Presenting the Union Budget 2011-12 in the Lok Sabha on Monday, Finance Minister Pranab Mukherjee said that the budget is a transition towards a more transparent and result-oriented economic management system in India. He said that while developments on India's external sector have been encouraging, continued high food prices have remained our principal concern.
Here's a lowdown of the highlights of the Union Budget 2011, which stressed more on social and education sectors.
Tax Reforms: DTC, GST
For sustaining growth, tax reform will continue with the Direct Taxes Code (DTC) to be operationalised from April, 2012, while a Constitution Amendment Bill is proposed to be introduced during the current session of the Parliament as a step towards roll-out of the Goods and Services Tax (GST).
He said the introduction of DTC and GST will result in moderation of rates, simplification of laws and better compliance.
Agriculture Gets A Boost
The Finance Minister announced a number of measures to strengthen the agricultural sector, particularly in the areas of pulses, vegetables and oil palm.
He announced a Rs. 300 crores expenditure to promote 60,000 pulses villages in rain-fed areas for increasing crop productivity and strengthening market linkages, and also proposed to spend Rs. 300 crores to promote oil palm plantation in 60,000 hectares, and Rs. 300 crores for an initiative on vegetable cluster. To improve rice-based cropping system in the eastern region, Rs. 400 crores were proposed to be spent.
Fertilizers An Infrastructure Sub-sector Now
Capital investment in fertilizer production is proposed to be included as an infrastructure sub-sector since investment in the sector is capital-intensive. Mukherjee said that the Nutrient Based Subsidy (NBS) has improved the availability of fertilizers, and the government is actively considering extension of NBS regime to cover urea.
Social Reforms On The Way
The allocation for social sector was increased by 17% to Rs. 1,60,887 crores, which amounts to 36.4% of the total plan allocation.
Bharat Nirman - which includes Pradhan Mantri Gram Sadak Yojana (PMGSY), accelerated irrigation benefit program, Rajiv Gandhi Grameen Vidyutikaran Yojana, Indira Awas Yojana, National Rural Drinking Water Program and Rural Telephony - has been allocated Rs. 58,000 crores.
Remuneration for Anganwadi workers has been increased to Rs. 3000 per month from Rs. 1500 per month, while the Anganwadi helpers will get Rs. 1500 per month.
This will be effective from 1st April 2011, benefiting about 22 lakhs Anganwadi workers and helpers.
Education Gets A Bigger Share
The allocation on education has been increased by 24% to Rs. 52,057 crores. Sarva Shiksha Abhiyan gets Rs. 21,000 crores, which is 40% higher than the previous year's allocation of Rs. 15,000 crores. The Finance Minister also proposed to introduce a scholarship scheme for needy students belonging to Scheduled Castes and Scheduled Tribes studying in classes IX and X.
It would benefit about 40 lakhs students.
Health Insurance To Mine Workers
Plan allocation for health has also been increased by 20% to Rs. 26,760 crores. The Rashtriya Swasthaya Bima Yojana will be extended to the unorganized sector workers in hazardous mining and associated industries.
SHGs, MFIs, Weavers Benefited
Underlining the need to strengthen Public Sector Banks (PSBs), the Finance Minister proposed to provide Rs. 6000 crores to maintain tier 1 capital to risk weighted asset ratio. He also proposed to infuse Rs. 500 crores into Regional Rural Banks (RRB).
A Women's Self Help Groups Development Fund with a corpus of Rs. 500 crores is proposed to be created. He also proposed to create a micro finance equity fund of Rs. 100 crores with Small Industrial Development Bank of India (SIDBI) for providing equity to smaller micro finance institutions. Rs. 3000 crores will be provided to NABARD to help handloom weaver cooperative societies to become financially viable.
Housing Loans Liberalized
Interest subvention of 1% on housing loans will now be available for loans up to Rs. 15 lakhs where the cost of the house does not exceed Rs. 25 lakhs. The present limit for the loan amount is Rs. 10 lakhs, while the cost of the house should not exceed Rs. 20 lakhs.
The total plan expenditure has been increased by 18.3a5 to Rs. 4,41,547 crores and the non-plan expenditure increases by 10.9% to Rs. 8,16,182 crores. The gross tax receipts are estimated to grow by 24.9% to Rs. 9,32,440.
Rs. 2,01,733 crores will be transferred to the states and UTs as plan and non-plan transfers. This also marks a rise of 23% over budget estimates of last year. The fiscal deficit is estimated at Rs. 4,12,817 crores, which works out to 4.6% of the GDP.
Income Tax: Women Get A Raw Deal
Turning to the direct taxes, the Finance Minister proposed to increase the exemption limit for general category individual tax payers by Rs. 20,000 to Rs. 1,80,000 per year. This will provide a uniform tax relief of Rs. 2000 to every tax payer of this category.
The exemption limit for women stays unchanged at Rs. 1,90,000.
The benefit for senior citizens will now be available at 60 years of age and the exemption limit will go up from Rs. 2,40,000 to Rs. 2,50,000. Those who are 80 years and above have been brought under a new category called "very senior citizens" and the exemption limit in this category will be Rs. 5 lakhs.
The minimum alternate tax rate has been hiked from 18% to 18.5% of book profits. Developers of Special Economic Zones as well as units operating MAT in SEZs have been brought under MAT. Tax benefit for investment in long term infrastructural bonds will continue for 1 more year. Income from foreign subsidiaries of Indian Company will now attract a lower tax of 15% tax on dividends.
Air Travel, Eating Out Costlier
Turning to indirect tax, the Finance Minister said that there are 370 items that enjoy exemption from Central Excise Duty but are chargeable to VAT. He proposed to withdraw the exemption on 130 of these items.
The remaining 240 items would be brought into the tax net when GST is introduced. A nominal 1% central excise duty is being imposed on 130 items. The basic customs duty has been reduced from 30% to 5% on raw silk, from 5% to 2.5% on certain textile intermediates, and from 7.5% to 5% on certain inputs for manufacture of technical fibre and yarn. Stainless steel scrap has been fully exempted from customs.
Export duty on iron ore has been increased to 20% ad valorem both for lumps and fines. The basic customs duty on pet coke and gypsum has been reduced by 2.5% to give relief to cement industry.
On the service tax front, a number of new services have been brought under tax net. Hotel accommodation in excess of Rs. 1000 per day, and service provided by air-conditioned restaurants with licence to serve liquor have been brought under the tax net. Service tax on air travel has been raised by Rs. 50 in case of domestic air travel, and Rs. 250 on international journey by economy class.
Services provided by Life Insurance Company in the area of investment and some more legal services have also been brought under tax net.
Finance Minister said the proposals on direct taxes are estimated to result in a revenue loss of Rs. 11,500 crore, while those on the service tax will yield Rs. 4000 crores. The Finance Minister has kept the disinvestment target at Rs. 40,000 crores for the coming year.
Ending On A Positive Note
Mukherjee, however, reiterated that the government is committed to retain at least 51% ownership and management control of the CPSUs. He said that as an emerging economy, India stands at the threshold of a decade which presents immense possibilities. He said we have the voice on the global stage, and we must not let the recent trends and tensions hold us back from converting these possibilities into realities.
For point-wise, concise break-up of the Union Budget 2011, click
here.
Courtesy: INN