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BUDGET: INCOME TAX EXEMPTION LIMIT HIKED TO RS 1.80 LAKH

Updated on Tuesday, March 13, 2012, 13:01 Print Email
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Zeebiz Bureau

New Delhi: In a relief provided to the salaried class in Union Budget 2011-12, Finance Minister Pranab Mukherjee on Monday hiked the individual taxpayers’ Income Tax exemption limit from the current Rs 1.60 lakh to Rs 1.80 lakh. This will translate into an annual savings of Rs 2,000 on Income Tax.

The exemption limit for senior citizens has also been increased from the current Rs 2,40,000 to Rs 2,50,000, while senior citizens’ age limit has been reduced from 65 years to 60 years. A very senior citizens category has also been created for people with age 80 years and above and they will get a higher exemption limit of Rs 5 lakh. The exemption limit for women tax payers remains unchanged at Rs 1,90,000.

The tax sop of Rs 20,000 investment in infrastructure bonds, which results in a tax saving of Rs 2,000, has also been extended by a year. Pranab however told the Lok Sabha that all other tax rates and slabs for personal income tax would continue to remain same. He said the idea was to make taxes moderate, payment simple, and collection easy.

The Finance Minister also raised the housing loan limit to Rs 25 lakh for priority sector lending. Pranab told the Parliament that the government is also liberalising scheme of interest subversion of 1% on home loan by including loans upto 15 lakh for houses that cost upto Rs 25 lakh. He further announced Rs 3000 crore for Rural Housing Fund.

For the corporate sector, the Finance Minister reduced surcharge of 7.5% to 5%. He however hiked direct tax from 18% to 18.5% for corporate. Pranab said he was not proposing any roll back in either the service tax or excise duty, which both currently stand at 10%.

Pranab hiked the service tax on each domestic air ticket by Rs 50 and on international ticket by Rs 250.

The Finance Minister also doled out sops for the agriculture sector and proposed Rs 7,860 crores for Farmer Development Program. The minister further proposed to raise farm loan target to Rs 4.75 lakh crores in the next fiscal year and said the government would also provide additional 3% interest benefit on some farm loans.

Pranab said inflation has remained above the comfort level for most part of the current fiscal and is another focus area. The overall inflation at 8.23% is higher than the comfort level of the Reserve Bank at 5-6%, he said. The minister added that food inflation had moderated to 9.3% in January this year from 20.2% in February 2010.

The Finance Minister further said that the new Companies Bill could be introduced in the current session of Parliament. On the Direct Tax Code, Pranab said the Bill was likely to be passed by Parliament in the next financial year after the Standing Committee’s report is received. GST, he assured, would roll out from April 1, 2012.

On the disinvestment front, Pranab promised to maintain the tempo and said the government had set a Rs 40,000 crore target this fiscal. The minister said discussions were on to further liberalise FDI Policy, while announcing that FIIs would be allowed to invest in mutual funds while their investment limit in corporate bonds to be hiked to USD 40 billion.


Budget Highlights

Income Tax Corporate Tax Black Money Service Tax
Indirect Tax Inflation Growth Subsidies
Infrastructure and Industry Agriculture Fiscal Health Fundamentals
Outlays Rural & Social Sector Education Banking & Finance
Green Initiatives    


Income Tax

  • Idea to make tax moderate, payment simple, collection easy
  • Rs 1.80 lakh exemption for general tax payer; will accrue benefit Rs 2000
  • Senior citizens age limit reduced from 65 years to 60 years
  • Amount of exemption on senior citizens increased from Rs 2,40,000 to Rs 2,50,000
  • Very senior citizens category created for 80 years and above
  • Very senior citizens to get higher exemption limit of Rs 5 lakh
  • To introduce simpler tax forms for presumptive tax
  • Invest-linked deduction for housing linked products
  • Tax sop of Rs 20,000 in infra bonds stays for one more year
  • Low withholding tax of 5% for notified infra funds
  • New revised income tax return form `Sugam` to be introduced for small tax papers
  • Net loss from direct tax proposals estimated at Rs 11,500 crore
  • Direct Taxes Code (DTC) to be effective from April 1, 2012
arrow

Corporate Tax
  • Corporate surcharge reduced to 5% from current 7.5%
  • Minimum Alternate Tax raised to 18.5%
  • MAT introduced on developers of SEZ
  • Foreign dividend rate tax cut to 15% for Indian companies
arrow

Black Money
  • Five-fold strategy to deal with black money
  • Discussions on double taxation avoidance agreements
  • 1200 cases have been filed under the Money Laundering Law
  • National policy to curb narcotics trade as it also fuels black money
  • Money Laundering Legislation’s scope expanded
  • Strength of Enforcement Directorate increased three-fold
arrow

Service Tax
  • Ambit of service tax increased
  • No roll back in service tax, to stay at 10%
  • Service tax widened to cover hotel accommodation above Rs 1,000 per day, A/C restaurants serving liquor
  • Service tax on some category of hospitals
  • Service tax on diagnostic tests
  • Some legal services to be brought under service tax net
  • Service by an individual to another individual exempted
  • Service tax to result in a revenue gain of Rs 4,000 crore
  • To raise service tax on domestic air travel by Rs 50 per ticket
  • To raise service tax on international air travel by Rs 250 per ticket
  • A new scheme to be introduced for refund of service tax on lines of drawback of duties
  • Service tax to be levied on investment services by insurance firms
  • Service tax mop up pegged at Rs 820 billion in FY12
  • Net revenue gain of Rs 40 bn from service tax changes
  • GST decision have to be taken in consonance with states
  • Areas of divergence have been narrowed on Goods and Services Tax (GST)
  • Working on model for GST roll out
  • GTC, GST will improve governance
  • Significant progress in establishing GST Network
arrow

Indirect Tax
  • Central excise duty to be maintained at standard rate of 10%
  • Reduction in number of exemptions in central excise rate structure
  • Nominal central excise duty of 1% imposed on 130 items entering in the tax net
  • Lower rate of central excise duty enhanced from 4% to 5%
  • Optional levy on branded garments or made up to be converted into a mandatory levy at unified rate of 10%
  • Peak rate of customs duty held at its current level
  • Excise duty exemptions enlarged to include agricultural storage and warehouse equipments
  • Basic customs duty reduced for specified agricultural machinery from 5% to 2.5%
  • Basic customs duty reduced on micro-irrigation equipment from 7.5% to 5%
  • De-oiled rice bran cake to be fully exempted from basic customs duty
  • Export duty of 10% to be levied on de-oiled rice bran cake’s export
  • Export duty for all types of iron ore enhanced and unified at 20% ad valorem
  • Full exemption from export duty to iron ore pellets
  • Rs 300 per 10 gram excise on gold bar from copper smelters
  • Rs 150 per 10 gram CVD on gold dore bars of upto 80% purity
  • Custom duty on specified gems, jewellery, machine cut to 5%
  • Levies 1% excise duty on branded jewellery
  • Extends 1% excise concession to water filters
  • Cut customs duty on yarn to 5% from 7.5%
  • 5% import duty on parts for DVD writers, combo drive
  • Import duty of 5% on inkjet and laserjet printers
  • Customs duty on cement industry raw materials - petcoke and gypsum - to be reduced to 2.5%
  • Cash dispensers fully exempt from basic customs duty
  • Imported batteries for electrical vehicles fully exempt from basic customs duty, to attract concessional rate of central excise duty
  • Concessional excise duty of 10% to vehicles based on fuel cell technology
  • Basic customs duty and special CVD exemption to critical parts/assemblies for Hybrid vehicles
  • Reduction in excise duty on kits for conversion of vehicles into Hybrid vehicles
  • Excise duty on LEDs reduced to 5% and special CVD being fully exempted
  • Basic customs duty on solar lantern reduced from 10 to 5%
  • Ship owners allowed duty free spare parts imports
  • Crude palm oil used in soap fully exempted
  • Pre-tanning chemicals, enzyme-based chemicals used in leather industry exempted
  • Bio-waste road making machines exempted
  • No excise duty on equipment for ultra mega power plants
  • Concessions to newspaper establishments for high speed printing presses extended to mailroom equipment
  • Some imported film colour rolls exempted from excise duty
  • No excise duty on select film rolls
  • Out right concession to factory-built ambulances from excise duty
  • Relief measures proposed for raw pistachio, bamboo for agarbatti, lactose for the manufacture of homoeopathic medicines, sanitary napkins, baby and adult diapers
  • Tax proposals to result in a net revenue gain of Rs 7,300 crore
  • Net revenue loss on account of taxes and duties will be Rs 200 crore
  • Net tax to Centre will be Rs 6,64,457 crore
  • Non-tax receipts pegged at Rs 1,25,435 crore
  • To retain factory tax rate at 10%
  • Stainless steel scrap exempted from import tax
  • Proposal to introduce self-assessment of customs duty wherein importers and exporters will themselves assess payment of duty
  • Long-term commitment to cut customs duty to ASEAN levels
arrow

Inflation
  • FY12 average inflation seen at 5%
  • Continued high food prices have been principal concern this year
  • Consumers denied the benefit of seasonal fall in prices despite improved availability of food items
  • Shortcomings in distribution and marketing systems
  • Food inflation 9.3% in Jan 2011 as against 20.2% in Feb 2010
  • See average inflation to lower in FY11
  • Must address structural concerns on inflation management
  • RBI measures to moderate inflation in coming months
  • Wholesale and retail price difference not acceptable
  • Onion, maize, poultry prices in FY10
arrow

Growth
  • Indian economy back to pre-crisis growth trajectory
  • Could have done better
  • Growth swift and broad based
  • Double digit growth in services
  • GDP growth to be 8.6% in FY 11
  • GDP growth to be around 9% in FY 12 (+/- 0.5%)
  • Services sector had grown at 9.6%
  • Exports grew at 24.1% in FY11
  • Imports grew at 11.6% in FY11
  • Don’t see resources as big problem, at least in short term
  • Implementation gap a key challenge
  • Much still needs to be done, especially in rural India
  • Need to ensure sustained private investment
  • Economy resilient to external shocks
  • Manufacturing share in GDP from 16% to 25% in next ten years
arrow

Subsidies
  • To move to direct transfer of cash subsidy on kerosene
  • To move to direct transfer of oil subsidy in phased manner
  • To move to direct transfer of fertilizer subsidy in phased manner
  • Aim direct cash subsidy for fertilizer, kerosene by March 2012
  • Direct transfer of cash subsidy for poor
  • To give Rs 140 bn more subsidy to oil companies
  • FY11 fertiliser subsidy seen Rs 550 bn
  • FY11 food subsidy seen Rs 606 bn
  • FY11 petroleum subsidy seen Rs 384 bn
  • FY12 petroleum subsidy seen Rs 236 bn
  • FY12 food subsidy seen Rs 605 bn
  • FY12 fertiliser subsidy seen Rs 500 bn
arrow

Infrastructure and Industry
  • Industry has grown at 8.1%
  • Allocation of Rs 2,14,000 crore for infrastructure in 2011-12
  • A comprehensive policy for further developing PPP projects
  • IIFCL to disburse Rs 20,000 cr by March 31, 2011 and Rs 25,000 cr by March 31, 2012
  • Tax free bonds of Rs 30,000 cr to be issued by govt undertakings during 2011-12
  • Share of manufacturing in GDP to grow from 16% to 25% over a period of 10 years
  • New manufacturing policy on the anvil
  • Thrust on greater transparency and accountability in procurement policy
  • Thrust on transparency in allocation, pricing and utilisation of natural resources
  • GoM to look into environmental concerns, especially those related to infrastructure and mining
  • National Mission for hybrid and electric vehicle to be launched
  • Financial assistance for metro projects in Delhi, Mumbai, Bengaluru, Kolkata and Chennai
  • Capital investment in fertiliser production to be included as an infrastructure sub-sector
  • Of 23 suggestions made by Task Force on Transaction Cost, 21 suggestions already implemented
  • Transaction cost of Rs 2,100 cr will thus be mitigated
  • Scheme for refund of taxes paid on services used for export of goods
  • Seven new mega clusters for leather products to be set up
  • Jodhpur to be included for the development of a handicraft mega cluster
  • Indian automobile market is the second fastest growing in the world
arrow

Agriculture
  • Agriculture has grown at 5.4%
  • Rs 7860 crore for farmer development program
  • FM proposes 15 mega food parks
  • To raise farm loan target to Rs 4.75 lakh crore in next FY
  • Existing interest subvention scheme on short-term farm loans at 7% interest to continue
  • To provide additional 3% interest benefit (effective rate 4%) to farmers who pay up farm loans on time
  • Credit flows to farmers raised from Rs 3.75 lakh crore to Rs 4.75 lakh crores
  • Allocation under Rashtriya Krishi Vikas Yojana to be raised from Rs 6,755 crore in the current year to Rs 7,860 crore
  • Propose to provide Rs 300 crore to boost output of pulses
  • To provide Rs 300 crore to increase palm oil output
  • To provide Rs 300 crore to raise coarse cereal output
  • Food grain stock in central pool at 47,500 metric tonnes
  • New storage capacity of 150,000 metric tonnes to be developed
  • Cold storage – 24 facilities have been sanctioned, 107 new facilities have been approved
  • Cold storage to be identified as infrastructure subsector
  • Propose to promote organic farming methods
  • Have to sustain farm productivity in long term
  • To give Rs 3 billion to up output of nutri-cereals
  • Rs 3 bn for animal-based protein production
  • Rs 3 bn to bring 60,000 hectare under palm oil plantation
  • To launch national protein mission with Rs 3 bn corpus
  • Rs 3 bn for production of higher millets
  • To provide Rs 3 bn to raise vegetable production
  • Rs 4 bn to eastern states for green revolution
  • 16.5 mn tn pulses output expected this year
  • To give Rs 3 bn to promote pulses, production, marketing
  • Removing bottlenecks in fruits, vegetables, poultry supply
  • Considering nutrient based urea subsidy policy
  • To set up additional 4 mln tonne foodgrain storage facilities by March 2012
  • Capital investment in fertiliser production to be considered as infrastructure sub-sector
arrow

Fiscal Health
  • FY12 fiscal deficit seen at 4.6% of GDP
  • FY12 fiscal deficit seen at Rs 4.12 tn
  • FY11 fiscal deficit revised to 5.1% of GDP
  • FY12 revenue deficit seen at 1.8% of GDP
  • FY11 revenue deficit seen at 2.3% of GDP
  • Fiscal deficit target 4.1% of GDP in FY13
  • Fiscal deficit target 3.5% of GDP in FY14
  • Aim fiscal deficit of 3% of state GDP y FY14
  • Current account deficit around FY09 is a concern
  • Current account gap a concern due to composition of FX flow
  • Counter-cyclical fiscal steps best bet vs external shock
  • To borrow Rs 100 bn in March
  • FY12 net market borrow target Rs 3.43 tn
  • FY12 MSS borrowing Rs 200 bn
  • FY12 cash draw down Rs 200 bn
  • FY12 short term borrowing Rs 150 bn
  • FY12 net market borrowing Rs 3.43 tn
  • FY12 gross market borrowing Rs 4.17 tn
  • FY11 gross market borrowing revised to Rs 4.47 tn
  • In addition, Rs 150 bn to be financed via T-bills in FY12
  • FY12 revenue from telecom licence fee seen Rs 296 bn
  • Concession to cell phone equipment manufacturing extended to March 2012
  • FY12 dividend from banks, RBI seen Rs 191 bn
  • FY12 dividend from PSUs seen Rs 235 bn
  • MSS ceiling for FY12 at Rs 500 bn
arrow

Fundamentals
  • Stronger fiscal consolidation needed
  • Development needs to be inclusive
  • Resources not a major concern in medium term
  • Quality of outcome needs to improve
  • 13th Finance Commission has worked out a fiscal consolidation roadmap
  • Combined states debt target of 23.4% of GDP
  • Public Debt Management of India Bill in next financial year
  • Budget 2011-12 as transition towards more transparent and result-oriented economic management
  • Some disinvestment decisions rescheduled
  • This FY current account deficit near previous year’s level
  • Govt to retain at least 51% ownership of state-run companies
  • Discussions on to further liberalise FDI policy
  • Fiscal consolidation targets have shown positive effect on macro-economic management
  • Amendment to Centre’s FRBM Act, 2003 to be introduced
  • Looking into extant classification of public expenditure between plan, non-plan, revenue and capital
  • National Food Security Bill to be introduced this year
arrow

Outlays
  • Total spend Rs 12.5 tn
  • Non-plan spend Rs 8.16 tn, up 10.9%
  • Rs 1.47 tn grants in aid
  • To provide Rs 10 bn for justice department
  • To provide Rs 1.64 tn for defence
  • To provide Rs 691.99 bn for defence capex
  • To provide Rs 98.9 bn for backward region grant fund
  • To provide Rs 1 bn for Jammu-Ladakh projects
  • To give Rs 80 bn for J&K development needs
  • To provide Rs 80 bn for Northeast, special states
  • To provide Rs 2 bn for clean energy fund
  • To provide Rs 520.57 bn for education sector
  • Allocation for STs hiked to Rs 2.44 bn
  • Allocation for Bharat Nirman up at Rs 580 bn
  • Allocation for social sector Rs 1.61 tn
  • Additional grant for National Skill Development Fund Rs 5 bn
  • Allocation for health Rs 267.60 bn, up 20%
  • To give PSU banks Rs 201.57 bn for Tier-I capital
  • To give Rs 60 bn to help PSU banks’ Tier-II capital
  • To give Rs 3 bn to states to roll out e-stamping in 3 yrs
arrow

Rural & Social Sector
  • To give Rs 30 bn to NABARD for handloom weavers
  • NABARD capital base to be strengthened with Rs 10,000 cr
  • Rural infrastructure development fund corpus to be raised to Rs 18,000 cr from the present Rs 16,000 cr
  • Rs 3,000 crore for Rural Housing Fund
  • Rs 10,000 croe for rural telephoney
  • NREGA wages to indexed to inflation
  • To create a self help development fund with a corpus of Rs 500 crore
  • Anganwadi workers’ salary increased from Rs 1500 to Rs 3000 per month
  • Anganwadi helpers wages doubled to Rs 1,500 per month
  • 2.2 million anganwadi workers to benefit from pay hike
  • Unorganised sector workers in hazardous industries to be covered under health scheme
  • To set up Mortgage Risk Guarantee Fund for rural housing
  • Over 2,000 population villages to have banks
  • Broadand connectivity to all villages in three years
  • Banks to cover 20,000 villages for opening accounts in FY11
  • Cut BPL pension scheme qualify age to 60 years from 65 years
  • RIDF corpus increased to create warehousing capacity
  • RIDF corpus Rs 180 bn in FY12 versus Rs 160 bn in FY11
  • Pension for over 80 year olds hiked to Rs 500 per month
  • To give one million unique identity cards per day from October
  • Minorities’ loan target up at 15% of priority loan for banks
  • Unorganised sector workers to benefit from health insurance plan
  • Govt contribution in old age pension raised to 5 yrs from 3 yrs
  • To enumerate caste in separate Census beginning June
arrow

Education
  • Rs 52057 cr for education, increase of 24% over the current year
  • Rs 21000 cr for sarva shika yojna up from Rs 15000 crore currently
  • National knowledge network will link 1500 institutes of higher learning by March 2012
  • National innovation Council under Sam Pitroda
  • Rs 50 cr each to Aligarh Muslim University centres coming up in Murshidabad and Malappuram
  • Rs 20 cr for Rajiv Gandhi National Youth Development Institute
  • Rs 10 cr for Delhi School of Economics
  • Rs 10 cr for Madras School of Economics
  • SC/STs students to get scholarship for class 9th and 10th
  • National Knowledge Network by 2013
  • New international award for Rs 1 cr in memory of Tagore
arrow

Banking & Finance
  • Financial sector reforms to move forward
  • Insurance Amendment Bill, LIC Bill and Pension Development Authority Bill in current session of Parliament
  • Banking Laws amendment Bill, SBI subsidiaries bill and BIFR Bill also in current session
  • India Microfinance Equity Fund of Rs 100 crore to be created with SIDBI
  • Appropriate regulatory framework to protect interest of small borrowers
  • Rs 5,000 cr to SIDBI for refinancing incremental lending
arrow

Green Initiatives
  • Rs 200 cr for Green India Mission from National Clean Energy Fund
  • Rs 200 cr to be allocated for Environmental Remediation Programmes
  • To provide Rs 200 cr for clean-up of important lakes and rivers other than Ganga
arrow
Post Your Comment
 Your comment(s) on this article
1
kjhxiano - 1
1
iqhvspsl - 1
1
hcamrbaa - 1
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xbujjdwg - 1
Very usefull one who liked to know and studies
SURENDRAN - New Delhi
Very usefull one who liked to know and studies
SURENDRAN - New Delhi
Hello Hiked
syed farooq nizam - khairatabad
Amend the budget and get the reward by serving and encouraging , Industry which would be attracted to the villages due to lower infrastructure and lower labor. It will provide sustainable rural livelihood, Stop the migration of villagers to the cities. Provide Income Generating Opportunities for Rural Youth.ncrease Productivity of Indian Farmer by introducing Sustainable Agriculture Practices.Create Community Infrastructure at Rural Level.Attract Industries in Rural India by providing low cost electricity during sunlight hours.Give the benefits to the private companies, so that lots of revenue can be avail along with the employment opportunities, where government cannaot provide due to lots of constraints.
Dharmujee Legal & Corporate Consultants - New Delhi - Bangalore
Please taget on solid waste management, which is very essential for the urban segment.
mahender singh - bangalore
Certainly this budget is not up to the mark, basically if you are targeting on the BPL and middle class people segment, you should have targeted on the basic amenities. Try to pouch the indian Black Money or Swiss amount, and avail the benefits to the investors for first 5 years and let us float the money in indian sub-continent.
mahender singh - Bangalore
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