UNION BUDGET 2013-14 - WHAT TO EXPECT?

By SP Tulsian

The countdown has begun. Though the “official” date for the Union Budget 2013-14 is not yet declared, “unofficially” routine over so many years suggests that in all probability, it could be held on 28^th Feb, Thursday.

The usual secrecy around the suitcase and the build-up and expectations to the Budget will rise to a crescendo as the D-Day approaches.

Listed below are my set of expectations for the Budget and feel that Chidambaram will be tempted to go all to try and garner as much revenue as possible as next Budget would be more “political” and less about economics. One fervently hopes that the Budget brings in cheer and not make the atmosphere more morose than what it is today.

Call this is a wish-list but as per me, these broad changes and roadmaps could be good for the economy as well as the stock markets. But before than take a look at the Government’s Income-Expenditure for FY13 and that gives us a better perspective of the compulsions in front of Chidambaram.

Budget 2012 -2013

1. Revenue

Plan                                                            5,21,025 cr.

Non Plan                                                     9,69,900 cr.

Total                                                        14,90,925 cr.

Revenue Break Up

Tax Revenue -                                             7,71,071 cr

Non Tax Revenue -                                      1,64,613 cr.

Capital Receipts -                                        5,55,240 cr.

(Includes Market loans)

2. Planned Expenditure

Revenue                                                      4,20,513 cr.

Capital                                                        1,00,511 cr.

Total                                                          5,21,025 cr.

Planned Expenditure Break Up

1. Central Plan -                                           3,91,027 cr.

[For various Ministeries - Total Expenditure is 6,51,509 cr.

Balance of 2,60,482 cr. by IEBR (Internal & Extra Budgetary Resource)]

2. Assistance to States & UT Plans -          1,29,998 cr.

3. Non Plan Expenditure

Revenue                                                     8,65,595 cr.

Capital                                                        1,04,304 cr.

Total                                                          9,69,900 cr.

Non Plan Expenditure Break Up

1. Interest + Debt Servicing                            3,19,759 cr.
2. Defense                                                    1,93,407 cr.
3. Fertilizer Subsidy                                       60,974 cr.

[Imported Urea - 13,398 cr.,

 Indigenous Urea - 19,000 cr.,

 Sale of decontrolled fertilizers with concession to farmers - 28,576 cr.]

4. Food Subsidy                                            75,000 cr.
5. Petroleum Subsidy                                    43,580 cr.
6. Pensions                                                   63,183 cr.
7. Grants to States                                        63,352 cr.
8. Capital outlay (w/o Defense)                        23,971 cr.

Roadmap for Budget 2013-14

• Raise personal Income Tax limit, with changes in slabs as well.
• Raise saving limit to Rs.1.50 lakh u/s 80 C, Rs. 50,000 u/s 80 CCF, Rs.30,000 u/s 80 D and Rs.2.50 Lakh for interest on Housing Loan and Rs.2.00 Lakh for housing loan repayment.
• Avoid bringing in Estate Duty.
• Keep Corporate income tax rates unchanged.
• Abolish surcharge of 5% on income above Rs. 1 crore, for Corporates.
• Reduce MAT from 18.5% to 15%.
• Abolish DDT and transfer taxability to recipient, with 50% upfront deduction.
• Keep service tax rates unchanged at 12%
• Reduce STT to 0.05% from current 0.1%
• Curtail Fiscal Deficit to 4.8%
• Roadmap on GST
• Sops to Oil and Gas sector to curtail CAD.
• Focus on infra sector for easy and cheap fund availability.
• Focus on GDP Growth of 7%.
• Curtail Inflation below 6%
• Restrict Govt. borrowings.
• Residual stake sale in HZL, Balco and Tata Comm.
• Monetize SUTTI assets in L & T, Axis Bank and ITC.
• Focus on vibrant Capital Market.
• Encourage savings via investment in insurance, PPF, Infra Bonds etc.
• Curtail Gold import by duty increase and offering alternate saving avenues.

Expectations for Budget 2013-14

• Increase in personal Income Tax limit from Rs.2 lakh to Rs.2.40 lakh.
• Change slab rate of tax for individuals

Rs.2.40 Lakh to Rs.7.50 Lakh.  -  10%

Rs.7.50 Lakh to Rs.12 Lakh           -  20%

Above Rs.12 Lakh                        -  30%

• Keep Corporate tax unchanged at 30%
• Remove surcharge of 5% on Corporate Tax, of above Rs. 1 crore.
• Sec. 80 C  - Raise limit to Rs.1.50 Lakh from Rs.1 lakh.
• Sec. 80 CCF -  Raise limit from Rs.20,000 to Rs.50,000 for Long Term Infrastructure Bonds.
• Sec. 80 D -  Raise Medical insurance Premium from Rs.15,000 (Rs.20,000 for senior citizen) to Rs.30,000.
• Sec. 80 IA and Sec .80 IB, Sec. 80 IAB and Sec .80 IC and Sec. 80 ID – Extension of benefits, given under various sub-sections.
• Reduce MAT to 15%.
• Abolish Dividend Distribution Tax.
• Tax Dividends in the hands of Payee, after an upfront deduction of 50%, with balance taxable at marginal rate of tax.