the common man over inflation as well as provides basic relief to corporate to maintain industrial growth. It also bring in a new class of service tax providers under the tax net in an effort to maintain GDP growth and reduce fiscal deficit against the backdrop of a still struggling world economy.
Mukherjee enhanced the exemption limit of individual tax payers to Rs 1,80,000 from Rs 1,60,000, gave substantial relief to senior citizens by first reducing eligibility from 65 to 60 and then enhancing their taxable limit to Rs 2,50,000 from Rs 2,40,000. He also created a special category of very senior citizens for people above 80 years and enhanced the taxable limit to whopping Rs 5,00,000 from the current Rs 2,40,000. A measure that senior citizens would cherish as their only source of income is savings and investments which are under attack from rising inflation and reduced interest rates from banks.
Corporates have been provided marginal relief as the current surcharge of 7.5 % has been reduced to 5% but Minimum Alternate Tax (MAT) has been raised to 18.5% from 18%. MAT has also been levied on developers of Special Economic Zones as well as units operating in SEZs.
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Industry and public welcomes Growth Oriented Budget
IT exemption limit raised to Rs 1,80,000 from Rs 1,60,000
Sr Citizens and Very Sr Citizens to benefit
MAT raised to 18.5%
Surcharge on cos to reduce from 7.5% to 5%
Despite a buoyancy in indirect tax collections, the finance minister did not provide the much needed relief in terms of roll back on the central excise levy to level prevailing in November 2008 as he said wanted to see improved business margins translated into higher investment rates. The idea being that the corporate don’t sit on the increased revenues from lower taxes as the economy improves from recessionary trends but invests the same to promote further industrial growth and economics growth and finally a bigger GDP growth rates which government has pegged at 9% , the highest in the world after Chinas’ 10%.
The direct taxes relief result in a revenue loss to the exchequer of about Rs 11,500 crores and rationalization of customs, excise and central excise duties yield Rs 11, 300 crores leaving an uncovered gap of about Rs 200 crores . The finance minister said he had not presented a resource mobilization at all through his taxation measures. The Rs 200 crore deficit is not worrisome as some of the tax relief given to corporate would result in larger investments and greater industrial growth consequently leading to higher tax collections that would wipe out the deficit eventually.
The revenue gain from increased central excise duties and other rationalities of customs duties would result in Rs 7300 crores and bringing in a anew class of service tax providers and newer items under the category would boost revenue to about Rs 4000 crores, the finance minister estimates.
Here is some number crunching on the budget estimates for 2011-12.
Total Expenditure : Rs 12,57,729 crore increase of 30.4% over budget estimates of 2010-11
Plan Expenditure : Rs 4,41,547 crore – 18.3% rise over Budget estimates of 2011-11
Non Plan Expenditure: Rs 8,16,182 crore rise of over 10.9% over budget estimate of 2010-11.
Gross Tax Receipts estimated ar Rs 9,32,440 crore – increase of 24.9% over Budget Estimates for 2010-11.
Net tax to Centre after devolution to states , Rs 6,64,457 crore. Non tax receipts: Rs 1,25,435 crore
Some of the major highlights of the budget presented by the finance minister are :
He has proposed the formation of a high level group of ministers to suggest ways and means and monitor procedures to check corruption in public life at the governmental levels.
He has proposed to announce a scheme to further rationalize the Foreign Direct Investment (FDI) policy to raise the investments as it had slipped to over 31 billion last fiscal. Also, to enhance the flow of funds to the infrastructure sector , the Foreign Institutional Investors (FII) level for investment in corporate bonds with residual maturity of over five years issued by companies is being raised an additional limit of US $ 20 billion taking the limit US $ 25 billion , eventually raising the total limit available to FIIs for investment in corporate bonds to US $ 40 billion.
The Finance Minister has assured that the nation would align to the GST next year when parliament hopes to approve the legislation next year. He also promised to further liberalise the financial sector reforms with the passage of the insurance laws amendment bill, life insurance corporation amendment bill, revised pension fund regulatory and development authority bill, banking laws amendment bill, state bank of India amendment bill and bill on factoring and assignment of receivables.
To help recapitalize public sector banks , he proposed an infusion of Rs 6,000 crores which will help it to maintain a healthy reserve as RBI measures aimed at curbing inflation were restricting their cash flow for lending which again indirectly negated growth trends. He has sought to remove this anomaly.
One of the important things proposed in the budget is that the finance minister has sought to exempt from import duties import of basic machinery for setting up cold storage chains in an effort to promote this new chain of development in the agri sector.
Author is the former economics editor of PTI who has anchored budget coverage for several years.