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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS


IT exemption limit raised to Rs 1 lakh

Tractors, computers to cost less No tax on pension of armed forces’ kin 2 pc education cess levied Interest on small savings unchanged
New Delhi, July 8 
In a highly innovative “Aam Admi” Budget, Finance Minister P. Chidambaram today sought to shift the terms-of-trade in favour of the rural economy where 80 per cent of the country resides and raised the income tax exemption limit to Rs 1 lakh while enhancing the defence budget by about Rs 12,000 crore.


HIGHLIGHTS

GRAPHICS
Union Budget at a Glance
Proposed IT structure

More Budget  stories

In videos:
Government targets deficit, poor in first budget. (28k, 56k)
Congress, Left parties laud Union Budget 2004-05.(28k, 56k)

Editorial: A commendable budget
Business: Carrot to industry, stick to market and more

2 pc cess to yield 5000 cr
Rs 259 cr for AIDS control; ITIs to be upgraded
New Delhi, July 8
The Centre today proposed to levy a cess of 2 per cent on income tax, corporation tax, excise and customs duties and service tax to give a boost to primary education in the country.

Left opposes hike in FDI cap; BJP says Budget inflationary
New Delhi, July 8
The Congress and other allies of the UPA today hailed the Union Budget as “pro-poor” and “pro-common man” while the BJP said it was “run of the mill” and had failed to meet expectations of the people.

Ms Nalini Chidambaram, wife of Finance Minister P. Chidambaram, accompanied by her daughter-in-law, on way to Parliament House to attend the Budget presentation
Ms Nalini Chidambaram (left), wife of Finance Minister P. Chidambaram, accompanied by her daughter-in-law, on way to Parliament House to attend the Budget presentation on Thursday.
— Tribune photo by Mukesh Aggarwal 

No change in IT slabs
New Delhi, July 8
Finance Minister P. Chidambaram today hinted at deepening the reforms process in the taxation arena and announced a host of direct and indirect tax proposals including the raising of the income tax exemption limit to Rs 100,000.

Agro-diversification gets priority
New Delhi, July 8
The road to the country’s economic growth passes through the farmland. This was clearly brought out by Union Finance Minister P. Chidambaram in the Union Budget by outlining the road map for diversification, doubling the flow of agricultural credit in three years, providing tax incentives and introducing a new weather insurance scheme.

Help for J&K, Rs 3,225-cr gift for Bihar
New Delhi, July 8
The Centre will provide a special assistance to militancy-hit Jammu and Kashmir to have a reasonable Plan size, apart from a grant of Rs 300 crore to help the state meet its “overdraft” situation.

Plan to repair water bodies for irrigation
New Delhi, July 8
In a move to enable farmers to overcome the vagaries of weather and reduce the dependence on monsoon, Finance Minister P. Chidambaram today proposed measures to improve irrigation facilities and identified the Panchayati Raj institutions as nodal agencies to implement the schemes.

Pay packets, tours of ministers cut
New Delhi, July 8

The UPA government has proposed to cut down the provisions for salaries and tour expenses of ministers by reducing the grants for 2004-05. The allocation for tour expenses has been put at Rs 46 crore for 2004-05 as compared to Rs 88 crore in the previous fiscal, Rs 42 crore less.

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2 pc cess to yield 5000 cr
Rs 259 cr for AIDS control; ITIs to be upgraded
Tribune News Service

New Delhi, July 8
The Centre today proposed to levy a cess of 2 per cent on income tax, corporation tax, excise and customs duties and service tax to give a boost to primary education in the country.

Presenting the 2004-05 Budget in Parliament, Finance Minister P. Chidambaram also proposed to allocate Rs 259 crore for the prevention and control of HIV-AIDS and to redesign the Universal Health Insurance Scheme to make it exclusive for persons and families below poverty line.

The move to impose “education cess” for providing basic education to children is in conformity with the common minimum programme of the UPA.

The new cess will yield about Rs 4000-5000 crore in a year and the entire amount will be earmarked for education, including the provision of nutritious cooked mid-day meal.

The minister also proposed to launch a programme in the Central sector to upgrade 500 ITIs over the next five years at the rate of 100 institutes a year.

He said the schemes imparted by the ITIs must keep pace with the technological demands of industry and to produce world class technicians. Under the programme, appropriate infrastructure and equipment will be provided, the syllabi will be upgraded and new trades will be introduced.

The Minister called for the creation of a public-private partnership model for designing and implementing the scheme. He said the selection of ITIs would be done in consultation with the state governments.

Mr Chidambaram announced that commercial banks had agreed to waive the collateral for education loans up to Rs 7.5 lakh if a satisfactory guarantee was provided on behalf of the student.

This is to ensure that no student admitted to any professional course in IITs, IIMs and medical colleges is deprived of the opportunity to study because of lack of funds, he said.

The Minister said the Universal Health Insurance Scheme would be redesigned to make it exclusive for persons and families below the poverty line. He said only a small number of families below the poverty line had been covered as the BPL families seemed to avoid the scheme due to inability to pay the premium.

The revised premium would be Rs 165 for individuals, Rs 248 for a family of five and Rs 330 for a family of seven, without any reduction in benefits.

To offset the reduction in premium, the minister proposed to enhance the premium subsidy from Rs 100 at present to Rs 200 for an individual, Rs 300 for a family of five and Rs 400 for a family of seven.

The cost to the exchequer, he said, would be Rs 40 crore a year. “If the money is fully spent, the number of insured will rise to about 10 lakh,” he said.

The Minister also proposed to introduce a new Group Health Insurance Scheme through public sector non-life insurance companies.

The insured will be members of self-help groups and other credit linked groups who avail of loans from banks or cooperative institutions. The Minister said under the scheme, the premium would be Rs 120 per person and the insurance cover would be for a sum of Rs 10,000.

Emphasising that bold and determined efforts were needed to achieve zero-level growth of AIDS/HIV, the minister announced an allocation of Rs 259 crore for the prevention and control of AIDS.

The amount would be utilised, among other things, for improved surveillance through setting up of more sentinel sites and use of primary health centres to monitor HIV/AIDS.

The money would also be used for public awareness campaigns, promotion of safe sex through the use of condoms, prevention of drug abuse and distribution of disposable syringes, Mr Chidambaram said. 
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Left opposes hike in FDI cap; BJP says Budget inflationary
Tribune News Service

New Delhi, July 8
The Congress and other allies of the UPA today hailed the Union Budget as “pro-poor” and “pro-common man” while the BJP said it was “run of the mill” and had failed to meet expectations of the people.

The Left leaders broadly welcomed the direction of the Budget but opposed the hike in FDI cap in insurance, telecom and civil aviation sectors. Former Prime Minister Atal Bihari Vajpayee said the Union Budget was “not up to the expectations.”

Talking to reporters after the presentation of the Budget, the former Prime Minister said, “It is a mixed Budget and inflation would only increase. Many programmes launched by the NDA have only been repackaged.” He said many promises had been made without resources to meet them. Mr Vajpayee said the Budget was silent on the highways project which had been launched by the NDA Government.

He said there were some announcements about agriculture but “mere announcements would not do as the main problem is their implementation.’’ Asked about the projected growth rate, he said it for the new government to attain it.

Former Union Finance Minister and BJP spokesman Yashwant Sinha criticised the Union Budget as being “run of the mill” and said it does not fulfil the promises made in the UPA Government’s Common Minimum Programme.

“It is run of the mill.....It does not even fulfil the promises made by the UPA government in its Common Minimum Programme,” Mr Sinha said.

There was no focus on the agricultural sector the Budget had nothing pathbreaking in the announcements made regarding schemes for providing drinking water, Mr Sinha said

NDA convener George Fernandes said the Budget had only carried forward the initiatives taken by the previous government.

Janata Dal (United) Parliamentary Board chairman Sharad Yadav said the Budget offered no relief. The farmers were the worst hit because the Budget, which had talked of promoting agro-industries, had not talked about costs of inputs like fertilisers, seeds and pesticides.

Left parties, supporting the UPA government from outside, welcomed the general direction of the budget but opposed the hike in FDI cap in telecom, insurance and civil aviation sectors.

Leaders of the CPM, CPI, RSP and Forward Bloc also opposed the raising of investment ceiling for foreign institutional investors (FIIs) in debt funds from $ 1billion dollars to $ 1.75 billion.

Opposing the hike in FDI cap in the three sectors, CPM leaders Nilotpal Basu, Rupchand Pal and Basudeb Acharia said while the insurance sector does not need infusion of funds, private investment in the telecom sector has not addressed the concerns of rural telephony.

The ratio of rural and urban tele-density currently stood at 1:11 and the rural-urban inequity has accelerated in the past five years, they said. The CPM leaders said nowhere in the world was the FDI cap in civil aviation sector as high as 49 per cent. They said increasing investment ceiling for FIIs in capital market would increase volatility as there was no regulatory mechanism in place. The leaders said they would not support any amendment to the Insurance Regulatory Development Authority Act to enforce FDI cap in the insurance sector.

Praising initiatives for agriclutural sector, CPI’s Gurudas Dasgupta, however, said there was no proposal in the Budget to unearth hundreds of crore worth of black money. he also opposed the proposed increase in FDI cap in insurance, civil aviation and telecom.
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No change in IT slabs
Tribune News Service

New Delhi, July 8
Finance Minister P. Chidambaram today hinted at deepening the reforms process in the taxation arena and announced a host of direct and indirect tax proposals including the raising of the income tax exemption limit to Rs 100,000.

The Finance Minister said that out of nearly 3.4 crore persons filing income tax returns, only 2.7 crore assessees are tax payers and the new proposals will give relief to 1.4 crore assessees. On the indirect tax front, he said the India’s tariff structure should be aligned to those of ASEAN countries.

The peak rate of customs duty has been left untouched at 20 per cent. Tractors and associated ancillary tools and implements have been fully exempted from excise duty as also computers.

The slabs for the purpose of computing income tax remain the same. The tax proposals also specify that a person having income exceeding Rs 8,50,000 in this slab would be required to pay 10 per cent surcharge on the total income tax payable after the rebate under Chapter VIII A, and also the education cess at the rate of 2 per cent.

For example, a resident individual with a taxable income of Rs 8,50,000 will have to pay an income tax of Rs 2,33,580 (Rs 4,580 more than what he paid last year).

Family pension received by widows, children and nominated heirs of members of the armed forces and the paramilitary forces killed in action will be exempt from income tax. The tax proposals also specify that benefit of Section 80 DD and Section 80 U is to be extended in respect of persons suffering from autism, cerebral palsy and multiple disability.

Compensation for acquisition of agricultural land in certain urban agglomerations is to be exempt from capital gains tax in such cases where the compensation or the enhanced compensation has been received on or after April 1, 2004.

Gifts from unrelated persons above the limit of Rs 25,000 is to be taxed as income while gifts received from blood relations, lineal ascendants and lineal descendants and gifts received on the occasion of marriage up to a limit of Rs 1,00,000 will continue to be exempt from tax computation.

Tax on long-term capital gains from securities transactions is to be abolished and instead a tax on transactions in securities on stock exchanges is to be levied on the buyer at the rate of 0.15 per cent of the security value. This means that a transaction involving securities valued at Rs 1,00,000 will now bear a small tax of Rs 150 and this will be levied on the buyer. The rate of tax on short-term capital gains from securities has been reduced to a flat rate of 10 per cent. 
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Agro-diversification gets priority
R. Suryamurthy
Tribune News Service

New Delhi, July 8
The road to the country’s economic growth passes through the farmland. This was clearly brought out by Union Finance Minister P. Chidambaram in the Union Budget by outlining the road map for diversification, doubling the flow of agricultural credit in three years, providing tax incentives and introducing a new weather insurance scheme.

“India is self-sufficient in wheat and paddy, but deficient in other agricultural produce. The time has come to encourage our farmers to diversity into areas such as horticulture, floriculture and oilseeds,” said the Finance Minister.

While there has only been a marginal increase of about Rs 200 crore in the fertiliser subsidy, which could spur the hike in prices of urea and DAP, the minister has promised to double the flow of agricultural credit in three years.

Stating that the government had entrusted the implementation of the farm credit policy to public-sector and private-sector banks, regional rural banks and cooperative banks, Mr Chidambaram said the government proposed to appoint a task force to examine the reforms required in the cooperative banking sector so that credit reached every farmer in need of it.

Research gets 775-cr jump

Union Finance Minister P. Chidambaram today announced a major boost to the agricultural research in the country by announcing a whopping Rs 1,000-crore allocation for it, which is an increase of Rs 775 crore in the 2003-04 budget estimates.

“Agricultural research must be expanded rapidly to new frontiers such as bio-technology, vaccines and diagnostics. There must be a special focus on farming in dry lands and unirrigated areas,” the Finance Minister said amidst the thumping of desks by members.

The Indian Council of Agriculture Research is a beneficiary of the scheme under which every commercial rupee earned by the organisation receives funds from the Technology Development Board in respect of projects that are commercially viable.

Apart from the existing risk mitigation measures for farmers from the vagaries of weather, Mr Chidambaram said a weather insurance scheme on a trial basis in 20 rain-gauge stations would be introduced in the current crop season. Further, the government had decided to extend the farm income insurance to Kharif 2004 to assess its feasibility.

Announcing the move to launch the National Horticulture Mission, he said the goal was to double horticulture products from the current level of 150 million tonnes to 300 million tonnes by 2011-12.

Lauding the success of the Anand model for milk and milk products, he said states would be encouraged to establish state-level cooperative societies for promoting horticulture.

Identifying oilseeds as another critical area, Mr Chidambaram said the government would facilitate farmers to diversify into oilseeds by promoting superior seed technology and through an appropriate policy of price support.

For promoting agro-business, the minister proposed to provide additional capital that small farmers’ agro-business consortiums would require. The Rs 10.95-crore corpus set up in 1998 had not been increased over the years, even though 13 districts in the country had been identified where there was a huge potential for agro-businesses and an appetite for investment of nearly Rs 170 crore.

Further, he proposed to amend Section 80 1-B of the Act to allow a deduction of 100 per cent of the profits for five years and 25 per cent of the profits for the next five years in the case of new agro-processing industries set up to process, preserve and package fruits and vegetables.

On the excise front, the minister said tractors, which attracted 16 per cent excise duty, would be fully exempted. Likewise, dairy machinery, which attracted an excise duty of 16 per cent, would be fully exempted. Hand tools such as spades, shovels and sickles, which currently attracted a 16 per cent excise duty, would also be fully exempted.

Excise duty on the preparation of meat, poultry and fish would be reduced from 16 per cent to 8 per cent and that on food-grade hexane (used in the edible-oil industry) would be reduced from 32 per cent to 16.

Mr Chidambaram proposed to exempt farmers from capital gains tax on the compensation for agricultural land acquired, where compensation or the enhanced compensation had been received on or after April 1, 2004.

In a move to restructure the Public Distribution System (PDS) in the country, Mr Chidambaram proposed to introduce food stamps on a pilot basis.

Under this scheme, he said, every eligible family would be entitled to collect its monthly quota of food stamps from a designated distribution centre, and such stamps could then be used to buy foodgrains from any food shop.


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Help for J&K, Rs 3,225-cr gift for Bihar
Tribune News Service

New Delhi, July 8
The Centre will provide a special assistance to militancy-hit Jammu and Kashmir to have a reasonable Plan size, apart from a grant of Rs 300 crore to help the state meet its “overdraft” situation.

Presenting the Budget today, Finance Minister P. Chidambaram also announced that the Centre would provide financial support for the long-pending Baglihar project and also extend up to April 1, 2005, the tax exemption for the new industries in the state.

Referring to the “overdraft” situation in Jammu and Kashmir, the minister said the Centre had agreed to provide a grant of Rs 300 crore to the state to ensure a smooth switchover from the current overdraft arrangement with the Bank of Jammu and Kashmir to the Ways and Means scheme of the RBI.

Apparently with an eye on the coming assembly elections in Bihar, the Finance Minister announced a special economic package of Rs 3,225 crore for Bihar. “Bihar has a number of projects pending for a long time, including projects in power, roads, drainage and rehabilitation of displaced persons. I would like to assure the House that Bihar will be assisted through the Rashtriya Sam Vikas Yojana,” he said.
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Plan to repair water bodies for irrigation
Tribune News Service

New Delhi, July 8
In a move to enable farmers to overcome the vagaries of weather and reduce the dependence on monsoon, Finance Minister P. Chidambaram today proposed measures to improve irrigation facilities and identified the Panchayati Raj institutions as nodal agencies to implement the schemes.

The minister said the Accelerated Irrigation Benefit Programme (AIBP) was being restructured and a sum of Rs 2800 crore was being allocated. He said the AIBP was introduced in 1998, but only 28 of the 178 large and medium irrigation projects identified had been completed.

“Truly last-mile projects that can be completed by March 2005 will be given over-riding priority and other projects that can be completed by March 2006 will also be taken up in the current year,” he said.

Mr Chidambaram proposed to launch a massive scheme to repair, renovate and restore all water bodies that are directly linked to agriculture.

He said in the current year pilot projects would be taken up in at least five regions of the country and the estimated cost would be Rs 100 crore.

“Once the pilot projects are completed and validated, the government will launch the National Water Resources Development Project and complete it over a period of seven or 10 years,” he said.
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Pay packets, tours of ministers cut

New Delhi, July 8
The UPA government has proposed to cut down the provisions for salaries and tour expenses of ministers by reducing the grants for 2004-05. The allocation for tour expenses has been put at Rs 46 crore for 2004-05 as compared to Rs 88 crore in the previous fiscal, Rs 42 crore less.

According to the provisions made under the Ministry of Home Affairs, the salaries of ministers have been reduced to Rs 1.51 crore from Rs 2.91 crore. — TNS
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 REACTIONS 

"We have shown we are a caring and daring government. We are caring by addressing agriculture, rural economy and infrastructure, providing for safety net programmes like food for work. We are daring by liberalising."

Finance Minister, P. Chidambaram

"First rain in the desert in six years; Pro-poor and pro-farmer"

Congress, UPA allies

The Budget will "find meaningful solutions to poverty, which still afflicts millions of people."

Prime Minister, Manmohan Singh

"There may be some good provisions in it but, overall, the Budget is far from satisfactory." There is "every possibility" of a general price rise. It is up to the new government to ensure higher growth rate as the NDA government was constantly being ridiculed on this. "Hamare liye kaha jata tha ki ham hawa mein ud rahe hain, ab to sarkar zameen par aa gayee."

Atal Bihari Vajpayee

"Bihar and all other backward states have always been neglected. This is the first time that justice has been done to them." A total package of Rs 45,000 crore has been sought for Bihar, this is the first instalment.

RJD chief Laloo Prasad on special package for Bihar

Priority should have been given to Jammu and Kashmir in the matter of development. An outlay of just Rs 300 crore has been allocated to Kashmir, whose present overdraft is Rs 1400 crore.

People’s Democratic Party leader Mehbooba Mufti.

"My income tax will definitely increase as I have to pay 2 per cent extra as education cess.... Even eating somosas and having coffee in a restaurant will be expensive with service tax being hiked from 8 to 10 per cent."

Executive working in a private firm

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