labels: economy - general, finance - general
Banking and Finance news
27 February 2008

Come Budget-time, and the media is rife with rumours about which taxes will be raised or lowered, and the direction in which the government might make fresh public investment.

This year is no different – although the corporate sector seems to be a little more relaxed than it has usually been in the past on Budget eve.

It's not only the various industry lobbies that push their demands on the government through the media. The government too does some kite flying, to see how the public (or sections of industry) might react to plans on the anvil.

Sometimes very few of the rumours turn out to be true. They end up as nothing but wishful thinking, or statements of a utopian dream.

But which of the rumours will turn out to be true and which will be falsified this time?

We'll never know, will we, until Budget day?

We thought it might be an interesting exercise to list the various rumours and speculations on government plans, along with industry demands floating around, and then see how they actually fare on budget day. Catch the score on 29 February 2008!


Watch this space for the Banking and Finance expectations, and we'll keep adding to it as and when new ideas are floated. Those doing the rounds till now, are listed below:

  • Interest or dividend earned on infrastructure bonds issued by commercial banks may be exempted from tax.
  • Interest earned on external commercial borrowings (ECBs) may be taxed. This will make foreign debt more expensive. It will also help in moderating the surplus on the capital account, which is expected to touch $103 billion this fiscal.
  • Public sector banks may get an exemption on fringe benefit tax (FBT) on their contribution to statutory pension funds.
  • Pass-through that allows tax exemption for earnings of venture capital funds may be restored for VC funds investing in the food processing industry and infrastructure facilities such as warehouses.
  • Provisioning for non-performing assets (NPAs) is taxed at 30 per cent presently. The government is mulling a proposal to waive taxes on the provisioning of non-performing (NPA) assets by banks, especially on farm sector lending.
  • Tax exemption for interest or dividend earned on infrastructure bonds issued by commercial banks may be on the cards.
  • In a move that analysts view as an obstacle in the growth of the banking sector, the government has said ownership in state-run banks will not fall below 51 per cent.
  • Foreign investors can take upto 74 per cent in private, but not over 20 per cent in public sector banks.
  • Income generated from agricultural advances by state co-operative banks and district central co-operative banks is likely to be exempted from tax from 2008-09.
  • A survey by FICCI says that the government is expected to announce a new fund for providing subsidised loans to companies for the adoption of energy-efficient and non-oil technologies.
  • Leather, textile, marine and handicrafts sectors will most likely to get an extension of the 2 per cent subvention in export credit for another year.




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