Union budget 2009-10

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Citizens’ View of Union Budget 2009-10
Union Budget
2009-10

The “Budget” simplified
J.Karthikeyan
Director – Research & Consulting
Finerva 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

Union budget 2009-10

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