The Finance Minister last year presented a balanced budget laying special emphasis on education and rural development. He also restructured income tax slabs and brought down corporate tax. Taxation
The highlights of the Union Budget for 2005-06 are as follows:
Budget Figures:
GDP growth at 6.9%
Manufacturing growth at 8.9%
Inflation at 5.01% which is 1% less than last year
Jan 2004-05 exports grew at 25.55%
Jan 2004-05 imports grew at 34.72%
Budget Estimates for FY 2005-06:
Plan expenditure Rs 17,2500 crores
Budget plan expenditure at Rs 143497 crores
Balance amount of Rs 29, 003 crores to be raised as loans by state govts lately
Non-Plan expenditure Rs 37,0847 crores
Total expenditure at Rs 51,4,344 crores
Total revenue receipts at Rs 35,1,200 crores
Total revenue expenditure at Rs 44,6,512 crores
Revenue deficit at Rs 95,312 crores which is 2.7% of GDP
Fiscal deficit estimated at Rs 15,1,144 which is 4.3% of GDP
Defence Expenditure increased from Rs 77,000 crores to Rs 83,000 crores, which includes allocation of Rs 34,375 crores for capital expenditure
Taxation
Direct Taxes
Income Tax slabs restructured
New I-T slabs:
-Upto Rs 1 lakh-Nil
-Rs 1-1.5 lakh- 10%
-Rs 1.5-2.5 lakh-20%
-Over Rs 2.5 lakh-30%
10% surcharge to be imposed on incomes over Rs 10 lakh per annum instead of Rs 8.5 lakh
Exemption limit at Rs 1 lakh
Exemption limit for Women at Rs 1.25 lakh
Exemption limit for Senior Citizens at Rs 1.5 lakh
Standard Deduction on incomes removed
Rs 1 lakh of saving to be deducted from income before tax for all categories
Exemption under Section 88 and 80L removed
Tax exemption to continue under six categories including home loans and medical insurance premium
1/6 criteria amended; mobile phones removed, bills of over Rs 50,000 p.a. on electricity included
Corporate Tax:
Corporate tax for domestic companies at 30%, additional surcharge of 10%
Rate of depreciation to be 15% for general machinery and plant; initial depreciation increased to 20%
Tax on technical services reduced from 20 to 10%
No change of tax on foreign companies
Tax exemptions extended till March 31, 2007 for:
-In-house research & development in bio-technology, pharmaceuticals, electronics, telecommunications, chemicals
-Deduction of profits of new industrial undertaking in J&K
-Scientific research and development conducted by companies and approved by Dept. of Scientific and Industrial Research
Expert committee to be set up for EET system
Fringe benefit tax at 30%; transport services for workers and staff and canteen services to be exempt
Stock Market:
One time exemption for stock exchanges on corporatisation
Trading in derivatives in specified stock exchanges not be treated as ‘speculative transactions’
STT on equity day traders raised to 0.02% Vs 0.015%
Black Money:
Two anti-tax evasion measures on to be introduced
0.1% tax on cash withdrawals over Rs 10,000 on a single day
Banks to report to Govt all deposits which are exempt from TDS on interest
Indirect Taxes
Customs & Excise duty:
Peak customs duty on non-agricultural products to be lowered to 15% from 20%
Custom duty on Textile machinery cut to 10%
Customs duty on refrigerators in food processing cut to 10%
Custom duty on footwear cut to 10% from 20%
Custom duty on Specified machinery in leather industry cut to 5%
Custom duty on nine Specified machinery in pharmaceuticals and biotech cut to 5%
Custom duty on battery operated road vehicles and printing presses cut to 10%
Customs duty on primary metals and secondary to reduced to 10%
Customs duty on industrial raw material reduced to 10%; on lead and coking coal at 5%
Customs duty on polyester, nylon chips, textile fibres, yarns and intermediates, fabrics and garments cut to 15%
Customs duty on 217 Information Technology Agreement (ITA) bound items cut to nil
Custom duty on second hand cars cut to 100%
Countervailing Duty (CVD) of 4% on all imports of ITA bound items and their inputs
No change in customs duty on agricultural commodities; Only cut flowers to attract 60% duty
Custom duty on atmospheric drinking water cut to 5%
Aircraft buy, lease exempt from tax until Sept 2005
Excise duty on polyester filament yarn, tyres and ACs cut to 16%
Cenvat exemption route for natural fibres to continue
2% excise duty on branded jewellery; no levy on unbranded jewellery including gold jewellery
Excise on imitation jewellery cut to 8% Vs 16%
To levy 8% excise duty on mosaic tiles
>Excise on tractors for semi-trailers at 16%
Agriculture tractors to remain exempt from excise duty
Surcharge on Tea, excise on edible oils, and vanasapati abolished
Excise duty on matches cut to 12%
Handmade matches to remain fully exempt
SSI exemption ceiling up to Rs 4 crores from Rs 3 crores
SSI units to have only two options: full exemption on first clearance of Rs 1 crore or normal duty on on first clearance of Rs 1 crore with Cenvat credit
Restoration of excise duty on iron and steel to 16%
Specific duty on molasses increased from Rs 500 per metric tonne to Rs 1000
Specific duty on cement clinkers increased from Rs 250 per metric tonne to Rs 350
50 paise per litre rise in petrol, diesel as cess for highway project
Custom duty on crude petroleum cut to 5%
Custom duty and excise duty removed on LPG and subsidized kerosene
Custom duty cut to 10% on motor spirit and diesel
Excise duties on petrol and diesel to be a combination of ad valorem and specific duties
Surcharge of 10% on cigarettes, some tobacco products; biris excluded
Additional levy of 10% ad valorem on non-biri tobacco products
Service tax to be maintained at 10%
Service providers with gross turnover less than Rs 4 lakh p.a. to be service tax exempt
New services to be covered under service tax include: pipeline transport of goods, site formation, demolition and like services; membership fees of clubs and associations; packaging and specialized mailing services; survey and map making services; dredging services in rivers and harbours; cleaning services for commercial buildings and similar premises; and construction of planned residential complexes, with more than 12 dwelling units, developed by builders
Agriculture:
Non-food credit up by 21.2%
Credit to agriculture in FY 05 at Rs 1,08,500 crore
58.2 lakh farmers have got new bank loan
Public sector banks to increase number of borrowers by another 50 lakh
Two crore families covered under Antyodaya Anna Yojana
Food-For–Work Plan announced in Nov now in 150 districts
Subsidies in agriculture to continue
Procurement to be decentralized without affecting MSP based process
Rs 1,6,254 crores subsidy for fertilizers
To bring 1 crore hectares more under assured irrigation
Allocates Rs 400 crores for promoting micro irrigation
National agricultural insurance for Kharib, Rabi to continue
Ministry of Agriculture to prepare roadmap for agricultural diversification
Rs 630 crore allocated for National Horticulture Mission
Expert committee to be set up to make Price Stabilization Fund effective
Development/Strengthening of Agricultural, Marketing Infrastructure, Grading and Standardisation to be set up with Rs 72 crores
National Project for Repair Renovation and Restoration of Water Bodies to launched in March 05 with allocation of Rs 100 crores
Task force constituted for flood management recommendations in UP, Bihar, West Bengal, Orissa, Assam and North-East with Rs 180 crores for implementation of report
Allocation for Accelarated Irrigation Benefit Programme (AIBP) increased to Rs 4,800 crores
Target for credit linking increased to 2.5 lakh Self Help Groups (SHGs)
Micro Finance Development Fund to be called Micro Finance Development & Equity Fund with corpus of 200 crores
To ask RBI to open window for ECBs for micro-finance firms
Govt to support IRDA move to promote micro institutions
NGOs, SHGs, cooperatives and MFIs to be invited to become micro-insurance agents
National Fund for Startegic Agricultural Research to created with 50 crores
Industry:
10% capital subsidy scheme for textile sector proposed
Manufacturing competitiveness programme to be launched
Ministry of Textiles to take up 20 clusters involved in handlooms at cost of 40 crores
LIC scheme to cover 20 lakh handloom weavers
Health insurance to be provided to 2 lakh handloom weavers
Financial package for revitalization of sugar industry
NABARD in consultation with state govt and financial institutions and RBI to work out scheme for sugar industry
Package to revive sugar industry proposed
IBA, NABARD plan to recast interest on sugar unit loans
2 yr moratorium on new financial aid to sugar units
To set up Rs 1.50 bn corpus for R&D in pharma
Stable policy environment for biotech, pharma sectors
Capital subsidy allocation for SSIs up to Rs 173 crores
108 items identified for dereservation from SSI sector
Small and Medium Enterprises Development Bill to be introduced
67 Industrial Training Institutes (ITIs) to be upgraded at the cost of Rs 1.6 crore each
Skills Development Initiative (SDI) to be launched
Auto, software, telecom. Electronic benefited from FDI
Scheme for expansion of production and employment in unorganized sector under PURA
Co-op banks to get package to wipe out accumulated losses
Proposals for more FDI in mining, trade, pension
Infrastructure:
Teledensity at 8.75%
Allocation of Rs 1200 crores for Universal Service Obligation Fund to increase rural connectivity
National Highway Development Programme III to be launched in next fiscal
Outlay for National Highway to Rs 9320 crore for FY 06
Rs 14 bn for four-laning 4000kms of highways
To fund infrastructure investments via SPVs in few sectors
SPVs proposed to fund roads, ports, airports, tourism
Rs 10,000 crores borrowing limit for new SPV for infrastructure
Viability growth funding at Rs 1,000 crores for infrastructure
National Urban Renewal Mission to have outlay of Rs 5,500 crores with Rs 1,650 crores as grant component
Mumbai Metro, harbour link under National Urban Renewal Plan
Expert committee set up to make Mumbai a regional financial centre
Forex resources can be used to fund infrastructure projects
Finance:
RBI roadmap for banking sector soon
Banking Regulation Act 1949 to be amended
Removal of cap on Statutory Liquidity Ratio (SLR) proposed
To allow banks to issue preferential shares
To introduce specific provisons to enable consolidated supervision of banks and their subsidiaries by RBI
Removal of limits on Cash Reserve Ratio (CRR) proposed
RBI to lend or borrow by repos, reverse repos or otherwise
Seven states under defined contribution pension plan
Pension scheme to be extended to unorganized sector
To authorize SEBI to set up training institute
FIIs to give cash/collateral for derivative trade
To amend securities definition to trade in securitised debt
To set up high level panel on corporate bonds, securitised debt
To clear legal validity of OTC derivative contracts
Commercial Papers to attract uniform stamp duty for all issuers
Mutual Funds to launch exchange traded gold funds so as to enable households to buy and sell gold units for as little as Rs 100
Social Sector:
Education:
Education allocation to be at Rs 1,8377 crore
110 million children now get mid-day meals in schools
Non-lapsable fund called ‘Prarambik Shiksha Kosh’ to be set up with allocation of Rs 7,156 crores
Current scholarships for SC/ST to continue
Scholarships to be increased for SC/ST student gaining admission in specified institutes:
Govt to set up Rajiv Gandhi National Fellowship for SC/ST students pursuing M.Phil and Ph.D
Central aid for recruitment and posting of Urdu teachers in primary schools
Certain percentage of schools to be opened under ‘Sarva Shiksha Abhiyan’ and ‘Kasturba Balika Vidyalaya Scheme’ in districts with substantial minority population
Scholarships for meritorious candidates of minority communities in Pvt institutions
IIS Bangalore to be made world class university, Rs 100 crores allocated
Employment:
Assured irrigation facilities to add 1 crore jobs in 5 years
Food Processing Industry to generate 2.5 lakh jobs p.a.
Information technology Industry to generate 70 lakh jobs by 2009
Construction Industry to throw up lakhs of jobs
Govt to give top priority to employment generating industries
1,88,168 additional Anganwadi centres to be opened
Rural Development:
Allocation of Rs 5,400 and 50 lakh metric tones of foodgrains for Food-For–Work Programme
Food-For–Work Programme to be converted to National Rural Employment Guarantee Scheme
Rural development allocation for Rs 1,8,334 crore
Rural Infrastructure Development Fund to be provided corpus of Rs 8,000 crores
66,822 villages to get telephone connections in Bharat Nirman
To connect all villages with population of 1,000 (500 for hilly/tribal areas) with road
Knowledge centers in every village by 2007
Rural electricification– Allocation of Rs 1100 crore for FY 06
‘Indira Awas Yojana’ allocation increased to Rs 2,750 crores
Health/Water & Sanitation:
National Rural Health Mission to be launched next year
Allocation for health and family welfare at Rs 10,280 crores
Work on for six AIIMS like institutions
To spend Rs 4,750 crores on water schemes in FY06 Vs Rs 33 bln
Project to improve water bodies to be taken up at a cost of Rs 100 cr
Emphasis on tackling water quality in Andhra, Gujarat, Karnataka, Rajasthan, West Bengal etc at cost of Rs 4,750 crores
Allocation for Total Sanitation Campaign (TCS) at Rs 630 crores, to cover entire country
To provide drinking water to remaining 74,000 habitations that are uncovered
Sanitation facilities for districts to get allocation of Rs 630 cr this year
Other Proposals:
Rs 3,644 cr package for tsunami relief, total plan outlay at Rs 10, 216
Rehabilitation of Tsunami victims ensured
Allocation of Rs 6253 crores for SC/ST schemes
Allocation for women and children at Rs 14,379 crores
All departments to present gender budgets
Backward Regions Grant Fund to be set up with allocation of Rs 5,000 crores, equal amount to be allocated every year for next 4 years
Special economic package for Bihar to continue till 2006-07
Special plan for J&K at Rs 4,200 crores Vs Rs 300 crores
To spend Rs 93,08 crores for schemes in North East
Rs 450 crores for highway development in North East
Flood control in Northeast plan outlay Rs 180 crores
To construct 60 lakh additional houses for poor
To provide Electricity to remaining 1,25,000 villages and offer connections to 2.3 crore households
Equity support of Rs 14,040 crores and loans of Rs 3,55,04 crore to Central Public Sector Enterprises
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