVAT rate on all goods from 16% to 14%. The 2% cut
meets the long-standing demand of the industry, which now has the option of boosting sales by passing on
the benefit to consumers or pumping up its bottom lines.
(2) No change in Peak Customs duty
If the finance minister decides to pare peak duties in 2008-09, it would be the fourth consecutive year of
the duty cuts. There has been a continuous annual reduction in Custom duties since 2005-06 when duties
were reduced from 20% to 15%. In the current fiscal, peak duties were bought down from 12.5% to 10%
while in the year before; the duties were reduced from 15 to 12.5%.
The peak rate for non-agricultural products was 20% in January ‘04 and now stands at 10%. Since April
‘07, the Rupee has appreciated against the Dollar by 9.8%. Consequently, finance minister proposes to
make no change in the peak rate of custom duty. While he has refrained from cutting the peak customs
duty for the first time since he took over, there are a bagful of goodies for India Inc in the form of cheaper
raw materials. While the rupee’s strength was making imports cheaper any way, here’s the icing on the
cake: countervailing duty (CVD) on most manufactured goods has gone down to 14% - thanks to cenvat
rate coming down from 16% to 14%.
So it may be time to splurge as imports are getting cheaper than ever before. In some cases like small cars
and motorbikes, the CVD now stands at 12%, while pharma products would attract a CVD of 8%. No
need to feel guilty, as many would argue, the more you spend, the better it is for the economy. Apart from
the common man, India Inc too has been given goodies on the Custom duty front. Say, for instance, the
Budget has bought down Custom duty on project imports to 5% compared to 7.5% earlier, bringing down
costs of refineries, steel plants, cement units and power projects.
(3) Personal Income Tax:
At present, an income slab of Rs 1.1 lakh to 1.5 lakh attracts a 10% tax rate while that of Rs 150,001 to
Rs 250,000 attracts 20%. A 30% rate is levied on income above Rs 250,001.
Finance minister has always maintained that moderate and stable tax rates coupled with a tax
administration that shows no fear or favour will bring high revenues to the exchequer. Accordingly, he
proposes to make some changes in the slabs for personal income tax. I propose to increase the threshold
limit for exemption: In case of all assesses, from Rs 110,000 to Rs 150,000, thus giving every assessee a
relief at a minimum of Rs 4,000. Consequently, the four slabs and rates will be as follows:
Up to Rs 150,000 NIL
Rs 150,001 to RS 300,000 10 per cent
Rs 300,001 to Rs 500,000 20 per cent
Rs 500,001 and above 30 per cent
In case of woman assessee, from Rs 145,000 to Rs 180,000
In case of a senior citizen, from Rs 195,000 to Rs 225,000
Tax updates... 22
Tax at the highest bracket (30%) will kick in only for income above Rs 5 lakh – twice the earlier limit of
Rs 2.5 lakh. The widening of the slab means that while earlier having an income of say Rs 2.6 lakh put an
individual in the 30% tax bracket, that level of income will now attract a rate of just 10% this year. Call it
PC magic. Even without touching tax rates, the FM has ensured individual earning 5-lakh annually to
take home up to Rs 4000 more every month.
Also, the finance minister proposes to add the Senior Citizens Saving Scheme 2004 and Post Office Time
Deposit to the basket of saving instruments under Section 80C of the Income Tax Act.
Besides, he also proposes to allow an additional deduction of Rs 15,000 under Section 80D to an
individual who pays medical insurance premium for his/her parent or parents
The government will now allow you an additional deduction of Rs 15,000 if you pay the premium for
health cover for your parents. This is how it works: Assume you have paid a medical premium of Rs
15,000 for your spouse and kids, and another premium of Rs 15,000 for your parents. The tax deductions
will now Rs 30,000. This means that additional limit will come as an extra benefit.
(4) No change in Corporate Income Tax
At present, India’s corporate tax rate now works out to 33.99%, after factoring surcharge of 10% and the
education cess of 3% on top of the statutory rate. FM proposes no change in corporate income tax
(5) No change in Surcharge
At present, in the case of individual, HUF, AOP, BOI having total income exceeding Rs 10-lakh, the tax
so computed after rebate under Chapter VIII-A shall be enhanced by a surcharge @ 10%. In the case of
every firm and domestic company, surcharge @ 10%, shall be levied only in cases where the total
income exceeds one crore rupee. The finance minister proposes no change in this regard.
Also, additional surcharge called the “Education Cess on income-tax” shall continue to be levied @ 2%,
and “Secondary and Higher Education Cess on income-tax” @ 1%, on the amount of tax and surcharge,
if any, in all cases. The finance minister proposes no change in this regard.
(6) 15% Short Term Capital Gains on equity instead of 10%
Section 111A and 115AD provide for special tax rate of 10% on STCG arising from the transfer of short-
term capital assets, being an equity share in a company or a unit of an equity oriented fund, where such
transactions are chargeable to STT. It is proposed to increase the rate of tax on such short-term capital
gains to 15%. These amendments will take effect from the 1st day of April, 2009 and will accordingly
apply in relation to AY 2009-10 and subsequent assessment years.
(7) Sole identification number
Finance Minister said that fear of the PAN has virtually disappeared. PAN is now the sole identification
number for all participants in the securities market. I propose to extend the requirement of PAN to all
transactions in the financial market subject, however, to suitable threshold exemption limit.
Tax updates... 23
Measures for additional revenue mobilisation
(1) Securities Transaction Tax
At present, the amount of STT paid is allowed as rebate under Section 88-E of the I-T Act. This rebate is
allowed when the income from taxable securities transactions is taxed under the head ‘profit and gains of
business or profession. It is proposed to discontinue the rebate available to such assessee under section
88-E of the I-T Act. Further, it is also proposed to allow the amount of STT as deduction under section 36
of the I-T Act. The amendments will take effect from 1st April, 2009 and will accordingly apply in
relation to AY 2009-10 and subsequent assessment years.
(2) Commodities Transaction Tax
The finance minister proposes to introduce a new Commodity Transaction Tax (CTT) on the same lines
as STT on F&O. The tax is proposed to be levied from the date on which Chapter VII of the Finance Bill
2008 comes into force by way of notification in the Official Gazette by the Central Government. Further,
it is proposed to amend section 36 of the Income-tax Act to provide that amount of CTT shall be allowed
as deduction. This amendment in section 36 of the Income-tax Act will take effect from 1st day of April,
2009 and accordingly apply to AY 2009-10 and subsequent assessment years.
(3) Capital gain tax on cross-border M&A
Overseas firms, acquiring companies in India just got costlier. The FM may not spelled it out in his
speech, but the Budget fine-print reveals that the government has opened the doors for taxing cross-border
deals. And that too with retrospective effect from June 2002. The onus of paying capital gain tax on an
acquisition in India will now rest with the buyer. The buyer is expected to deduct tax at source and failure
to do so would leave him liable to pay tax. If the government has its way, the proposed changes in the tax
could bring in close to $ 5 billion as capital gains tax from M&A deals struck after June 2002, according
to an estimate by a leading tax consultant.
(4) Service tax on fees charged to Ulipholders
Returns on Ulips will dip. The drop could be more in the first year of premium payment, but less in
subsequent years. The FM’s intention is to increase a more level-playing field between MF products and
Ulips. In achieving this, he proposed a service tax on charges that insurance companies recover from
Ulipholders. From now on, every life insurance company will have to pay service tax on all fees charged
to Ulipholders.
(5) Charitable ends when profits start kicking in
It is proposed to amend section 2 (15) so as to provide that “the advancement of any other object of
general public utility” shall not be a charitable purpose if it involves the carrying on of – (a) any activity
in the nature of trade, commerce or business or, (b) any activity of rendering of any service in relation to
any trade, commerce or business, for a fee or cess or other consideration, irrespective of the nature of use
or application of the income from such activity, or the retention of such income, by the concerned entity.
This amendment will take effect from 1st day of April, 2009 and will accordingly apply in relation to the
AY 2009-10 and subsequent assessment years.
Tax updates... 24
Rationalisation measures
(1) TDS on Corporate bonds
Section 193 of the Income-tax Act provides for deduction of tax at source on any income by way of
interest on securities payable to a resident.
In order to facilitate development of the corporate bond market, it is proposed to remove TDS on any
interest payable to a resident on any security issued by a company where such security is in
dematerialised form and is listed on a recognised stock exchange in India. This amendment will take
effect from 1st day of June 2008.
(2) Dividend Distribution Tax
The most relevant move in the budget for companies, is removing the incidence of double taxation. The
companies were paying dividend distribution tax (16.99%) twice.
It is proposed that the amount of dividend will be reduced by the amount of dividend received by the
domestic company from its subsidiary. This is one of the biggest hurdles for the creation of holding
companies in India. Now, this has been addressed in the budget. However, FM pointed out that tax laws
would not be allowed to encourage shell companies that are created just as tax shelters.
(3) Cash payment exceeding 20K
Section 40A(3)(a) of the I-T Act, 1961 provides that any expenditure incurred in respect of which payment
is made in a sum exceeding Rs 20,000/- otherwise than by an account payee cheque drawn on a bank or
by an account payee bank draft, shall not be allowed as a deduction. The provisions are however subject
to exceptions provided in Rule 6DD of Income-tax Rules, 1962.
It has come to notice of the department that the provision of this section are being circumvented by
splitting a particular high value payment to a person into several cash payments, each below Rs 20,000/-.
This splitting is also resorted to for payments made in the course of a single day.
According to the judicial opinion, the words used are ‘in a sum’ i.e., single sum. Therefore, irrespective of
any number of transactions, where the amount does not exceed the prescribed amount in each
transaction, the rigours of section 40A (3) will not apply.
To overcome the splitting of payments to the same person made during a day as referred above and to
increase the efficacy of the provision, the amendment seeks to substitute the present provision to provide
that where a payment or aggregate of payments made to a person in a day, otherwise than by an account
payee cheque on bank or account payee bank draft, exceeds twenty thousand rupees, the disallowance of
such expenditure shall be made under the proposed sub-section (3) of section 40A or the payment shall be
deemed to be the profits and gains of business or profession under (3A) of section 40A, as the case may
be. The proviso to the proposed sub-section (3A) provides that in certain prescribed cases and
circumstances the provisions of proposed sub-section (3) and (3A) shall not apply. This amendment will
take effect from 1st April 2009 and will accordingly apply in relation to AY 2009-10 and thereafter.
Tax updates... 25
Relief’s in fringe benefit tax
Sub-section (2) of section 115WB of the I-T Act provides that where an employer incurs any expenditure,
inter alia, for the purposes of entertainment, hospitality, conference, and sales promotion (including
publicity), such employer shall be deemed to have provided fringe benefits to its employees. Section
115WC of the Income-tax Act provides for valuation of the fringe benefits provided by the employer.
With a view to rationalising the provisions of Fringe Benefit Tax, the following amendments to sub-
section (2) of section 115WB of the I-T Act are proposed –
Hospitality expenditure shall not include payment through pre-paid Electronic meal card
Any expenditure on the payment through pre-paid electronic meal card shall also be excluded from the
hospitality expenditure for calculation of the value of fringe benefit. Such electronic meal card should not
be transferable, should be usable only at eating joints or outlets and should fulfil such other conditions, as
may be prescribed.
Employees’ welfare shall not include crèche facility for the children; Sponsors a sportsperson; Organise
sports events – all for employees
Explanation to clause (E) is proposed to be amended to provide that any expenditure incurred or payment
made to – Provide crèche facility for the children of the employee; or Sponsors a sportsperson, being an
employee; or Organise sports events for employees shall not be considered for employees’ welfare for the
purposes of calculation of the value of fringe benefit.
Guest house - Omitted
Clause (K) is proposed to be omitted. Hence any expenditure or payment made for maintenance of any
accommodation in the nature of guest house shall not be considered for valuation of fringe benefit.
Expenditure on festival celebration - Value of fringe benefits shall be 20% (existing 50%)
Further, clause (c) and clause (d) of sub-section (1) of section 115 WC is proposed to be amended so as to
provide that the value of fringe benefits on account of expenditure on festival celebration shall be twenty
per cent as against the existing rate of fifty per cent. These amendments shall take effect from 1st April,
2009 and shall accordingly apply in relation to assessment year 2009-10 and subsequent year.
Banking Cash Transaction Tax withdrawn from April 1, 2009
The BCTT has served a very useful purpose in enlarging the information system of the Income Tax
Department. Since the information is also being gathered through other instruments introduced in the last
few years, I propose to withdraw this tax with effect from April 1, 2009.
Tax updates... 26
Service Tax
Exemption from service tax:
(1) The annual threshold limit of service tax exemption for small service providers is being increased
from the present level of Rs 8 lakh to Rs 10 lakh. It will come into effect from 1st April, 2008.
(2) Exemption from service tax is being provided to - 75% of the gross amount charged as freight for
services provided in relation to transport of goods by road in a goods carriage by a goods transport
agency (GTA), unconditionally. Consequently, 75% abatement provided under notification No.
1/2006-Service tax, dated the 1st March, 2006 is withdrawn. This will come into effect from 1st
March, 2008.
Following services are specified as taxable service: The changes will come into effect from the date to be
notified after the enactment of the Finance Bill 2008.
(1) Services provided in relation to information technology (IT) software for use in the course, or
furtherance, of business or commerce.
(2) Services provided in relation to management of investment, under Ulip schemes;

(3) Services provided by a recognised stock exchange in relation to securities;
(4) Services provided by commodity exchanges in relation to sale or purchase of any goods or forward
contracts;
(5) Services provided by processing and clearinghouse in relation to processing, clearing and settlement
of transactions in securities, goods or forward contracts.
(6) Services provided in relation to supply of tangible goods, without transferring right of possessions
and effective control of the tangible goods;
(7) Services provided in relation to internet telecommunication.
The biggest blow however has been to the IT industry as customised software will now attract service tax.
With this, the government has made it clear that software would now be classified as a service and not as a
good. Scope of specified taxable services is being amended to include the IT related services. Now:
o ‘Testing and analysis service’ will include testing or analysing of IT software;
o ‘Technical inspection and certification services’ will include inspection, examination and
certification of IT software.
o It is to clarify that services provided by a consulting engineer in relation to advice, consultancy or

technical assistance in the disciplines of both computer hardware engineering and computer software
engineering shall also be classifiable under ‘Consulting engineering services’.
o It is to clarify by way of removal of doubt that ‘properties’ referred to in ‘Management, maintenance

or repair service’ includes IT software.
Tax updates... 27
Excise duty
General rate of excise duty (CENVAT) has been reduced from 16% to 14%. The other ad valorem rate of
24%, 12% and 8% remain unchanged.
National Calamity Contingent duty (NCCD):

• NCCD @1% has been imposed on mobile phones. On imported mobile phones, this duty shall be
levied as additional duty of Customs.
Cellphones are set to become a bit pricier due the 1% NCCD on all handset sales. Symbolically, it is not
a progressive move as it impacts the end user, the common man. The impact however is marginal. The
other related telecom segments have attracted Mr Chidambaram’s benevolence-
o Wireless internet connectivity will be more affordable, for example, with data cards being exempted
from 16% excise duty, leading to price cuts of Rs 500 upwards. Data cards, whose prices vary
between Rs 3,000 and Rs 8,000, enable Internet access without landline connections. The waiver of
excise duty on wireless data cards will shore up broadband usage and penetration levels nationally.
o Modems and set-top boxes (STBs) will also be cheaper as excise and custom duties have been halved
to 8% and 5%, respectively, for specified convergence products. Also, the 7.5% customs duty on STB
components has been axed.
Miscellaneous:
• e rate of duty applicable to clearances of goods to domestic tariff area from export oriented units,
software technology parks, electronic hardware technology parks etc, has been revised from 25% of
the basic custom duty + excise duty payable on the like goods to 50% of the basic custom duty +
excise duty payable on the like goods.
Amendment in Central Excise Act:
• Section 2 of the Central Excise Act, 1944 is being amended to insert an explanation in clause (d) to
provide that “goods” include any article, material or substance which is capable of being bought and
sold for a consideration and such goods shall be deemed to marketable.
Waste material produced by some industries is sold in the market. However, companies do not pay excise
duty on it since the definition of goods in the Excise Act said duty would be levied on marketable
products. Interestingly, some residual material like zinc dross or copper ash are high value items
commanding a good price. The new definition plugs this loophole. According to new definition, goods will
be deemed to be marketable. The government has in the Finance Bill, taken a number of measures aimed
at increasing duty collection by plugging loopholes.
• Section 3A is being inserted in the Central Excise Act, 1944 empowering the Central Government to
charge excise duty on the basis of capacity of production in respect of notified goods, and to notify the
procedure for the same.
• Notes on certain Chapters in the Central Excise Tariff Act, 1985 are being amended to align the
definition of processes amounting to manufacture with the definition of manufacture in section 2f (iii)
of the Central Excise Act, 1944.
6 MISCELLANEOUS UPDATES
With the last full-fledged Budget session of the 14th Lok Sabha starting from Monday, February 25, 2008,
both the government and the opposition are expected to use the floor of the house for maximum political
positioning for the next two months with an eye on a series of Assembly elections this year and the
general election early next year. The session is slated to last till May 9. There will be a total of 35 sittings,
18 before the 25-day recess starting on March 20, and 17 in the second half.
The session began with the President’s address to the joint session on February 25th. The railway budget
was presented on 26th and the Union Budget on 29th. The Government also presented the Economic
Survey on 27th February ’08. However Union Budget has not addressed so many things buzzing on the
streets, some of which are given below -
Uncertainty on FIIs
The government’s relentless attempt to whittle down the double-taxation treaty with Mauritius is causing
uncertainties among foreign investors. Taxation on FIIs has been dogged by uncertainty for several years.
FIIs mostly declare their income as capital gains and pay no tax because of the tax avoidance treaty. In the
absence of treaty, short-term capital gains would have attracted 10% tax. The concern expressed by the
Indian tax authorities that investors from third countries are routing their investments through Mauritius is
strange. Investors have located in Mauritius only to access the Indian market. A lightly regulated offshore
tax haven can be a major boon to a continental sized economy with higher taxation rates, the Hong Kong-
China combine being the classic example. Mauritius has played a similar role for India.
Employment Exchanges
The government is expected to announce a complete makeover of the 965 employment exchanges that
have been decrepit and redundant so far. All of them will be computerised and linked up to create a
virtual national job market for job seekers and recruiters. With resumes stored in physical, sorting and
updating resume has been a big challenge, making the database largely useless for the talent-starved
corporate sector. The budget has not addressed this long-pending need of the job market.
Special fund for rejuvenation and plantation
The ageing of plants had emerged as a key issue affecting productivity and global competitiveness of
plantation crops. Emergence of new players like Vietnam, Sri Lanka and Kenya – which have new plants
with higher productivity and, thereby, low production costs – on the international scene has further
hampered the growth of the domestic industry. Further, these sectors are also reeling under the impact of
bilateral agreements such as the India-Sri Lanka free trade agreement (FTA). And now that India is giving
finishing touch to its FTA with Asean, there is a need for providing increased support to the industry to
prepare it for competition from its East Asian neighbours.
Sovereign fund
The government is considering a sovereign investment fund with an initial corpus of $ 5 billion to acquire
companies abroad. The investment fund may also be used for bolstering the country’s energy security by
acquiring mine and oil & gas blocks abroad. Prime Minister Manmohan Singh has issued a directive to
the finance ministry in this regard and an announcement was likely in the budget.
7 KNOWLEDGE RESOURCE
Railway Budget
Railway minister Lalu Prasad Yadav has done it again. This year’s rail budget has cut fares and freight
and announced 63 new trains, significant concessions to women, students and porters, ‘world-class’
railway stations and other amenities, besides a fancy IT initiative, including smart cards for suburban
Mumbai passengers. And yet, it has projected healthy financials and substantial investments to enhance
the railways’ future carrying capacity and productivity.
But this is not empty rhetoric: the railways’ report card in the current fiscal shows a sharp reduction in
accidents, cash surplus of over Rs 25,000 crore, record return of 21% on capital, 31% increase in Plan
spending, and 15% rise in traffic earnings on the basis of just 8.6% rise in freight volumes. The operating
expenditure as a proportion of revenues (lower the ratio, more efficient the railways) – is down to 76.3%.
The operating ratio had climbed to unsustainable highs in the first two years of this decade – 98.3% and
96% - under the previous NDA government.
We have posted Rs 25,000 crore profit this year. This is better than the net profit of most of the Fortune
500 companies. Had we listed ourselves, we would have been on the Top 10 list. The operating ratio at
76.3 is one of the best in the world. Our commonsensical and counterintuitive approach has been the
foremost reason behind the turnaround.
Our out-of-box thinking, mega scale, high-volume game, boldness in approach has fuelled the turnaround.
And to make this turnaround sustainable, we have multiplied our investment for future by about 4 times
which is exemplary by any standards in the last 4 years. The Railways would invest Rs 25,000 crore over
the next five years in capacity augmentation, technology upgradation, doubling of tracks and promotion
of world-class services to our customers.
(1). Social obligations:
We have shown that social obligation of the public utility married with the commercial enterprise. It has
been possible for us to become profitable and at the same time win hearts of teeming millions of the
country. This happens only when we think creative and act swiftly with the time.
• Garib Raths: Nano would make cars affordable for two-wheeler owners in India. Similarly, Garib Rath
will make air-conditioned travel affordable for lower middle class and poor section of our society.
This time we have announced 10 more Garib Raths.
• Rationalisation in fares: Satisfied with the volume strategy, Mr Yadav cut fares across the board for the
second year running. There is Rs 1 cut in loss-making non-suburban second class travel for fares up to
Rs 50. The non-suburban second class fares of mail/express and ordinary trains have been reduced by
5% for tickets costing more than Rs 50. This means that a long-distance travelers stands to benefit
more. There are some concessions as well. Women travelers of 60 years and above age would now get
a 50% discount against 30% earlier. Boys up to standard 12 and girls up to graduation would now
eligible for free monthly season tickets for travel from home to school.
(2). Priority areas:
Over the medium and long term, the priority areas are throughout enhancement and technological
upgradation of rolling stock, signaling and telecommunication, wider application of information
technology for operational improvements, revenue enhancement & better customer’s service.
Railway Budget... 30
• Travel on e-track: ‘Passenger is the king’, seems to have been driving mantra of Mr Prasad as he
unveiled a basket of goodies to make train travel more comfortable and greener. Forget the long
queues to book your tickets. You could do it through your mobile phone. The Railways is all set to
make ticketing a child’s play. E-booking could now be done for a waitlisted ticket as well. All coaches
on trains would have an online display board giving train arrival and departure information,
reservation information. The initiatives not only make travel easier for passengers but could also spell
a huge business opportunity for IT companies.
• Stress on cleanliness: ‘Atithi Devo Bhav’, said Mr Prasad as he went to announce the landmark
initiative – discharge free toilets. Indian railways would provide for such toilet in all 36,000 coaches
in next five years. Besides, passengers will not have to bear with dirty coaches in their journey with
the new on-board cleaning facility that would be outsourced to private agencies. The stress on
cleanliness will not be limited to just the trains, the platforms will also gets a new face with a large
number of them witnessing an increase in heights to make them passengers friendly.
(3). Art of making money:
The focus over the last 3 years is not on yield per passenger or yield per train kilometer. We have made
money not by increasing tariff, but by increasing length, payload, seating capacity and occupancy levels.
• Tariff regulator: At the macro level, the focus is not on denominator but on the numerator. In other
words, we have taken steps to revive and regenerate the competitiveness of railways in the market
place – by setting up of a tariff regulator. The battle of the market has to be fought and won and
therefore railway pricing strategy factor is not totally commercial but customer-centric and market-
driven. We have a dynamic pricing and commercial policy across routes, regions and periods.
• Railways vs Air: Competition between the railways and low-cost airlines is set to reach a new level
with railway minister lowering AC fares up to 7%. This would help railways woo passengers as the
gap between airfare and rail fare has widened significantly on the short-haul routes. Mr Yadav
announced reduction of fares for AC-I class by 7% and AC-II tier by 4%. A fair reduction of 2% for
the newly designed AC 3 tier and AC Chair Car coaches was also announced. The reduction would,
however, only be half for popular trains and during the peak period.
(4). Creative and strategic thinking:
We have set up a strategic business analyst and innovation group comprising railway experts for creativity
and strategic thinking in Railways on a long-term basis. We would come with a vision document 2025 for
the Railways and vision 2012 on IT exclusively over the next few months. The annual plan for the current
year is Rs 35,000 crore, which is the biggest till date, and 80% funding of the plan would be done through
net budgetary resources and internal generation.
• World-class stations will be developed in New Delhi, Chhatrapati Shivaji Terminus, Mumbai, Patna
and Secunderabad through global competitive bidding.
• Development of surplus land for commercial use at major railway stations through the railway land
development authority is an attractive proposition for the private sector.
Railway Budget... 31
• New wagon leasing policy shall attract investors to induct their own wagons into the railway circuit for
leasing to private operators. This shall also attract new innovative designs with commodity-specific
wagons. So far, parties having their own production units were allowed to own wagons. The new
wagon leasing policy shall attract private investors to become partners in railways’ operations and will
also bridge the demand-supply gap for wagons.
• Development of freight terminals via private sector participation, which will bring revolutionary
changes as it would introduce new innovations and technology that will not only improve quality of
service but also improve terminal operations. Similarly, the PPP model will be adopted to develop
diesel loco, electric loco, rail coach factories, container trains, container depots and multi-model
logistic parks.
(5). Investment strategy:
The investment strategy focus in on low cost, short gestation, rapid pay-back and high return projects for
better operating efficiency, more effective utilisation of rolling stock and removal of capacity bottlenecks
on the high-density network.
• Effective utilisation of rolling stock: Of the plan investment, the largest share is for rolling stock. This
covers locomotives, carriages, wagons, cranes and track machines and other rolling stock. The railway
ministry has also prepared a multi-pronged scheme to reduce accidents caused by human failure.
Under this scheme, it would provide automatic safety equipments to strengthen rail safety.
• Technology upgradation for wagon design: There will be heavy investments in technology upgradation
for wagon design as foreign companies are now allowed to collaborate with Indian manufacturers for
building high-capacity steel wagons that will have higher axle load capacity of up to 25 tonnes. This
will open up various options of investments and would result in lower cost of transportation with
increased throughput.
• Upgradation of Information Technology: There will be huge investments in Information Technology

upgradation over the next five years as customers need better information system to track their
consignments. The move will also help in running freight trains on time.
• Freight corridor: Construction of the North-East section of the dedicated freight corridor will
commence in 2008-09 and, similarly, the northern corridor should also be taken up since the current
line capacity is saturated.
• Port connectivity: Emphasis on port connectivity will result in improved export-import business,
which is projected to be 1,100 million tonnes by the end of the 11th Five-Year Plan.
(6). Huge potential:
What the country has seen so far is not even the tip of the iceberg. The Railways have huge potential and
coming time would see this magic unfold with all its beauty and charm. Foundation of a mega enterprise
has been laid and the identity of the Railways as an institution has grown stronger with the morale and
pride of employees at an all-time high.
WILL THEY DELIVER?
WWW.MI7SAFE.ORG
Alka Agrawal
Promoter of Mi7 & SAFE
Financial Literacy Mission

A crash course of literacy
Missions Seven Charitable Trust

120/714, Lajpat Nagar, Kanpur - 208005
Phone 0512-2295545, 9450156303, 9336114780
e mail at: safe@mi7safe.org
Safe Financial Advisor Practice Journal: March 2008

Journal of FInance Vol 15

Transféré par

Informations du document

Description originale:

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Journal of FInance Vol 15

Transféré par

Droits d'auteur :

Formats disponibles

1 BETTING ON THE BUDGET

Union Budget 2008-09

(1) Pan Indian market for securities

(2) Exchange-traded market for corporate bonds

(3) Currency and derivatives markets

(4) Classification of market products

Farm loan waiver

5. RISK MANAGEMENT CONSULTANTS

Advancement of due date of filing of return

Advancement of the period of notice

8. TECH SAVVY PROFESSIONALS

Use of Information Technology in tax administration:

Centralised processing of return

(a) any arithmetical error in the return; or

To facilitate this, it is also proposed that –

These amendments will take effect from 1st April 2008.

10. GLOBAL OUTLOOK

No capital gains on transfer of FCEBs

11. CONTINUING LEARNING CENTRES

CST and a Roadmap towards GST

12. ISSUES OF THE PRESENT

Hold the priceline

Growth during 2008-09

(1) Wockhardt Hospitals to call off IPO

(2) Investor apathy forces Emaar- MGF to call off IPOs

(3) Listing of Reliance Power IPO

(4) Listless Street leaves grey market in tatters

(5) R-power mulls bonus issue to woo investors

(6) R-power sets 3:5 bonus

(7) Well-priced PSU issues

Where do we go from here?

1st week of February ’08 – Glooms all around

Daily review 01/02/08 04/02/08 05/02/08 06/02/08 07/02/08 08/02/08

Weekly review 01/02/08 08/02/08 Points Percentage

2nd week of February ’08 – Continuing gloom

Daily review 08/02/08 11/02/08 12/02/08 13/02/08 14/02/08 15/02/08

Weekly review 08/02/08 15/02/08 Points Percentage

3rd week of February ’08 – Fed lowers growth forecast

Daily review 15/02/08 18/02/08 19/02/08 20/02/08 21/02/08 22/02/08

Weekly review 15/02/08 22/02/08 Points Percentage

Daily review 22/02/08 25/02/08 26/02/08 27/02/08 28/02/08 29/02/08

Weekly review 22/02/08 29/02/08 Points Percentage

Monthly review on last Friday

Union Budget: Capital market

(1) 50% increase in tax on short-term capital gains:

(2) Scrapping of income tax rebate on securities transaction tax:

(3) Chang in the methodology of STT calculation on option contracts

(4) Service tax on stock exchanges and clearing houses

Turn right for reforms

• Decontrol sugar, fertiliser and pharmaceutical segments.

• Allow 100% FDI in Greenfield rural-agricultural banks.

• Introduce multi-application smart cards to empower recipients of a wide range of government

(2) No change in Peak Customs duty

(3) Personal Income Tax:

(4) No change in Corporate Income Tax

(5) No change in Surcharge

(6) 15% Short Term Capital Gains on equity instead of 10%

(7) Sole identification number

Measures for additional revenue mobilisation

(1) Securities Transaction Tax

(2) Commodities Transaction Tax

(3) Capital gain tax on cross-border M&A

(4) Service tax on fees charged to Ulipholders