BUDGET AT A GLANCE

BANKING
MEASURE bridge regulatory gap
IMPACT this step will protect investors who
are being duped by money circulating
schemes. A change in the act would also
protect unsuspecting agents who work for
pyramid marketing schemes to earn high
commissions which are unsustainable. The
present act does not distinguish a pyramid
marketing scheme from a bonafide agency.
SMALL CUSTOMER
MEASURE differentiated banks
IMPACT More small banks in niche areas
may come up serving small customers who
have been Ignored by bigger ones. These
banks could be a thorn for bigger ones if
they begin to attract Depositors .local area
banks would serve farmers and migrant
workforce.
MONEY MATTERS
MEASURE a modern policy framework
IMPACT There could be a fundamental
change in the way monetary policy is
conducted in
India. The RBI may move towards a formal

inflation target as a prime monetary policy

goal as
Suggested by the urjit patel committee.
Besides it may look at consumer price
inflation as a
Formal benchmark.
AT SESSION
MEASURE 6 new debt recovery tribunals
IMPACT This will result in quicker recovery
and reduce the cost of funds for banks.
Currently Each DRT handles a large number
of cases. A state that does not have a
tribunal usually Transfers the case to be
heard in the neighbouring sates tribunal.
MERGER MANIA
MEASURE promoting consolidation
IMPACT SBI could be the biggest beneficiary
of it with its plan to merge subsidiaries.
Some of the regional banks may get
absorbed into bigger ones such as Punjab
national
Banks and bank of baroda. But there needs
to be caution and the government should
consider
Unions reaction.
RURAL INFRA PUSH

MEASURE rural infra development fund

IMPACT foregein banks which often fail to
meet priority sector lending targets. Can
Make Up for the shortfall by investing more
in such funds. Nabard which operates the
scheme will Have more resorces in funding
rural projects.
Dividend distribution tax to hurt corporate:
The overall changes in direct taxes will leave
corporate with more money to invest and
keep start growth. The only dampener is the
increase in effective dividend distribution
tax, A tax on dividends paid by companies.
But their tax outgo will increase only if they
pay out the same amount as dividend. If
companies want to maintain their outgo,
then shareholder will have to reckon with
lower dividends. The new DDT mechanism
effectively reduces the return on long term
investment of shareholders . the
methodology is complex, and a simpler way
would have been a revision in the DDT rate,
Said Kaushik Mukherjee (Executive Director
of PWC). The finance minister has raised the
effective DDT Rate by changing the way the
dividends distribution tax is workout.

Currently dividend taxes are calculated on

the net amount that is to paid into the
hands of Shareholders . The new norms
propose computing the tax on the grossesd
up amount in jargon. The tax will be levied
on the amount of dividend inclusive of the
tax.
How will this work?
Lets say a company had a surplus of Rs.100
and once to pay shareholders the entire
surplus as dividend. It has to pay a DDT of
Rs.15, and the balance Rs.85 will be paid to
shareholders. Earlier the company had to
pay only Rs.13 as Tax, and the balance
Rs.87 was paid as dividend to shareholders.
Effectively, say accountants and analysts,
this will result in the dividend distribution in
tax rising by about 3 percentage points.
Home is where this Budgets heart is
1. Basic income Tax exemption hiked on
from Rs.2 Lakh To Rs.2.5 Lakh for ordinary
Tax payers
2. No change in Rs. 5 Lakh exemption Limit
for very senior citizen above 80 years.
3. 10% surcharge on tax for income above
Rs.1Crore To continue. It was introduced in

the 2013 budget as a on e time measure.

4. Housing loan interest deduction enhanced
from Rs.1.5 Lakh To 2 Lakh.
5. For senior citizen, the basic exemption
has been hiked from Rs.2.5 Lakh To Rs.3
Lakh.
6. Rs.2000 tax Relief for those earning upto
Rs.5 Lakh a year to continue(It was started
in 2013)
7. Section 80C Deduction enhanced from
Rs.1 Lakh to Rs.1.5 Lakh. No separate limit
for life insurance and Retirement.
8. Annual invest limit in the PPF enhanced
from Rs.1 Lakh To Rs. 1.5 Lakh.