Union budget 2009-10

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Citizens’ View of Union Budget 2009-10

Union Budget 2009-10



The “Budget” simplifiedJ.KarthikeyanDirector – Research & ConsultingFinerva Financial Solutions Pvt Ltd



The Menu!

• Jargon, De-Jargonised• Fiscal Policy• Key Features of Budget

2009-10• Effects on the Indian

Economy: A Perspective



• The budget of a government is a summary or

plan of the intended revenues and

expenditures of that government.

• Annual report of the Government’s

performance



Components of Budget

• Revenue receipts

• Capital receipts

• Revenue expenditure

• Capital expenditure



Revenue Receipts

• Receipts: From taxes and other sources

• Taxes: Income tax, Corporate Tax,

Indirect taxes etc

• Interest on lending, dividends from

PSU’s, fees etc



Revenue Expenditure

• Day to day running of the

government

• “anything that does not result

in creation of assets.



Capital Budget

• Capital receipts: Loans, T-bills, Divestment

income, Provident Fund

• Capital Expenses: On assets. Land, Machinery,

Loans to states



Taxes



Taxes

Meaning : Non quid pro quo transfer of private income to public coffers by means of taxes.

1. Direct taxes- Corporate tax, Div. Distribution Tax, Personal Income Tax, Fringe Benefit taxes, Banking Cash Transaction Tax

2. Indirect taxes- Central Sales Tax, Customs, Service Tax, excise duty



Plan and Non Plan

• Plan: Discussion between Ministries and

Planning Commission

• Non-Plan: Comes from Interest

payments, subsidies, salaries, social

services, defense spending ,etc.,



Fiscal Policy-Meaning

The word fisc means ‘state treasury’ and fiscal policy

Refers to policy concerning the use of ‘state treasury’ or the

govt. finances to achieve the macroeconomic goals.

“any decision to change the level, composition or timing of

govt. expenditure or to vary the burden ,the structure or

frequency of the tax payment is fiscal policy.” G.K.

Shaw



Fiscal Policy And

Macroeconomic Goals

• Economic Growth: By creating

conditions for increase in

savings & investment.

• Employment: By encouraging

the use of labour-absorbing

technology



Contd..

• Stabilization: fight with depressionary trends and booming (overheating) indications in the economy

• Economic Equality: By reducing the income and wealth gaps between the rich and poor.

• Price stability: employed to contain inflationary and deflationary tendencies in the economy.



Budgetary surplus and deficit

• “A budget is a detailed plan of

operations for some specific

future period”

• Keeping budget balanced (R=E)

or deficit (R<E) or surplus (R>E)

as a matter of policy is itself a

fiscal instrument.



Numbers 2009-10• Fiscal deficit 6.5% of GDP• Expenditure: Rs 10 Lakh Crore• Plan Expenditure- up by 34%• Non Plan Outlay- up by 37 %• Tax receipts: 6.41 lakh crore• Fiscal Deficit – 35.9% of the

expenditure.



Effects on the Economy

• Interest rates• PSU Disinvestment• Debt• Industry



Industry wise affects



Citizens’ Angle on Budget 2009-10



Personal Finance Today

• Predominantly Tax Planning• Investment in Section 80C Instruments

and taking a Housing Loan• Goal Based Planning hardly heard of• Budget awaited for tax benefits



Personal Finance - Scope

•Goal Term –Long Term–Short Term–Mid Term



Contd..

• Cash Flow– Investment– Debt– Income Tax– Asset Management– Pension– Estate Planning



Budget Angle for Students

• Student Loans Interest get tax benefit under Section 80E for all types of higher education.



Budget Angle for Salaried Class

• Marginal Benefit from Higher Slab for Taxation– Rs.10,000 increase in Base Slab (Rs.15,000 for

senior citizens > 65 years of age)• Benefit to those earning >Rs.10 lakhs from

surcharge removal• New Pension Scheme to remain in the EET

regime. But tax benefits on its income and transactions are a plus.




• Wealth Tax limit raised to Rs.30 lakhs from Rs.15 lakhs

• Section 80C Instruments remain unchanged– ULIPs and ELSS for the youth most beneficial – Stay away from Housing Loan for tax benefit

purpose; as it creates negative cash flow. • Retired Defence personnel get benefits under

One Rank One Pension Scheme.




• Fringe Benefit Tax removed. Better and Meaningful perks can be expected.



Budget Angle for Small Business & Entrepreneurs

• Presumptive Tax Scheme for turnover <Rs.40 lakhs.– Income @8%– Exempt from maintaining books of accounts– Tax Pay-Out only at the time of Tax Returns Filing



The Take Aways

• Budget alone should not influence Personal Finance Decisions

• Goal Based Planning and Implementation required

• Maximise Benefits from Tax Breaks; But don’t Break Yourselves Doing It

• Wealth Creation ≠ Tax Planning



Technology

Union budget 2009-10