Union Budget 2016

Four themes that could drive the Union Budget exercise…

As the market prepares for another Union Budget on February 29th, the question is what can the economy and the markets expect? This will be Jaitley’s third consecutive budget and hence expectations will be high. While specifics may be hard to predict, we believe that there will be four broad themes that could form the theme of the Budget. Continue reading

Minimum Alternate Tax (MAT) – What the Budget did and what it left out…

Minimum Alternate Tax (MAT) was introduced by Mr. P Chidambaram almost 2 decades ago to impute taxes based on book profits. Effectively, MAT was never an additional impost on companies. It only prevented companies from postponing their entire tax liability. When MAT was first introduced it was fixed at 7.5% of book profits. Over the last two decades; with MAT hikes and surcharge, the effective MAT has gone up to 18.5%. The Union Budget has issued some clarifications pertaining to MAT, although many critical areas were left untouched. Continue reading

Why are rating agencies sceptical about the Union Budget?

That is a question that is on the top of everyone’s mind. How will the rating agencies react to the Union Budget? Will they consider a favourable rating upgrade post the budget? These may be early days but the initial response to the Union Budget was that the rating agencies were disappointed. Most rating agencies would have required clarity on 3 fronts viz. Growth & infrastructure, fiscal responsibility and global vulnerability. One can argue that at 7.5%, India is the fastest growing large economy. In fact, by 2016 India’s growth rate will surpass China also. But, there other statistics that are revealing! In terms of GDP per capita, India ranks below nations like Bolivia, Bhutan, Georgia, Swaziland, Angola and Paraguay. If you look at literacy within BRICS, India is still at 74%, while other BRICS nations are above 95%. That is a long way to go… Continue reading

Post Budget – Something good and not-so-good for individuals

One of the major confusions prevailing pertained to the tax treatment when mutual fund schemes were consolidated. This is common practice. Mutual funds tend to consolidate multiple schemes when a particular story has outlived its purpose. This created a tax point for customer. This anomaly has been rectified which is positive. At the same time, the deduction of TDS on bank interest has been made far more stringent. That will surely put retail investors through a lot of hassles. Continue reading

Post Budget – Getting the Disinvestment Maths right…

The Union Budget has put out a disinvestment target of approximately $11.5 billion for the fiscal year 2015-16. That is roughly Rs.69,500/- crore through the disinvestment route. Of course, this target is going to be broken up into; Rs.28,500 crore through the strategic divestment route and Rs.41,000/- crore through the minority divestment route. The reason this target is humongous is that in the last 24 years (1991-2015), the total disinvestment was about $29 billion. In a nutshell, Arun Jaitley is planning to raise 40% of the amount India raised in the last 24 years through divestment, in a single year. That is how ambitious his target is. Continue reading

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