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Page 1: Budget 2015

FINANCE DESKDELIVERING VALUES

Contact us: [email protected]

Page 2: Budget 2015

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BUDGET AT GLANCEA lot has happened since the new government has taken charge and understandably, expectations are getting built-up in the run-up to the budget. The reform measures undertaken so far are nothing less than transformational. One has to only look at the gamut of sectors touched by the government initiatives to get an idea of the potential cascading impact the steps can have on our economy.

Page 3: Budget 2015

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FACESAVER AT CLOSE

Page 4: Budget 2015

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Volatility kept the market company on budget day as investors frowned upon the absence of "big-bang" measures but gave a token thumbs-up to the proposed cut in corporate tax and the deferral of the dreaded General Anti-Avoidance Rules (GAAR).

The upshot was the BSE sensex ended the day with a gain of 141.38 points after a roller-coaster ride - the first rise on a budget day in four years.The benchmark index opened on a promising note at 29411.33 and made steady gains as the finance minister talked about implementing the goods and services tax from April 2016.

Page 5: Budget 2015

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The stocks then softened as the budget speech spoke of several social initiatives and the fiscal deficit road map.

The markets whooped as the finance minister announced a staggered cut in corporate taxes to 25 per cent although the fine print suggested that the effective gains need not be as high as initially expected.

The deferment of the GAAR by two years took the 30-share index to the day's peak of 29560.32 - a gain of 340 points. However, the joy was short-lived and stocks came back to negative territory as Jaitley finished his budget speech.

Page 6: Budget 2015

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Although it saw an abrupt drop of more than 200 points at one stage, the index managed to recover the ground lost since this morning.

The reason behind the drop during intra-day trades was the hike in excise duties on cigarettes. The shares of the cigarette major ITC, which have a huge weightage in the sensex, tanked by 8.27 per cent after the budget raised excise duties by 25 per cent on cigarettes up to 65mm in length.

Page 7: Budget 2015

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MARKET REFORMSPropose to merge commodities regulator with

SEBITo bring a new bankruptcy codeTo set up public debt management agencyProposes to introduce a public contract

resolution of disputes billTo establish an autonomous bank board

bureau to improve management of public sector banks

Page 8: Budget 2015

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POLICY REFORMSTo enact a comprehensive new law on black moneyPropose to create a universal social security system

for all IndiansTo launch a national skills mission soon to enhance

employability of rural youthTo raise visa-on-arrival facility to 150 countries from

43Allocates 346.99 billion rupees for rural employment

guarantee scheme Raises threshold for application of transfer pricing

rules to 200 million rupees from current 50 million rupees

Page 9: Budget 2015

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MARKET REACTIONBSE index gains 0.48 percent; NSE index up

0.65 percentITC slumps after budget hikes excise duty on

cigarette

Page 10: Budget 2015

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STOCKS NEGATIVELY IMPACTEDMedia companies: Companies in the media

space could be affected by the change in service tax rules. Now, the entertainment sector would be brought under the service tax net. Earlier, these services were exempted from service tax. The tax would push up prices of services like theatre tickets or cable television. As a result, it could discourage customers and affect demand.

Page 11: Budget 2015

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Metal and mining stocks: The Budget announced two measures that could directly impact metals and mining companies, the increase in clean energy cess on coal to Rs 200/tonne from Rs 100/tonne, and the hike in basic custom duty on metallurgical coke to 5% from 2.5% earlier. Coal and metallurgical coke are key raw materials. The increase in clean energy cess on coal could also impact power companies like NTPC, Tata Power and CESC, which depend on coal to produce energy. However, the impact would be limited.

Page 12: Budget 2015

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PSU banks: The Budget announced that the government will infuse Rs 7940 crore in PSU banks in the next fiscal. “However, this is a meager amount in comparison with the humongous capital requirements by the PSU banks over next few years to meet BASEL III norms,” a report by Kotak Securities said. This is why the Budget has negative impact on the banks mentioned above

Page 13: Budget 2015

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Tobacco Companies: The government usually reduces taxes for essential goods and increases tax burden on goods which are not essential and/or harmful. One such product which sees high taxation is cigarettes. The Budget further increased tax burden by hiking excise duty in certain cigarette products by 25% and 15%. This would make your cigarettes costlier from April 2015. Any rise in price negatively impacts demand and thus corporate profits.

Page 14: Budget 2015

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Consumer durables: The consumer durables company is in the plastic product-making business. The government wants to deter plastic consumption to reduce its harmful effects on the environment. For this reason, the Budget increased excise duty from 12% to 18% on plastic products (polymers). This would make plastic products costly.

Page 15: Budget 2015

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BORROWINGGross market borrowing seen at 6 trillion

rupeesNet market borrowing seen at 4.56 trillion

rupees

Page 16: Budget 2015

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TAXATIONTo abolish wealth taxReplaces wealth tax with additional 2 pct

surcharge on super richProposes to cut to 25 percent corporate tax

over next four yearsCorporate tax of 30 percent is uncompetitiveNet gain from tax proposals seen at 150.68

billion rupees

Page 17: Budget 2015

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Extends withholding tax concession on foreign debt purchases by two years

Expects to implement goods and services tax by April 2016

To reduce custom duty on 22 itemsBasic custom duty on commercial vehicle

doubled to 20 percentProposes to increase service tax rate and

education cess to 14 percent from 12.36 percent

Page 18: Budget 2015

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PERSONAL INCOME TAXNo revision of income tax bracketsLimit of deduction of health insurance

premium increased to 25,000 rupees from 15,000 rupees; limit increased to 30,000 rupees from 20,000 rupees for the elderly

People aged above 80 and not covered by health insurance to be allowed deduction of 30,000 rupees for medical expenses

Additional deduction of 25,000 rupees for the disabled

Page 19: Budget 2015

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Limit on deduction for contributions to pension fund and new pension scheme increased to 150,000 rupees from 100,000 rupees

Additional deduction of 50,000 rupees for contribution to new pension scheme under section 80CCD

Monthly transport allowance exemption doubled to 1,600 rupees

Page 20: Budget 2015

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Plans to introduce direct tax regime that is internationally competitive on rates without exemptions

Exemptions for individual tax payers to continue

To enact tough penalties for tax evasion in new bill

Tax dept to clarify indirect transfer of assets and dividend paid by foreign firms

Page 21: Budget 2015

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INFRASTRUCTUREInvestment in infrastructure will go up by

700 bln rupees in 2015/16 over last yearPlans to set up national investment

infrastructure fundProposes tax-free infrastructure bonds for

projects in roads, rail and irrigation projectsProposes 5 "ultra mega" power projects for

4,000 MW each

Page 22: Budget 2015

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Second unit of Kudankulam nuclear power station to be commissioned

Ports in public sector will be encouraged to corporatize under Companies Act

Page 23: Budget 2015

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INVESTMENTGovernment to provide 79.4 billion rupees

capital infusion to state-run banksPropose to do away with different types of

foreign investment caps and replace them with composite caps

To allow foreign investment in alternative investment funds

Public investment needed to catalyse investment

Page 24: Budget 2015

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SUBSIDIESFood subsidy seen at 1.24 trillion rupees Fertiliser subsidy seen at 729.69 billion

rupeesFuel subsidy seen at 300 billion rupeesMajor subsidies estimated at 2.27 trillion

rupees

Page 25: Budget 2015

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CIGRATTESRaises excise duty on cigarettes by 25

percent for cigarettes of length not exceeding 65 mm

Raises excise duty by 15 percent for cigarettes of other lengths

Page 26: Budget 2015

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GOLDTo launch gold deposit accounts and

sovereign bondImport duty stays at 10 percent; disappoints

jewelersTo work on Indian-made gold coin to cut

imports

Page 27: Budget 2015

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INFLATIONExpects consumer inflation to remain close to

5 percent by March, opening room for more monetary policy easing

Monetary policy framework agreement with the RBI clearly states objective of keeping inflation below 6 percent

One of the achievements of my government has been to conquer inflation. This decline in my view represents a structural shift

Page 28: Budget 2015

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Thank You