All about the process of Union Budget

Why Budget

Only Parliament can authorise the government to collect funds by way of taxes, duties and borrowings. All goverment expenditures need Parliament's approval

Starting the process

The Budget division of the economic affairs department issues a circular to all ministries, states and UTs, autonomous bodies and the defence forces for preparing revised estimates for the current financial year and the budget estimates for the next financial year

The budget team

The finance ministry has the overall responsibility for framing the budget. Each department of the ministry has specific responsibilities:

Department of Expenditure: Expenditure

Department of Economic Affairs: Non-tax revenue, deficit

Department of Revenue: Tax Revenue

With inputs from

The Planning Commission: Sets overall targets for ministries

The Comptroller & Auditor General: Keeps a tab on accounts

Administrative Ministries: State their requirements and plan priorities

Other stakeholders: Extensive consultations are held with other stakehoders - industry, political parties, economists and civil society groups

Once the pre-budget meetings are over, a final call on the tax proposals is taken by the Finance Minister, in consultation with the PM

Passing the budget

Presentation

The Finance Minister presents the Budget in Lok Sabha on the last working day of Feb

The Budget speech has two parts. Part A deals with general economic survey & policy statements while Part B contains taxation proposals

The Annual Financial Statement is laid on the table of the Rajya Sabha after the FM's speech

Discussion

A few days after the Budget is presented, the LS discusses the Budget as whole and not the details for 2 to 3 days

The FM makes a reply at the end of discussion

A Vote on Account for expenditure for the next two months of ensuing year is obtained after which the house is adjourned. During this period, demands for grants are considered by relevant standing committees

Voting

The standing committee reports are presented to the House, which discusses & votes on demands for grants

The Speaker puts all the outstanding demands to the vote of the House. This device is called 'guillotine'.

After the general discussion & voting on demands for grants, the govt introduces the Appropriation Bill. This Bill is to give authority to the govt to incur expenditure from & out of the Consolidated Fund of India

Security trivia

Budget text prepared on computers which are delinked from all networks Several officials and staff are quarantined, right from those involved in printing to legal experts who check the text of the tax acts Intelligence Bureau sleuths keep a close eye on all those quarantined, and all communication devices, including mobile phones, are monitored and sometimes jammed Storage devices are out of bounds

IRDA okays health cover portability

Holders of health insurance policies can now switch companies without fear of losing benefits of a ‘no claim’ track record or out of concerns that they may have to wait a while before certain health conditions are covered.

The insurance regulator has said on Thursday that insurers must allow policyholders to transfer the credit in terms of waiting period for pre-existing illness and bonus sum insured from one insurer to another. The Insurance Regulatory and Development Authority on Thursday issued guidelines on portability of health insurance which will be effective from July 1, 2011 and apply to life and general insurance companies.

The insurance regulator’s move to allow portability will hugely benefit disgruntled policyholders who have to put up with poor service from their insurance companies for fear of losing the track record they have built up over the years. For example, if under a previous policy, a medical condition is excluded from coverage for two years and at the end of the second year the policyholder decides to switch, he will not have to go through the same waiting period again.

If under the new plan the waiting period for the same condition is three years, the new health insurance policy can only exclude the condition from coverage for one extra year. The final guidelines are a departure from earlier proposals where a standard policy, similar to the standard motor insurance cover, was mooted which could have been renewed with any insurers . However, given the difference in terms of coverage , the regulator has stuck to the nub of the issue—policyholders losing the track record they have built.

According to insurers, policyholders who shift will have to find a cover similar to their existing policy or accept the new plans. “In a way, it will be similar to mobile portability. Just as a customer opting for a new provider will have to accept the terms of the new plan, the policyholder too will have to accept the terms and conditions of the new insurer,” said Sanjay Datta, head of health at ICICI Lombard General Insurance .

Claims such as those for bypass surgeries are invariably rejected if they occur in the first year of cover on the grounds that such medical conditions do not develop overnight. Insurers agree to pay these claims only if the insured has been continuously covered for a couple of years at least.

IRDA has said that the credit (in terms of waiting period ) would be limited to the sum assured (including bonus ) under the previous policy . The regulator has put the onus on the new insurer for continuing the cover. If the policy results lapses into discontinuance because of any delay by the insurer in accepting the proposalthe insurer shall be bound to continue coverage.

All insurers have been asked to inform policyholders that all health insurance policies are portable and that the policyholder who wants to shift should take action well before the renewal date. According to Datta, the industry will move to a shared database by which an insurance company can immediately figure out the track record of any person who approaches them for health insurance. IRDA has asked companies to share the claim details of the policies, where the policyholder has opted for portability, within seven working days of a request from the renewing insurer.

Easy Switch

IRDA’s move to allow portability will benefit disgruntled policyholders who have to put up with poor service from their insurance companies for fear of losing the track record they have built up over the years

Insurers say policyholders who shift will have to find a cover similar to their existing policy or accept the new plans. The industry will gradually have to move to a shared database.

Track Your PF information on internet and mobile

Over 4.72 crore subscribers of EPFO will soon be able to track status of their claim settlement and account transfer online and also get updates on their mobile  phones .

This will be possible as the entire data of the retirement fund manager EPFO will be digitalised by March-end.

"We have already completed the digitalisation of data at our 113 offices and the work in the remaining seven offices would be completed by the end of next month," Central Provident Fund Commissioner Samirendra Chatterjee told PTI.

"Once the digitalisation process is completed, the account transfer and money withdrawal claims' status could be done and tracked online by Employees' Provident Fund Organisation (EPFO) subscribers on the mobile phone," he said.

Besides, the subscribers would be intimated via short mobile messages (SMS) about the status of their request for account transfer and claim settlement.

In case of account transfer, the subscribers would get two messages on his or her mobile–first stating that the account is closed followed by one about the amount of money transfered from old to new one, an EPFO official involved in the project said.

Similarly, in claim settlement requests, first SMS message would be for intimating that the EPFO has received their application.

When the claim is settled, applicant would get another message stating the amount is credited in the specified bank account.

 

However, the official said, this facility could only be possible when the subscribers provide their mobile phone numbers in their application forms.

There are some subscribers who hesitate to provide their personal mobile numbers, Chatterjee said.

 

Asked about applying online for account transfer and claim settlement, he replied, "That would be possible in the next phase. But through digitalisation we would try to adhere to the norm of settlement of claims and account transfer in a month's time".

At present, it takes months to settle claims and transfer of accounts because everything is done manually

Source : ET

Egypt crisis to impact policy: RBI

The crisis in Egypt has raised concerns of a disruption to supply of west Asia oil shipped through Egypt and of unrest spreading across the west Asia and North Africa

Events in Egypt will have an impact on Indian monetary policy, the Reserve Bank of India (RBI) deputy governor told reporters on Sunday.

“After making the policy announcement on 25th Jan, a whole set of events unfolded in the Middle East (west Asia), which are starting to have an impact on oil prices, obviously, which we did not anticipate at the time we made the announcement,” Subir Gokarn, deputy governor at the central bank, said.

The crisis in Egypt has raised concerns of a disruption to supply of west Asia oil shipped through Egypt and of unrest spreading across the west Asia and North Africa, which combined produce more than a third of the world’s oil.

“So, a completely new environment has emerged in a very short time after the announcement. It is going to have an impact on our thinking, our action going forward,” Gokarn added.

India’s central bank raised interest rates on 25 January by a quarter of a percentage point to clamp down on resurgent inflation and warned of persistently higher food prices unless steps are taken to boost supplies.

 

Source: Livemint

Black money list revealed, 15 Indians named

Names of 15 Indians who have stashed away wealth in offshore banks have been made public by Tehelka magazine in its latest issue.

Tehelka claimed it has in possession two more names, but were holding them back for verification. One name is alleged to be that of a prominent politician and the other chairman of a leading company.

The 15 names include Manoj Dhupalia, Rupla Dhupalia, Mohan Dhupalia, Hasmukh Gandhi, Chintan Gandhi, Dilip Mehta , Arun Mehta, Arun Koohar, Gunwanti Mehta, Rajnikant Mehta, Prabodh Mehta, Ashok Jaipuria, Raj Foundation, Urvasi Foundation and Ambunova Trust.

According to information with ET, a member of a promoter family of a reputed Chennai-based business group and some diamond traders also figure in the full list furnished by German authorities to the Indian government two years ago.

The German government purchased the data from an ex-employee of LGT Bank, the flagship bank of Liechtenstein , a country viewed by global banking groups as one of the major tax havens in the world.

Germany handed over the list on March 18, 2009, but the Government had refused to divulge the names as it had to honour the commitment given under tax treaties. Under provisions of the tax treaties, information exchanged is to be used only for the purpose for which it is sought.

Therefore, the government is not in a position to make these names public, but only recover tax on the unaccounted income.

The Income -Tax Department has sent notices asking 15 entities to pay up but the government has taken special care to ensure that no name was released to the public. The amount of money stashed away in Liechtenstein's is minor, compared to the size of the black money stashed in several other offshore banks.

As per an estimate by Tax Justice Network, an NGO, the volume of money lying in these banks could be over $11 trillion.

China's largest insurers guilty of three billion yuan fraud

China's national auditor has revealed that two of the country's largest insurers committed financial misconduct involving over three billion yuan in 2009.

The revelations were contained in two reports published by the National Audit Office (NAO).

The reports were produced last year after the NAO audited the 2009 financial reports of all subsidiaries and branches of China Life Insurance ( Group )) Company (China Life) and People's Insurance Company (Group) of China Ltd ( PICC )).

It found that the misconduct and non-compliance in operations and accounting included expense frauds, false premium increases and fake claim settlement cases, the China Daily reported.

The reports also cited other financial problems, including funds secretly kept off account books to avoid regulation. These funds are widely considered to be prone to corruption.

A total of 352 unidentified employees with the companies have been held responsible, and been punished, the reports said.

Source : ET

FIIs may turn away from India, inflation; move to Brazil

Brazil and Russia may be emerging more attractive than India to foreign investors this year, as the domestic economy is plagued by inflation and high commodity prices, say brokers and analysts.

These emerging markets have the advantage of being commodity producers and are benefiting from rising prices. India, on the other hand, is a net commodity importer.

“The shift of the FIIs is a cause for worry. When commodity prices rise, valuations for countries such as Brazil and Russia look good. Indonesia is also a commodity producer, but investors are worried about governance issues there,” Mr Atul Singh, Managing Director and Head, Global Wealth & Investment Management, India, DSP Merrill Lynch, told Business Line.

FIIs have pulled out more than $1.2 billion (around Rs 5,800 crore) so far this year, pushing the Sensex below the 18,000 mark in intraday trade on Tuesday. Since January, the benchmark index has fallen 13 per cent from a high of 20,664.

Mr Ashish Gupta, Head of Research at Credit Suisse, said Indian markets have seen “disproportionately high foreign flows” last year ($29 billion). In 2010, “emerging” Asia saw inflows of $64 billion with the most coming into India.

Global investments are likely to also head towards a recovering US market, besides Germany, said Mr Singh. These markets are expected to give 10-15 per cent returns in 2011, while Indian markets are expected to be flat.

“Though higher inflation might be partly priced, we are yet to see significant selling on the part of FIIs. Their selling can take Indian markets down a further 10-15 per cent”, said Mr Suresh A Mahadevan, Analyst at UBS Securities.

Merrill Lynch, however, feels that in the long-term FIIs are likely to head back to India. “The biggest factor is growth expectations. India has fundamental growth, which will be chased by global savings,” said Mr Singh. The brokerage expects FIIs to pump in close to $16 billion this year.

SEBI's new directives to strengthen the reporting process related to offshore derivative instrument and participatory note activity has also discouraged FIIs somewhat. In a circular issued in January, SEBI said that FIIs issuing offshore derivative instruments and participatory notes need to provide trade-wise details of their activities in India by the tenth of every month with a six-month lag (that is, April data by October 10).

Source : Business Line