X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
10 key measures of Budget 2003-04 - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Feb 28, 2003

    10 key measures of Budget 2003-04

    Personal Taxes: It turned out to be an encouraging budget for individuals. For one, standard deduction has been hiked from a maximum of 25,000 per annum to 30,000 p.a. (40% of salary, whichever is less). The FM removed the security surcharge of 5% for individuals earning below 8.5 lacs. However, if you are earning above 8.5 lacs per annum then you pay double, i.e. 10% as security surcharge. In effect, good for the middle class pockets. The FM has also retained leave travel concessions (LTC). Also, education expenses upto Rs 12,000 per child per annum will now be exempt under Section 88 (for 2 children). We hope that this encourages both parents and children to pursue higher studies. Also, tax sops on housing loans have been left untouched.

    Interest rates: The FM cut administered interest rates on small savings and PPF by 1% effective March 1, 2003. In effect, he’s brought these rates closer to the real interest rates, thus reducing the threat of a bloated pension liability going forward. In the long term, its good for individuals, as its saves the PPF pool and improves the chances of the government keeping its PPF commitments. Added to that, exemption under section 80L (for interest and dividend related income) has been increased from Rs 9,000 p.a. to 15,000 p.a.

    Senior Citizen focus:  The FM has tried to soften the blow of cut in interest rates on PPF and other fixed income securities by announcing tax exemptions for senior citizens and pensioners. The FM has now guaranteed the return on senior citizens pension policy at 9% per annum. The LIC will be reimbursed for any shortfall due to this measure. In a way, it’s a social security net for senior citizens. Also, from now on, senior citizen income has effectively become tax-free upto 183,000 per annum. Added to that, VRS consideration to employees will be tax exempt upto Rs 5 lacs.

    Equity investments:  Come FY04, and equity investors will no longer pay the 10% dividend tax. Also, even mutual funds will be exempt from the 12.5% dividend distribution tax for 1 year. Also, equity investments bought from March 1, 2003 and sold after one year, will no longer be taxed under capital gains. All these measures are likely to serve as a boost for both equity markets and investors. However, companies will have to shell out 12.5% as dividend distribution tax.

    Excise duty:  The 3-tier excise structure i.e. 8%, 16% and 24% (except for petroleum products and tobacco) was largely left unchanged. In line with this, excise duty on capital goods like A/C’s, passenger cars and tyres has been reduced from 32% to 24% in line with the aforesaid excise structure. So, one can hope that A/C’s and cars will become more affordable now. Excise duty on PFY was also reduced from 34% to 20%. However, excise on cement was hiked to Rs 400 per tonne (from Rs 350 per tonne earlier).

    Import duty:  Custom duty rationalising continues. The peak rate of custom duties was reduced from 30% to 25%.

    Benefits to banks:  The foreign direct investment (FDI) limits for private and MNC banks has been upped from 49% to 74%. This is a big thumbs up to foreign participation in India’s banking sector and we could see a spate of consolidation moves in the coming years due to this. Also, in a bid to improve the asset quality of banks the government has decided to buyback high cost interest loan portfolio of banks. This will enable banks to realise one time gains on their G-Sec portfolio and these gains can then be used for higher NPA provisioning.

    Connection moves:  The FM focused on development plans for roads, ports, railways and airports. Consequently, the FM announced outlays for modernisation of Delhi and Mumbai airports, modernisation of JNPT Mumbai port and the Cochi port. For development of roads, he outlined 48 new road projects, over and above the existing PM’s road project. 25% of these roads will be cemented. The FM also announced a ‘Rail Vikas Yojana’ for development of railways network with a plan outlay envisaged at Rs 80 bn. The total infrastructure outlay of on all these measures is pegged at Rs 600 bn. The focus on the 4 major links to transportation is welcome and a big step towards a ‘connected’ India.

    Power and telecom focus:  For development of the power infrastructure, the FM announced that mega power status would now be given to all power projects meeting the existing norms. A new electricity bill has already been mooted with broad guidelines to reduce government interference. Also, for telecom the FDI limit has been hiked from 49% to 74%.

    Agriculture benefits:  The loans to agriculture and to small-scale sector will now be available at maximum 2% above prime lending rate (PLR). This should encourage investments in both the segments and improve credit off take. Also, the FM addressed the fertiliser subsidy issue by hiking the support prices.

    All in all, Budget 2003-04, was as expected a ‘populist’ budget with an eye on the next elections. The cut in PPF rate, senior citizen benefits are good moves. However, the continued focus on infrastructure development is very encouraging. We can only hope that the FM can achieve all that he promised, keeping his 5.6% budget deficit target.

     

     

    Equitymaster requests your view! Post a comment on "10 key measures of Budget 2003-04". Click here!

      
     

    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    MARKET STATS