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Budget 2010: Tax relief but fuel prices to go up
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Zeebiz Bureau
New Delhi, Feb 26: The Union Budget 2010-11, presented by Finance Minister Pranab Mukherjee in the Lok Sabha on Friday, proposed a sizable tax relief for individuals, but hiked the excise and minimum alternate tax (MAT) as part of the partial stimulus rollback, besides imposing a Re 1 per litre increase on petrol and diesel duty.
With the economy expected to grow 8.5 percent in the next fiscal, the Finance Minister estimated a deficit of 5.5 percent for 2010-11, lower from the current estimated 6.9 percent this fiscal.
In his marathon 100-minute speech, Mukherjee sounded upbeat about the resilience of the country’s economy and said India has successfully “weathered” the global crisis.
Mukherjee said 46 percent of the plan allocation will be set aside for infrastructure, while hiking the outlays for rural and urban development, as also for education and healthcare. He also promised to implement the direct tax code from April next year, and assured a simplified foreign investment policy soon.
BUDGET HIGHLIGHTS
 Income Tax
Personal Income Tax slabs widened
Income up to Rs 1.6 lakh – NIL
Above Rs 1.6 lakh to 5 lakh -- 10%
Above Rs 5 lakh to 8 lakh -- 20%
Above Rs 8 lakh -- 30%
Deduction of Rs 20,000 in long term infrastructure bonds
Contribution under central scheme to be included for Health Insurance exemption
Income Tax Department ready with Saral-2 form for salaried tax-payers
2,000 Income Tax Returns daily
Revamp needed of internal working system
One percent interest subsidy on home loan up to Rs 10 lakh March 2011
Weighted deduction on RD raised to 200% from 150%=
Professionals with Rs 15 lakh income need account audit
Interest on tax deduction, not paid, raised to 18%
Research and Development deduction hiked
Two more centres for tax filing
Income tax centres in Pune and Cochin -- Single window system to address grievances
Four more cities to get this system 
 Direct Taxes
Minimum Alternative Tax (MAT) hiked from 15% to 18%
Corporate Surcharge down from 10% to 7.5% and 7%
Service taxes unchanged
More services to be taxed
 Indirect Taxes
Exemptions for two-star and above hotels anywhere in the country
Excise duty hiked on tobacco
Partial excise on cement, cars
Central Excise Duty to be hiked by Re 1/litre on petro-products
2% interest subvention for some export companies extended by one year
Textiles, gems and jewellery to benefit from interest subvention extension
Customs duty 5% on machinery, instruments and appliances for solar thermal plants, exempt from central excise duty
Peak Customs Duty unchanged at 10%
Partial roll back of central excise cut
To raise excise on petro-products to 10% from 8%
Large cars, SUVs, MUVs’ excise rate at 22%, up by 2%
Restore 5% basic customs duty on crude petroleum
Excise on cigars, cigarettes to go up
Increased excise duty on all non-smoking tobacco
To raise central excise on non-petro products to 10% from 8%
Some rollback of excise on cement, cement products
Cereals, pulses transported via road exempted from service tax
Central excise on LED lights, CFLs cut to 4% from 8%
Imposed 4% excise duty on electric cars, vehicles
Uniform, concessional 5% duty on all medical appliances
Special duty exemption on mobile phone accessories extended
Customs duty rationalized on music, gaming, software
Transfer of intellectual property right to attract service tax
Import duty on gold, platinum, silver to go up
 Fundamentals
India has weathered crisis well
Economy in better position now than a year ago, but challenges remain
Three challenges and medium-term perspective that was outlined last year
First challenge: Need to revert to high GDP of 9% and then breach 10% barrier
Second challenge: Harness economic growth to make it more inclusive. Thrust of Infrastructure in rural areas, education and health
Third challenge: Public delivery mechanism needs to improve through reforms of structures and institutions and mechanisms
Deceleration in Q2 FY 09 slowed our growth to 6.9% from over 9% in past three years
Economy stabilised and GDP was 6.8%
Optimistic about Q3 and Q4
Renewed growth in manufacturing; December growth was 18.5%, highest in past two decades
FY 10 economy stabilized in Q1 with 6.1%, Strong rebound in Q2 at 7.9%
We are averaging growth of 7.2% as of now but can be higher once final figures of Q3 and Q4
Signs of revival in exports in Nov-Dec, Jan encouraging too
Fiscal deficit at 6.9% at FY 10
Tax collections in FY 10 at Rs 746,651 crore
Non-tax revenue in FY 10 at Rs 148,118 cr
FDI inflows April-December $2,090 crore
Direct tax proposals revenue loss Rs 26000 crore
FY10 food subsidy seen at Rs 56,000 crore
FY10 petroleum subsidy seen at Rs 15000 crore
FY10 fertiliser subsidy seen at Rs 53000 crore
FY10 interest payment seen at Rs 2.12 lakh crore
FY10 total subsidies Rs 1.31 lakh crore
 Budget Estimates
10% GDP growth can be achieved in not too distant future
To cap combined Centre-State debt at 68% of GDP by 2014-15
Total spending FY11 Rs 11.08 lakh crore
FY11 plan spend Rs 3.73 lakh crore
FY11 non-plan expenditure at Rs7.35 lakh crore
Non-plan expenditure increase at 6%
Fiscal deficit projections at 4.8% and 4.1% for FY 12 and FY 13
Fiscal deficit projection at 5.5% for FY 11
FY11 fiscal deficit Rs 381,408 crore
Net tax revenue estimate as per 11 Finance Commission recommendations
Divestment proceeds in FY11 seen over Rs 40,000 crore, up from 25,000 crore in FY10
FY11 power sector allocation at Rs 5130 core
FY11 renewable energy plan outlay up 61% at Rs 1,000 crore
Ganga mission allocation doubled to Rs 500 crore in FY 11
Rs 7,300 crore for backward regions in FY11
Urban development allocated Rs 5400 crore in FY11
Allocated Rs 2400 crore for micro, SMEs in FY11
FY11 net market borrowing pegged at Rs 3.45 lakh crore
Customs, excise net revenue gain Rs 43,500 crore in FY11
Central excise on latex, rubber thread cut to 4% from 8%
To bring more services under the service tax net
Cut excise duty on water heaters, purifier to 4%
FY11 indirect tax net revenue gain seen Rs 46,500 crore
FY11 net revenue gain from tax proposals at Rs 20,500 crore
FY11 food subsidy seen at Rs 55,600 crore
FY11 petroleum subsidy seen at Rs 3,100 crore
FY11 fertiliser subsidy seen at Rs 50,000 crore
FY11 total subsidies Rs.1.162 lakh crore
Revenue loss from direct taxes to be Rs 26,000 crore
Corporate tax mop up seen at Rs 3.01 lakh crore in FY11
Income tax mop up seen at Rs 1.28 lakh crore in FY11
Customs duty mop up seen at Rs 1.15 lakh crore in FY11
Excise duty mop up seen at Rs 1.32 lakh crore in FY11
Service tax mop up seen at Rs 68000 crore in FY11
 Inflation
Major concern has been double digit food inflation
Fear of food inflation spreading to other items as well
Consulting states to bring down inflation
Consulting state governments to control food prices
Supply-demand imbalance need to be managed
Expect inflation to come down in next few months
 Reforms
New steps to simplify FDI regime
Effective management of public expenditure is also part of fiscal consolidation procedure
Companies Bill introduced, will address regulation in corporate sector
Interest subversion of 2% extended by one year
Will mull Parikh panel recommendations on fuel prices
Need to open retail trade, will bridge wholesale and retail price
Financial Sector Reforms Commission to be set up
ARC recommendations are being implemented
Need to review public spending
Agriculture
Southwest monsoon undermined kharif crop
Need for better management of food security in the country
Four-pronged strategy on agriculture
Extend Green Revolution to eastern side of the country
Rs 400 cr for this initiative
60,000 pulse and oils villages to enhance productivity
Rs 200 cr for the project
Rs 200 cr for climate resilience agriculture
To increase credit to farmers; target raised to Rs 375,000 cr
Five more food parks to be set up
Banks taking pro-active role to provide loans to farmers
Rs 375,000 cr credit by banks to farmers raised from Rs 3,25,000 cr
Repayment period for farm loans extended by 6 months
FY 11 bank credit to farm sector at Rs 3,750 crore
Subvention for timely farm loans up to 2% from 1%
Those who repay loans on time can get fresh loans at 5%
Direct transfer of subsidy to farmer on fertilizers
Fertiliser subsidy to be reduced
Nutrient-based fertilizer policy effective from this April
Proposed Rs 300 crore in FY11 for Rashtriya Krishi Vikas Yojana
Concessional customs duty of 5% on agri machines
 Infrastructure
To maintain thrust in upgrading infrastructure
20 km/day of national highway to be built
13% increase in road allocation to Rs 19,894 cr
IIFCL to be set up to provide finance to infra projects
Infrastructure for food processing: 5 more projects
Doubled plan allocation to power sector to Rs 5200 cr
Rs 500 cr for power projects in Ladakh
Coal regulatory authority to be set up
Rs 1.73 lakh crore for infrastructure development
46 percent of total plan expenditure for infra
To loan Rs 16752 crore for railway development projects
Mega power plant policy modified to cut production costs
More than doubled allocation to power sector
To set up 20,000 MW of solar power by 2022
To develop new port at Sagar Island in West Bengal
25% of plan allocation for rural infrastructure
Monorail projects get special imports status
 Social Schemes
Rs 40100 crore for NREGA in FY11
Shaakshar Bharat Mission to make 7 crore adults literate was launched
Rs 4,500 cr for Ministry of Social Justice
To support the program for target groups like SCs and STs
Indian Fine Language Research and Development Centre to be set up
Minority affairs allocation increased to Rs 2600 crore
15% target lending for minorities achieved
Banks for villages with population over 2,000
Health insurance for NREGA beneficiaries
Rs 1,200 crore for drought-hit Bundelkahnd
30 lakh people to be helped in textiles
Women and Child Development Ministry to get 50% more funds vis-à-vis last year
Mission for empowerment of women
Rs 4,500 crore for Social Justice and Empowerment Ministry
Rs 1,000 crore for workers in unorganised sector
Education allocation at Rs 31,000 crore
Will spend divestment earnings on social sectors
Spending on social sector upped to Rs 1.37 lakh crore
Annual health survey for all districts in 2010
To allocate Rs 22300 crore for the Ministry of Health in FY11
Bharat Nirman allocation at Rs 48,000 crore
Indira Aawas Yojana FY11 allocation at Rs 10,000 crore
Rajiv Awaas Yojana allocated Rs 1,270 crore in FY11
National security fund for unorganized sector workers allocated Rs 1000 crore in FY11
National Security
Defence allocation Rs 147,344 crore for FY 11
Defence capex Rs 60,000 crore in FY 11
Integrated plan for 33 Naxal-hit districts’ growth
To recruit 2,000 youths as constables in CRPF in 2010
Rs 430 crore more for modernization of the police force
Additional Rs 2284 crore for strengthening border management
100,000 dwellings for central paramilitary forces personnel
 Banking
FY11 capital for public sector banks at Rs 16,500 crore
Rs 16,500 crore to be infused into PSU banks in 2010-11
RBI considering giving new banking licenses
Capital for Regional Rural Banks (RRBs)
 Other Highlights
Acted on 11th Finance Commission
To exit stimulus in calibrated month
Need to review stimulus and move towards fiscal consolidation in 5 years
Need to make growth broad-based and demand-supply balance better managed
In six months a status paper on detailed analysis of public debt followed by annual reports
Need to strengthen domestic macroeconomic environment
Need to review public spending
Accepted the recommendations of 13th Finance Commission
Listing of PSUs is a priority
Both ownership and control has been identified as important
New financial stability apex council to be set up
Have adhered to fiscal roadmap
We have not issued fertilizer or oil bonds
Private investment can sustain 9% growth
Focus on financial literacy and inclusion
First set of UID numbers in the coming year
Rs 1900 cr for UIDA
Technology advisory group to be set up under UIDA chief Nandan Nilekani to expedite technological roll out in the government
New symbol for Indian rupee in the offing
Committed to SEZ to improve employment and growth
Better rural infra must for better economic growth
Had to give fiscal expansion and liberal monetary support in FY10
India among few nations to implement broad-based stimulus
India among first two nations to have counter-cyclical steps
Focus to cut waste of foodgrain in storage, supply chain
To relax norms for shops, built-up area in housing projects
Budget belongs to Aam aadmi, farmers, entrepreneur
Will implement direct tax code from April 1, 2011
Deadline for repayment of loan extended by six month to June 2010
Finalising the structure of GST, planning to implement it by April 2011
External borrowing allowed for cold storages
System to tackle tax evasion and get black money abroad
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