Guest (Guest) 06 July 2009

BUDGET

FBT abolished, exemption limit for income tax raised by Rs 10k

Pranab Mukherjee proposed to raise by Rs 10,000 the exemption limit for women on income tax. For all others, Rs 10,000 up from Rs 1,50,000, says Mukherjee.

Other highlights of the Union Budget 2009:

• To further improve the efficiency of tax system, Pranab proposes to set up two authorities for advance ruling

• Share of direct taxes has increased to 56 per cent in 2008-09 over 41 per cent in 2007-08

• Direct Tax code to be released in 45 days along with discussion paper

• Growth Target at 9 pct per annum

• Increase investment in infrastructure: Pranab

• Ensure 4 pct growth for agriculture: FM

• Policy target to revive agriculture and industrial growth

• One Budget can't solve all issues: FM

• Infra investment to exceed 9% of GDP by 2014

• Significant hike in foreign capital

• Trade in goods and services doubled in 2008

• Govt took 3 stimulus packages to fight slowdown

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Guest (Guest) 06 July 2009

Union Budget 2009: Budget Highlights

Finance Minister Pranab Mukherjee has presented Budget 2009-10 in Parliament.

Beginning his Budget speech, Pranab first thanked the voters for reposing faith in the UPA government.

Here are the Budget highlights even as it’s presented in Parliament:

Total budget expenditure for 2009-10 will be Rs 10,28,032 cr

Plan expenditure, for both Centre and States, to go up by Rs 61,000 cr

Fiscal deficit in 2009-10 is proposed at 6.8 per cent of GDP

Higher public investment in infrastructure

Goods and Services Tax to be introduced from April 1, 2010

Defence outlay goes up

Total fiscal stimulus for 2008-09 amounts to Rs 1,86,000 cr

Strengthen the delivery mechanism for healthcare

Increase investment in infrastructure

Mandate for inclusive growth

Re-energise government and reinstitutionalise development

Challenege before UPA to return to 9 per cent growth

Aim to create 12 million jobs

Economic growth is a synergy of states and Centre

Integration of Indian economy with rest of the world

Significant hike in foreign capital

Trade in goods and services doubled in 2008

Govt took 3 stimulus packages to fight slowdown

Two worst quarters since September slowdown behind us

Signs of revival in the domestic industry

Fiscal stimulus gave economy a boost

New company IIFCL to look at infrastructure needs

IIFCL will also look at incremental lending by banks

GDP grew at 6.7 per cent

IIFCL will refinance 60% of commercial bank loans in PPP

JNNURM allocation hiked by 87 per cent

Hike infrastructure investment to over 9% of GDP by 2014

Fund allocation for urban poor accommodation is 3,973,000 cr

Hike in allocation for Mumbai flood management

Housing allocation hiked under Rajiv Awaas Yojana

JNNURM allocation hiked by 87 per cent

NHAI allocation up by 23 per cent

IIFCL will also look at incremental lending by banks

New company IIFCL to look at infrastructure needs

Additional budget allocation to farmers

FIIs have returned to India in last few months

Target for agriculture credit raised to Rs 3,25,000 cr in 2009-10

Pranab Mukherjee quotes Kautilya in Budget speech

Export Credit Guarantee scheme extended till March 2010

Incentives in interest rates to farmers to pay back

An expert group will look into petroleum product pricing

Saral-II forms to simplify taxation process

Move towards energy security via Integrated Energy Act

Raise threshold for non-promoter public listed companies

Banking network to be expanded

NREGA gave employment opportunities to more than 4.479 cr households

Stimulus for print media extended till December 2009

Rs 39,100 crore allocation for NREGA

Indira Awaas Yojna hiked by 63% to Rs 8,883 cr, up 144 per cent

Rs 100 cr one-time grant to expand banks in 'unbanking' areas

Work on National Food Security scheme for subsidised food

Families below the poverty line will be entitled to 25 kg of rice or wheat per month at Rs 3 per kg

Rs 100 crore for pilot scheme for development of SC-dominated villages.

Aim to bring 50 per cent of all rural women under women’s self-help groups in five years and link them to banks.

Aim to reduce female illiteracy by half. The scheme will focus on the minorities, SCs, STs and other marginalised groups.

One rank, one pension for ex-servicemen from July 1

Interest subsidy for home loans up to Rs 1 lakh

Rs 2,000 cr for rural housing fund under National Housing Bank

Commonwealth Games allocation hiked to Rs 16,300 cr

Rs 2,113 cr for IITs and NITs

Pension of non-commissioned officers to be hiked

Rs 25 cr each for AMU campuses in Murshidabad and Mallapuram

Rs 1,000 cr for Aila rehabilitation programme to West Bengal

Funds for GSI to enhance exploration of minerals

Guest (Guest) 06 July 2009

https://indiabudget.nic.in

Government of India

“Democracy is the art and science of mobilizing the

entire physical, economic and spiritual resources of various

sections of the people in the service of the common good of

all.”

Mahatma Gandhi

BUDGET 2009-10

July 6, 2009

https://indiabudget.nic.in

Key Features of Budget 2009-2010

CHALLENGES

! to lead economy to high GDP growth rate of 9 per cent per annum at the earliest

! to deepen and broaden the agenda for inclusive development

! to improve delivery mechanisms of the government.

OVERVIEW OF THE ECONOMY

! Growth rate of Gross Domestic Product dipped from an average of over 9 per cent

in the previous three fiscal years to 6.7 per cent during 2008-09.

! Whole sale price index rose to nearly 13 per cent in August, 2008 and had an

equally sharp fall to zero per cent in March, 2009.

! The structure of India’s economy changed over the last ten years with contribution

of the services sector to GDP at well over 50 per cent and share of merchandise

trade doubling to 38.9 per cent of GDP in 2008-09.

! Recognising economic recovery and growth as co-operative effort of the Central

and State Governments, meeting with Finance Ministers of States held as part of

preparation of the Budget. This is intended to become an annual feature.

TOWARDS ECONOMIC REVIVAL

Short-term Measures

! To counter the negative fallout of the global slowdown on the Indian economy,

Government responded by providing three focused fiscal stimulus packages in the

form of tax relief and increased expenditure on public projects along with RBI

taking a number of monetary easing and liquidity enhancing measures.

! Fiscal accommodation led to an increase in fiscal deficit from 2.7 per cent in

2007-08 to 6.2 per cent of GDP in 2008-09.

! The fiscal stimulus at 3.5 per cent of GDP at current market prices for 2008-09

amounts to Rs.1,86,000 crore.

! Measures taken by the Government were effective in arresting the fall in GDP

growth rate in 2008-09. 6.7 per cent growth rate recorded in 2008-09.

Infrastructure Development

! IIFCL to evolve a Takeout financing scheme in consultation with banks to facilitate

incremental lending to infrastructure sector.

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! IIFCL to refinance 60 per cent of commercial bank loans for PPP projects in critical

sectors over the next fifteen to eighteen months. IIFCL and Banks are now in a

position to support projects involving total investment of Rs.1,00,000 crore.

Highway and Railways

! Allocation to National Highways Authority of India (NHAI) for the National

Highway Development Programme (NHDP) increased by 23 per cent over

B.E. 2008-09 in B.E. 2009-10 and allocation for Railways increased from Rs.10,800

crore in Interim B.E. 2009-10 to Rs.15,800 crore in B.E. 2009-10.

Urban Infrastructure

! Allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM)

stepped up by 87 per cent to Rs.12,887 crore in B.E. 2009-10 over B.E. 2008-09.

Allocation for housing and provision of basic amenities to urban poor enhanced to

Rs.3,973 crore in B.E. 2009-10. This includes provision for Rajiv Awas Yojana

(RAY), a new scheme announced.

Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA)

! Provision for the project BRIMSTOWA initiated in 2007 and funded through Central

Assistance to address the problem of flooding in Mumbai, enhanced from Rs.200

crore in Interim B.E. 2009-10 to Rs.500 crore in B.E. 2009-10 to expedite

completion of the project.

Power

! Allocation under Accelerated Power Development and Reform Programme

(APDRP) increased by 160 per cent to Rs.2,080 crore in B.E. 2009-10 over

B.E. 2008-09.

Gas

! Blueprint to be developed for long distance gas pipelines leading to a National Gas

Grid to facilitate transportation of gas across the length and breadth of the country.

Assam Gas Cracker Project

! Outlay for Assam Gas Cracker Project stepped up suitably in B.E. 2009-10.

AGRICULTURE DEVELOPMENT

! Target for agriculture credit flow set at Rs.3,25,000 crore for the year 2009-10.

In 2008-09 agriculture credit flow was at Rs.2,87,000 crore.

! Interest subvention scheme for short term crop loans up to Rs.3 lakh per farmer at

the interest rate of 7 per cent per annum to be continued. Additional subvention of

1 per cent to be paid from this year, as incentive to those farmers who repay short

term crop loans on schedule. Additional allocation of Rs.411 crore over Interim

B.E. 2009-10 made for this.

Debt Relief for Farmers

! Time given to the farmers having more than two hectares of land to pay 75 per cent

of their overdues under Debt Waiver and Debt Relief Scheme extended from 30th

June, 2009 to 31st December, 2009.

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! Taskforce to be set up to examine the issue of debt taken by a large number of

farmers in some regions of Maharashtra from private money lenders who were not

covered by the loan waiver scheme announced last year.

Accelerated Irrigation Benefit Programme

! Allocation under Accelerated Irrigation Benefit Programme (AIBP) increased by

75 per cent over B.E. 2008-09.

! Allocation under Rashtriya Krishi Vikas Yojana (RKVY) stepped up by 30 per

cent in B.E. 2009-10 over B.E. 2008-09.

RESTORING EXPORT GROWTH

! Adjustment assistance scheme to provide enhanced Export Credit and Guarantee

Corporation (ECGC) cover at 95 per cent to badly hit sectors extended upto

March 2010.

! Allocation for Market Development Assistance Scheme enhanced to Rs.124 crore

in B.E. 2009-10.

! Interest subvention of 2 per cent on pre-shipment credit for seven employment

oriented export sectors extended beyond the current deadline of September 30,

2009 to March 31, 2010.

! To facilitate flow of credit at reasonable rates, Rs.4,000 crore provided as special

fund out of Rural Infrastructure Development Fund (RIDF) to Small Industries

Development Bank of India (SIDBI). This will incentivise Banks and State Finance

Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing

50 per cent of incremental lending to MSEs during the current financial year.

! Stimulus package for print media comprising waiver of 15 per cent agency

commission on DAVP advertisements and 10 per cent increase in DAVP rates to be

paid as a special relief subject to documentary proof of loss of revenue in nongovernmental

advertisements, extended from 30th June, 2009 to 31st December, 2009.

MEDIUM-TERM SUSTAINABILITY

! To bring the fiscal deficit under control, institutional reform measures to be initiated

during the current year itself.

Fertilizer Subsidy

! To ensure balanced application of fertilizers for increasing agricultural productivity,

Government intends to move towards a nutrient based subsidy regime so as to

cover larger basket of fertilizers with innovative fertilizer products available in the

market at reasonable prices.

! It is intended to move to a system of direct transfer of subsidy to the farmers in due

course.

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Petroleum and Diesel pricing Policy

! With almost three quarters of our oil consumption met through imports, it is

important to recognise that domestic prices of petrol and diesel are broadly in sync

with global prices. Government to set up an expert group to advise on a viable and

sustainable system of pricing petroleum products.

Taxation

! SARAL – II forms to be introduced early.

People’s ownership of PSUs

! While retaining at least 51 per cent Government equity in Public Sector

Undertakings, people’s participation in disinvestment programmes to be encouraged.

! Public Sector Enterprises such as banks and insurance companies to remain in

public sector and will be given full support including capital infusion to grow and

remain competitive.

Financial Sector

! The threshold for non-promoter public shareholding for all listed companies to be

raised in a phased manner.

! Scheduled commercial banks allowed to set up off-site ATMs without prior approval

subject to reporting.

! A sub-committee of State Level Bankers Committee (SLBC) to identify and

formulate an action plan for providing banking facilities in under-banked/unbanked

areas in the next three years. Rs.100 crore set aside as one-time grant in-aid to

ensure provision of at least one centre/Point of Sales (POS) for banking services in

each of the unbanked blocks.

! Government has established Competition Commission of India, an autonomous

regulatory body. An Appellate body headed by a retired judge of Supreme Court

also constituted.

TOWARDS INCLUSIVE DEVELOPMENT

National Rural Employment Guarantee Scheme (NREGS)

! Allocation under NREGS increased by 144 per cent to Rs.39,100 crore in

B.E. 2009-10 over B.E. 2008-09.

! To increase productivity of assets and resources under NREGA, convergence with

other schemes relating to agriculture, forests, water resources, land resources, rural

roads initiated. In the first stage 115 pilot districts selected for convergence.

National Food Security Act

! National Food Security Act to be brought in to ensure entitlement of 25 kilo of rice

or wheat per month at Rs.3 per kilo to every family living below the poverty line in

rural or urban areas. Food Security Bill to be put on the website of the Department

of Food and Public Distribution for public debate.

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Bharat Nirman

! Allocation for Bharat Nirman increased by 45 per cent in 2009-10 over

B.E. 2008-09. Allocations under Pradhan Mantri Gram Sadak Yojana (PMGSY)

increased by 59 per cent over B.E. 2008-09 to Rs.12,000 crore in B.E. 2009-10.

Under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), allocation increased

by 27 per cent to Rs.7,000 crore.

! Allocation under Indira Awaas Yojana (IAY) increased by 63 per cent to Rs.8,800

crore in B.E. 2009-10. Allocation of Rs.2,000 crore made for Rural Housing Fund

(RHF) in National Housing Bank (NHB) to boost the resource base of NHB for

refinance operations in rural housing sector.

Pradhan Mantri Adarsh Gram Yojana (PMAGY)

! New scheme Pradhan Mantri Adarsh Gram Yojana (PMAGY) with an allocation

of Rs.100 crore launched on pilot basis for integrated development of 1000 villages

having population of scheduled castes above 50 per cent.

EMPOWERMENT OF WEAKER SECTIONS

! The Swarna Jayanti Gram Swarozgar Yojana (SGSY) restructured as National Rural

Livelihood Mission to make it universal in application, focused in approach and

time bound for poverty eradication by 2014-15. In addition to capital subsidy at

enhanced rate, interest subsidy to poor households to be provided for loans upto

Rs.1 lakh from banks.

! There are over 22 lakh Women’s Self Help Groups linked with banks. Reach of

SHGs to be widened to enrol at least 50 per cent of all rural women in India as

members of SHGs over the next five years.

! Corpus of Rashtriya Mahila Kosh to be increased from Rs.100 crore to Rs.500

crore over the next few years.

Female Literacy

! National Mission for Female Literacy to be launched with focus on minorities, SC,

ST and other marginalized groups with the aim to reduce level of female illiteracy

by half in three years.

Integrated Child Development Services (ICDS)

! All ICD Services to be extended to every child under the age of six by

March, 2012.

Student Loans to Weaker Sections

! To enable students from economically weaker sections to access higher education,

a scheme to provide full interest subsidy during the period of moratorium introduced

to cover loans taken from scheduled banks to pursue any of the approved courses

of study in technical and professional streams from recoganised institutions in India.

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Welfare of Minorities

! Plan outlay of Ministry of Minority Affairs enhanced from Rs.1,000 crore in B.E.

2008-09 to Rs.1,740 crore in 2009-10 registering an increase of 74 per cent. This

includes Rs.990 crore for Multi-Sectoral Development Programme for Minorities,

Grants-in-aid to Maulana Azad Education Foundation, National Minorities Development

and Finance Corporation and pre and post matric scholarship for minorities.

! Allocations made for the new schemes of National Fellowship for Students from

minority community and Grants-in-aid to Central Wakf Council for computerization

of records of State Wakf Boards.

! Rs.25 crore each allocated for establishing new campuses at Murshidabad in West

Bengal and Malappuram in Kerala by Aligarh Muslim University.

Welfare of workers in the unorganized sector

! Action initiated to ensure implementation of social security schemes for occupation

like weavers, fishermen and women, toddy tappers, leather and handicraft workers,

plantation labour, construction labour, mine workers, bidi workers and rickshaw

pullers. Necessary financial allocation will be made for these schemes.

Employment Exchanges

! New project for modernization of Employment Exchange in public private

partnership to be launched so that a job seeker can register on line from anywhere

and approach any employment exchange.

Handloom

! One handloom mega cluster each in West Bengal and Tamil Nadu and one

powerloom mega cluster in Rajasthan to be set up. New mega clusters for carpets

to be also set up in Srinagar (J&K) and Mirzapur (UP).

Health

! Allocation under National Rural Health Mission (NRHM) increased by Rs.2,057

crore over Interim B.E. 2009-10 of Rs.12,070 crore.

! All BPL families to be covered under Rashtriya Swasthya Bima Yojana (RSBY).

Allocation under RSBY increased by 40 per cent over previous allocation to Rs.350

crore in B.E. 2009-10.

Environment and climate change

! In furtherance to National Action Plan on Climate Change, eight national missions

representing a multi-pronged long-term and integrated approach to be launched.

! National Ganga River Basin Authority set up. Budgetary allocation under National

River and Lake Conservation Plans increased from Rs.335 crore in B.E. 2008-09

to Rs.562 crore in B.E. 2009-10.

! Special one-time grant of Rs.100 crore given to Indian Council of Forestry Research

and Education, Dehradun.

! Rs.15 crore each to be allocated to Botanical Survey of India and Zoological Survey of

India. An additional amount of Rs.15 crore to be allocated for Geological Survey of India.

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TOWARDS BUILDING ACOUNTABLE INSTITUTIONS

Improving Delivery of Public Services

! Unique Identification Authority of India (UIDAI) to set up online data base with

identity and biometric details of Indian residents and provide enrolment and

verification services across country. Provision of Rs.120 crore made for this in the

Budget.

! First set of unique identity number to be rolled out in 12 to 18 months.

National Security

! Additional amount of Rs.430 crore provided over Interim B.E. 2009-10

to modernise police machinery in the States.

! Additional amount of Rs.2,284 crore proposed over Interim B.E. 2009-10 for

construction of fences, roads, flood lights on the international borders.

! Programme for housing to create 1 lakh dwelling units for Central Para-military

Forces personnel to be launched through innovative financing model.

One Rank One Pension for Ex-servicemen (OROP)

! Based on the recommendation of the Committee headed by the Cabinet Secretary

on OROP, government has decided to substantially improve the pension of pre

01.01.2006 defence pensioners below officer rank and bring pre 10.10.1997

pensioners on par with post 10.10.1997 pensioners. The decisions to be implemented

from 01st July, 2009 and will cost more than Rs.2,100 crore annually.

Education

! Provision for the scheme ‘Mission in Education through ICT’ substantially increased

to Rs.900 crore and the provision for setting up and up-gradation of Polytechnics

under the Skill Development Mission enhanced to Rs.495 crore.

! Rs.827 crore allocated for opening one Central University in each uncovered State.

! Rs.2,113 crore allocated for IITs and NITs which includes a provision of Rs.450

crore for new IITs and NITs.

! The overall Plan budget for higher education is to be increased by Rs.2,000 crore

over Interim B.E. 2009-10.

! Rs.50 crore allocated for Punjab University, Chandigarh. Plan allocation for

Chandigarh to be suitably enhanced during the year to provide better infrastructure

to the people of Chandigarh.

Commonwealth Games, 2010

! Outlays to be stepped up from Rs.2,112 crore in Interim Budget to Rs.3,472 crore

in regular Budget 2009-10.

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Srilankan Tamils

! Rs.500 crore allocated for rehabilitation of internally displaced persons and

reconstruction of the northern and eastern areas of Sri Lanka. Ministry of External

Affairs to work closely with the Sri Lankan Government.

Cyclone Aila

! Rs.1,000 crore allocated for programme for rebuilding the damaged infrastructure

caused due to cyclone Aila in West Bengal.

BUDGET ESTIMATE 2009-10

! Budget Estimates provide for a total expenditure of Rs.10,20,838 crore consisting

of Rs.6,95,689 crore under Non-plan and Rs.3,25,149 crore under Plan registering

an increase of 37 per cent in Non-plan expenditure and 34 per cent in Plan

expenditure over B.E. 2008-09.

! Total expenditure in B.E. 2009-10 increased by 36 per cent over B.E. 2008-09.

! Increase in Non-plan expenditure is mainly due to implementation of Sixth Central

Pay Commission recommendations, increased food subsidy and higher interest

payment arising out of larger fiscal deficit in 2008-09.

! Interest payments estimated at Rs.2,25,511 crore constituting about 36 per cent of

Non-plan revenue expenditure in B.E. 2009-10.

! Subsidies up from Rs.71,431 crore in B.E. 2008-09 to Rs.1,11,276 crore in B.E.

2009-10.

! Outlay for Defence up from Rs.1,05,600 crore in B.E. 2008-09 to Rs.1,41,703

crore in B.E. 2009-10.

! Gross Budgetary Support for Annual Plan 2009-10 enhanced by Rs.40,000 crore

over Interim B.E. 2009-10.

! State Governments to be permitted to borrow additional 0.5 per cent of their GSDP

by relaxing the fiscal deficit target under FRBM from 3.5 per cent to 4 per cent of

their GSDP. This will enable the States to borrow Rs.21,000 crore additionally

over Interim B.E. 2009-10.

! Gross tax receipts budgeted at Rs.6,41,079 crore in B.E. 2009-10 compared to

Rs.6,87,715 crore in B.E. 2008-09.

! Non-tax revenue receipts estimated at Rs.1,40,279 crore in B.E. 2009-10 compared

to Rs.95,785 crore in B.E. 2008-09.

! Revenue deficit projected at 4.8 per cent of GDP in B.E. 2009-10 compared to 1

per cent in B.E. 2008-09 and 4.6 per cent as per provisional accounts of 2008-09.

! Fiscal deficit as a percentage of GDP is projected at 6.8 per cent compared to 2.5

per cent in B.E. 2008-09 and 6.2 per cent as per provisional accounts 2008-09.

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TAX PROPOSALS

! Tax reform, like all reforms, is a process and not an event. Thrust of reforms has

been to improve the efficiency and equity of our tax system. This is sought to be

achieved by eliminating distortions in the tax structure, introducing moderate levels

of taxation and expanding the base and accompanied by requisite re-engineering

of key business processes coupled with automation.

! Recent initiative, on direct taxes side, of the setting up of a Centralized Processing

Centre (CPC) at Bengaluru where all electronically filed returns, and paper returns

filed in entire Karnataka, will be processed.

! Centre’s Tax-GDP ratio has increased to 11.5 per cent in 2008-09 from a low of 9.2

per cent in 2003-04. Share of direct taxes in the Centre’s tax revenues has increased

to 56 percent in 2008-09 from 41 percent in 2003-04, reflecting sharp improvement

in equity of our tax system.

! Structural changes in direct taxes to be pursued by releasing the new Direct Taxes

Code within the next 45 days and in indirect taxes by accelerating the process for

the smooth introduction of the Goods and Services Tax (GST) with effect from 1st

April, 2010.

! The Direct Taxes Code, along with a Discussion Paper, to be released to the public

for debate. The Direct Taxes Code Bill will be finalised for introduction in Lok

Sabha sometime during the Winter Session based on the inputs received.

! The Authorities for Advance Rulings on Direct and Indirect Taxes to be merged by

amending the relevant Acts.

! Agreement has been reached on the basic structure of GST in keeping with the

principles of fiscal federalism enshrined in the Constitution. Broad contour of the

GST Model envisages dual GST comprising of a Central GST and a State GST.

The Centre and the States will each legislate, levy and administer the Central GST

and State GST, respectively.

Direct Taxes

! No changes made in the Corporate Tax rates.

! Exemption limit in personal income tax raised by Rs.15,000 from Rs.2.25 lakh to

Rs.2.40 lakh for senior citizens; by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh

for women tax payers; and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all

other categories of individual taxpayers.

! Deduction under section 80-DD in respect of maintenance, including medical

treatment, of a dependent who is a person with severe disability being raised from

the present limit of Rs.75,000 to Rs.1 lakh.

! Surcharge on various direct taxes to be phased out; in the first instance, by

eliminating the surcharge of 10 percent on personal income-tax.

! Sun-set clauses for deduction in respect of export profits under sections 10A and

10B of the Income-tax Act being extended by one more year i.e. for the financial

year 2010-11.

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! Fringe Benefit Tax on the value of certain fringe benefits provided by employers to

their employees to be abolished.

! Scope of provisions relating to weighted deduction of 150% on expenditure incurred

on in-house R&D to all manufacturing businesses being extended except for a

small negative list.

! Businesses to be incentivised by providing investment linked tax exemptions

rather than profit linked exemptions. Investment linked tax incentives to be

provided, to begin with, to the businesses of setting up and operating ‘cold chain’,

warehousing facilities for storing agricultural produce and the business of laying

and operating cross country natural gas or crude or petroleum oil pipeline network

for distribution on common carrier principle. Under this method, all capital

expenditure, other than expenditure on land, goodwill and financial instruments

to be fully allowable as deduction.

! Minimum Alternate Tax (MAT) to be increased to 15 per cent of book profits from

10 per cent. The period allowed to carry forward the tax credit under MAT to be

extended from seven years to ten years.

! New Pension System (NPS) to continue to be subjected to the Exempt-Exempt-

Taxed (EET) method of tax treatment of savings. Income of the NPS Trust to be

exempted from income tax and any dividend paid to this Trust from Dividend

Distribution Tax. All purchase and sale of equity shares and derivatives by the

NPS Trust also to be exempt from the Securities Transaction Tax. Self employed

persons to be enabled to participate in the NPS and to avail of the tax benefits

available thereto.

! Alternative dispute resolution mechanism to be created within the Income Tax

Department for the resolution of transfer pricing disputes. Central Board of Direct

Taxes (CBDT) to be empowered to formulate ‘safe harbour’ rules to reduce the

impact of judgemental errors in determining transfer price in international

transactions.

! Commodity Transaction Tax (CTT) to be abolished.

! Donations to electoral trusts to be allowed as a 100 percent deduction in the

computation of the income of the donor.

! Deduction under section 80E of the Income-tax Act allowed in respect of interest

on loans taken for pursuing higher education in specified fields of study to be

extended to cover all fields of study, including vocational studies, pursued after

completion of schooling.

! To mitigate the practical difficulties faced by charitable organisations, anonymous

donations received by charitable organisations to the extent of 5 percent of their

total income or a sum of Rs.1 lakh, whichever is higher, not to be taxed.

! Scope of presumptive taxation to be extended to all small businesses with a turnover

upto Rs. 40 lakh. All such taxpayers to have option to declare their income from

business at the rate of 8 percent of their turnover and simultaneously enjoy exemption

from the compliance burden of maintaining books of accounts. As a procedural

simplification, they are also to be exempted from advance tax and allowed to pay

their entire tax liability from business at the time of filing their return. This new

scheme to come into effect from the financial year 2010-11.

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! Tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto

available in respect of profits arising from the commercial production or refining

of mineral oil, to be extended to natural gas. This tax benefit to be available to

undertakings in respect of profits derived from the commercial production of mineral

oil and natural gas from oil and gas blocks which are awarded under the

NELP-VIII round of bidding. The section to be retrospectively amended to provide

that “undertaking” for the purposes of section 80-IB(9) will mean all blocks awarded

in any single contract.

Indirect Taxes

! Proposals on indirect taxes to seek to achieve stable framework by maintaining the

overall rate structure for customs and central excise duties as well as service tax.

Customs duties

! Customs duty of 5% to be imposed on Set Top Box for television broadcasting.

! Customs duty on LCD Panels for manufacture of LCD televisions to be reduced

from 10% to 5%.

! Full exemption from 4% special CVD on parts for manufacture of mobile phones

and accessories to be reintroduced for one year.

! List of specified raw materials/inputs imported by manufacturer-exporters of sports

goods which are exempt from customs duty, subject to specified conditions, to be

expanded by including five additional items.

! List of specified raw materials and equipment imported by manufacturer-exporters

of leather goods, textile products and footwear industry which are fully exempt

from customs duty, subject to specified conditions, to be expanded.

! Customs duty on unworked corals to be reduced from 5% to Nil.

! Customs duty on 10 specified life saving drugs/vaccine and their bulk drugs to be

reduced from 10% to 5% with Nil CVD (by way of excise duty exemption).

! Customs duty on specified heart devices, namely artificial heart and PDA/ASD

occlusion device, to be reduced from 7.5% to 5% with Nil CVD (by way of excise

duty exemption).

! Customs duty on permanent magnets for PM synchronous generator above 500

KW used in wind operated electricity generators to be reduced from 7.5% to 5%.

! Customs duty on bio-diesel to be reduced from 7.5% to 2.5%.

! Concessional customs duty of 5% on specified machinery for tea, coffee and rubber

plantations to be reintroduced for one year, upto 06.07.2010.

! Customs duty on ‘mechanical harvester’ for coffee plantation to be reduced from

7.5% to 5%. CVD on such harvesters has also been reduced from 8% to nil, by

way of excise duty exemption.

https://indiabudget.nic.in

! Customs duty on serially numbered gold bars (other than tola bars) and gold coins

to be increased from Rs.100 per 10 gram to Rs.200 per 10 gram. Customs duty on

other forms of gold to be increased from Rs.250 per 10 gram to Rs.500 per 10

gram. Customs duty on silver to be increased from Rs.500 per Kg. to Rs.1000 per

Kg. These increases also to be applicable when gold and silver (including ornaments)

are imported as personal baggage.

! Customs duty on cotton waste to be reduced from 15% to 10%.

! Customs duty on wool waste to be reduced from 15% to 10%.

! Customs duty on rock phosphate to be reduced from 5% to 2%.

! CVD exemption on Aerial Passenger Ropeway Projects to be withdrawn. Such

projects will now attract applicable CVD.

! Customs duty exemption on concrete batching plants of capacity 50 cum per hour

or more to be withdrawn. Such plants will now attract customs duty of 7.5%.

! On packaged or canned software, CVD exemption to be provided on the portion of

the value which represents the consideration for transfer of the right to use such

software, subject to specified conditions.

! Customs duty on inflatable rafts, snow-skis, water skis, surf-boats, sail-boards and

other water sports equipment to be fully exempted.

Central excise duties

! Excise duty rate on items currently attracting 4% to be raised to 8% with following

major exceptions:

• Specified food items including biscuits, sharbats, cakes and pastries

• Drugs and pharmaceutical products falling under Chapter 30

• Medical equipment

• Certain varieties of paper, paperboard and articles thereof

• Paraxylene

• Power driven pumps for handling water

• Footwear of RSP exceeding Rs.250 but not exceeding Rs.750 per pair

• Pressure cookers

• Vacuum and gas filled bulbs of RSP not exceeding Rs.20 per bulb

• Compact Fluorescent Lamps

• Cars for physically handicapped

! Specific component of excise duty applicable to large cars/utility vehicles of engine

capacity 2000 cc and above to be reduced from Rs. 20,000/- per vehicle to Rs.15,000

per vehicle.

https://indiabudget.nic.in

! Excise duty on petrol driven trucks/lorries to be reduced from 20% to 8%. Excise

duty on chassis of such trucks/lorries to be reduced from ‘20% + Rs.10000’ to

‘8% + Rs.10000’.

! Excise duty on Special Boiling Point spirits to be reduced to 14%.

! Excise duty on naphtha to be reduced to 14%.

! Duty paid High Speed Diesel blended with upto 20% bio-diesel to be fully exempted

from excise duties.

! The ad valorem component of excise duty of 6% on petrol intended for sale with a

brand name to be converted into a specific rate. Consequently, such petrol would

now attract total excise duty of Rs.14.50 per litre instead of ‘6% + Rs.13 per litre’.

! The ad valorem component of excise duty of 6% on diesel intended for sale with a

brand name to be converted into a specific rate. Consequently, such diesel would

now attract total excise duty of Rs.4.75 per litre instead of ‘6% + Rs.3.25 per litre’.

! Excise duty on manmade fibre and yarn to be increased from 4% to 8%.

! Excise duty on PTA and DMT to be increased from 4% to 8%.

! Excise duty on polyester chips to be increased from 4% to 8%.

! Excise duty on acrylonitrile to be increased from 4% to 8%.

! The scheme of optional excise duty of 4% for pure cotton to be restored.

! Excise duty for man-made and natural fibres other than pure cotton, beyond the

fibre and yarn stage, to be increased from 4% to 8% under the existing optional

scheme.

! An optional excise duty exemption to be provided to tops of manmade fibre

manufactured from duty paid tow at par with tops manufactured from duty paid

staple fibre.

! Suitable adjustments to be made in the rates of duty applicable to DTA clearances

of textile goods made by Export Oriented Units using indigenous raw materials/

inputs for manufacture of such goods.

! Full exemption from excise duty to be provided on goods of Chapter 68 of Central

Excise Tariff manufactured at the site of construction for use in construction work

at such site.

! Excise duty exemption on ‘recorded smart cards’ and ‘recorded proximity cards

and tags’ to be made optional. Manufacturers have the option to pay the applicable

excise duty and avail the credit of duty paid on inputs.

! EVA compound manufactured on job work for further use in manufacture of

footwear to be exempted from excise duty.

! Benefit of SSI exemption scheme to be extended to printed laminated rolls bearing

the brand name of others by excluding this item from the purview of the brand

name restriction.

https://indiabudget.nic.in

! On packaged or canned software, excise duty exemption to be provided on the

portion of the value which represents the consideration for transfer of the right to

use such software, subject to specified conditions.

! Excise duty on branded articles of jewellery to be reduced from 2% to Nil.

Service tax

! Service Tax to be imposed on the following services:

• Service provided in relation to transport of goods by rail

• Service provided in relation to transport of coastal cargo; and goods through

inland water including National Waterways

• Advice, consultancy or technical assistance provided in the field of law (this

tax would not be applicable in case the service provider or service receiver is

an individual).

• Cosmetic and plastic surgery service

! Exemption from service tax being provided to inter-State or intra-State transportation

of passengers in a vehicle bearing ‘Contract Carriage Permit’ with specified

conditions.

! Exemption from service tax (leviable under Banking and other financial services

or under Foreign exchange broking service) being provided to inter-bank purchase

and sale of foreign currency between scheduled banks.

! Two taxable services, namely, ‘Transport of goods through road’ and ‘Commission

paid to foreign agents’ to be exempted from the levy of service tax, if the exporter

is liable to pay service tax on reverse charge basis. However, present cap of 10%

on commission agency charges is retained. Thus there would be no need for the

exporter to first pay the tax and later claim refund in respect of these services.

! For other services received by exporters, service tax exemption to be operated

through the existing refund mechanism based on self-certification of the documents

where such refund is below 0.25 per cent of FOB value, and certification of

documents by a Chartered Accountant for value of refund exceeding the above

limit.

! Export Promotion Councils and the Federation of Indian Export Organizations

(FIEO) to be exempt from service tax on the membership and other fees collected

by them till 31st March 2010.

Tax proposals on direct taxes to be revenue neutral. On indirect taxes, estimated net gain

to be Rs.2,000 crore for a full year.

Guest (Guest) 06 July 2009

Budget 2009-10: IT exemption limit increased, corporate tax rate unchanged

With a view to providing interim relief to small and marginal taxpayers and senior citizens, the budget 2009-10 has increased the

personal income tax exemption limit by Rs 15,000 from Rs 2.25 lakh to Rs 2.40 lakh for senior citizens. Similarly it has aslo raised the exemption limit by Rs 10,000 from Rs 1.80 lakh to Rs 1.90 lakh for women tax payers and by Rs 10,000 from Rs 1.50 lakh to Rs 1.60 lakh for all other categories of individual taxpayers. Further, it has also increased the deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability to Rs 1 lakh from the present limit of Rs 75,000.

In the past, surcharges on direct taxes have generally been levied to meet the revenue needs arising from natural calamities. The Government has set up the National Calamity Contingency Fund to build up resources to meet emergency situations. As a corollary, surcharge on direct taxes should be removed. However, this has to be balanced with the revenue needs of the Government. Therefore, the budget has phased out the surcharge on various direct taxes by eliminating the surcharge of 10 per cent on personal income tax.

There is no change in corporate taxation.

Deduction in respect of export profits is available under sections 10A and 10B of the Income-tax Act. The deduction under these sections would not be available beyond the financial year 2009-2010. In order to tide over the slowdown in exports, I propose to extend the sun-set clauses for these tax holidays by one more year i.e. for the financial year 2010-11.

The budget has aslo abolished the Fringe Benefit Tax that wa sintroduced in the Finance Act, 2005 on the value of certain fringe benefits provided by employers to their employees.

Guest (Guest) 06 July 2009

Budget 2009-10 lays major emphasis on infrastructure

The budget has laid major emphasis on infrastructure development. The government proposes to ensure that IIFCL is given greater

flexibility to aggressively fulfil its mandate.

To ensure that infrastructure projects do not face financing difficulties arising from the current downturn, the Government has decided that IIFCL will refinance 60 per cent of commercial bank loans for PPP projects in critical sectors over the next fifteen to eighteen months. The IIFCL and Banks are now in a position to support projects involving a total investment of Rs.100 thousand crore in infrastructure. Combined with the steps we are taking to increase public investment in infrastructure, this will provide a big boost to such investment.

Highway and Railways

The allocation during the current year to National Highways Authority of India (NHAI) for the National Highways Development Programme (NHDP) is being stepped up by 23 per cent over the 2008-09 (BE). Allocation for the Railways has been increased from Rs.10,800 crore made in the Interim Budget for 2009-10 to Rs.15,800 crore.

Urban Infrastructure

The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has been an important instrument for refocusing the attention of the State governments on the importance of urban infrastructure. In recognition of the role of JNNURM, the allocation for this scheme is being stepped up by 87 per cent to Rs.12,887 crore in the current budget. To improve the lot of the urban poor, allocation has been enhanced for housing and provision of basic amenities to urban poor to Rs.3,973 crore in the current year’s budget. This includes the provision for Rajiv Awas Yojana (RAY), a new scheme announced in the address of the President of India. This scheme, the parameters of which are being worked out, is intended to make the country slum free in the five year period.

Guest (Guest) 06 July 2009

Budget allocates Rs.39,000 crore for rural jobs scheme

The government Monday hiked the allocation for its flagship rural job scheme by 144 percent to Rs.39,000

crores.

"I am allocating Rs.39,000 crores for NREGA (National Rural Employment Guarantee Act). This is a hike of 144 percent," Finance Minster Pranab Mukherjee said while presenting the budget for fiscal 2009-10 in the Lok Sabha.

"NREGA is a magnificent success. The government is committed to providing a wage of Rs.100 a day to rural households in convergence with other schemes for rural areas. One hundred and fifteen pilot districts have been identified for these convergence schemes. The details will be given by the minister for rural development," Mukherjee added.

The finance minister said the government would soon publicise a draft food security (guarantee) bill and seek comments from everybody before finalising the bill. In its election manifesto earlier this year, the Congress had promised 25 kg of rice or wheat a month at Rs.3 per kg to families below the poverty line.

Guest (Guest) 06 July 2009

India Inc welcomes Budget with reservations

India Inc on Monday welcomed the focus on reviving economic growth to 9 per cent as also the indications for bold tax reforms, but

expressed regret that the Minimum Alternate Tax was raised and Security Transaction Tax was let to continue.

"Finance Minister Pranab Mukherjee's efforts to revive the economy back to nine per cent (growth) is in the right direction," ICICI Bank MD and CEO Chanda Kochhar said today.

"I am happy on behalf of the whole industry that Fringe Benefit Tax has been abolished, but I am a little bit unhappy about MAT," top industrialist Rahul Bajaj said.

The MAT rate was hiked to 15 per cent from 10 per cent. Kochhar felt that the Securities Transaction Tax too should have caught the government's attention.

"Health care sector has been ignored. We had been expecting a boost for the health care infrastructure, but nothing has been said. Budget was mute. We are disappointed," Shivinder Mohan Singh of Fortis said.

The stock market tanked 700 points mid-way during Mukherjee's Budget speech, but recovered partially at 1315 hrs.

The industry also welcomed restoration of seven year tax break on natural gas production, saying it will help attract foreign bidders for NELP-VIII.

"This was always there. It is not a new benefit. We are very happy about the clarification as it ends the ambiguity," said P M S Prasad, President and CEO (Oil & Gas), RIL.

Guest (Guest) 06 July 2009

Fiscal deficit should be 3% of GDP

TVS Motors chairman & managing director V Srinivasan is of the opinion that Budget 2010 should target subsidies in a better way.

Mr Srinivasan said that subsidies will have to come down.

Speaking to ET NOW, laying a target for the fiscal deficit, he said that fiscal deficit should be 3% of Gross Domestic Product (GDP).

Guest (Guest) 06 July 2009

More funds for welfare, infrastructure in Budget 2009-2010

Promising to halve poverty by 2014 and add 12 million jobs each year, finance minister Pranab Mukherjee presented the Union Budget for this fiscal that hikes income tax exemption limit and steps up allocations for welfare schemes and infrastructure, while assuring high growth for the $1.2 trillion economy once again.

New incentives to farmers, 45 percent jump in funds for Bharat Nirman, India's flagship rural reconstruction programme, higher spending on urban development, fresh impetus on energy security and revival of the divestment programme were among the highlights of the 100-minute Mukherjee's budget.

He also announced that the national food security act will be enacted soon promising 25 kg of rice or wheat per month to the poor at Rs 3 per kg, while announcing a new health insurance scheme for those below the poverty line.

The income tax exemption limit for senior citizens was sought to be hiked by Rs15,000, while that for women and others was stepped up by Rs10,000. The 10 percent surcharge on personal income tax also was sought to be removed in Mukherjee's Budget presented in the Lok Sabha.

For India Inc, the corporate tax rate was kept unchanged, even as the finance minister sought to reduce the burden on industry by abolishing the commodities transaction tax, but hiked the minimum alternate tax to 15 percent of book profits.

Mukherjee also promised to scrap the fringe benefit tax to please corporates, introduce a pan-India goods and services tax from April next year and gave 100 percent tax deductions to political donations.

Dressed in a smart white bandgala suit, the 73-year-old politician - who had presented his last full budget as finance minister in the government of Prime Minister Indira Gandhi 25 years ago - said the United Progressive Alliance (UPA) government would push forward an agenda that will ensure 12 million new jobs each year and reduce poverty by half by 2014.

"The government also recognises the challenges," he said, referring to the global slowdown and the decline in India's high growth rate in the past year to 6.7 percent from over 9 percent in the preceding three years.

"The first challenge is to bring back the GDP (gross domestic product) growth rate to over 9 percent per annum," he said, setting the tone of what is his fourth career budget watched by Prime Minister Manmohan Singh and UPA chairperson Sonia Gandhi.

He said the other challenges included better governance and to ensure that the fruits of development reached across regions to touch the lives of every citizen - the 'aam admi' (the common man) as he called them.

Mukherjee said infrastructure would also be a priority, especially in areas like roads, highways and energy. "I, on my part, will ensure that sufficient funds are made available to these sectors."

The finance minister also said the unique identification plan, approved by the previous UPA government will be operational in 12-18 months and the process begin to hand over biometric smart cards to 1.17 billion citizens.

He said the total central government expenditure for the current fiscal year had been stepped up to Rs.10,20,800 crore, and compared it with Rs.193 crore that was set aside in the country's first budget over six decades ago.

Mukherjee said with industry still under the grip of global recession, the finance minister said he was providing additional incentives in the form of both direct and indirect taxes.

He enhanced the customs duty on items like set-top boxes, LCD televisions and premium textile goods to encourage domestic production and value addition.

Guest (Guest) 06 July 2009

UNION BUDGET 2009-2010

GENERAL:

Economic crisis: The worst is behind us, says the FM.

FM intends to make pre-budget consultations with state finance ministers an annual affair.

Total budget expenditure for 2009-10 will Rs 10,28,032 crore, crossing Rs 10 lakh crore mark for the first time since Independence.

Estimates for FY-10: Total expenditure is Rs10, 20, 800 crore

Fiscal Deficit seen at 6.8 per cent of GDP.

Target for agriculture credit raised to Rs 3,25,000 crore in 2009-10 from Rs 287,000 crore. Subsidy regime for fertilisers to change to nutrient- based rather than price-based.

Export Credit Guarantee scheme extended till March 2010.

Banks and insurance companies outside the divestment plan.

Simple and exemption free tax structure to be brought in 4 years.

Income Tax Saral Form II to be reintroduced, says FM. In 4 years, filing of tax returns online to be made easier.

Full interest subsidy to be given for students taking courses in approved institutions. 5 lakh students to benefited.

Unique Identification Card to all citizens to roll out in 12-18 months. Provision of Rs 120 crore for the project.

To hike public ownership of all companies, including PSUs, in a phased manner.

Rs 2,113 crore allocated for IITs and new IITs.

DIRECT TAX:

Share of Direct Taxes has increased to 56 per cent in 2008-09 over 41 per cent in 2007-08.

No change in Corporate Tax

Minimum Alternate Tax (MAT) hiked to 15% of book profits. MAT tax credit increased from 7 years to 10 years.

Fringe Benefit Tax (FBT) abolished.

Surcharge on Direct Taxes to be removed.

Surcharge on personal Income Tax slashed by 10%

National Pension Scheme to be exempted from STT.

Income tax incentives on education loans expanded to cover vocational studies after schooling.

Small businesses having up to Rs 40 lakh turnover are exempted from filing advance tax returns

Personal Taxation:

Income Tax rates exemption limit raised from 2,25,000 to 2,40,000 for Senior citizens (an increase of 15,000).

Income Tax rates exemption limit raised from Rs 1,80,000 to 1,90,000 for Women (an increase of 10,000).

Income Tax rates exemption limit raised from Rs 1,50,000 to 1,60,000 for others (an increase of 10,000).

INDIRECT TAX:

Commodities Transaction Tax (CTT) abolished!

Securities Transaction Tax (STT) cut to %

Goods & Service Tax (GST) to come into effect from April 01, 2010.

Customs duty on gold and silver import increased.

Custom duty on LCD panels cut from 10% to 5%.

Imposition of 5% custom duty on set top boxes

Individual law consultants not to attract service tax. Service Tax to be extended to lawyers on technical advice, consultancy.

Guest (Guest) 06 July 2009

BJP dubs budget as unimpressive

BJP on Monday dubbed the general budget as timid, tepid and unimpressive while the Congress hailed finance minister Pranab Mukherjee

for doing an "excellent job".

"I do not see any great message in the budget. It is timid, tepid and unimpressive," senior BJP leader and former finance minister Yashwant Sinha said.

Congress spokesman Manish Tewari said, "The Budget is a very judicious mix of short term stimulus, medium term prudence and long term structural reforms."

"The finance minister has done an excellent job in times of global economic recession as no taxes have been imposed on the people," he told reporters outside Parliament House soon after the Budget was presented.

Asked why the markets have not reacted positively, Tewari said the finance minister does not look only at the market while presenting the budget.

On the fiscal deficit, the spokesman said that this has gone up due to the stimulus packages given in December last year to fight the economic recession.

Tewari also hailed the decision to bring transparency in electoral funding.

Guest (Guest) 06 July 2009

FM Pranab Mukherjee ends 2009/10 Budget speech
BSE Sens*x crashes by over 750 points
Duty exemption made at construction sites restored
Service taxes extended to legal consultants
FM recommendation on direct tax revenue neutral
No new taxes on edible oils imports
Customs duty on gold, silver import increased
Drugs for heart diseases to become cheaper
Custom duty on small bulk drugs reduced by 5%
Mobile phone accessories to become cheaper
Excise duty on petrol cars reduced
Branded jewellery to become cheaper
Customs duty on bio-diesel reduced
4% excise duty on Cotton textiles restored
8% excise duty on man-made fibre restored
Tax holiday extended for textile units
Income Tax limit raised by Rs 10,000
Custom duty on gold bars raised
Small businesses exempt from advance tax
Early introduction of Saral 2 forms
Footwear to become cheaper
Set top box to cost more
Custom duty on set top boxes now at 5 per cent
Mobile phones to be more expensive
LCD TV sets to be cheaper
Personal tax limit raised to Rs 1.6 lakh
Political funding to get 100% tax reduction
Tax holiday for exporters extended to 2011
BSE Sens*x falls by over 400 points
Anonymous funds to charitable bodies get tax relief
MAT hiked to 15% of book profit
New Pension Scheme introduced
Commodity transaction tax to be axed
BSE Sens*x drops by 3 per cent
Hike in IT exemption for women to Rs 1,90,000
Surcharge on personal tax scrapped
Fringe Benefit Tax scrapped
Elimiate surcharge of 10 pc on personal income tax
IT exemption by Rs 15000 for senior citizens
No change in Corporate tax
GST will be dual in nature
Centre and state will each legislate on GST
Goods and Services Tax to be introduced April 1, 2010
Federal tax\GDP ratio is 11.5 per cent
Share of direct taxes increased by 56%
New direct tax code in next 45 days
Direct tax share gone up by 58 per cent
Fiscal deficit estimated at 6.8 per cent
Tax GDP improves to 11.9 pc
Centralise Tax processing centre at Bengaluru
Tax distortions to be eliminated
Budget expenditure of 2009-10 at Rs 10,28,032cr
Sens*x dips as Pranab presents budget
Planned expenditure raised by 34 per cent
Expenditure has crossed Rs 10 lakh crore mark
Non planned expenditure estimated at 3.9 lakh
Enhance pension for defence pensioners
Biometric smart cards in 12-18 months
Allowances of Para-military at par with defence forces
National Ganga Project hiked to Rs 562 cr
One rank, one pension for ex-servicemen from July 1
Pension of non-commissioned officers to be hiked
Allocation of Rs 50 cr to Chandigrah University
Commonwealth allocation hiked to Rs 16,300 cr
50 per cent of rural women in self-help groups
Unique Identification ID project to tap pvt talent
Employment exchanges to be modernised
Rashtriya Mahila Kosh corpus to be raised to 500cr
Rs 350 cr allocation for bpl families
Rs 2,000 cr for rural housing fund
Rural mega clusters in Bengal and Rajasthan
Social Security mulled for unorganised sector
Interest subsidy to benefit 5 lakh students
Female literacy to be doubled in 3 years
Full interest subsidy for educational loans
NREGA outlay increased by 144%
Govt to move Food Security Bill soon
Rice, wheat at Rs 3 per kg to the poor
Subvention of 1% as incentives to farmers
Indira Awaas Yojna hiked by 63% to Rs 8,883 cr
Real wage of Rs.100/day provided under NREGA
Rs. 31,100 crore allocation for NREGA
PSUs will remain under Govt control
NREGA gave jobs to more than 4.479 cr households
NREGA has been a magnificient success: FM
Banks, Insurance to stay with Govt: FM
Banking network to be expanded
Banking sector relatively unaffected by the slowdown
IT return forms to be more user friendly
Saral-II forms to simplify taxation process
More funds for SIDBI for SMEs
Hike in allocation for Mumbai flood management
Additional 1000 cr for irrigation programmes
Expert grp to look into petroleum product pricing
Farmer loan waiver period extended by 6 months
Strenghten mechanism for healthcare: FM
Export Credit Guarantee extended till March 2010
Blueprint on for National Gas Grid
Print media stimulus package extended by 6 months
Most Agri sops through banks, not budget
Storm-water drainage project fund hiked
Rashtriya Krishi Vikas Yojna stepped up by 30%
Agri credit for at Rs 3.25 lakh crore for 09-10
Hike in infrastructure to over 9 pc of GDP by 2014
Hike in allocation for Mumbai flood management
Fund for urban poor housing at Rs 3,973,000cr
JNNURM allocation hiked by 87 per cent
Local production of Natural Gas to double
Fiscal stimulus of Rs 1,86,000 cr provided
23% hike in fund allocation for highway development
IIFCL will refinance 60% of commercial bank loans
Fiscal stimulus steps helped the economy
Foreign investors returning to Indian market
New company IIFCL to look at infrastructure
Govt took 3 stimulus packages to fight slowdown
Trade is now at 39 pc of GDP
Trade in goods and services doubled in 2008
Significant hike in foreign capital
Priority for inclusive growth
Challenge to get back to 9pc growth rate: FM
Infrastructure investment at 9 pc GDP: FM
Will create close to 12 million jobs
Need integrated energy policy: FM
Need to reduce population below poverty line
Need to sustain growth rate of 9 pc per annum: FM
For inclusive growth and equitable development
Pranab Mukherjee begins Budget 2009/10 speech
Budget unlikely to raise cess on petol, deisel
Subsidies expected for textiles, gems and jewellery
Flagship schemes likely to be over Rs 1,20,000 cr
Major boost for housing, highway sectors expected
Plans likely to sell state firms to fund schemes
Govt may raise borrowing target for 2009/10
Securities Transaction Tax may be removed
Budget to carry forward NREGA & JNNURM schemes
Sens*x crosses 15k ahead of budget
Government may scrap Fringe Benefit Tax
Budget 2009 to focus on social sectors, growth
Plans to revamp public transport across the country
More plans to repair shoddy infrastructure expected
Finance Minister reaches Parliament
Pranab Mukherjee to present Union Budget at 11 am

Guest (Guest) 06 July 2009

Union Cabinet approves Budget 2009-10

The Union Cabinet on Monday approved the Budget for 2009-10. As is customary, the Cabinet met an hour before the presentation of the budget in the Lok Sabha to put its seal of approval.

Guest (Guest) 06 July 2009

Pranab Mukherjee set to present Union Budget 2009-10

Amid high expectations in a slowing economy, Finance Minister Pranab Mukherjee will present India's national budget for this fiscal on Monday, seeking a fine balance between the need for resources to fund welfare schemes and minimising the burden on the average citizen and industry.

The veteran politician will need to draw from his experience of having presented three regular budgets as finance minister between January 1982 and December 1984 and push forward the agenda listed in the interim budget he tabled in February.

"Extraordinary economic circumstances merit extraordinary measures. Now is the time for such measures," Mukherjee had said when he presented the interim budget in the Lok Sabha, the lower house of parliament, Feb 16.

"Depending on the response of the domestic economy and the revival of the global economy, there may be a need to consider additional fiscal measures when the regular budget is presented by the new government after the elections."

Monday will be the day when he will have to consider these fiscal measures.

At the macro level, the finance minister will be concerned over the fact that the growth rate of India's $1.2 trillion economy had decelerated to 6.7 percent last fiscal from an average of over nine percent in the preceding three years.

But his hands in terms of additional allocation will be tied by the high fiscal deficit of the central government that ballooned from 2.7 percent in 2007-08 to over six percent the next year.

A low inflation rate, though, will be a comforting factor.

Mukherjee also has to contend with his ministry's Economic Survey for 2008-09 tabled in parliament Thursday that suggests some sweeping reforms - like resumption of divestment, a cut in subsidies and allowing foreign equity in retail and defence equipment.

And slowdown-hit industry hopes for specific measures to suit the needs of sectors like steel, cement, auto, energy, textiles, banking, pharmaceuticals, chemicals, consumer goods and realty and construction.

"This is necessary to curb the bloated fiscal deficit of the government," said the Associated Chambers of Commerce and Industry of India Sunday, having already given its wish list to the finance ministry - as have other chambers.

Experts, however, maintain the prospect of a cut in corporate taxes look bleak, with India Inc. only hoping that the across-the-board excise duty cuts in the interim budget is not reversed.

The salaried class, though, is looking forward to the re-introduction of the standard deduction in income tax that will place more money in their hands and push demand.

This apart, with most ministries having set their 100-day agenda at the instance of the Prime Minister, allocations for many of the outlined programmes are also expected to be addressed in the budget.

Guest (Guest) 06 July 2009

Key features of Union Budget 2009-2010

Finance Minister Pranab Mukherjee presented the 2009-10 Union Budget in the Parliament on Monday. Following are the key highlights:

CHALLENGES

· To lead economy to high GDP growth rate of 9 per cent per annum at the earliest

· To deepen and broaden the agenda for inclusive development to improve delivery mechanisms of the government.

OVERVIEW OF THE ECONOMY

· Growth rate of Gross Domestic Product dipped from an average of over 9 per cent in the previous three fiscal years to 6.7 per cent during 2008-09.

· Whole sale price index rose to nearly 13 per cent in August, 2008 and had an equally sharp fall to zero per cent in March, 2009.

· The structure of India’s economy changed over the last ten years with contribution of the services sector to GDP at well over 50 per cent and share of merchandise trade doubling to 38.9 per cent of GDP in 2008-09.

· Recognising economic recovery and growth as co-operative effort of the Central and State Governments, meeting with Finance Ministers of States held as part of preparation of the Budget. This is intended to become an annual feature.

TOWARDS ECONOMIC REVIVAL

Short-term Measures

· To counter the negative fallout of the global slowdown on the Indian economy, Government responded by providing three focused fiscal stimulus packages in the form of tax relief and increased expenditure on public projects along with RBI taking a number of monetary easing and liquidity enhancing measures.

· Fiscal accommodation led to an increase in fiscal deficit from 2.7 per cent in 2007-08 to 6.2 per cent of GDP in 2008-09.

· The fiscal stimulus at 3.5 per cent of GDP at current market prices for 2008-09 amounts to Rs.1,86,000 crore.

· Measures taken by the Government were effective in arresting the fall in GDP growth rate in 2008-09. 6.7 per cent growth rate recorded in 2008-09.

Infrastructure Development

· IIFCL to evolve a Takeout financing scheme in consultation with banks to facilitate incremental lending to infrastructure sector.

· IIFCL to refinance 60 per cent of commercial bank loans for PPP projects in critical sectors over the next fifteen to eighteen months. IIFCL and Banks are now in a position to support projects involving total investment of Rs.1,00,000 crore.

Highway and Railways

· Allocation to National Highways Authority of India (NHAI) for the National Highway Development Programme (NHDP) increased by 23 per cent over B.E. 2008-09 in B.E. 2009-10 and allocation for Railways increased from Rs.10,800 crore in Interim B.E. 2009-10 to Rs.15,800 crore in B.E. 2009-10.

Urban Infrastructure

· Allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) stepped up by 87 per cent to Rs.12,887 crore in B.E. 2009-10 over B.E. 2008-09.

· Allocation for housing and provision of basic amenities to urban poor enhanced to Rs.3,973 crore in B.E. 2009-10. This includes provision for Rajiv Awas Yojana (RAY), a new scheme announced.

Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA)

· Provision for the project BRIMSTOWA initiated in 2007 and funded through Central Assistance to address the problem of flooding in Mumbai, enhanced from Rs.200 crore in Interim B.E. 2009-10 to Rs.500 crore in B.E. 2009-10 to expedite completion of the project.

Power

· Allocation under Accelerated Power Development and Reform Programme (APDRP) increased by 160 per cent to Rs.2,080 crore in B.E. 2009-10 over B.E. 2008-09.

Gas

· Blueprint to be developed for long distance gas pipelines leading to a National Gas Grid to facilitate transportation of gas across the length and breadth of the country.

Assam Gas Cracker Project

· Outlay for Assam Gas Cracker Project stepped up suitably in B.E. 2009-10.

AGRICULTURE DEVELOPMENT

· Target for agriculture credit flow set at Rs.3,25,000 crore for the year 2009-10.

In 2008-09 agriculture credit flow was at Rs.2,87,000 crore.

· Interest subvention scheme for short term crop loans up to Rs.3 lakh per farmer at the interest rate of 7 per cent per annum to be continued. Additional subvention of 1 per cent to be paid from this year, as incentive to those farmers who repay short term crop loans on schedule. Additional allocation of Rs.411 crore over Interim B.E. 2009-10 made for this.

Debt Relief for Farmers

· Time given to the farmers having more than two hectares of land to pay 75 per cent of their overdues under Debt Waiver and Debt Relief Scheme extended from 30th June, 2009 to 31st December, 2009.

· Taskforce to be set up to examine the issue of debt taken by a large number of farmers in some regions of Maharashtra from private money lenders who were not covered by the loan waiver scheme announced last year.

Accelerated Irrigation Benefit Programme

· Allocation under Accelerated Irrigation Benefit Programme (AIBP) increased by 75 per cent over B.E. 2008-09.

· Allocation under Rashtriya Krishi Vikas Yojana (RKVY) stepped up by 30 per cent in B.E. 2009-10 over B.E. 2008-09.

RESTORING EXPORT GROWTH

· Adjustment assistance scheme to provide enhanced Export Credit and Guarantee Corporation (ECGC) cover at 95 per cent to badly hit sectors extended upto March 2010.

· Allocation for Market Development Assistance Scheme enhanced to Rs.124 crore in B.E. 2009-10.

· Interest subvention of 2 per cent on pre-shipment credit for seven employment oriented export sectors extended beyond the current deadline of September 30, 2009 to March 31, 2010.

· To facilitate flow of credit at reasonable rates, Rs.4,000 crore provided as special fund out of Rural Infrastructure Development Fund (RIDF) to Small Industries Development Bank of India (SIDBI). This will incentivise Banks and State Finance Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing 50 per cent of incremental lending to MSEs during the current financial year.

· Stimulus package for print media comprising waiver of 15 per cent agency commission on DAVP advertisements and 10 per cent increase in DAVP rates to be paid as a special relief subject to documentary proof of loss of revenue in nongovernmental advertisements, extended from 30th June, 2009 to 31st December, 2009.

MEDIUM-TERM SUSTAINABILITY

· To bring the fiscal deficit under control, institutional reform measures to be initiated during the current year itself.

Fertilizer Subsidy

· To ensure balanced application of fertilizers for increasing agricultural productivity, Government intends to move towards a nutrient based subsidy regime so as to cover larger basket of fertilizers with innovative fertilizer products available in the market at reasonable prices.

It is intended to move to a system of direct transfer of subsidy to the farmers in due course.

Petroleum and Diesel pricing Policy

· With almost three quarters of our oil consumption met through imports, it is important to recognise that domestic prices of petrol and diesel are broadly in sync with global prices. Government to set up an expert group to advise on a viable and sustainable system of pricing petroleum products.

Taxation

· SARAL – II forms to be introduced early.

People’s ownership of PSUs

· While retaining at least 51 per cent Government equity in Public Sector Undertakings, people’s participation in disinvestment programmes to be encouraged.

· Public Sector Enterprises such as banks and insurance companies to remain in public sector and will be given full support including capital infusion to grow and remain competitive.

Financial Sector

· The threshold for non-promoter public shareholding for all listed companies to be raised in a phased manner.

· Scheduled commercial banks allowed to set up off-site ATMs without prior approval subject to reporting.

· A sub-committee of State Level Bankers Committee (SLBC) to identify and formulate an action plan for providing banking facilities in under-banked/unbanked areas in the next three years. Rs.100 crore set aside as one-time grant in-aid to ensure provision of at least one centre/Point of Sales (POS) for banking services in each of the unbanked blocks.

· Government has established Competition Commission of India, an autonomous regulatory body. An Appellate body headed by a retired judge of Supreme Court also constituted.

TOWARDS INCLUSIVE DEVELOPMENT

National Rural Employment Guarantee Scheme (NREGS)

· Allocation under NREGS increased by 144 per cent to Rs.39,100 crore in B.E. 2009-10 over B.E. 2008-09.

· To increase productivity of assets and resources under NREGA, convergence with other schemes relating to agriculture, forests, water resources, land resources, rural roads initiated. In the first stage 115 pilot districts selected for convergence.

National Food Security Act

· National Food Security Act to be brought in to ensure entitlement of 25 kilo of rice or wheat per month at Rs.3 per kilo to every family living below the poverty line in rural or urban areas. Food Security Bill to be put on the website of the Department of Food and Public Distribution for public debate.

· Allocation for Bharat Nirman increased by 45 per cent in 2009-10 over B.E. 2008-09. Allocations under Pradhan Mantri Gram Sadak Yojana (PMGSY) increased by 59 per cent over B.E. 2008-09 to Rs.12,000 crore in B.E. 2009-10.

· Under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), allocation increased by 27 per cent to Rs.7,000 crore.

· Allocation under Indira Awaas Yojana (IAY) increased by 63 per cent to Rs.8,800 crore in B.E. 2009-10. Allocation of Rs.2,000 crore made for Rural Housing Fund (RHF) in National Housing Bank (NHB) to boost the resource base of NHB for refinance operations in rural housing sector.

Pradhan Mantri Adarsh Gram Yojana (PMAGY)

· New scheme Pradhan Mantri Adarsh Gram Yojana (PMAGY) with an allocation of Rs.100 crore launched on pilot basis for integrated development of 1000 villages having population of scheduled castes above 50 per cent.

EMPOWERMENT OF WEAKER SECTIONS

· The Swarna Jayanti Gram Swarozgar Yojana (SGSY) restructured as National Rural Livelihood Mission to make it universal in application, focused in approach and time bound for poverty eradication by 2014-15. In addition to capital subsidy at enhanced rate, interest subsidy to poor households to be provided for loans upto Rs.1 lakh from banks.

· There are over 22 lakh Women’s Self Help Groups linked with banks. Reach of SHGs to be widened to enrol at least 50 per cent of all rural women in India as members of SHGs over the next five years.

· Corpus of Rashtriya Mahila Kosh to be increased from Rs.100 crore to Rs.500 crore over the next few years.

Female Literacy

· National Mission for Female Literacy to be launched with focus on minorities, SC, ST and other marginalized groups with the aim to reduce level of female illiteracy by half in three years.

Integrated Child Development Services (ICDS)

· All ICD Services to be extended to every child under the age of six by March, 2012.

Student Loans to Weaker Sections

· To enable students from economically weaker sections to access higher education, a scheme to provide full interest subsidy during the period of moratorium introduced to cover loans taken from scheduled banks to pursue any of the approved courses of study in technical and professional streams from recoganised institutions in India.

Welfare of Minorities

· Plan outlay of Ministry of Minority Affairs enhanced from Rs.1,000 crore in B.E.

2008-09 to Rs.1,740 crore in 2009-10 registering an increase of 74 per cent. This includes Rs.990 crore for Multi-Sectoral Development Programme for Minorities, Grants-in-aid to Maulana Azad Education Foundation, National Minorities Development and Finance Corporation and pre and post matric scholarship for minorities.

· Allocations made for the new schemes of National Fellowship for Students from minority community and Grants-in-aid to Central Wakf Council for computerization of records of State Wakf Boards.

· Rs.25 crore each allocated for establishing new campuses at Murshidabad in West Bengal and Malappuram in Kerala by Aligarh Muslim University.

Welfare of workers in the unorganized sector

· Action initiated to ensure implementation of social security schemes for occupation like weavers, fishermen and women, toddy tappers, leather and handicraft workers, plantation labour, construction labour, mine workers, bidi workers and rickshaw pullers. Necessary financial allocation will be made for these schemes.

Employment Exchanges

· New project for modernization of Employment Exchange in public private partnership to be launched so that a job seeker can register on line from anywhere and approach any employment exchange.

Handloom

· One handloom mega cluster each in West Bengal and Tamil Nadu and one powerloom mega cluster in Rajasthan to be set up. New mega clusters for carpets to be also set up in Srinagar (J&K) and Mirzapur (UP).

Health

· Allocation under National Rural Health Mission (NRHM) increased by Rs.2,057 crore over Interim B.E. 2009-10 of Rs.12,070 crore.

· All BPL families to be covered under Rashtriya Swasthya Bima Yojana (RSBY).

Allocation under RSBY increased by 40 per cent over previous allocation to Rs.350 crore in B.E. 2009-10.

Environment and climate change

· In furtherance to National Action Plan on Climate Change, eight national missions representing a multi-pronged long-term and integrated approach to be launched.

· National Ganga River Basin Authority set up. Budgetary allocation under National River and Lake Conservation Plans increased from Rs.335 crore in B.E. 2008-09 to Rs.562 crore in B.E. 2009-10.

· Special one-time grant of Rs.100 crore given to Indian Council of Forestry Research and Education, Dehradun.

· Rs.15 crore each to be allocated to Botanical Survey of India and Zoological Survey of India. An additional amount of Rs.15 crore to be allocated for Geological Survey of India.

TOWARDS BUILDING ACOUNTABLE INSTITUTIONS

Improving Delivery of Public Services

· Unique Identification Authority of India (UIDAI) to set up online data base with identity and biometric details of Indian residents and provide enrolment and verification services across country. Provision of Rs.120 crore made for this in the Budget.

· First set of unique identity number to be rolled out in 12 to 18 months.

National Security

· Additional amount of Rs.430 crore provided over Interim B.E. 2009-10 to modernise police machinery in the States.

· Additional amount of Rs.2,284 crore proposed over Interim B.E. 2009-10 for construction of fences, roads, flood lights on the international borders.

· Programme for housing to create 1 lakh dwelling units for Central Para-military Forces personnel to be launched through innovative financing model.

One Rank One Pension for Ex-servicemen (OROP)

· Based on the recommendation of the Committee headed by the Cabinet Secretary on OROP, government has decided to substantially improve the pension of pre 01.01.2006 defence pensioners below officer rank and bring pre 10.10.1997 pensioners on par with post 10.10.1997 pensioners. The decisions to be implemented from 01st July, 2009 and will cost more than Rs.2,100 crore annually.

Education

· Provision for the scheme ‘Mission in Education through ICT’ substantially increased to Rs.900 crore and the provision for setting up and up-gradation of Polytechnics under the Skill Development Mission enhanced to Rs.495 crore.

· Rs.827 crore allocated for opening one Central University in each uncovered State.

· Rs.2,113 crore allocated for IITs and NITs which includes a provision of Rs.450 crore for new IITs and NITs.

· The overall Plan budget for higher education is to be increased by Rs.2,000 crore over Interim B.E. 2009-10.

· Rs.50 crore allocated for Punjab University, Chandigarh. Plan allocation for Chandigarh to be suitably enhanced during the year to provide better infrastructure to the people of Chandigarh.

Commonwealth Games, 2010

· Outlays to be stepped up from Rs.2,112 crore in Interim Budget to Rs.3,472 crore in regular Budget 2009-10.

Srilankan Tamils

· Rs.500 crore allocated for rehabilitation of internally displaced persons and reconstruction of the northern and eastern areas of Sri Lanka. Ministry of External Affairs to work closely with the Sri Lankan Government.

Cyclone Aila

Rs.1,000 crore allocated for programme for rebuilding the damaged infrastructure caused due to cyclone Aila in West Bengal.

BUDGET ESTIMATE 2009-10

Budget Estimates provide for a total expenditure of Rs.10,20,838 crore consisting of Rs.6,95,689 crore under Non-plan and Rs.3,25,149 crore under Plan registering an increase of 37 per cent in Non-plan expenditure and 34 per cent in Plan expenditure over B.E. 2008-09.

· Total expenditure in B.E. 2009-10 increased by 36 per cent over B.E. 2008-09.

· Increase in Non-plan expenditure is mainly due to implementation of Sixth Central Pay Commission recommendations, increased food subsidy and higher interest payment arising out of larger fiscal deficit in 2008-09.

· Interest payments estimated at Rs.2,25,511 crore constituting about 36 per cent of Non-plan revenue expenditure in B.E. 2009-10.

· Subsidies up from Rs.71,431 crore in B.E. 2008-09 to Rs.1,11,276 crore in B.E.

2009-10.

· Outlay for Defence up from Rs.1,05,600 crore in B.E. 2008-09 to Rs.1,41,703 crore in B.E. 2009-10.

· Gross Budgetary Support for Annual Plan 2009-10 enhanced by Rs.40,000 crore over Interim B.E. 2009-10.

· State Governments to be permitted to borrow additional 0.5 per cent of their GSDP by relaxing the fiscal deficit target under FRBM from 3.5 per cent to 4 per cent of their GSDP. This will enable the States to borrow Rs.21,000 crore additionally over Interim B.E. 2009-10.

· Gross tax receipts budgeted at Rs.6,41,079 crore in B.E. 2009-10 compared to Rs.6,87,715 crore in B.E. 2008-09.

· Non-tax revenue receipts estimated at Rs.1,40,279 crore in B.E. 2009-10 compared to Rs.95,785 crore in B.E. 2008-09.

· Revenue deficit projected at 4.8 per cent of GDP in B.E. 2009-10 compared to 1 per cent in B.E. 2008-09 and 4.6 per cent as per provisional accounts of 2008-09.

· Fiscal deficit as a percentage of GDP is projected at 6.8 per cent compared to 2.5 per cent in B.E. 2008-09 and 6.2 per cent as per provisional accounts 2008-09.

TAX PROPOSALS

· Tax reform, like all reforms, is a process and not an event. Thrust of reforms has been to improve the efficiency and equity of our tax system. This is sought to be achieved by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the base and accompanied by requisite re-engineering of key business processes coupled with automation.

· Recent initiative, on direct taxes side, of the setting up of a Centralized Processing Centre (CPC) at Bengaluru where all electronically filed returns, and paper returns filed in entire Karnataka, will be processed.

· Centre’s Tax-GDP ratio has increased to 11.5 per cent in 2008-09 from a low of 9.2 per cent in 2003-04. Share of direct taxes in the Centre’s tax revenues has increased to 56 percent in 2008-09 from 41 percent in 2003-04, reflecting sharp improvement in equity of our tax system.

· Structural changes in direct taxes to be pursued by releasing the new Direct Taxes Code within the next 45 days and in indirect taxes by accelerating the process for the smooth introduction of the Goods and Services Tax (GST) with effect from 1st April, 2010.

· The Direct Taxes Code, along with a Discussion Paper, to be released to the public for debate. The Direct Taxes Code Bill will be finalised for introduction in Lok Sabha sometime during the Winter Session based on the inputs received.

· The Authorities for Advance Rulings on Direct and Indirect Taxes to be merged by amending the relevant Acts.

· Agreement has been reached on the basic structure of GST in keeping with the principles of fiscal federalism enshrined in the Constitution. Broad contour of the GST Model envisages dual GST comprising of a Central GST and a State GST.

· The Centre and the States will each legislate, levy and administer the Central GST and State GST, respectively.

Direct Taxes

· No changes made in the Corporate Tax rates.

· Exemption limit in personal income tax raised by Rs.15,000 from Rs.2.25 lakh to Rs.2.40 lakh for senior citizens; by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh for women tax payers; and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all other categories of individual taxpayers.

· Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability being raised from the present limit of Rs.75,000 to Rs.1 lakh.

· Surcharge on various direct taxes to be phased out; in the first instance, by eliminating the surcharge of 10 percent on personal income-tax.

· Sun-set clauses for deduction in respect of export profits under sections 10A and 10B of the Income-tax Act being extended by one more year i.e. for the financial year 2010-11.

· Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees to be abolished.

· Scope of provisions relating to weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses being extended except for a small negative list.

· Businesses to be incentivised by providing investment linked tax exemptions rather than profit linked exemptions. Investment linked tax incentives to be provided, to begin with, to the businesses of setting up and operating ‘cold chain’, warehousing facilities for storing agricultural produce and the business of laying and operating cross country natural gas or crude or petroleum oil pipeline network for distribution on common carrier principle. Under this method, all capital expenditure, other than expenditure on land, goodwill and financial instruments to be fully allowable as deduction.

· Minimum Alternate Tax (MAT) to be increased to 15 per cent of book profits from 10 per cent. The period allowed to carry forward the tax credit under MAT to be extended from seven years to ten years.

· New Pension System (NPS) to continue to be subjected to the Exempt-Exempt- Taxed (EET) method of tax treatment of savings. Income of the NPS Trust to be exempted from income tax and any dividend paid to this Trust from Dividend Distribution Tax. All purchase and sale of equity shares and derivatives by the NPS Trust also to be exempt from the Securities Transaction Tax. Self employed persons to be enabled to participate in the NPS and to avail of the tax benefits available thereto.

· Alternative dispute resolution mechanism to be created within the Income Tax Department for the resolution of transfer pricing disputes. Central Board of Direct Taxes (CBDT) to be empowered to formulate ‘safe harbour’ rules to reduce the impact of judgemental errors in determining transfer price in international transactions.

· Commodity Transaction Tax (CTT) to be abolished.

· Donations to electoral trusts to be allowed as a 100 percent deduction in the computation of the income of the donor.

· Deduction under section 80E of the Income-tax Act allowed in respect of interest on loans taken for pursuing higher education in specified fields of study to be extended to cover all fields of study, including vocational studies, pursued after completion of schooling.

· To mitigate the practical difficulties faced by charitable organisations, anonymous donations received by charitable organisations to the extent of 5 percent of their total income or a sum of Rs.1 lakh, whichever is higher, not to be taxed.

· Scope of presumptive taxation to be extended to all small businesses with a turnover upto Rs. 40 lakh. All such taxpayers to have option to declare their income from business at the rate of 8 percent of their turnover and simultaneously enjoy exemption from the compliance burden of maintaining books of accounts. As a procedural simplification, they are also to be exempted from advance tax and allowed to pay their entire tax liability from business at the time of filing their return. This new scheme to come into effect from the financial year 2010-11.

· Tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto available in respect of profits arising from the commercial production or refining of mineral oil, to be extended to natural gas. This tax benefit to be available to undertakings in respect of profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the NELP-VIII round of bidding. The section to be retrospectively amended to provide that “undertaking” for the purposes of section 80-IB(9) will mean all blocks awarded in any single contract.

Indirect Taxes

· Proposals on indirect taxes to seek to achieve stable framework by maintaining the overall rate structure for customs and central excise duties as well as service tax.

· Customs duties

· Customs duty of 5% to be imposed on Set Top Box for television broadcasting.

· Customs duty on LCD Panels for manufacture of LCD televisions to be reduced from 10% to 5%.

· Full exemption from 4% special CVD on parts for manufacture of mobile phones and accessories to be reintroduced for one year.

· List of specified raw materials/inputs imported by manufacturer-exporters of sports goods which are exempt from customs duty, subject to specified conditions, to be expanded by including five additional items.

· List of specified raw materials and equipment imported by manufacturer-exporters of leather goods, textile products and footwear industry which are fully exempt from customs duty, subject to specified conditions, to be expanded.

· Customs duty on unworked corals to be reduced from 5% to Nil.

· Customs duty on 10 specified life saving drugs/vaccine and their bulk drugs to be reduced from 10% to 5% with Nil CVD (by way of excise duty exemption).

· Customs duty on specified heart devices, namely artificial heart and PDA/ASD occlusion device, to be reduced from 7.5% to 5% with Nil CVD (by way of excise duty exemption).

· Customs duty on permanent magnets for PM synchronous generator above 500 KW used in wind operated electricity generators to be reduced from 7.5% to 5%.

· Customs duty on bio-diesel to be reduced from 7.5% to 2.5%.

· Concessional customs duty of 5% on specified machinery for tea, coffee and rubber plantations to be reintroduced for one year, upto 06.07.2010.

· Customs duty on ‘mechanical harvester’ for coffee plantation to be reduced from 7.5% to 5%. CVD on such harvesters has also been reduced from 8% to nil, by way of excise duty exemption.

· Customs duty on serially numbered gold bars (other than tola bars) and gold coins to be increased from Rs.100 per 10 gram to Rs.200 per 10 gram. Customs duty on other forms of gold to be increased from Rs.250 per 10 gram to Rs.500 per 10 gram. Customs duty on silver to be increased from Rs.500 per Kg. to Rs.1000 per Kg. These increases also to be applicable when gold and silver (including ornaments) are imported as personal baggage.

· Customs duty on cotton waste to be reduced from 15% to 10%.

· Customs duty on wool waste to be reduced from 15% to 10%.

· Customs duty on rock phosphate to be reduced from 5% to 2%.

· CVD exemption on Aerial Passenger Ropeway Projects to be withdrawn. Such projects will now attract applicable CVD.

· Customs duty exemption on concrete batching plants of capacity 50 cum per hour or more to be withdrawn. Such plants will now attract customs duty of 7.5%.

· On packaged or canned software, CVD exemption to be provided on the portion of the value which represents the consideration for transfer of the right to use such software, subject to specified conditions.

· Customs duty on inflatable rafts, snow-skis, water skis, surf-boats, sail-boards and other water sports equipment to be fully exempted.

Central excise duties

· Excise duty rate on items currently attracting 4% to be raised to 8% with following major exceptions:

o Specified food items including biscuits, sharbats, cakes and pastries

o Drugs and pharmaceutical products falling under Chapter 30

o Medical equipment

o Certain varieties of paper, paperboard and articles thereof

o Paraxylene

o Power driven pumps for handling water

o Footwear of RSP exceeding Rs.250 but not exceeding Rs.750 per pair

o Pressure cookers

o Vacuum and gas filled bulbs of RSP not exceeding Rs.20 per bulb

o Compact Fluorescent Lamps

o Cars for physically handicapped

· Specific component of excise duty applicable to large cars/utility vehicles of engine capacity 2000 cc and above to be reduced from Rs. 20,000/- per vehicle to Rs.15,000 per vehicle.

· Excise duty on petrol driven trucks/lorries to be reduced from 20% to 8%. Excise duty on chassis of such trucks/lorries to be reduced from ‘20% + Rs.10000’ to ‘8% + Rs.10000’.

· Excise duty on Special Boiling Point spirits to be reduced to 14%.

· Excise duty on naphtha to be reduced to 14%.

· Duty paid High Speed Diesel blended with upto 20% bio-diesel to be fully exempted from excise duties.

· The ad valorem component of excise duty of 6% on petrol intended for sale with a brand name to be converted into a specific rate. Consequently, such petrol would now attract total excise duty of Rs.14.50 per litre instead of ‘6% + Rs.13 per litre’.

· The ad valorem component of excise duty of 6% on diesel intended for sale with a brand name to be converted into a specific rate. Consequently, such diesel would now attract total excise duty of Rs.4.75 per litre instead of ‘6% + Rs.3.25 per litre’.

· Excise duty on manmade fibre and yarn to be increased from 4% to 8%.

· Excise duty on PTA and DMT to be increased from 4% to 8%.

· Excise duty on polyester chips to be increased from 4% to 8%.

· Excise duty on acrylonitrile to be increased from 4% to 8%.

· The scheme of optional excise duty of 4% for pure cotton to be restored.

· Excise duty for man-made and natural fibres other than pure cotton, beyond the fibre and yarn stage, to be increased from 4% to 8% under the existing optional scheme.

· An optional excise duty exemption to be provided to tops of manmade fibre manufactured from duty paid tow at par with tops manufactured from duty paid staple fibre.

· Suitable adjustments to be made in the rates of duty applicable to DTA clearances of textile goods made by Export Oriented Units using indigenous raw materials/ inputs for manufacture of such goods.

· Full exemption from excise duty to be provided on goods of Chapter 68 of Central Excise Tariff manufactured at the site of construction for use in construction work at such site.

· Excise duty exemption on ‘recorded smart cards’ and ‘recorded proximity cards and tags’ to be made optional. Manufacturers have the option to pay the applicable excise duty and avail the credit of duty paid on inputs.

· EVA compound manufactured on job work for further use in manufacture of footwear to be exempted from excise duty.

· Benefit of SSI exemption scheme to be extended to printed laminated rolls bearing the brand name of others by excluding this item from the purview of the brand name restriction.

· On packaged or canned software, excise duty exemption to be provided on the portion of the value which represents the consideration for transfer of the right to use such software, subject to specified conditions.

· Excise duty on branded articles of jewellery to be reduced from 2% to Nil.

Service tax

· Service Tax to be imposed on the following services:

o Service provided in relation to transport of goods by rail

o Service provided in relation to transport of coastal cargo; and goods through inland water including National Waterways

o Advice, consultancy or technical assistance provided in the field of law (this tax would not be applicable in case the service provider or service receiver is an individual).

o Cosmetic and plastic surgery service

· Exemption from service tax being provided to inter-State or intra-State transportation of passengers in a vehicle bearing ‘Contract Carriage Permit’ with specified conditions.

· Exemption from service tax (leviable under Banking and other financial services or under Foreign exchange broking service) being provided to inter-bank purchase and sale of foreign currency between scheduled banks.

· Two taxable services, namely, ‘Transport of goods through road’ and ‘Commission paid to foreign agents’ to be exempted from the levy of service tax, if the exporter is liable to pay service tax on reverse charge basis. However, present cap of 10% on commission agency charges is retained. Thus there would be no need for the exporter to first pay the tax and later claim refund in respect of these services.

· For other services received by exporters, service tax exemption to be operated through the existing refund mechanism based on self-certification of the documents where such refund is below 0.25 per cent of FOB value, and certification of documents by a Chartered Accountant for value of refund exceeding the above limit.

· Export Promotion Councils and the Federation of Indian Export Organizations (FIEO) to be exempt from service tax on the membership and other fees collected by them till 31st March 2010.

· Tax proposals on direct taxes to be revenue neutral. On indirect taxes, estimated net gain to be Rs.2,000 crore for a full year.