13 momentous Budget decisions post independence

Zee Research Group has profiled 13 momentous decisions taken in previous budgets which have transformed the nation completely.

Siddharth Tak/ZRG

Not many view 2013 as a lucky year simply as it is linked to the number 13. However, the perception can change if government takes bold decisions in the upcoming budget. Zee Research Group (ZRG) has profiled 13 momentous decisions taken in previous budgets which have transformed the nation completely.

1) First budget of the independent India (1947-48): The first budget of independent India was presented by RK Shanmukham Chetty at 5 pm on 26th November, 1947. The decision to present the first budget itself was a unique one as it covered a period of just 7-1/2 months from August 15, 1947 to March 31, 1948.

2) Formation of the planning commission (1950-51): The budget presented by John Mathai laid down the roadmap for the creation of the Planning Commission. The launching of the First Five Year Plan in April 1951 initiated a process of development aimed not only at raising the standard of living of the people but also opening out to them new opportunities for a richer and more varied life. This was sought to be achieved by planning for growth, modernisation, self-reliance and social justice.

3) Gift tax introduced (1958-59): Jawaharlal Nehru introduced Gift tax in India. It was governed under the Gift Tax Act constituted on April 1, 1958. However, with effect from October 1, 1998, gift tax got demolished. Furthermore, in 2004, Gift Tax was again revived partially and a new provision was introduced in the Income Tax Act, 1961 under section 56 (2). According to this, any gifts received by any individual or Hindu Undivided Family (HUF) in excess of Rs. 50,000 in a year would be taxable.

4) Introduction of self assessment system by all big and small manufacturers (1968-69): Morarji Ranchhodji Desai presented the budget on February 29, 1968. He introduced the system of self assessment of small and big manufacturers by ending the requirement of stamping and assessment by the Excise Department authorities of goods at the factory gate. This was a major procedure relaxation that went a long way in boosting manufacturing. Administrative convenience in removal of goods made the process less complicated and tedious.

5) MODVAT credit introduced (1986-87): This scheme was introduced by VP Singh. It allowed credit/ set-off of duty paid on raw materials against the duty on final products. It was aimed to avoid multi level taxation effect on the final price of goods. It was a modest beginning at major indirect tax reform that will culminate in the shift to the Goods & Services Tax regime. {MODVAT credit means modified value added tax credit}

6) MAT introduced (1987-88): In 1987, Rajiv Gandhi introduced provisions related to minimum corporate tax. Today, it is known by the name of ‘Minimum Alternate Tax’ (MAT). It was brought in with the primary objective of bringing into the tax net highly profitable companies that were legally managing to avoid paying income tax.

7) The process of economic liberalisation took off (1991-92): The budget presented by Manmohan Singh on July 24, 1991 overhauled the import-export policy, slashed import licensing and went for vigorous export promotion and optimal import compression to expose Indian industry to competition from abroad. He initiated rationalisation of duty structures by reducing the peak customs duty from 220 per cent to 150 per cent.

8) Service Tax introduced (1994-95): It was introduced by Manmohan Singh. It was aimed to reduce the degree and extent of tax on core business, industry and trade without reducing the revenue stream for the government. It is a tax which is payable on services provided by the service provider. This Tax is payable by the service provider to the Govt. of India. It was implemented to tap the growing sector of the Indian economy.

9) Tax rates moderated (1997-98): P Chidambaram presented the “dream” Budget for the year 1997-98. The budget made tax rates moderate for individuals as well as for corporates. He reduced maximum marginal income tax rate for individuals from 40 per cent to 30 per cent, and cut the income tax rate for domestic companies to 35 per cent from the earlier 40 per cent. Peak customs duty was reduced from 50 per cent to 40 per cent, and the excise duty structure was simplified. Chidambaram also announced a Voluntary Disclosure of Income Scheme (VDIS) to recover black money.

10) Transfer Pricing regulations introduced for curbing tax avoidance (2001-02): Transfer Pricing in India was introduced in the budget session by Yashwant Sinha. This regulation played a big role in the prevention of erosion of the tax base in India. It was aimed to check tax avoidance by laying down norms for computation of income arising from international transactions having regard to the “arm’s length price”.

11) Social welfare schemes like National Rural Health Mission (NRHM) and NREGA were announced for the first time (2005-06): P Chidambaram introduced NRHM to reduce Infant Mortality Rate, Maternal Mortality Rate and fertility rate. Its objective was to improve the availability of and access to quality health care for people in rural areas. On the other hand, NREGA was introduced to provide a legal guarantee of 100 days of wage employment in the financial year.

12) Farm loan waiver scheme kicked off (2008-09): P Chidambaram announced Rs 60,000 crore relief package for 37 million farmers in the country. Chidambaram announced waiver of Rs 50,000 crore worth of loans to small and marginal farmers and a settlement scheme for other farmers that would cost the exchequer another Rs 10,000 crore.

13) Rajiv Gandhi Equity Saving Scheme announced (2012-13): Pranab Mukherjee announced this scheme with the objective to encourage the savings of the small investors in domestic capital markets.