BUDGET 2013 HIGHLIGHTS

1. DIRECT TAX Bits

-No change in Income-Tax slabs

- Relief of Rs 2,000 for tax payers in tax bracket of Rs 2-5 lakh

- 10%  surcharge on rich men with taxable income of over Rs 1 crore....(However 

the surcharge is just for this year!  Also it seems there are only 42,800 guys in 

India who pay Tax above 1crore!

-New taxes (Direct+Indirect) to collect Rs 18,000 crore for government

2. INDIRECT TAXES

-No change in basic customs duty; normal excise and service tax rates unchanged at 12 per cent

-Voluntary Compliance Encouragement Scheme launched for recovering service tax dues.... PC said... if people pay tax they haven't for the last 5 years... their penalty, interest, fine will be maaf!

-Service Tax Negative list now includes vocational courses k institutes and Testing activities for agriculture k services

-Tobacco products, SUVs (except the ones used as Taxi) and mobile phones (above Rs.2000) to cost more. Also luxury cars, bikes and yatchs pe Excise Duty has been raised (Damn... pehle hi fancy cars kitne kum dikhte hai Mumbai mein)

-Commodity transaction tax of 0.01% proposed on non-agri futures traded on commodity courses

-Securities Transaction Tax brought down to 0.01%

-Handmade carpets and textile floor coverings of coir or jute exempted from excise duty

3. The SCHEMES

-  Direct Benefit Transfer scheme to be rolled out in the entire country during tenure of UPA government 

-Income limit under Rajiv Gandhi Equity Savings Scheme raised to 12 lakh from Rs 10 lakh

-Rashtriya Swasthya Bima Yojana benefit extended to rickshaw pullers, auto and taxi drivers, mine workers, rag pickers, sanitation workers among others  

-The Pradhan Mantri Gram Sadak Yojana PART 2 to be launched in AP, Haryana, Karnataka, Maharashtra, Punjab and Rajasthan

-TUF (Technology Upgradation Fund) Scheme for textile sector to continue in 12th Plan with an investment of Rs 1.51 lakh crore

-Rashtriya Madhyamik Shikshan Abhiyan to be alloted 25.6% more investment over the current RE

4. First home loan of up to Rs 25 lakh to get extra interest deduction of up to Rs 1 lakh!  

5. Duty free limit of gold import increased to Rs 50,000 for male passengers and Rs 1 lakh for female passengers 

6. India's FIRST women's bank to be set up by October 2013!

'Nirbhaya Fund' of Rs 1,000 crore to empower women and provide safety in the 

wake of Delhi gang-rape incident 

7.SOME NUMBERS

-Fiscal deficit for 2013-14 pegged at 4.8 % of GDP and 5.2 % in 2012-13.

-Revenue Deficit is expected to be 3.3% in 2013-14, for 2012-13 it was 3.9%

-Plan expenditure pegged at Rs 5,55,322 crore (33%) and non-Plan at Rs 11,09,975 crore

-Rs 14,000 crore earmarked for capital infusion in public sector banks in 2013-14

8. INSTITUTIONS

-There is gonna be reconstruction and development of the NALANDA University

-Grant of 100 crore to the Aligarh University, Banaras Hindu University, the Tata Institute of Social Sciences (Guwahati) and Indian National Trust of Art and Cultural Heritage each

-A National Institute for Sports Coaches will come up at PATIALA

-The National Institute of Biotic Stress Management for addressing plant protection issues --> Raipur, Chhatisgarh

- The Indian Institute of Agriculture Bio-technology will be estb. in Ranchi, Jharkhand

- National Skill Development Corporation to set the curriculum and standards for training in different skills. Any institution or body may offer training courses. At the end of the training, the candidate will be required to take a test conducted by authorised certification bodies. Upon passing the test, the candidate will be given a certificate as well as a monetary reward of an average of Rs.10,000 per candidate. 

9. Refinance capacity of SIDBI (Small Industries Development Bank Of India) raised to Rs 10,000 crore

- LIC Insurance Offices in every town with a population above 10,000. Micro-Insurance and Group Insurance to be provided 

- Farm credit target set at Rs 7 lakh crore as against Rs 5.75 lakh crore in 2012-13

-Concessional 6% interest on loans to weavers

10. MISCELLANEOUS 

 *To improve power supply in the Leh-Kargil region and connect the Ladakh region to the northern grid, the Government will construct a transmission system from Srinagar to Leh

 *Two new major ports will be established in Sagar, West Bengal and in Andhra Pradesh to add 100 million tonnes of capacity

 *The Lakhipur – Bhanga stretch of river Barak in Assam will be the sixth national waterway

 *Private FM radio services to 294 more cities. About 839 new FM radio channels will be auctioned in 2013-14 and, after the auction, all   cities having a population of more than 100,000 will be covered by private FM radio services 

 *Rs 9,000 crore earmarked as first installment of balance of CST compensation to states

 *Defense allocation at Rs 203,672 crore, education Rs 65,867 crore and Rural Development Ministry Rs 80,194 cr

 *Rs 10,000 crore earmarked for National Food Security towards incremental cost

 *A pilot programme on Nutri-Farms for introducing new crop varieties that are rich in micro-nutrients such as iron-rich bajra, protein-rich maize and zinc-rich wheat

"Chidambaram says India to become USD 5 trillion economy, and among top 

five  in the world by 2025"

Commodities Transaction Tax.....Good ya Bad ..v go inside the world of Commodities Market !!!

Budget aane ko hai...nd they r thinking of introducing this CTT .....sab iska oppose kar rhe hai..letzz see kyn kr rahe hai ..aur kya hota hai yeah CTT !!!!

What is CTT tax ?

The Basics

CTT is a tax levied on exchange-traded commodity derivatives in India on the lines of the Securities Transaction Tax or STT — a tax imposed on the purchase and sale of securities and their derivatives traded on stock exchanges in the local market.

source - The Hindu

CTT was proposed in Union Budget 2008-09 but was withdrawn later following the recommendations of the Prime Minister’s Economic Advisory Council. The recommendations came after a debate in the media and demands from certain groups on imposing transaction taxes on commodity derivatives.

Why the  Opposition ?

India's five commodity futures exchange houses are strongly against the idea of a transaction tax on commodity trades similar to that on stock and equity derivatives trade. According to experts, CTT will sound the death knell for the organised commodity futures market as the cost of trading will shoot up eight-folds.

Commodities exchange traders and their fellow mates from the stock markets have locked horns on whether a Commodity Transaction Tax (CTT), on the lines of the Securities Transaction Tax (STT), is desirable or not. 

Stock market operators, brokers and officials want the STT withdrawn as they feel it is an unfair levy. 

Is CTT necessary?

Straight answer, no! It is a fact that the transaction tax is not an equitable tax. 

By its very nature, tax should be collected only on profits or gains from business activity. However, transaction tax is imposed on the transaction value irrespective of whether such deal ends up in profit or loss. 

For example, if you sell a share in the stock market and incur a loss, you still have to part with a portion of the proceeds of the sale to the government, which is not desirable by many a traders and institutions alike.

Industry representatives have also warned that any transaction tax on commodity derivatives will shift the declining business to either illegal 'dabba' trading or overseas commodity exchanges.

"Imposition of Transaction Tax on commodity derivatives transactions will boost the illegal 'dabba trading' markets without any gain to the exchequer," said the commodity exchanges in their representation to the government.

"The government considered the advice of PMEAC, as it concerns lakhs of jobs and livelihood in the entire commodities market ecosystem and took a considered view", they said, adding it would be retrograde to impose it at a time when the commodities market is struggling to arrest decline in trading volume.

Rejecting the contention that securities transaction tax (STT) was shifting trade to commodity exchanges, they said, while equity trade provides for capital appreciation, commodity exchanges help stakeholders to hedge risk against adverse price movements. Both cannot be compared, they added.

With such ‘crowding out’ of short-term volumes, there can be losses in incomes and concomitant tax collections, which might even outweigh the expected revenues from CTT.

Again, such reduction in market liquidity will increase the bid-ask spread, a major component of transaction costs.

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Some Questions which must b answered ?

Two issues arise. 

The first is what about farm products? Should they be taxed? 

Today, vibrant trade takes place in the oil complex and to a limited extent in chana and some spices. The trading community is well dispersed across traders, brokers, corporates, etc. There is also a suspicion about the role played by speculators in pushing up prices in the case of pulses and cereals earlier that prompted bans and the magnification of prices when there are shortages in narrow commodities such as spices. We have had an expert committee that looked into the linkage between futures trading and spot prices which did find any such relation.

But, this raises an interesting question. If futures trading does not influence spot prices, then what exactly do we mean by price discovery? Therefore, there is an inherent contradiction in such logic because if prices are discovered and efficient, then they should logically impact spot prices. And if they do not, then what could be the purpose of such prices? One may recollect that the main reason from bringing back futures trading was to enable benefits to go to farmers through better prices. Therefore, the basis of futures trading hangs precariously when this rationale has to be balanced with causes for inflation and the quality of trading.

The second is what happens to hedgers in this market? 

Farmers do not trade, because they have little access. The non-passage of the FCRA means that their participation remains a part of the wish-list of FMC, which has little power to change the rules of the game. Further, there are hedgers such as jewellers and corporates who deal with steel, aluminum, edible oils, etc. Such a tax puts a burden on them. The solution is really to have exemptions for hedgers who already have separate hedge limits with the exchanges as per the rules laid down by the FMC. Therefore, they should get refunds or exemptions. The UID Aadhaar scheme should help to keep farmers out of the ambit of such a tax as and when they come in.

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Why is Government is Desperate to bring 

it ?

1.  The first is that the government requires money, and any amount is welcome as the effort is to look at all options. 
2. The second is that if the stock markets are subject to the securities transaction tax (STT), why not the commodity market? 
3. The third is that the market is now mature, or has reached whatever level of maturity that is possible given the constraints of absence of movement in policy, and is almost a decade old. In fact, as a corollary, once done, the government can also start looking at the forex derivative market.

Moral of the Story 

The CTT issue is contentious and there are an equal number of examples of success 

and failure of such taxes in markets, be it securities or commodities. The same holds 

for countries with and without such taxes. But the reality is that the government is 

trying to tap all possible sources of taxation and this market looks juicy enough—

especially the non-farm segment. The fact that there is a lot of concern on gold 

imports could be a factor hastening the introduction of this tax. Hence, while the 

market would be better off in case CTT is held back for some more time, it may be 

inevitable.

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Addititional Reading !!!

What is a FUTURES MARKET/ 

WAYDA BAZAAR ?

An auction market in which participants buy and sell commodity/future contracts for delivery on a specified future date. Trading is carried on through open yelling and hand signals in a trading pit.

When you make an agreement with someone that you’ll buy gold/potato or anything in x quantity at y price on z date in future. This is future contract.

Waydaa Bazaar is the place where brokers hang out to make and trade such future and options* contracts.

*Options means, with such agreement, you’ve the right to buy that 1000 kg potato at the pre-determined price Rs.150,000 in future, but not the obligation to buy it.

Means you can refuse to buy it later on, if you’re not in mood or find someone who is selling the same thing at lower prices! But in that case you loose the premium money paid on that options contract.

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What is FMC and FCRA ?

FMC stands for Forwards Market Commission ....it functions exactly the same way in commodity markets (forwards market ) as SEBI functions in case of Securities market i.e. Regulating. (but does not have strong powers like SEBI as )

FCRA stands for Future Contracts Regulation Act which is yet to b passed in Parliament ..empowers with greater powers to the FMC !!

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What is 

Dabba 

trading  ?

Dabba means box and a dabba operator, in stock market terminology is the one who indulges in dabba trading. His office is like any other broker’s office having terminals linked to the stock exchange showing market rates of stocks. However, the difference is that the investor’s trades do not get executed on the stock exchange system but in the dabba operator’s books only. A dabba operator acts as a principal to all the trades and not as an agent of the client. He is a counter party to the trades, whereas, he should be the Clearing Corporation who guarantees trades on the BOLT/NEAT system. This kind of operation, where trade is kept within the books of the operator is called “dabba” in the popular market terms.

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What is Crowding Out and Crowding 

In effect ?

Crowding Out 

An economic concept where increased public sector spending replaces, or drives down, private sector spending. 

For example, the higher taxes required for government to fund social welfare programs leaves less discretionary income for individuals and businesses to make charitable donations. Further, when government funds certain activities there is little incentive for businesses and individuals to spend on those same things. Another example is increased government spending on Medicaid, which has been linked to decreased availability of private health insurance.

Crowding In 

An economic principle in which private investment increases as debt-financed government spending increases. This is caused by government spending boosting the demand for goods, which in turn increases private demand for new output sources, such as factories. This is in contrast to crowding out

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Who is a Hedger , Speculator and 

Arbitrageur ?

 

Hedgers :

They are generally the commercial producers and consumers of the traded commodities. They participate in the market to manage their spot market price risk. Commodity prices are volatile and their participation in the futures market allows them to hedge or protect themselves against the risk of losses from fluctuating prices. For e.g. a copper smelter will hedge by selling copper futures, since it is exposed to the risk of falling copper prices.

 

Speculators :

They are traders who speculate on the direction of the futures prices with the intention of making money. Thus, for the speculators, trading in commodity futures is an investment option. Most Speculators do not prefer to make or accept deliveries of the actual commodities; rather they liquidate their positions before the expiry date of the contract.

 

Arbitrageurs :

They are traders who buy and sell to make money on price differentials across different markets. Arbitrage involves simultaneous sale and purchase of the same commodities in different markets. Arbitrage keeps the prices in different markets in line with each other. Usually such transactions are risk free.

SARAL banged into the space 794 km (PSLV - C20)

Indo-French satellite 'SARAL'

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**aimed at oceanographic studies,

**The PSLV-C20 rocket is expected to deliver its main luggage — the 407-kg SARAL (Satellite with ARGOS and ALTIKA) and six other foreign satellites 794 km above the earth.

**The ISRO-built SARAL --> 410-kg satellite with payloads -- Argos and Altika -- from French space agency CNES

***for study of ocean parameters towards enhancing the understanding of the ocean state conditions which are otherwise not covered by the in-situ measurements

**Altimeter (Altika) would help study the sea surface heights while Argos payload is a satellite-based data collection platform.

**The successful launch of the satellites will take ISRO’s tally of launching foreign satellites to 35.

**Besides SARAL, two micro-satellites UniBRITE and BRITE from Austria

**AAUSAT3 from Denmark and STRaND from United Kingdom 

**as also one micro-satellite (NEOSSat) and one mini-satellite (SAPPHIRE) from Canada were launched by PSLV, which yet again proved its versatality recording its 22nd succesful flight in a row in its 23 missions of which the first one had failed.

Argos and Altika