Indian Budget 2010 - vIndianz.com

vIndianz.com (26 Feb, 2010) — New Delhi: The 2010-11 general budget on Friday provided considerable relief to income tax payers by raising the slabs at two levels but hiked the central excise duty on non-petroleum products across the board from 8 to 10 per cent and the basic duty on crude and petroleum products besides effecting a one-rupee increase per liter on petrol and diesel.

pranab-mukherjee For the first time ever during a budget session, the entire opposition walked out of the Lok Sabha during the presentation of budget by Finance Minister Pranab Mukherjee, dubbing it “highly inflationary” as he partially rolled back the stimulus by hiking the ad velorum component of excise duty on large cars and multi-utility vehicles by two per cent to 22 per cent.

The budget also raised the specific rates of duty on portland cement and cement clinker. The basic duty of 5 per cent on crude petroleum, 7.5 per cent on diesel and petrol and 10 per cent on other refined products is being enhanced.

The central excise duty on petrol and diesel is being enhanced by Re one per litre, according to media reports.

The proposals relating to customs and central excise are estimated to result in a net revenue gain of Rs 43,500 crore for the year. The proposals for service tax, in which government plans to bring in some more services, will result in a net revenue gain of Rs 3000 crore for the year.

While direct tax proposals are expected to result in a loss of Rs 26,000 crore for the year, those relating to indirect tax are estimated to result in a net revenue gain of Rs 46,500 crore.

Taking into account the concessions and measures to mobilise additional resources, the overall revenue gain is estimated to be Rs 20,500 crore for the year.

The basic threshold limit for income tax exemption will remain at Rs 1.60 lakh. Under the new proposal, 10 per cent tax will be levied between Rs 1,60,001 and Rs 5,00,000, 20 per cent on incomes between Rs 5,00,001 and Rs 8,00,000 and 30 per cent above Rs 8,00,000.

The present income tax slabs and rates are 10 per cent for income between Rs 1,60,001 and Rs 3,00,000, 20 per cent for income between Rs 3,00,001 and Rs 5,00,000 and 30 per cent for income above Rs 5,00,001.

Proportionately, similar changes have been made in the taxes related to women and senior citizens aged above 65 years.

Mukherjee also gave another relief to individual tax payers by raising the existing limit of Rs 1,00,000 on tax savings by an additional amount of Rs 20,000 for investments in long-term infrastructure bonds.

Contributions to Central Government Health Scheme (CGHS) have also been allowed as deductions within the overall ceiling for tax rebate besides contributions to health insurance schemes which are currently allowed as deductions under the Income Tax Act.

Defence budget up

The budget also proposed a hike in defence expenditure from Rs 1,41,703 crore to Rs 1,47,344 crore, including Rs 60,000 for capital expenditure. In the Budget Estimates for 2010-11, gross tax receipts are estimated at Rs 7,46,651 crore while the non-tax revenue receipts are estimated at Rs 1,48,118 crore.

Total expenditure is placed at Rs 11,08,749 crore, which is an increase of 8.6 per cent over the total expenditure in Budget Estimates of 2009-10. The plan and non-plan expenditures in Budget Estimates in 2010-11 are estimated at Rs 3,73,092 crore and Rs 7,35,657 crore respectively.

The fiscal deficit for 2010-11 has been pegged at 5.5 per cent and the rolling targets for 2011-12 and 2012-13 have been pegged at 4.8 per cent and 4.1 per cent respectively.

The fiscal deficit of 5.5 per cent of GDP in 2010-11 works out to Rs 3,81,408 crore. Taking into account various other financing items for fiscal deficit, the actual net borrowing of the government in 2010-11 would be of the order of Rs 3,45,010 crore.

Direct and indirect taxes

In direct taxes, the Finance Minister proposed to reduce the current surcharge of 10 per cent on domestic companies to 7.5 per cent but at the same time raised the rate of Minimum Alternate Tax (MAT) from 15 per cent to 18 per cent of book profits.

In indirect taxes, Mukherjee made structural changes in the excise duty on cigarettes, cigars and cigarillos, coupled with some increase in rates. He also proposed to enhance excise duty on all non-smoking tobacco such as scented tobacco, snuff and chewing tobacco.

In addition, he proposed to introduce a compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch-making machines.

Attempting to pay focussed attention to agriculture and related sectors, the Finance Minister proposed to provide project import status with a concessional import duty of 5 per cent for setting up mechanised handling systems and pallet-racking systems in mandis and warehouses for foodgrain and sugar as well as full exemption from service tax for installation and commissioning of such equipment.

A similar status on customs duty with full exemption from service tax will also be extended to initial setting up and expansion of cold storage, cold room and processing units for such produce.

Extending his goodies in excise duties in certain sectors, he gave full exemption to toy balloons and reduction in basic customs duty on long pepper, asafoetida and excise duty on goods covered under Medicinal and Toilet Preparations Act.

The Service Tax net is being expanded to include domestic and international air journeys of all classes, health check-up undertaken by hospitals for employees of business entities and health services provided under health insurance schemes offered by insurance companies.

Cigarettes, TVs, ACs and cars go dearer

New Delhi: Consumers will have to pay more for petrol, diesel, cars, TVs, cigarettes, tobacco, air-conditioner, gold and silver as the government announced on Friday hike in excise duty as part of a partial roll back of stimulus measures announced for reviving the economy.

On the other hand, mobile accessories, medical equipment energy efficient CFL lamps, set top boxes, compact disc, toys and books will be cheaper on account of some tax concessions offered on these items by Finance Minister Pranab Mukherjee in the Union Budget for 2010-11. “Symptoms of economic recovery are widespread and more clear now,” he said.

Before announcing the tax measures, Mukherjee substantially cut income tax rates along with other direct tax concessions that would result in a net loss of Rs 26,000 crore to the exchequer.

India Inc lauds Budget

New Delhi: Indian industry welcomed the Union Budget for 2010-11 saying it was a balanced approach though it expressed disappointment over the hike in minimum alternate tax (MAT) from 15 per cent to 18 per cent.

The captains of the industry lauded the concessions given to individual and corporate tax payers, saying Mukherjee had done a “good” job.

“The Finance Minister has done a good in balancing job… He has been able to contain the fiscal deficit at 6.9 per cent, which is very good,” said Harshpati Singhania, President of apex chamber FICCI.

“However, there is a big surprise and disappointment on MAT. Decrease in surcharge would be eaten by increase in the MAT rate,” Singhania added, according to news agencies.

CII President Venu Srinivasan said: “It is a very balanced and responsible budget. The growth will continue with this Budget. The changes in Income Tax slabs are a welcome step.” He also complimented the Finance Minister for calibrated roll back of stimulus measures, which is how the industry had wanted it.

“The only dark spot is increase in MAT.”

Financial sector experts, in their initial reactions to the Budget have described it as a “positive and pragmatic” one.

The Sensex zoomed over 350 points backed by strong technicals and a friendly budget which focused on maintaining growth and reducing fiscal deficit.

“The budget is a big positive in terms of controlling fiscal deficit–from 5.5 per cent to 4.8 per cent to 4.1 per cent. Besides, the market also found positive the Government’s net borrowing target of Rs 3,45,000-crore (gross Rs 4,50,000-crore),” banker and financial sector expert, Uday Kotak, said.

The Goverment’s borrowing programme is in line with market expectations, he said, adding that the budget has also been “very, very benign on taxes.”

The Government’s borrowing programme is in line with market expectations, he added.

Enam Group’s Chairman, Vallabh Bhansali, said that the Government’s announcement that banking licences would be considered for NBFCs and the private sector, is “a big announcement and very welcome.”

“It is a very balanced budget with a spirit of pragmatism and boldness,” he said.

IDBI Fortis Life Insurance’s Managing Director & CEO, G V Nageswara Rao, said that for most people, the budget should be net positive.

“The Finance Minister has reduced the income-tax burden on the middle-class significantly by increasing the slab limits for lower tax brackets. Additional tax deduction has been introduced for investment in infrastructure bonds,” Rao said.

However, there would be a general increase in prices of all manufactured goods because of increase in excise duty on goods as well as petrol and diesel. “So one hand gives, while the other takes it away, but for most people it should be net positive,” Rao said.

The Government’s focus on expenditure management was very welcome, he said.

Highlights of the Union Budget 2010-11 presented by Finance Minister Pranab Mukherjee on Friday:

– Net revenue gain from tax proposals at Rs 20,500 crore

– Certain accredited news agencies exempted from service tax

– Service tax to remain 10 per cent

– Increase in duty on gold and silver import

– Clean energy cess of Rs 50 per tonne to be levied on coal produced in India

– 10 per cent central excise duty on all non-petroleum products

– Structural changes in excise duties on cigarettes, cigars and cigarillos.

– Revenue loss of Rs 26,000 crore on direct tax proposals.

– 7.5 per cent duty on petrol, diesel, crude restored.

– Exempt duty raised for all non-smoking tobacco producs

– Investment linked tax deductions to be allowed to two–star hotels anywhere in the country.

– Fiscal deficit seen at 4.8 per cent and 4.1 per cent in 2011–12 and 2012–13 respectively.

– 20 per cent tax for income above Rs 5 lakh and up to Rs 8 lakh

– 30 per cent tax for income above Rs 8 lakh.

– Income Tax department ready with two–page Saral–2 return forms for individual salaried assesses

– Surcharge on companies reduced to 7.5 per cent

– Additional exemption of Rs 20,000 for long term investment in infra bonds

– Ten per cent tax slab for income above 1.6 lakhs up to Rs. 5 lakhs.

– No income Tax upto Rs. 1.6. lakhs

– National Social Security Fund created for workers in unorganised sector with allocation of Rs.1,000 crore

– Government to give Rs.1,000 for each National Pension Scheme account opened by workers in the unorganised sector

– Exclusive skill development programme for the textile sector

– Fifty percent hike in allocation for schemes for women and child development

– Rs.4,500 crore allocated for ministry of social justice and empowerment, a hike of 80 percent

– Rs.2,600 crore allocated for ministry of minorities affairs

– Rs.1,900 crore for Unique Identification Authority of India

– Rs.147,344 crore allocated for defence

– 2,000 youth to be recruited in central paramilitary forces

– Draft Food Security Bill prepared and will be put in the public domain

– Allocation on primary education raised from Rs.26,800 crore to Rs.31,300 crore

– Banking facilities to be provided to all habitations with a population of 2,000 and more

– Rs.66,100 crore allocated for rural development in 2010–11; Rs.40,100 crore for National Rural Employment Scheme; RS.48,000 crore for Bharat Nirman

– Rs.1,270 crore allocated for Rajiv Awas Yojna for slum dwellers, up from Rs.150 crore, an increase of 700 percent with the aim of creating a slum free India.

– Forty–six percent of plan allocations in 2010–11 will be for infrastructure development

– Coal Regulatory Authority to be set up to benchmark standards of performance

– Allocation for new and renewable energy sector increased 61 percent from Rs.620 crore to Rs.1,000 crore in 2010–11

– National Clean Energy Fund to be established

– Rs.200 crore allocated as special package for Goa to prevent erosion and increase green cover.

– Government committed to growth of SEZs.

– Four–pronged strategy for growth of agricultural sector.

– Rs.200 crore to be provided in 2010–11 for climate–resilient agricultural initiative.

– Involvement of private sector in grain storage to continue for another two years.

– In view of drought and floods, debt repayment period extended to June 2010.

– Five more mega food processing projects in addition to 10 existing ones.

– FDI flows in April–December 2009 $20.9 billion.

– FDI policy to be made more user–friendly with one comprehensive document.

– Apex level financial stability council to be set up for banking sector.

– Indian Banking Association to give additional licences to private players.

– Provision for further capital for regional rural banks.

– Roadmap for reducing public debt in six months.

– Implementation of direct tax code from April 2011.

– Government actively engaged in finalising structure of general sales tax regime; hopes to implement it from April 2011.

– Rs.35,000 crore raised from divestment in 2009–10; will be higher in 2010–11.

– New fertiliser policy from April 2010; will lead to improved productively and more income for farmers.

– Economy stabilised in first quarter of 2009–10; strong rebound in second quarter; overall growth at 7.2 and could be higher when Q3 and Q4 are taken into account.

– Export figures for January encouraging.

– Hope to breach 10 percent growth mark in not too distant future.

– Government set in motion steps to bring down food inflation.

– Need to review stimulus package; need to make growth more broad–based.

– India has weathered global economic crisis well; Indian economy in far better position than it was a year ago. In 2009 Indian economy faced grave uncertainty; delay in southwest monsoon had undermined agricultural production.

– First challenge now is to quickly revert to 9 percent growth and then aim for double digit growth; need to make recovery more broadbased.

– Second challenge is to make growth more inclusive; have to strengthen food security.

– Third challenge is to overcome weakness in government’s public delivery mechanism; a long way to go in this.

– First challenge: quickly revert to higher GDP growth path of 9%, cross double digit growth

– Economy is in a better position than a year ago, however, challenges remain

– Uncertainity was there on account of delay in monsoon, concerns about production and food prices

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