Scribd
Upload
83 views21 pages

Budget 2006-07

The budget document provides details of the Indian government's revenues, expenditures and economic growth projections for the 2006-07 fiscal year. It allocates funds to various sectors including a Rs. 500 crore contingency fund, extends the service tax rate to 12% and applies it to 15 new categories of services. Personal and corporate income tax rates remain unchanged while customs duties are reduced on some products. Infrastructure spending is increased substantially and tax benefits are provided to financial institutions merging with banks. The budget aims to continue high economic growth while controlling the fiscal deficit.

Uploaded by

Saurabh G
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
83 views21 pages

Budget 2006-07

The budget document provides details of the Indian government's revenues, expenditures and economic growth projections for the 2006-07 fiscal year. It allocates funds to various sectors including a Rs. 500 crore contingency fund, extends the service tax rate to 12% and applies it to 15 new categories of services. Personal and corporate income tax rates remain unchanged while customs duties are reduced on some products. Infrastructure spending is increased substantially and tax benefits are provided to financial institutions merging with banks. The budget aims to continue high economic growth while controlling the fiscal deficit.

Uploaded by

Saurabh G
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 21

BUDGET 2006-07

February 28, 2006


Annual
Financial
Statement

Consolidated Contingency Public


Fund Fund Account
Revenues raised,
money borrowed Rs. 500-crore fund Government merely
receipts from loans disposal of the President acts as a banker
ECONOMIC INDICATORS
 Growth rate at 8.1%, one of the highest
growth rates globally.
 Agriculture(2.3%), industrial (9%)

service sectors(9.8%)
Saving rate 29.1% of GDP.
 Inflation (4.02%) - restricted
 Stock market rewarded lifetime

high return of 40%


 FI flows revenue - increased.
GDP Composition Undergoing a Drastic
Change
PERSONAL INCOME TAX

Current tax slabs:


 Upto Rs. 1 lac – NIL
 1 lac to 1.5 lacs – 10%
 1.5 lacs to 2.5 lacs – 20%
 Above 2.5 lacs – 30% (10% surcharge on
income above 10 lacs).
 2% education cess chargeable.

Proposals:
 No change proposed in these slabs
Service Tax

 Service tax increased from 10% to 12%

 Service tax extended to 15 new categories


of services (Registrar & share transfer
services, ATM operations, recovery agent,
advertisement space other than print
media, business support services, etc)
Customs Duty
 Peak rate - non-agr. products reduced
from 15% to 12.5%
 Additional duty of 4% extended to all
imported goods
 Additional Customs duty is modvatable
against excise on manufactured goods
 duty-various food processing items - NIL
 duty on ready-to-eat packaged food and
instant food mixes reduced -16% to 8%
 Tax incentive on housing loans:
Tax incentive - housing loans - propelled
incremental credit offtake - mortgage
loans segment
mortgage loan to GDP ratio- 3% from the
erstwhile 2%
 Higher risk weightage:

The risk weightage on mortgage loans has


been increased to 125%, - additional
burden - capital adequacy ratio of HFCs
Tax benefits to FIs

Amendments in the tax laws - offer tax


breaks to FIs merging with banks (with
retrospective effect). This was beneficial to
FIs that have got converted to banks
(IDBI and the like).
 Conversion into banking entity:
 The NBFCs - track record & net worth over Rs
2 bn - convert into a commercial bank.
 Enable the FIs to access low cost deposits
and improve their margins.

90 day NPA norm:


 HFC’s have shifted to the 90 day norm of
accounting for NPAs - brought their risk
appraisal system –as per banks.
Issues Pre Budget Expectations Post Budget Impact

Allow the Amendmen Positive for


Issue of Banks not
issuance t Sector, for
preference allowed to
of perpetual to the state-owned
share capital issue preference BRA tabled banks.
under the
shares before the
BRA, 1949
Parliament

Exemption Include Positive for


for savings Currently
savings bank FD’s with SBI, PNB,
deposit u/s 80 not part of deposits for maturity of Bank of India
investments
exemption u/s more than (BoI) and
80 five years Canara Bank
allowed
S/10(23G) Negative for
income from Exempt
No change Exemption IDFC
investment in expected withdrawn (earnings to
infrastructure drop by
company 15%), IDBI
and ICICI
INFRASTRUCTURE

 Larger budgetary support (54% increase) to


BHARAT NIRMAN programme.

 Golden Quadrilateral project and planned 1000 Km


of access controlled Expressways

 Provision of Rs.1,500 cr telecom industry & financial


support to infrastructure for cellular telephony
in rural areas.
Cascading Effect
 More demand for steel, cement industry

 Golden quadrilateral - boost demand –


Commercial vehicle

 Higher disposable income in rural India – boost


consumption of consumer products
COAL MINISTRY UPSET-
DERESERVATION PLAN

 De-block coal reserves of 20 bn tonnes in


favour of power projects after reserving
the blocks for CIL upto 2012

 Coal production - taken up from 350 to


782 million tonne by 2025
BUDGET CRITICS
 Silent on further reforms in more difficult
areas - FDI, PSU disinvestment, cutting
subsidies, labour market reforms
 Pharmaceuticals and healthcare sector.
 Nothing in the Budget to promote R&D
despite specific demand from the industry
FINANCIAL SECTOR

 Net capital support to banking sector-


Rs. 22,808 cr
 Capital Market:
 Limit on FII inv. in Govt sec increased to
$2 bn from $1.75 bn;
 In corporate debt - $1.5 bn from $0.5 bn
 Ceiling on aggregate investment by MF’s
in OSI’s - raised to $2 bn from $1 bn
Sensex zooms past 10500
 Benchmark indices surged nearly 2%-highest
ever closing levels
 Gains in auto, cement, metal, and tech shares.
 The budget’s focus on rural economy, infra &
power sector - controlling the fiscal deficit,
pegged at 3.8 per cent of GDP.
 BSE Sensex ended at 10565.47, up 195.23 points
 Nifty ended at 3123.10, up 48.40 points
 Maruti Udyog and TaMo –
new 52-week highs.
THANK YOU!!!

You might also like