Budget 2009 @ a Glance

Wednesday, July 8, 2009 , Posted by Sarvesh at Wednesday, July 08, 2009

Soon after Finance Minister Pranab Mukherjee presented the Union Budget 2009, the first negative sign came from the market and Sensex went southward.However, there is silver line for other sectors and already they are showing the Budget 2009 impact.

Cars and TVs reduce prices: In the Budget 2009 presented on Monday Pranab had announced the cuts in excise and custom duties. Already automobile companies like Mitsubishi, Ford, Toyota et al have announced the full benefit to customers.

The Budget 2009 had directed a cut of Rs 5,000 in excise duty on all passenger vehicles with engines over 2000cc that means SUVs get major benefit as 70% of sales in passenger vehicles comes from the small car segment. Mitsubishi’s Outlander, Pajero and Montero, have cut Rs 6000 while Ford’s Endeavour, Toyota’s Camry and Innova, General Motors’ Tavera and vehicles from Mahindra & Mahindra too followed suit.

Consumer companies like Samsung Electronics and LG who are major players in LCD TVs too have said they would pass on the benefit to the customer. Samsung Electronics announced a cut Rs 1,200 on 32 inch monitors, Rs 2000 on 40-inch monitors and Rs 3500 on 46-inch, according to reliable sources. However Samsung spokesman promised further cut from August. So did LG who have less than 30% market share on LCDs. And both auto makers as well as consumer companies are confident to make the best of time till September.

No hike in home loan tax exemption: Despite plea from urban development ministry, Pranab chose it to ignore coolly by not increasing the income tax ceiling on home loan interest payments. "It has been requested that the deduction on account of interest payment available under section 24 of the Income-tax Act should be increased to the extent of full payment paid in housing loan taken, for all categories of assesses, at least in respect of one house," acknowledged Minister of State for Finance S. S. Palanimanickam. The ceiling of Rs 1.5 lakh is applicable only in case of self-occupied property and in the case of rented property, the entire interest paid on home loan is already allowed as a deduction.

Employers may rejig salary: The removal of the Fringe Benefit Tax (FBT) proposed in the Budget is being regarded as a welcome move for companies and may also provide them scope to restructure employee remuneration, say Human Resources experts.

"The abolishment of the FBT is a welcome move from employers. It means that perquisites will be taxed in the hands of employees at the marginal rate of tax applicable to them," observed R. Sankar of PricewaterhouseCoopers India.

Many analysts opined that the withdrawal of FBT will benefit employees rather than the employees. The companies will reintroduce superannuation plans as the third retirement benefit for their employees, said one.

"There are possibilities that companies may look at increasing salaries to an optimal level," another expert was quoted as saying in a news agency.

HR experts said that the removal of 10 per cent surcharge is also a good move and would be seen as beneficial for the salaried class, particularly against the prevailing backdrop of salary freezes and reductions.

Another expert said that the cut in FBT is also a loss for the exchequer: Employers use this opportunity to add this as an incentive for the employees and thus means less salary!.

Not just LCDs got a excise duty cut, Pranab also showered benefits to gems and jewellery and gave bonanza to the upper middle class by doing away 10 per cent surcharge and doubling the threshold on wealth tax of 1 per cent to Rs 30 lakh. Also do not forget pharmaceutical companies.

Items like biscuits, cakes, pressure cookers, vacuum and gas-filled bulbs of retail selling price of not more than Rs 20 per bulb, certain varieties of paper, paperboard and related articles were put under the exempted items list.

Some say Union General Budget as an expenditure budget as Pranab enhanced allocations for National Rural Employment Guarantee Act, National Rural Health Mission and other social sector schemes like Rajiv Awas Yojana and Pradhan Mantri Adarsh Gram Yojana for villages which have a Scheduled Caste majority.

The budget also focused on housing for urban poor, relief for farmers who paid loans on time, hike in allocation for Bharat Nirman and a new scheme for 1,000 villages with Scheduled Caste majority.

Disinvestment: Pranab was expected to mention something for disinvestment in the loss making public sector units who are are bleeding the exchequer. At least 100 such PSUs combined losses over Rs 10000 crores. PSUs like National Aviation Co of India Ltd, that operates Air India is expected to register a loss Rs.5,000 crore in 2008-09, others include NTPC (National Thermal Power Corporation), BHEL (Bharat Heavy Electricals Ltd).

Pharma firms smile: "Reduction in customs and central excise duties for selected drugs will benefit patients," promised a top offical pharma company. Even though the excise duty of 4% has been retained, custom duty has been lowered on some vital life saving drugs. With reduction in custom duty on certain selected life saving drugs, the prices of 9 particular drugs used for the treatment of fatal ailments like cancer, HIV, Hepatitis B and Arthritis are to be cut soon. The prices of two vital heart devices are also expected to come down.

Interest rates to rise: Amidst all these happenings, one sector - bankers - foresee rising interest rates in six months. They say that the days of softer interest rates were over. Since the government would be forced to pack in a dramatic increase in borrowing in the next three months, pressing the Reserve Bank of India (RBI) to buy more bonds from the market, crowding out borrowing by the private sector. On July 11, Finance Minister Pranab Mukherjee will address the Central Board of Directors of the Reserve Bank and is expected to discuss the government’s borrowing programme and other issues. Bankers are also waiting anxiously for the first quarter monetary policy review scheduled for July 28, where the central bank is expected to announce its strategy to ensure that government borrowings would not affect corporate fund raising plans and interest rates.

(Source: MSN News)

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