Budget 2010-11 expectations: Firstcall

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Taxes:

The common men and the corporates are looking for decrease in taxes. The Finance Minister is likely to augment exemption limit of individual taxes to Rs 2 lakh from Rs 1.60 lakh for salaried people. Exemption limit for women is expected to be increased from Rs 1.90 lakh to Rs 3.5 lakh and for senior citizen from Rs 2 lakh to 4 lakh. However, taxes levied on the perks availed by income earners are expected to be restructured on higher level. This arrangement may satisfy junior employees and senior citizens. But, it may not go well with the people belonging to higher position.

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Corporate Tax:

A reduction of 30% is expected in the corporate tax. The expectation is found in line with the introduction of Direct Tax Code (DTC) suggesting a 25% rate. The individual rate was lowered by 30% previous year also.

Capital Gains Tax:

As far as the 2010 Budget expectation in the area of capital gain tax is concerned, finance minister is unlikely to bring any reform in this category of tax. It is predicted to be included under the Direct Tax Code, to be implemented from April 2011.

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Re-fixing of Tax Slabs:

As mentioned earlier, the tax slab for women is expected to be revised to Rs 3.5 lakh and senior citizens to Rs 4 lakh. However, second and third slabs of tax would see significant change. The second tax slab is expected to be augmented from the existing Rs 3 lakh to 1 million to be taxed at 20%. The third slab is likely to be increased from Rs 5 lakh to Rs 25 lakh to be taxed at the rate of 30% .These revisions would act in favor of the reputed advocates as well as the doctors.

Gratuity Limit:

The Budget 2010 expectations show that significant revision in gratuity limit is also considered. The gratuity limit of the income class is expected to be raised to Rs 8 lakh in the budget 2010 from Rs 3.5 lakh. Both the upper as well as middle level executives will benefit a lot, if this revision is brought into effect.

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Employees are paid gratuities in the government as well as corporate organizations during the time of their retirement. The amount that is dished out as gratuity falls outside the tax regime. If the gratuity limit is enhanced, the employees will surely benefit from it.

Self Assessment Slab:

The self assessment slab for businessmen and professionals is Rs 40 lakh at present. According to expectations, the slab may be revised to Rs 80 lakh to lower the burden felt by the business people and professionals.

Foreign investment:

Foreign investment reform is likely to usher in more funds to the financial services industry. There is also expectation that there will be at least a small amount of foreign investment in print media. Further, education department is also expected to have foreign investments that shall enable Indian students to avail the international education at affordable costs in the country itself. Students' safety while studying abroad is another major concern that will be kept under consideration during the framing of the Union Budget. These foreign investments can prove to highly helpful to India in preventing the outflow of foreign exchange for abroad studies and also in bringing funds to the land.

IT Sector

The National Association of Software and Services Companies (NASSCOM) has submitted its Budget 2010-11 wish list to the government, where in it has recommended that the software technology parks of India (STPI) initiatives should be at par with special economic zone (SEZ) schemes.

The premier trade body of the IT-BPO companies in India has also suggested that there should be higher tax incentives for the Indian business process outsourcing (BPO) sector. Further it has asked the government should introduce a legal cell for litigation cases.

The outlay for higher education, NASSCOM has said must be upped minimum four fold. It also sees a need to fast-track public-private partnership (PPP) projects for quicker implementation.

Capital Markets:

The Sensex has almost doubled from its lows in March last year, factoring in economic growth projections of even 8-9% over the next couple of years. A section of the market thinks the stimulus should stay for some more time for the economic growth to rebound to their estimates. But the government is reluctant to oblige investors or the industry on this matter on concerns that it could result in overheating of certain pockets of the economy and further deterioration of its finances.

• The government should reduce securities transaction tax (STT) by at least half in the upcoming Budget.
• The exiting STT rates have almost driven away arbitrageurs and have affected the liquidity in the market.
• There is a need to keep corporate taxes stable to ensure that the revival is not killed mid-way.The government should scrap dividend distribution tax (DDT) levied on companies.
• There also needs to be a clear-cut definition for long-term capital gains versus business income emanating from stock market transactions.

Health:

The budget 2010-11 proposes to increase the allocation to health sector by 21 per cent over the previous year. National Rural Health Mission (NRHM), a key initiative by the government with the aim to achieve the goal of health for all.

Stimulus:

Budget 2010 speculations suggest that it is not the right time for the government to roll back stimulus packages, despite the fact that GDP growth of the nation in the Q2 (July – September) of the current fiscal stood at 7.9%. However, we believe that government would withdraw few of the subsidies from the market. The oil companies were aided with the stimulus package to check loss.

Government did not allow the Oil companies to raise product costs of kerosene and diesel, which would have forced the common men to pay more. As high prices of diesel and petrol would bear adverse effect on the transport rates of food products, the stimulus packages are expected to continue in the oil industry. However, partial withdrawal of the stimulus aid can be expected in this sector to tackle the situation of increasing fiscal deficit. Nevertheless, stimulus packages from engineering as well as export sectors are expected to be rolled back.

Agriculture Sector:

According to Budget 2010 expectations, the agriculture sector would be the highlight of the session. This sector is likely to receive enormous boost from the government. Finance minister's invitation to the farmers for the pre-budget meet is held to be the main reason behind such speculation.

Infrastructure and Social Sector:

Infrastructure industry is also expected to be the focus of the budget results of 2010. We believe that development in this sector would account for massive growth in GDP. However, it is unlikely to ease monetary policy to better infrastructure. Interest rate cannot be reduced as well.

Food processing industry:

Budget 2010-11 is projected to have substantial impact on the Food processing business. The accelerated growth in the prices of fruits and vegetables can be prevented by controlling the food wastage. The impending budget is expected to resolve this issue besides dealing with the issue of heavy excise duty on branded items.

Other Sectors:

While taking into account the Budget 2010 expectations of various sectors, it was found that the garment industry is looking for considerable cut in interest rates in its exports segment. The garment exporters also want the ministry to remove all the confusion faced in the case of excise as well as custom duties. The sector wants major commercial as well as fiscal relief. Similarly, the tea industry is expecting to get an allocation of more than Rs 130 crore, which was granted in the fiscal year 2009-10.

Outlook:

The economy is recovering from a downturn induced by a global recession that forced the government to cut taxes and increase spending to boost demand. The Reserve Bank of India is keeping policy rates at record low levels to encourage economic activity. With tight fiscal situation, the assurance from finance ministry comes after considering the spiralling inflation and the need for more funds for fulfilling UPA's promise in sectors like rural development, education and agriculture. The UPA dispensation is also under pressure to ensure funds for new schemes, which have been announced but are yet to be implemented, like food for all and Right to Education. So for 2010-2011 Indian budget, a common man can hope for Considerable reduction in the prices of food items. Food processing sector will witness a predominant growth.