Union Budget 2013-14 : Investment Environment & Tax Aspects

Mr. Chander Sawhney
Vice President
+9810557353
chandeer@indiacp.com
Hon’ble Finance Minister Shri. P. Chidambaram on 28.02.2013 presented the Union Budget 2013 and mentioned that slowdown in Indian economy has to be seen in the context of slowing global economic growth. He admitted that the country’s present situation and growth is indeed challenging but India has potential growth rate of 8 percent and getting back to this is possible as has been proven in the past.

The central theme now is “higher growth leading to inclusive and sustainable development” with emphasis on women, children, minorities, backward classes and disabled persons. Impetus has also been given to create opportunities for youth for skill development. Health, Education, Rural, Manufacturing, Infrastructure and affordable housing have been kept on the priority list. Capital Markets initiatives like strengthening SEBI for Investor protection and fine tuning FDI/ FII norms has also been touched upon.

The Fiscal deficit for the current year has been contained at 5.2 per cent of GDP and for the year 2013-14 is estimated at 4.8 per cent. By 2016-17 fiscal deficit is targeted to be brought down to 3 per cent. On the other hand, it is food inflation that is worrying, and he said that all possible steps will be taken to augment the supply side to meet the growing demand for food items. The Finance Minister has showed greater worry towards current account deficit (CAD) and has admitted that FDI, FII or External Commercial Borrowing (ECB) is the only ways to finance it.

Given this backdrop, the Finance Minister identified following focus areas in Budget 2013-14:

  • Additional Resource Mobilization
  • Measures to Promote Socio-economic Growth
  • Relief and Welfare Measures
  • Widening of Tax Base and Anti Tax Avoidance Measures Rationalization Measures

In our view, the delivery and governance of the budget with adherence to timelines will be a critical factor. Based on the Capital Market outlook, we expect some clarity and road-map from the Government on some of the budget proposals-

  • Tax Residency Certificate (TRC) necessary but not sufficient for claiming DTAA benefits.
  • No clarity on indirect transfer of capital assets in India
  • Setting up of Tax administration reforms commission is positive for Investors and is expected to have sustainability in tax regime.
We are providing herein the snapshot of the major budget 2013 proposals with our comments which you can DOWNLOAD HERE...

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