Budget is one of the biggest challenges of Pranab Mukherjee's long political career and the Finance Minister set the tone for it when he described the year gone by as a "year of recovery interrupted." He began with listing grim ground realities - the global economic scenario, the battle with double digit inflation and said it was time for tough decisions.
Here are the highlights of this fiscal's financial budget.
• Income tax exemption limit rose to Rs.2 lakh to provide relief of relief of Rs.2, 000 for all assesses; 20 per cent tax on income over Rs.10 lakh, up from Rs.8 lakh.
• Deduction of up to Rs.10, 000 from interest from savings bank accounts. Defense to get Rs.1.93 lakh crore during 2012-13.
• Service tax rate raised from 10 per cent to 12 per cent to bring in Rs.18, 660 crore.
• Number of proactive steps taken on black money (stashed away abroad); information has started flowing in, prosecution to be initiated; White Paper in current session.
• No change in corporate taxes but measures to enable them better access funds.
• Withholding tax on external commercial borrowings reduced from 20 per cent to five per cent for power, airlines, roads, bridges, affordable houses and fertilizer sectors.
• National Skill Development Fund allocated Rs.1, 000 crore.
• Four thousand residential quarters to be constructed for paramilitary forces with an allocation of Rs.1, 185 crore.
• National Population Register to be completed in two years.
• Excise duty rose from 10 to 12 per cent.
• Cinema industry exempted from service tax.
• Branded silver jewellery fully exempt from excise duty.
• Customs duty on warning systems/track upgrade equipment for railways reduced from 10 per cent to 7.5 per cent.
• Import duty on equipment for iron ore mining reduced from 7.5 to 2.5 per cent
OVERVIEW:
The main 3 things to be looked upon are:
1. Revenues
2. Expenditure
3. Deficit
Revenues
Direct Taxes:
• Exemption limit for the general category of individual taxpayers proposed to be enhanced from Rs 1, 80,000 to Rs 2, 00,000 giving tax relief of Minimum Rs 2,000.
• Upper limit of 20 per cent tax slab proposed to be raised from Rs 8 lakh to Rs 10 lakh.
• Proposal to allow individual tax payers, a deduction of up to Rs 10,000 for interest from savings bank accounts.
• Proposal to allow deduction of up to Rs 5,000 for preventive health check-up.
• Senior citizens not having income from business proposed to be exempted from payment of advance tax.
• Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent up to 31.3.2012
Indirect taxes:
• Rate of service tax has been increased to 12.36% (including education cess, secondary and higher education cess)
• The composition in the work of service tax for works contract has been increased to 4.94%.
• Proposals from service tax expected to yield additional revenue of Rs 18,660 Cr
• Excise duty rate has been enhanced from 10.30 to 12.36%
• The reduced rate of penalty under section 11AC will be applicable only where the reduced amount of penalty so computed is also paid along with duty and interest within 30 days.
• Given the imperative for fiscal correction, standard rate of excise duty to be raised from 10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions
• No change proposed in the custom duty on non agricultural goods.
Disinvestment:
In 2011-12, as against a target of ` 40,000 crore, the Government will raise about ` 14,000 crore from disinvestment. For 2012-13, At least 51 per cent ownership and management control to remain with Government
Interest Income:
Interest income in 2011-2012 is 3, 19,000 crore.
EXPENDITURE
• Budget Estimates of Expenditure for 2012-13 show a net increase of 172205 crore over the Revised Estimates.
• Non-Plan expenditure has shown an increase of 77784 crore and Plan expenditure has also increased by ` 94421 crore
• Finance Minister Pranab Mukherjee earmarked Rs.1, 93,407 crore for Defense — which is 1.9 per cent of the GDP — in the budget proposals.
Subsidies
• The Government has decided that from 2012-13 subsidies related to food and for administering the Food Security Act will be fully provided for
• The expenditure on Central subsidies is restricted to fewer than 2 per cent of GDP in 2012-13. Over the next three years, it would be further brought down to 1.75 per cent of GDP
• Subsidy on petroleum products has been reduced by Rs 24,900 crore
Salaries
• No major development in the salaries.
DEFICIT
Fiscal Deficit:
• Budget now projects a revised fiscal deficit estimate at 5.9% of GDP.
• Against this, the government targets a fiscal deficit at 5.1% of GDP in FY2013: a decline of Rs 83 billion from the revised FY2012 estimates.
Current account deficit:
• It’s likely to be around 3.6%
Trade deficit
• The developments in India’s external trade in the first half of the current year were encouraging
• India has successfully achieved diversification of imports and exports market
• Asia’s share in total trade increase is from 33.3 per cent in 2000-2001 to 57.3 per cent in the first half of 2011-12.
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