FY09-10 Indian Financial Bill
Year 2009 is when INC(Indian nation congress) regained ruling with a very good number of seat. Everyone and every institute appreciated the victory, they thought to pay back to the loyal citizens with the most populist budget.
The final Budget of FY09-10 is introduced in the lower house call Lok Sabha. Here it an appeal as populist one but soon you will realize is it populist or its a tool to convert you to pay more tax than ever.
Some main good points as per my 1st cut view :
1. Corporate Tax rates- no change.
2. Exemption limit in personal income tax raised (15,000 for senior citizens and 10,000 for others).
3. Fringe Benefit Tax abolished.
4. New Pension System (NPS) to continue the Exempt-Exempt- Taxed (EET).
5. Commodity Transaction Tax (CTT) to be abolished.
These are very good and and daring steps which will help tax payer to reduce tax burden from his pocket. I want to give a clarity on fine line mentioned in budget which will help you to realise how your tax payments will burn deep whole in your pockets.
I just went thought fine line in FBT ( Fringe Benefit Tax ):
FBT is removed and in place of it now your take home plus other benefits receivable are carried in to your net income, all the benefits received house allowance, company cell phone bill, any personal conveyance, any benefit provided by company, even food coupons and expense on those benefits will be part your net income and must be deducted at the source that is your company must deduct the tax from the every rupee they pay you plus they expense on you apart from your salary, its a simple example where your pockets will burn deep with this you must pay more now than before.
Lets take a simple math where a person's CTC is Rs. 5,00,000, and net is around Rs. 4,00,000 in existing context Tax payable amount is on Rs. 4,00,000.
so assuming 80C deduction of Rs. 1,00,000 and Rs. 1,50,000 is tax exempted. this come around
Previous regime
CTC________________________________Rs. 5,00,000
Net taxable___________________________Rs. 3,00,000 (4,00,000 - 1,00,000)
Tax upto 1,50,000______________________ Nil
Above Tax upto 3,00,000________________Rs. 15,000
Upto 4,00,000__________________________Rs. 20,000
Total Tax_____________________________Rs. 35,000
Present regime
CTC__________________________________Rs. 5,00,000
Net taxable_____________________________Rs. 4,00,000(5,00,00 - 1,00,000)
Tax upto 1,60,000________________________Nil
Above Tax upto 3,00,000__________________Rs. 14,000
Upto 4,00,000___________________________Rs. 40,000
Total Tax_______________________________Rs. 54,000
The difference in both the taxes is 20,000, so this year onwards get ready pay more tax than what you get actually. This is the basic way to rob working class in a legal way.
Enjoy for misuse of voting power.
Thursday, July 23, 2009
Thursday, May 14, 2009
Third rate cut by SBI in last 40 days
Third Rate cut by the SBI in last 40days reasons can be clasified :
1 Is the bank suffering to find a load takers
2 Can be increase in the liquidity situation
3 Is govt. using SBI as a tool to encourage agressive interest rate cut regime in the banking space at a time where the gilts are reaching for highs of 1yr interest rate.
4 Is the this indicate to the traditional shift of funds to PSU banks from private sector banks.
5 Is govt. using its power to force the bank to cut rates this will in agaist the future of the bank, it will hurt both customers (low yield to ther deposit compared to other banks) and investors (as it leads to a rise in the NPA).
Reason may be any of the 4 or a combination. But were will it lead this can be devastating for banks to write losses in this slow down.
1 Is the bank suffering to find a load takers
2 Can be increase in the liquidity situation
3 Is govt. using SBI as a tool to encourage agressive interest rate cut regime in the banking space at a time where the gilts are reaching for highs of 1yr interest rate.
4 Is the this indicate to the traditional shift of funds to PSU banks from private sector banks.
5 Is govt. using its power to force the bank to cut rates this will in agaist the future of the bank, it will hurt both customers (low yield to ther deposit compared to other banks) and investors (as it leads to a rise in the NPA).
Reason may be any of the 4 or a combination. But were will it lead this can be devastating for banks to write losses in this slow down.
Thursday, March 5, 2009
RBI Rate Cut on 05-03-2009
On 4th March 2009, RBI was lowering the repo rate, at which it lends to banks, to 5.0 per cent from 5.5 per cent, effective immediately. It also cut the reverse repo rate, at which absorbs excess cash from the banking system, to 3.5 percent from 4.0 percent, effective immediately. The credit policy is reviewed based on the inflation numbers.
About repo and reverse repo click here
The details of inflation, inflation is calculated based on the WPI numbers inflation for weekend Feb 21 is 3.03% Vs 3.39%(WoW), it peaked around 13% in CY2008. If a interest rate falls it will take a long time for interest rate to move up.
On basis of the current inflation number easing, but when inflation is calculation is based on WPI, (wholesale Price index) and there is a mismatch in the reality and projection of WPI based inflation numbers. Leave aside the base effect for some time. WPI shows a decrease in price but its not visible accross the board except for petroleum product. Consider fall in petrol price should make the Rs/KM based cab charges or autos or taxis must also fall but its not happening. If you consider the food prices there is not match between inflation and prices across most commodities and services.
Is the WPI is the right index to measure the inflation ? If yes, so why is it very different from the reality. As WPI is taking all goods into account when compared with CPI. WPI index should be altered to reflect the right situation but not to project the imaginary.
While considering base effect, when there is a sharp increase in a index and a correction takes place it will obviously show a -ve growth for correction, consider a index of 100 number rose by 20% to 120 and by correction if it falls to 108 which is is still a 8% increase wrt 100 but same is -10% wrt 120 number. On a time line if the WPI due to a spike goes to 13% and when it is taken as a bench mark to compare it with the fall of spike gives a deflatory situation. Any policy making should consider these extraordinary condtions which project a deflationary times but its a high inflationary time when calculated for a longer period of time.
Coming to CPI (Consumer Price Index), inflation will be more than 15% (my expectation depending on food and essential articles). CPI gives the ability of the common man living conditions, with the inflation of 15% a man with Rs.10,000 income can survive easily if his expences grow from Rs.2000 to Rs.2300, but it will be hard for a person earning Rs.1000 and spends almost his income on living and he cann't be able to efford the rise in his expence but cut short his requirements and live below the previous living standard.
If rate cut is to increase economic activity it is well and good but this can lead to the problem of over spending and again inflation climbs up which is not intend of the monitory policy and above all rate cuts will not increase the economic activity. Instead rate cut must have been sectorial wise and not across the board similar to a fisical stimulus. Rate cut will make the banks to increase it business (revenue) due to falling interest rates to spur business and relax the rule to lend and this in turn create a bad debit. And India is a saving based economy this will turn into a punishment for the 80% of popualtion which saves.
As per many banker the liquidity is ample in the system and there is a lack of confidance to spending in a shrinking economy. For this, sentiment has to be boosted and not the interest rate cut, sentiment can only be boosted by support to job generating sectors like textiles, exports and manufactoring, etc., Infrastructure is required but this is not the time to make a blunder by following the history its time to innovate the policies and change the mind set and work for a better economy and lead the world to create a history. Its a good time for to work and create education and medical infrastructure under government for free education and free medical support as it is prevalent in developed countries, this will also create a a large number of employement than pumping money meaninglessly. Working on the needs of the requirement and job creation is required than following someone else who failed in every possible way.
Coming to liquidity pressure seen by corporates will not be easied so soon as many PE players are exiting the lending space due to lack of liquidity. No corporate is ready to get loan against the security and to be frank there is a huge gap between loan value and security valuation. The corporates know if they decrease the price they get the revenue and cash follow for sustaining but are reluctant for not lossing the profit they are not in a mind set to operate atleast in breakeven for some time and turn the things into there favour. I could like to add a sentence here " You are profititable when you buy low but not when you sell high".
About repo and reverse repo click here
The details of inflation, inflation is calculated based on the WPI numbers inflation for weekend Feb 21 is 3.03% Vs 3.39%(WoW), it peaked around 13% in CY2008. If a interest rate falls it will take a long time for interest rate to move up.
On basis of the current inflation number easing, but when inflation is calculation is based on WPI, (wholesale Price index) and there is a mismatch in the reality and projection of WPI based inflation numbers. Leave aside the base effect for some time. WPI shows a decrease in price but its not visible accross the board except for petroleum product. Consider fall in petrol price should make the Rs/KM based cab charges or autos or taxis must also fall but its not happening. If you consider the food prices there is not match between inflation and prices across most commodities and services.
Is the WPI is the right index to measure the inflation ? If yes, so why is it very different from the reality. As WPI is taking all goods into account when compared with CPI. WPI index should be altered to reflect the right situation but not to project the imaginary.
While considering base effect, when there is a sharp increase in a index and a correction takes place it will obviously show a -ve growth for correction, consider a index of 100 number rose by 20% to 120 and by correction if it falls to 108 which is is still a 8% increase wrt 100 but same is -10% wrt 120 number. On a time line if the WPI due to a spike goes to 13% and when it is taken as a bench mark to compare it with the fall of spike gives a deflatory situation. Any policy making should consider these extraordinary condtions which project a deflationary times but its a high inflationary time when calculated for a longer period of time.
Coming to CPI (Consumer Price Index), inflation will be more than 15% (my expectation depending on food and essential articles). CPI gives the ability of the common man living conditions, with the inflation of 15% a man with Rs.10,000 income can survive easily if his expences grow from Rs.2000 to Rs.2300, but it will be hard for a person earning Rs.1000 and spends almost his income on living and he cann't be able to efford the rise in his expence but cut short his requirements and live below the previous living standard.
If rate cut is to increase economic activity it is well and good but this can lead to the problem of over spending and again inflation climbs up which is not intend of the monitory policy and above all rate cuts will not increase the economic activity. Instead rate cut must have been sectorial wise and not across the board similar to a fisical stimulus. Rate cut will make the banks to increase it business (revenue) due to falling interest rates to spur business and relax the rule to lend and this in turn create a bad debit. And India is a saving based economy this will turn into a punishment for the 80% of popualtion which saves.
As per many banker the liquidity is ample in the system and there is a lack of confidance to spending in a shrinking economy. For this, sentiment has to be boosted and not the interest rate cut, sentiment can only be boosted by support to job generating sectors like textiles, exports and manufactoring, etc., Infrastructure is required but this is not the time to make a blunder by following the history its time to innovate the policies and change the mind set and work for a better economy and lead the world to create a history. Its a good time for to work and create education and medical infrastructure under government for free education and free medical support as it is prevalent in developed countries, this will also create a a large number of employement than pumping money meaninglessly. Working on the needs of the requirement and job creation is required than following someone else who failed in every possible way.
Coming to liquidity pressure seen by corporates will not be easied so soon as many PE players are exiting the lending space due to lack of liquidity. No corporate is ready to get loan against the security and to be frank there is a huge gap between loan value and security valuation. The corporates know if they decrease the price they get the revenue and cash follow for sustaining but are reluctant for not lossing the profit they are not in a mind set to operate atleast in breakeven for some time and turn the things into there favour. I could like to add a sentence here " You are profititable when you buy low but not when you sell high".
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