Posts tagged ‘FDI’

India’s Budget 2013-2014

The Union Budget was presented on the 28th February,2013.earlier the Railway Budget was also presented a day or two back.The hikes in freight charges by the Railways will be negative for the Industry.Inflation will also rise. Coal India may hike Coal prices too.

Chidamabram does not say anything about Blackmoney,though Switzerland has announced that it would provide the data on the Bank Clients from February,2013 onwards.

Under-recoveries claimed by the Oil marketing Cos are IMAGINARY and had to be FULLY stopped.Only partial reduction is announced,taking ONLY AUTO FUELS.Kerosene and LPG had also to be considered.This is very great mistake encouraging SCAMS.

WTO has to be informed about the :-

i)LOW per capita income of Indians

ii)Their actual low pays

iii) their actula petty perks

iv)Low Standard of living.

of Indians compared to international Standards,hence subsidy where deserving cannot be stopped.”LOCAL PAYS,PERKS and INTERNATIONAL PRICES”cannot be allowed.

And the Indan and Foreign Cos enjoy heap laboiur,land,water etc,n India.

The SUBSIDY ,the so called STIMULI,started to the rich Oligarchs started in 2008,has not been stopped.This is a very big mistake and anti-national policy.Fiscal Deficit and inflation are HIGH.the wealth of Indians has been ERODED massively by this wrong policy from 2008.


I.Budget Text


Norhing ,in the Budget for 93% of Indian workers;-On ContactTrade Unions are also of the same opinion.Nothing for the UNORGANIZED Sector.


Budget 2013-2014
Budget expenditure is Rs 16,65,297 crore and Plan expenditure Rs 5,55, 322 crore
Plan expenditure in 12th Five Year Plan revised to Rs 14,30,825 crore or 96 per cent of budgeted expenditure.
Current account deficit continues to be high due to excessive dependence on oil, coal and gold imports and slowdown in exports
IV..Food Bil Rs 1,02,500 Crores
FII tax issues and new surcharge on domestic corporates left investors disappointed.
Banking stocks led by State Bank of India suffered heavy losses on concerns a liquidity in the banking system after the government set its target for gross market borrowing at Rs. 6.29 trillion this fiscal was less than the market expectations.
The rupee weakened sharply on Thursday, retreating from a three-week high hit earlier, after the 2013/14 budget increased spending despite keeping fiscal deficit targets in place, while measures to attract foreign flows were seen as limited.
the government sought to increase taxes on certain individuals and companies.

Those tax proposals hit stocks, and the government also disappointed some investors by not announcing a cut in debt withholding tax.

Govt proposes levying a withholding tax of 20% on profits distributed by unlisted firms to shareholders through buyback of shares
Remya Nair First Published: Thu, Feb 28 2013. 04 15 PM IST
New Delhi: In a setback to foreign investors who buy shares of privately held companies and use the buyback route for repatriation of funds, finance minister P. Chidambaram proposed levying a withholding tax of 20% on profits distributed by unlisted companies to shareholders through buyback of shares.
“Some tax avoidance arrangements have come to notice, and I propose to plug the loopholes. Some unlisted companies have avoided dividend distribution tax by arrangements involving buyback of shares. I propose to levy a final withholding tax at the rate of 20% on profits distributed by unlisted companies to shareholders through buyback of shares,” Chidambaram said in his budget speech.
This will impact foreign investors, including private equity investors, who had invested from countries with whom India has a beneficial tax treaty such as Singapore and Mauritius and were using buyback as a way to repatriate surplus from Indian businesses without paying taxes. Buyback was treated as capital gains tax in the foreign country and hence shareholders could get away with paying zero or a very low rate of tax.
But with the reclassification of buybacks as dividends, there will be a significant tax on investors since now companies will have to pay tax akin to a dividend distribution tax at 20%.
“This amendment will discourage adoption of selective buybacks as a means of distributing surplus to foreign investors. Also, since the tax is on the distributing company, it will impact the ability of the shareholder to claim credit in the home country,” said Prerna Mehndiratta, a director at BMR Advisors
Withholding Tax Definition | Investopedia

Income tax withheld from employees’ wages and paid directly to the government by the employer.2. A tax levied on income (interest and dividends) from …

Total Expenditure slightly less than Rs 17 lakh Crores
Chidambaram said he has a confidence to be more ambitious in the coming year in pegging the total expenditure at Rs 16,65,297 crore and Plan expenditure of Rs 5,55,322 crore. Non-Plan expenditure is estimated at Rs 11,09,975 crore. – See more at:
Farm credit target set at Rs 7 lakh crore as against Rs 5.75 lakh crore in 2012-13 –
Defence allocation has been stepped up by 14 per cent over the revised expenditure in the current year to Rs 2,03,672 crore in the next Fisacl.
Commodity transaction tax of 0.01 per cent proposed on non-agri futures traded on commodity bourses.
In a bid to revive manufacturing, the Finance Minister announced the grant of investment allowance at the rate of 15 per cent to manufacturing companies that invest more than Rs 100 crore in plant and machinery between April 2013 and March 2015. This will be over and above currently allowable depreciation.
That is for 2 years

Under-recoveries reduced by Rs 31880 Crores
1.Oil Subsidy
The oil subsidies, which is given to the state-run oil marketing firms such as Indian Oil Corp, BPCL and HPCL, for selling diesel, domestic LPG to households and kerosene through the PDS system, below cost, is estimated lower at Rs 65,000 crore for next fiscal against the revised estimate (RE) of Rs 96,880 crore in 2013-13 fiscal.
“Decrease is mainly due to less requirement for compensation to oil companies for under recoveries,” said the budget document.
The food subsidy given to run the public distribution system is estimated to rise to Rs 90,000 crore next fiscal from the RE of Rs 85,000 crore in 2012-13.

REACTION ON: Markets MC 28/2/2013
The budget proposal to allow Insurance and Pension companies to directly trade in debt segment is a welcome move. This will allow institutional participation in the exchange traded bond market.

The Reserve Bank today welcomed the General Budget, saying it has laid the foundation for lowering fiscal and current account deficits, apart from supporting both domestic and foreign investments.

March 19. “As you know, the mid-term monetary policy review is next month. So, we will reflect on that and discuss it next month.”
Chidambaram said that the economy was likely to grow below 5 percent during second half (October-April) of the current fiscal[2012 2013].

The GDP reading for the October-December quarter has come in at 4.5 percent, and given the sharp reduction in plan expenditure for FY13, the current quarter is also likely to see anemic growth.

Bank shares, especially public sectors ones, were battered as market viewed the higher agriculture credit target and continuation of interest rate subsidy on short term crop loans and extending it to private sector banks as well, as negatives.
Income tax slabs:
Tax Rate Existing Tax Slabs 2012-13 Proposed in Budget 2013-14
Nil Upto INR 2,00,000 (INR 2,50,000 for senior citizens) Upto INR 2,00,000 (INR 2, 50,000 for senior citizens).
10.00% INR 2,00,000 to INR 5,00,000 INR 2,00,000 to INR 5,00,000. However, tax credit of Rs 2,000 would be provided.
20.00% INR 5,00,000 to INR 10,00,000 INR 5,00,000 to INR 10,00,000
30.00% Above INR 10,00,000 Above INR 10,00,000
* Education cess of 3% would remain same in FY 2013-14.
RBI may cut rates and hene the indces may rise from the present levels

Equitymaster opinion.

Higher tax on royalties, technical fees to hit MNCsMNCs not covered by tax treaties will have to shell out more on royalties
The Finance Minister’s proposal to increase the rate of tax on payments by way of royalty and fees for technical services to non-residents from 10 per cent to 25 per cent has not gone down well with the multinationals operating in India as they will now have to pay more tax while receiving royalties from their Indian subsidiaries.
The Finance Minister’s proposal to increase the rate of tax on payments by way of royalty and fees for technical services to non-residents from 10 per cent to 25 per cent has not gone down well with the multinationals operating in India as they will now have to pay more tax while receiving royalties from their Indian subsidiaries.
Tax advisors say the increase in the domestic tax rate on royalties and fees for technical services from 10 to 25% is unnecessary and goes beyond the rates proposed in the direct tax code. Whilst this will not have a very significant impact on investors from most OECD countries where treaty rates have already been reduced to 10%, service providers from major technology and investment partners like the US and the UK will face a hit as their tax bill will go up 15 per cent from the present rate of 10 per cent.

The domestic withholding tax rate in case of payment of royalty would have significant impact in relation to payments made for acquisition of content, transponder hire charges, etc. especially where the tax treaty benefit is not available.

“Though the Finance Minister has outlined the need to provide a stable regime for foreign investors, the clarity that was sought on many aspects on the law relating to indirect transfers is missing. This would impact M&A as this is a big roadblock for global restructuring involving Indian assets,” says N C Hegde, Partner, Deloitte Haskins & Sells.

Payment of royalty and technical fees has been a bone of contention between minority shareholders and MNCs in the recent past. Shares of many multinationals witnessed sharp fall after the board decided to increase royalties and technical fees from India. The independent directors of ACC and Ambuja Cements owned by Holcim, in fact, asked both companies to reduce technical fees by half to Holcim and seek minority shareholders consent.

Analysts say the amendments to Section 115A of the income tax act may also increase the costs for the Indian companies. Very often the foreign companies may pass the tax cost to the Indian Companies. Though the increased tax rate has been prescribed under the provisions of section 115A the Indian companies while making remittances are required to withhold tax at the rate of 25% consequent to this amendment.

“However, if the foreign companies are able to obtain treaty benefits then the lower rate prescribed under the treaty law which is generally 15% will be applicable. In the event foreign companies are not able to obtain TRCs or in the event of making payments to the foreign companies who are not residents of treaty based countries, the enhanced rate of 25% will apply,” says K R Sekar, leader of international tax practice of Deloitte.

Multinationals operating in India said the increased tax on royalty will be paid by parent and not impact the local company. “The tax will be paid by Suzuki as it has to be paid by receiver,” Maruti Chairman R.C. Bhargava said. Maruti is owned by Suzuki of Japan and pays a significant amount of its net sales as royalty to Suzuki.

But investor associations are cheering the increased tax in the hands of MNC parent but wanted more clarity on what basis the multinationals are taking out money from their Indian subsidiaries. “We wanted more clarity on what is the basis for charging royalty from the Indian company. Take for example, many Indian companies have developed a brand in India, for India but it’s their foreign parent which is charging a hefty royalty from their Indian subsidiary. The government should make it mandatory that the majority of all minority shareholders should clear the proposal to pay any royalty to foreign companies,” says Shriram S, founder and MD of InGovern Research Services.
MNCs tax-avoidance addressed
Fertilizer  subsidy reduced to Rs 65334 Crores

Suresh Surana
RSM Astute Consulting Group

Section 115BBD of Income Tax Act (the Act) provides for taxation of gross dividends received by an Indian company from a specified foreign company (in which it has shareholding of 26% or more) @ 15% (plus surcharge of 5% and education cess of 3%) if such dividend is included in the total income for the Financial Year 2012-13 i.e. Assessment Year 2013-14. This provision was introduced as an incentive for attracting repatriation of income earned by residents from investments made abroad.

The Finance Bill, 2013 proposes to extend the concessional tax rate of 15% (plus surcharge of 10% and education cess of 3%) on dividend received from specified foreign company for one more year i.e. for the financial year ending 31 March 2014. Further, it is to be noted that any dividend distributed by the Indian company in the same year, to the extent of dividends received from the foreign company, shall not be subject to Dividend Distribution Tax.

This is very positive step for improving inflow of funds in India. However, taxability of such foreign dividend under Minimum Alternate Tax (MAT) may partially negate the benefit of concessional tax
Rs 25,000 Crires additional Fuel Subsidy

Aviation Sector:-
Equity Boost for Air India


Sensex +212; 18081(2/8/2010)

Trouble in Telengana and Manipur.Read here
Credit default swaps may be allowed in corporate bonds soon
FDI in defence can have a lock in of 3 years.
Trucks in southern states to go off road from 2/8/2010.
E-trade in Gold bars,in NSEL,begins on August 2nd,2010.
Coal India IPO,likely, between October 18th and 21st 2010.
fii Rs Crores D/M/Y: +728;+728;+12963;DII -173,-173,+5709
bdi  1977; BELOW 200 DMA of 3119
gold 1182 $/Oz
silver 591 $/kg
Dr COPPER  3.3750 $/kg
us dollar index 80.92
Re v Dollar 45.81
crude  81.37 $/bbl   Gulf Of Mexico storm.
Reuters CRB Index   276.85
Sensex +212;      18081
VIX  :
india 17.99;-4.95;-5.02%
usa 22.01;-1.49;-6.34%