The street takes stock, Dalal st. visibly upbeat

FIIs: Allowed to give non-cash security than cash margins.
IMPACT: Should boost FII flows as the cash margins had to be provided before trades.

MF: Investments in equity-linked saving schemes look up
IMPACT: Savers can put money in MF units instead of saving schemes alone.

BSE Market Capitalisation: Up Rs 23,050 crore to Rs 16,26,302 crore

“Increased STT on all transactions has been handled well with a marginal increase, although STT on mutual fund unit transactions is unwarranted as it would tantamount to double taxation. There has been disappointment that the benefit of the capital gains tax reduction has not been extended to other form of transactions such as buybacks (tender route), open offers, spot delivery transactions and offers for sale through offer documents, such as IPOs, ADRs and GDRs”
– Nimesh Kampani, Chairman, JM Morgan Stanley

“The biggest positive of the Budget is there is no negative. I would give him (finance minister) seven marks out of 10. Minor changes in STT will hardly have any impact. Treating speculative income as business income and giving level playing field in derivatives transaction is a welcome step. However, it has to be seen that how the shortfall on the revenue side will be met.”
– Shitin Desai, Vice-Chairman, DSP Merrill Lynch

Not a dream…, but India Inc is not complaining

Corporate Tax
As widely expected, corporate tax rates (including surcharge) were cut to 30% and though the FM added 10% surcharge, India Inc is not complaining.
IMPACT: Companies had expected some sort of reduction in rates, and are happy with the broad signal.

Fringe Benefit Tax
Corporates will to pay now 30% tax on fringe benefits to employees.
IMPACT:Costs will go up as firms will have to first define the benefits enjoyed collectively by the employers and then pay taxes at 30%.

Tax on Withdrawals
Firms will have to pay a 0.1% tax on cash withdrawals > Rs 10,000.
IMPACT:Firms across the board who withdraw high value cash for expenditure like salaries are upset that they now have to pay tax.

Depreciation
Depreciation rate on general machinery and plants reduced from 25% to 15%. The rate on new plants and machinery increased to 20% from current 15%.
IMPACT: While a lower rate will have a negative impact on firms, corporate India has digested it along with lower corporate tax rates.

Tax Credit For MAT
Tax credit will be allowed for the 7.5% MAT paid in an assesment year after 2006-07.
IMPACT: Good for firms whjo can now avail fo tax credit for up to five years Services No change in the service tax rate. Firms below Rs 4 lakh turnover exempted.

Services that businesses employ exempt from tax
IMPACT: Corporates will have to pay less for services outsourced outside.

Exemptions
The terminal dates on exemptions for R&D, biotech, pharma, telecom etc have been extended by two years in some cases.
IMPACT: This will help biotech, and pharma companies to invest more in in-house R&D.

Customs
The government to cut peak customs duty to 15% from 20%
IMPACT: In line with the broad trend to bring customs down to Asian levels.

EXPERT-SPEAK

What this budget has done is to ensure that the growth rates are not affected adversely. Further, the underlying principle seems to be to bet on the economic buoyancy for revenue generation. The budget has a strong focus on infrastructure investments, along with rural development and investments in the social sector.
– Ishaat Hussain, Finance Director, Tata Sons

The cut in corporate tax is a very good move which will spur industrial growth. Corporates will invest more in new projects and create more jobs. This was a dream budget expected from the finance minister and Manmohan Singh.
– Venugopal Dhoot, Chairman, Videocon group