Budget 2012: Everything retail investors need to know

Budget 2012, overall, was nothing to write homeabout. But it did offer individuals and retail investors some reasons to smile.

DK Aggarwal CMD, SMC Investments and Advisors said that steps like thereduction in the securities transaction tax on delivery-based capital market turnover, tax exemption under Rajeev Gandhi Equity Scheme, an increase in the limit of tax-free bonds to Rs 60,000 crore and an increase in the personal taxation limit by Rs 20,000 are welcome and will leave more disposable income in the hands of investors and increase their participation and boost the capital markets.

Here’s a quick look at Budget proposals relating to retail investors and individuals:

•Cut in securities transaction tax (STT):

This tax on delivery-based transactions was cut to 0.1 percent from 0.125 percent. However, this measure will not have any major impact as the benefit will will not have any major impact since cash markets account for less than eight percent of stock exchange volumes - of which cash delivery trades account for 35 percent (this is the segment affected by the STT cut). So the benefit will be marginal.

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•Disinvestment target lowered

The target has been lowered Rs 30,000 crore for the new financial year starting 1 April compared with the target of Rs 40,000 crore in the current year (actual proceeds were just 25 percent of that). Skepticism abounds over how much of the target will be achieved next year. Will it force LIC to buy again?

• Boost to electronic****IPO process

In a bid to encourage investors from small towns to participate in initial public offerings, the Finance Minister has announced that it will becompanies undertaking IPOs of Rs 10 crore and above should do it in electronic form.

• More****Infrastructure tax-free bonds

In a bid to boost the sagging infrastructure space in the country, the FM announced an increase in tax-free bonds to Rs 60,000 crore in the new financial year from Rs 30,000 crore currently.

That includes Rs 10,000 crore from National Highways Authority of India, Rs 10,000 crore from Indian Railway Finance Corporation, Rs 10,000 crore from India Infrastructure Finance Company Ltd, Rs 5,000 crore from HUDCO, Rs 5,000 crore from National Housing Bank, Rs 5,000 crore from Sidbi, Rs 5,000 crore from ports and Rs 10,000 crore from the power sector.

On the back of this measure, stocks of Larsen & Toubro, GMR Infrastruture and IRB Infrastructure Developers touched an intra-day high.

•Income tax limit hiked

The income tax exemption limit was raised to Rs 2 lakh from Rs 1.8 lakh. This provides tax relief upto Rs2,000 to every tax payer in the country.

Income tax slabs were also changed. For those earning between Rs 2-5 lakh, the tax rate has been set at 10 percent, for those earning between Rs 5 lakh and Rs 10 lakh, the rate has been set at 20 percent, and for those earning Rs 10 lakh and above, the rate is 30 percent).

The budget also has a proposal to allow individual tax payers a deduction of up to Rs 10,000 for interest on savings bank accounts.