2% tax on large bank cash withdrawal excellent move: Amar Ambani, YES Securities
Body blow to HNIs by levying high surcharge on the rich, Ambani said.
- Taxing buybacks at 20% to close loophole to avoid DDT
- TCS, Wipro may offload shares worth Rs 75,000 crore if public shareholding rises to 35%
- Bouquets & brickbats: India Inc, economists shoot holes in Nirmala's Budget
- Budget boost to realty: Tax sop on home loans, tax holiday for affordable housing & push to rental housing
Proceeds from dividends from Public owned enterprises, RBI and disinvestment route made it possible to stick with its deficit target. Budget now projects Rs40,000cr more from non-tax revenues, from what it presented in the interim budget in February. The government also has a buffer from 4G and 5G telecom auctions, which don’t seem to have been budgeted. Therefore, meeting the deficit should be manageable.
The Budget has also corrected the over-estimation of tax revenues provided in the interim budget. Personal income tax growth projection down from 17% yoy to 7.6% for FY20. GST tax collection target done from 18% yoy growth to 3% for FY20. The estimates for tax collection now look a lot reasonable.
Excise collections are expected to jump significantly from interim expectations on back of hike in duty on auto fuels. Customs duty also expected to rise materially because of hikes, in an attempt to protect domestic industries.
The Centre has cut its sharing of revenues with states as well in its projections by 100 basis points from FY19 to 32.9% in FY20E. The disinvestment target is also set at Rs105,000cr vis-à-vis Rs80000cr in FY19. It must be noted that it had achieved to generate a similar amount in FY18 though. Achievement will depend on capital market remaining conducive.
It has largely maintained its expenditure projection as per interim estimates, with 13.4% yoy growth for FY20E. The big incremental rise has been to agriculture on account of the Direct Farm Income scheme with Rs750bn allocation. Although the budget speech talked about pension for shopkeepers, the budget provision is only showing 4.6% yoy rise for FY20E.
Liquidity situation was partly addressed by ear-marked capital infusion of Rs700bn in Public Sector Banks during FY20. An attempt was also made to help NBFCs by allowing securititsation upto Rs1000bn with a government assurance for the initial 10% stress.
Indian equities fell during the day, due to a possible liquidity squeeze in secondary market on account of proposed higher public shareholding and PSU disinvestment increasing the supply of paper. Higher tax on UHNIs also reduces their investible surplus in stocks directly, through MFs and PMSes, especially in the midcap space.
- Capital expenditure through internal and extra budgetary resources for projects besides railways has been significantly reduced for FY20E; drop of 15.8% yoy vs a rise before.
- No allocation to turnaround plan for Air India in FY20E vs Rs40bn in FY19.
- Adequately provisioned for payment to Food and Public Distribution (Rs1,917bn in FY20E vs 1,766bn in FY19)
- Many MNCs may consider delisting route if increased public shareholding norms go through. We also think that it may be better to allow a higher promoter holding in midcaps and small caps, so as to ensure that they have more skin in the game. Indian capital market is still in developing state.
- Effective tax rates for high income group has significantly gone up to 38% and 42% for Rs20mn and Rs50mn income bracket respectively.
- Focus on infrastructure, measures to make India FDI friendly, steps taken for Start-ups, speeding roll-out of Electric Vehicles, deduction for Home loans and curbing black money by levying 2% tax on Rs10mn+ cash withdrawals from bank in a year are noteworthy measures.