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Brokerage expectations from 2010 Budget
February, 20th 2010

Following are the main sectoral expectations of brokerages from Budget 2010.


* Increase in excise duty by 2%-4%.

* Increased allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) for buses

* No change in excise duties for large cars

Banking and financial services

* Interest subventions for pre-shipment credit and short-term crop loans announced in the last budget are expected to be withdrawn.

* Relaxation in the lock-in period for fixed deposits - from five to three years - to qualify for tax benefits under Sec.80C.

* Increase in the ceiling of TDS (Tax Deducted at Source) on interest income from fixed deposits.

* Allowing banks to raise tax-free infrastructure funds.

* Tax breaks to housing finance and infrastructure-lending companies.

* Housing loans below 3 million rupees (currently at 2 million rupees) to be considered as "priority sector" lending.

* Refinancing from India Infrastructure Finance Co Ltd (IIFCL) for upto 60% of commercial bank loans for PPP (public private partnership) projects in critical sectors is expected to continue.

* Increase (Foreign Direct Investment) FDI in insurance sector from 26% to 49%.

* Recapitalisation of PSU (Public Sector Undertaking) banks with lower tier-1 capital.


* Partial roll back of excise duty cuts of around 2%-4%.

* Reduction in import duty on coal from the present 5%.


* An increase in government spending in infrastructure, especially for roads and urban projects

* Clarity on refinancing for India Infrastructure Finance Company Ltd (IIFCL) funding

* Clarity on minimum alternate tax provisions under a new Direct Tax code, to be implemented in FY12

* Improved availability and mechanism of financing for infrastructure projects

* National project status for state government projects

Engineering and capital goods

* Increase in import duty on foreign power equipments like turbines, boilers and generators.

* Rollback of excise duty concession given in the stimulus package to manufacturers by minimum 2%.


* Excise duty on cigarettes to go up by 5%-8%

* Excise duty cuts on products except food items may be reversed by 200-300 bps

* Rural initiatives for income generation are expected to continue

* MAT (Minimum Alternative Tax) rates can be increased, as a step forward towards the Direct tax Code.


* To be included under Sec 80 IA (Infrastructure status) for all hotels across India and across all categories.

Real estate

* Increasing priority sector housing loans to 3 million rupees from existing 2 million rupees

* Greater thrust on PPP projects in housing.

* Increase in allotment to the Rajiv Gandhi Awas Yojana (slum rehabilitation programme)

* Increasing tax breaks provided to housing finance and infrastructure lending companies.

* Re-introduction of tax holiday for housing projects under Sec 80 IB (10)

* Increase in income tax deduction under Sec 80 C on home loan principal re-payment from Rs 0.1 million to Rs 0.2-0.3 million.

Information technology

* Extension of tax benefits for units in Software Technology Parks of India (STPIs) beyond March 2011.

* Spending on education through Sarv Shiksha Abhiyan to be increased.

* Abolishing MAT in STPI units

* Reduction in excise duty on electronic and IT goods from present 10% to 8%.


* Increase in foreign investment limits in direct-to-home (DTH), cable, FM radio and news broadcasting services.

* Increase in rate of service tax to 10%.

* Customs duty to be levied on newsprint.

* Tax holiday for the capital intensive business such as Gaming, Animation, VFX.

* Reduction of custom duty of 5% to zero on set-up boxes.


* The 150% weighted deduction enjoyed by in-house R&D expenses should be extended to expenses on outsourced studies such as clinical trials and specific laboratory studies. The weighted deduction should also be raised to 200%.

* State excise duty on certain formulations should be cut to 8% from present 16%.

* Central excise duty on drugs to be restored to 8% from the present 4%.

* Allocation for the National Rural Health Mission should be increased significantly.

* Removal of excise duties for all essential drugs.

* Extension of tax exemption for export oriented units and clarity on the new direct tax code on special economic zones.


* Extension of income tax exemption for mega power generation projects.

* Increasing the allocation towards the government-led electrical infrastructure augmentation schemes namely Rajeev Gandhi Grameen Viyuktikaran Yojana (RGGVY) and Restructured Acclerated Power Development and Reforms Programme (R-APDRP)

* Reduction of import duty on thermal coal.


* Allow foreign investment in multi-brand retail.

* Accord industry status to retail.

Metals and mining

* Increase in excise duty cut to 10% from 8% now

* No change in customs duty structure

* Increase in iron ore exports duty by 5%

* Removing the 5% import duty on stainless steel and alloy steel scraps

Chemicals & fertilisers

* Increase the price of diammonium phosphate (DAP) between 8%-10% from present Rs 9,350 a tonne.

* Tax holiday for a period of 10 years should be extended to all new fertiliser projects

* Excise duty on fuel oil used for fertiliser manufacturing should be abolished.

Oil & gas

* Infrastructure status for Oil and Gas to promote investments with tax sops.

* Tax benefits for city gas distribution and extension in tax holiday for new refineries

* Declared goods status to be given to natural gas.

* Abolishing service tax on exploration and production activities.


* Unification of tax regime from current differential taxation methods

* Reduction in license fee to 6%

* Tax holiday for mergers and acquisition activities of telecom companies to be extended till April 2010

* Clarity on 3G Auction timeline

* Increase in service tax by 200 basis points

* Government to use Universal Service Obligation funds for rural and broadband penetration

* Increase in Minimum Alternate Tax from the present 16.5%. (Collated from the reports of following brokerages: Anand Rathi, Edelweiss Securities, HSBC, India Infoline, KR Chokey Shares & Securities, Macquarie, Morgan Stanley, Omi Advisories, Sharekhan, HDFC )

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