February 28, 2011

 

 

BUDGET HIGHLIGHTS

 

Finance Minister Pranab Mukherjee today announced the budget 2011-2012.

• FM raised a concern on food inflation and said that strong fiscal consolidation and enlarged resource base of private enterprise is necessary to bring inflation to a moderate rate.
  
• Implementation gaps, leakages from public programmes and the quality of outcomes pose a serious challenge. There is an urgent need to reform systems to track black money.
  
• Gross Domestic Product estimated to have grown at 8.6% in 2010-11 in real terms.
  
• Exports have grown by 29.4 per cent, while imports have recorded a growth of 17.6 per cent during April to January 2010-11 over the corresponding period last year.
  
• Monetary policy measures taken expected to further moderate inflation in coming months.
  

  Average inflation expected lower next year and current account deficit smaller.
  

• Proposal to introduce the Public Debt Management Agency of India Bill in the next financial year.
  
• Fiscal Deficit brought down from 5.5 %( budget estimate) to 5.1 %( real) of GDP in 2010-11.
  
• Fiscal Deficit target kept at 4.6 %of GDP for FY 2011-12
  
• Direct Taxes Code (DTC) to be finalized for enactment during 2011-12. DTC proposed to be effective from April 1, 2012. Areas of divergence with States on proposed Goods and Services Tax (GST) have been narrowed.
  
• Rs.40,000 crore to be raised through disinvestment in 2011-12.
  
• Discussions underway to further liberalize the FDI policy.
  
• SEBI registered mutual funds permitted to accept subscription from foreign investors who meet KYC requirements for equity schemes.
  
• To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds issued in infrastructure sector being raised.
  
• To create Rs 100cr equity fund for microfinance companies.
  
• FII's permitted to invest in unlisted bonds.
  
• FII limit in corporate bonds in infra is being raised by additional USD 20bn.
  
• More banking licenses to be provided to private players.
  
• Exemption limit for the general category of individual taxpayers enhanced from 1,60,000 to
  

  1,80,000 giving uniform tax relief of 2,000.
  

• Qualifying age for senior citizens reduced to 60 vs 65.
  
• Higher exemption limit for Very Senior Citizens, who are 80 years or above.
  
• Current surcharge of 7.5 per cent on domestic companies proposed to be reduced to 5 per cent.
  
• MAT rate increased from 18% to 18.5%.
  
• Additional deduction of 20,000 for investment in long-term infrastructure bonds proposed to be extended for one more year.
  
• Lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.
  
• Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.
  
• Ship-owners allowed duty-free spare parts import.
  
• Export duty on iron ore pellets withdrawn.
  
• To replace excise with ad valorem duties for cement.
  
• 20% ad valorem export duty on iron ore.
  
• Cut customs duty on yarn to 5% from 7.5%.
  
• Stainless steel scrap exempt from basic customs duty.
  
• 10% excise duty on branded garments.
  
• Basic customs duty on Pet Coke and Gypsum to be reduced to 2.5%
  
• Basic food, fuel exempted from central excise duty.
  
• 1% excise duty on 130 new items.
  
• Reduce customs duty on micro irrigation equipment.
  
• Service Tax to add another Rs 4,000 cr revenue gains.
  
• Service tax retained at 10%.
  
• To tax life insurance service providers.
  
• Servcie tax on hotel accomodation above Rs 1,500 per day.
  
• Domestic travel to pay Rs 50 service tax, Rs 250 on international travel.
  
• AC hospitals with more than 25 beds under service tax.
  
• Rs 21,000cr to be allocated to Sarva shikshan Abhiyan
  
• Allocation of Rs 52057cr for education sector, increase of 24%.
  
• To index NREGA wage rates to inflation.
  
• Have allocated Rs 58000cr for social schemes (Bharat Nirman)
  
• Food security bill to be introduced this year.
  
• Increased priority home loan limit to Rs 25 lakh vs Rs 20 lakh
  
• On-going metro projects will be provided financial assistance for speedy execution
  
• Modified infra debt funds to be created to attract foreign funds for infra development.
  
• Rs 2.14cr to be allocated towards infra development. Infra financial commission to provide assistance to infra projects.
  
• Propose to allow tax free infra bonds worth Rs 30000 cr for PSBs.
  
• Propose tax free bonds of Rs. 30,000 for enhancement of infra sector.
  
• Parallel Excise Duty exemption for domestic suppliers producing capital goods needed for expansion of existing mega or ultra mega power projects.
  
• Removal of production and distribution bottlenecks for items like fruits and vegetables, milk, meat, poultry and fish to be the focus of attention this year.
  
• To allocate Rs 300 cr for fodder development.
  
• Credit flow for farmers raised from 3,75,000 crore to 4,75,000 crore in 2011-12
  
• Provision of Rs 300cr being made to promote production of bajra, jowar, ragi.
  
• Rs 300 cr to be allocated for oil palm production.
  
• Propose to give Rs 3000cr to NABARD.
  
• To raise corpus of rural infra development fund to Rs 18000cr vs Rs 16000cr.
  
• To move to direct cash subsidy for kerosene.
  
• Mulling nutrient-based subsidy policy for urea.
  
• Extension of NBS to cover urea under review.
  
• Various Tax Information Exchange Agreements (TIEA) and Double Taxation
  
• Avoidance Agreements (DTAA) concluded. Foreign Tax Division of CBDT has been strengthened to effectively handle increase in tax information exchange and transfer pricing issues
  
• Average inflation and current account deficit to be lower and better managed next year
  
• Budget 2011-12 to serve as a transition towards a more transparent and result oriented economic management system in India.
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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