Budget 2013 Top 10 Impacts
Finance Minister P. Chidambaram’s eighth Budget (Budget 2013) was not a big bang affair, but analysts said he has quietly ensured that India’s finances are in shape and the economy gets back on track even as the government gets into an election mode. The markets may have been unimpressed by the Budget, but the aam aadmi walked out with a better deal.
Here are 10 announcements in the Union Budget that impacts you:
1. High earners:
The biggest impact will be felt by the 42,800 Indians who earn over Rs. 1 crore. Mr Chidambaram has imposed a 10 per cent surcharge on their income, which means they will have to shell out at least an additional Rs. 3 lakh in taxes. However, those earning up to Rs. 5 lakh per annum will get Rs. 2,000 by way of tax credit.
2. Home buyers:
Mr Chidambaram has proposed an additional deduction of Rs. 1 lakh paid towards interest on a home loan (besides the Rs. 1.5 lakh deduction now available) for first-time home buyers. The value of the house should not exceed Rs. 40 lakh and the loan should be restricted to Rs. 25 lakh. The loan should be taken in fiscal 2013-14. This will help save Rs. 30,000. At the same time, he has proposed a 1 per cent tax deducted at source (TDS) on high-value transactions of over Rs. 50 lakh on immovable properties.
3. Car buyers:
Sports utility vehicles (SUVs) will be costlier as Mr Chidambaram has proposed a hike in the duty paid by the manufacturers of the vehicles to 30 per cent from 27 per cent. He has also proposed an increase in the import tax on luxury vehicles to 100 per cent from 75 per cent, and on motorcycles with an engine capacity above 800cc to 75 per cent from 60 per cent.
Cigarettes will be costlier as the excise duty has been hiked by 18 per cent. Mobile phones will also be costlier as handsets with a price tag of over Rs. 2,000 will attract 6 per cent excise duty. Eating out will be costlier after Mr Chidambaram announced a service tax on AC restaurants.
In a significant move for women empowerment, Mr Chidambaram has proposed to set up the country’s first women’s bank as a public sector bank. For this, he has set aside Rs. 1,000 crore as initial capital. The bank will predominantly employ women and will lend mostly to women and women-run businesses.
6. Jewellery buyers:
Good news for gold buyers in the Budget as the finance minister held the gold import duty unchanged, defying industry expectations that the world’s biggest bullion buyer would increase rates to curb demand and rein in a record current account deficit. The Budget also raised to Rs. 1 lakh the maximum value of jewellery that may be brought home by Indian women who have lived abroad for more than a year, or who are changing residence, from Rs. 20,000 earlier.
7. Retail investors:
Mr Chidambaram plans to issue inflation-indexed bonds to attract investors. The finance minister has also proposed liberalising the Rajiv Gandhi Equity Savings Scheme to enable first time investors to park funds in mutual funds and listed shares and extended tax benefits to three successive years. Also, the limit for investors wanting to invest in RGESS has been raised to Rs. 12 lakh from Rs. 10 lakh earlier.
The Budget has proposed to reduce securities transaction tax on equity futures to 0.01 per cent from 0.017 per cent currently. However, it has imposed a transaction tax on futures contracts of non-agricultural commodities like gold, silver and base metals. The proposal is to levy a commodities transaction tax (CTT) of 0.01 per cent of the price of every trade. Futures trade in non-agricultural commodities accounted for nearly 88 per cent of the total turnover on Indian commodity exchanges in 2011-12, with MCX cornering much of the share.
Mr Chidambaram has proposed to increase the surcharge to 10 per cent on domestic companies with annual income of more than Rs. 10 crore. For foreign companies, who pay the higher rate of corporate tax, the surcharge will increase from 2 per cent to 5 per cent.
10. Foreign investors:
The government did not announce a cut in the withholding tax imposed on income from government and corporate debt investments and deducted at source that can now reach up to 20 per cent. The government has also created confusion with a proposal stating a tax residency certificate “shall be necessary but not a sufficient condition” to take advantage of double taxation avoidance agreements. Tax authorities had previously considered this tax residency as enough proof to allow foreign investors registered in countries with these treaties to avoid paying taxes in India.