Glimpses of the Budget 2010

by Anand Lakhotia 27. February 2010 13:02

GENERAL OVERVIEW:

  • Economic crisis: "We have withered the global slowdown well," says FM.
  • 18.9% growth rate in manufacturing sector in third quarter of 2009 (highest in last 2 decades).
  • Fiscal deficit pegged at 5.5%
  • Hope to breach 10% mark in GDP in near future, says FM.
  • Growth to exceed 7.2% in this fiscal, says FM.
  • General Sales Tax and Direct Tax Code can be introduced in April 2011
  • Gradual phasing out of stimulus packages, says FM.
  • Rs 25,000 Crores disinvestment target this year
  • Government to set up apex level Financial Stability and Development Council
  • RBI to release additional licenses to Private sector banks and non-banking financial institutions
  • Repayment tenure for farmer loans extended by 6 months to June 30th 2011
  • Delhi-Mumbai industrial corridor taken up for development
  • Government to raise Rs 25000 Crores through Disinvestment
  • Technology advisory group to be set up under Nandan Nilekani. UID authority given Rs 1900 Crores
  • Allocation to Defence over Rs 147,000 Crores
  • Petrol prices to go up
  • Rs 16,500 Crores capital support for PSU banks
  • NREGA allocation to Rs 40,100 Crores
  • Rs 400 Crores corpus for micro-finance scheme
  • Interest subvention for exports to extended for one year
  • Interest subvention of 2% to be extended for Exporters of handicrafts and SMEs
  • Bank for every village with population of 2,000
  • No extension of STPI
  • Subsidy delivery in cash to oil & fertilizer companies
  • Slum Free India at the earliest
  • Easy access for funds to marine and cold storage facility
  • Repayment Extension For Farmer to June 2010
  • Aims to make FDI policy user-friendly

  

DIRECT TAX:

·         Direct tax code will be implemented from April 1, 2011

·         I-T dept to notify simple two-page Saral 2 (Only 2 Pages) form for individuals for current year

  • Direct Tax proposals to give loss of Rs 26,000 Crores; Indirect Tax to yield gain of Rs 45,000 Crores
  • No capital gains tax on conversion of a business entity into Limited Liability Partnership
  • R&D allocation increased 200%
  • Businesses up to Rs 60 Lacs and professionals up to Rs 15 Lacs to be exempted from auditing obligations
  • Interest on delay deposit of TDS increased to 18% pa
  • SOPS on Real estate housing project has extended
  • Two star hotels anywhere in India are provided Investments based incentives

PERSONAL TAXATION:

 

            -Income up to Rs 1.60 Lacs:                    NIL tax

-Income between Rs 1.60-5 Lacs:             Tax at 10%

-Income between 5-8 Lacs:                     Tax at 20%

-Income above Rs 8 Lacs:                       Tax at 30%

 

  • Minimum Tax Exemption limit for Senior Citizens and Women remains unchanged; i.e. Rs. 2,40,000 and Rs. 1,90,000 respectively.
  • Additional Rs 20,000 deduction made available for investment in Infrastructure Bonds. This is above Rs. 1,00,000 80C exemption

 

Change in Corporate Tax

 

  • Minimum Alternate Tax up from 15% to 18% on book profits
  • Reduced Surcharge of 10% on domestic companies to 7.5%
  • Professionals with Gross receipts exceeding Rs 15 Lacs need accounts audit

INDIRECT TAX:

·         Service Tax rates unchanged at 10%, to bring more services under service tax

  • Duties on smoking and non-smoking tobacco products up
  • Peak excise duty hiked from 8% to 10%
  • Peak customs duty remains unchanged at 10%
  • Rs 1 per liter excise on petrol, diesel
  • Full excise cut on electric cars
  • Partial rollback of excise duty on cement
  • Agricultural seeds exempt from Service Tax
  • News agencies exempt from Service Tax
  • Service tax to GDP ratio is 1%
  • Customs duty on gold, platinum imports raised to Rs 300 from Rs 200
  • Import duty on silver raised to Rs 1500 per kg
  • 5% import duty on crude petroleum restored
  • Duty free import of samples now allowed upto Rs 3 Lacs
  • No penalty on excise dues paid voluntarily before SCN issued
  • Excise duty on cement & cement clinker & precious metals increased
  • Service tax refund simplified
  • Setting up of cold storages exempted from service tax

 

 

Budget which speaks in figures:

 

  • National Social Security Fund created for workers in unorganized sector with allocation of Rs.1,000 crores
  • Rs.4,500 crores allocated for ministry of social justice and empowerment, a hike of 80 percent
  • Rs.2,600 crores allocated for ministry of minorities affairs
  • Rs.1,900 crores for Unique Identification Authority of India
  • Rs.147,344 crores allocated for Defence
  • 2,000 youth to be recruited in central paramilitary forces
  • Allocation on primary education raised from Rs.26,800 crores to Rs.31,300 crores
  • Rs.66,100 crores allocated for rural development in 2010-11; Rs.40,100 crore for National Rural Employment Scheme; RS.48,000 crores for Bharat Nirman
  • Rs.1,270 crores allocated for Rajiv Awas Yojana for slum dwellers, up from Rs.150 crores, an increase of 700 percent with the aim of creating a slum free India.
  • Forty-six percent of plan allocations in 2010-11 will be for infrastructure development
  • Allocation for new and renewable energy sector increased 61 percent from Rs.620 crores to Rs.1,000 crores in 2010-11
  • Rs.200 crores to be provided in 2010-11 for climate-resilient agricultural initiative
  • Rs 500 Crores for Clean Ganga Mission
  • Rs 66, 100 Crores for rural development in FY10-11
  • Allocation for school education up from Rs 26, 800 crores to Rs 31, 036 Crores
  • Rs 22, 300 Crores allocated for Health Ministry
  • Coal regulatory authority proposed
  • Rs 300 Crores for Rashtriya Krishi Vikas Yojana
  • Bank farm loan target: Rs 3.75 Lacs crores

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New Norms for Mutual Funds Valuation

by Deepak Sharma 4. February 2010 14:28

Preface

 

The Debt and Money Market Instruments in various portfolios of mutual funds are governed by the norms prescribed by the SEBI. As per the norms all instruments having residual maturity over 180 days are valued on the traded prices of the instruments on a particular valuation day and the Mutual funds to follow pricing matrix provided by the rating agencies for the instruments not traded. The instruments less than 180 days residual maturity are valued at the traded prices or on the amortisation basis.

 

The Change

 

*              SEBI has modified provisions related to valuation of Debt and money market instruments in a circular dated February 02, 2010  has reduced the residual maturity period to 91 days from earlier 180 days for the valuation purpose to ensure that portfolios of Mutual Funds reflect the current market scenario.

 

*              In case of securities purchased by mutual funds do not fall within the current framework of the valuation of securities then such mutual fund shall report immediately to AMFI regarding the same. Further, at the time of investment AMCs shall ensure that the total exposure in such securities does not exceed 5% of the total AUM of the scheme. AMFI has been advised that the valuation agencies should ensure that the valuation of such securities gets covered in the valuation framework within six weeks from the date of receipt of such intimation from mutual fund. In the interim period, till AMFI makes provisions to cover such securities in the valuation of securities framework, the mutual funds shall value such securities using their proprietary model which has been approved by their independent trustees and the statutory auditors.

 

*              The aforesaid valuation would be applicable with effect from July 1, 2010.


 

The possible impact

 

*              Clear segmentation between Liquid Funds and Ultra Short term Funds (largely known as Liquid Plus) by risk profile,

*              The daily NAV of Ultra Short-term funds will be now will be reflecting the current interest rate scenario in its valuation and can be more volatile relatively,

*              The mark to market portion will increase in the portfolios of Ultra Short-term funds or the existing Ultra-short term funds may reduce their average maturities from 90-130 days to 50-100 days to protect the NAV from market Volatility,

*              Ultra Short-Term Schemes may introduce some exist loads for investors for some days to prevent the price volatility affect in their portfolios,

*              More transparency in valuation of debt portfolios,

Now, investor has to look at more closely into the Ultra-Short term schemes portfolios as per their risk appetite,

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