Budget 2010-11; I-T slab rises, new entry of GST and Direct Tax code

Presenting his second consecutive budget for the Fiscal Year (FY) 2010-11 in the United Progressive Alliance (UPA) government, Finance Minister of India Pranab Mukherjee has made a reliving announcement for the individual taxpayers by raising slabs in tax levels. FM has also announced to introduce Direct Tax Code and Goods and Service Tax (GST) pattern in the system by April 01, 2010. With these new tax patterns, India's tax system will become the world-class tax system and tax collections will also be improved.

Pranab Mukharjee, who was rated one of the world's among top 5 Finance Ministers (FMs) for the year 1984 has emphasized on growth consolidation, improving investment environment, better transparency and public accountability in his budget presentation.

Giving an adequate relief to the individual taxpayers, FM has announced a 10% income tax (I-T) levied on the annual income of Rs.1,60,001 to Rs.5,00,000; 20% on Rs.500001 to Rs.8,00,000 and 30% on above Rs.8,00,000. However, he has not enhanced the basic threshold limit for income tax exemption and remain it at Rs.1.60 lakh.

For the women, the basic threshold limit will be remain at Rs.1,95,000 and for the senior citizens, it will also be at par the present FY's level of Rs. 2,25,000. Moreover, FM has also eased the maximum tax saving limit from currently Rs.1,00,000 to Rs.1,20,000 but for it the tax payees will have to invest in the longterm infrastructure bonds.

This long-term infrastructure bond will support the realty sector, which was hit worst in the present FY.

However, this announcement of I-T relief would not prove much effective for the lower income group employees as the basic threshold exemption limit has not been enhanced while their salary have gained 40 – 70% zoom after implemention of the modified sixth pay commission recommendation, as experts analyse.

From the new financial year, two new tax systems - Direct Tax Code and GST are proposed to be implemented by April 01, 2010. The introduction of GST will lead to the elimination of taxes such as octroi, Central sales tax, State level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, and other multi-level taxes.

In Budget 2010-11, FM has charged an additional central excise duty of Re.1 per litre on Petrol and diesel and proposed to enhance the basic duty on petroleum products too. On non-petroleum product, he has proposed to enhance the ad valorem from 8% to 10%.

FM has estimated a total expenditure of Rs.11,08,749 crore, 8.6% more as against last year's budget in today's budget proposal. The proposal of planned expenditure is estimated at Rs.3,73,092 crore, 15% more from previous year's while the non-planned expenditure is estimated to Rs.7,35,657 crore, a rise of 6% from the last year's.

The proposal of fiscal deficit has been estimated to freeze at 5.5% of the Gross Domestic Product (GDP) for FY 2010-11 from current FY's of expected 6.9% that will result a sum of Rs.3,81,408 crore. The government would try to tighten it to 4.8% and 4.1% in the next two fiscals, proposed Pranab.

The net market borrowing is expected to a sum of Rs. 3,45,010 crore, quite sufficient for fulfilling the credit needs of private sector, while the gross tax receipts is pegged at Rs.7,46,651 crore in which non-tax receipt may be at Rs.1,48,118 crore, he added in his budget presentation speech.

Here are the highlights of the Budget 2010-11:

• More services have been brought under service tax umbrella while accredited news agencies are proposed to be exempted from it, the tax rate is unchanged at 10%
• GDP growth in 2009-10 may be higher
• Fiscal stimulus in 2009-10 is a success
• New corporate tax rate at 33.21%
• Partially rollback of central excise duty
• Stimulus package to continue
• Gradual phasing out of fiscal stimulus
• Excise duty on tobacco products hiked
• Excise duty cut on CFL
• Excise duty on SUVs, MUVs hiked
• Excise duty on oil products hiked
• Customs duty on crude oil back to 5%
• Partial rollback of excise duty on cement and cement products
• Clean energy cess of Rs.50 per tonne on coal produced in India
• Concessional duty of 4 percent for solar power rickshaw developed by Council of Scientific and Industrial Research
• Silver, gold import duty raised
• Concessional customs duty of 5 percent for cable TV operators for importing equipment
• Toys fully exempt from central excise duty
• Concession for medical equipments for hospitals remains
• Sops for real estate housing projects to be extended
• Tax audit limit for small businesses to raise to Rs 60 lakh
• Surcharge on domestic companies cut to 7.5%
• Saral - II for individual taxpayers in two pages
• Advanced tax receipts expected at Rs 7.46 lakh crore
• To include subsidies into physical accounting
• To recruit 2000 youths to central constabulary
• 15% increase in planned expenditure
• Defence allocation at Rs 1.47 lakh crore
• Health insurance for NREGA beneficiaries
• Allocation of Rs 22,300 crore to Health Ministry
• Rs 2600 cr for Minorities Commission
• Rs 1900 cr for UAID project
• Social sector spending increased to Rs 1.37 lakh
• To rewrite and revamp financial sector laws
• Indira Awas Yojna allocation up to Rs 1000-crore
• Govt to boost all rural literacy mission
• Rs 31,000 crore for primary education
• Rs 5,400 crore for urban development
• Rs 66,100 crore for rural development
• All villages with 2000+ population to get banking facilities by 2012
• Rs 1,200 crore for drought mitigation in Bundelkand area
• Govt to set up financial sector commission
• Govt to launch five more food parks
• Govt ready with Food Security bill
• To extend housing interest subsidy scheme for one more year
• Rs 100 crore for financial inclusion fund
• Allocation for Bharat Nirman at Rs 48,000 crore
• NREG scheme allocation stepped up
• Propose to double allocation to Ganga clean-up mission
• Rs. 200 crore to Goa govt to meet green cover
• Will extend Green revolution in Eastern states
• Coal Regulatory Authority to be set up
• Rs. 300 cr for Rashtriya Krishi Yojna
• Plan allocation for power more than doubled in 2011
• 46% of total plan dedicated to infrastructure
• Additional funds for upgrading infrastructure in rural and urban areas
• Provided more than Rs 16,500 crore for railways
• To extend 2% interest subvention for one more year
• Food inflation should come down in 2010-11
• RBI to give additional licenses to NBFCs
• No to more private banks
• With the economy recovering, need to review public spending
• Consistent policy on downstreaming investment
• FDI regime has been simplified
• Listing of PSUs will ensure corporate governance
• Nutrient based subsidy policy will be effective by April 01, 2010
• Govt to raise Rs 35,000 crore through disinvestments
• Govt has taken steps to ensure food security and bring inflation down