IT exemption limit raised to Rs 1 lakh
New Delhi, July 8
Mr Chidambaram’s primary focus was on education, health, rural infrastructure, agriculture and water. As expected, he proposed a 2 per cent cess on all taxes which is expected to raise Rs 4,000 crore to Rs 5,000 crore exclusively for universalisation of education, promising a “new dawn for the poor children of India.”
The Finance Minister raised the service tax from 8 per cent to 10 per cent and widened the base by bringing another 13 more areas in its ambit in addition to the existing 58.
The new direct tax proposal to raise the exemption limit is expected to benefit about 1.4 crore income tax assessees and the limit can be raised further in subsequent years.
“No one with an income of Rs 100,000 will be required to pay any income tax any more. I cannot give more relief in this Budget. If compliance improves, I promise to revisit the subject.”
Mr Chidambaram disclosed that there would be no change in the interest rates of the General Provident Fund, Public Provident Fund and the Special Deposit Scheme. These would attract 8 per cent interest this year. “The Varishta Pension Bima Yojana may no longer be necessary since the new savings scheme will cover the senior citizens adequately.”
Expressing the government’s commitment to the orderly development and functioning of the capital markets, the Finance Minister announced a pilot food stamp project, primarily to target those below the poverty line.
Acceding to a long-pending demand of the industry, the Finance Minister raised the ceiling of FDI in telecom from 49 per cent to 74 per cent, 40 per cent to at per cent in civil aviation and 26 per cent to 49 per cent in insurance.
As the engine of growth, the government deserved 85 items in the small-scale sector and raised the cap for loans under the capital subsidy scheme from Rs 40 lakh to Rs 1 crore. The rate of subsidy would also be increased from 12 per cent to 15 per cent. Rs 135.24 crore was earmarked for the “promotion of SSI schemes.”
A fresh tax regime was unveiled for the ailing textile sector. The mandatory Cenvat chain was abolished and there will be no mandatory excise duty on pure cotton, wool and silk.
To enable more extensive farm mechanisation, tractors have been fully exempted from excise as also other ancillary tools and implements such as spades, shovels and sickles.
A further reduction in the cost of computers can be expected with the government deciding to grant full excise duty exemption. At present, computers attract an excise duty of 8 per cent.
Family pension received by widows, children and nominated heirs of members of the armed forces and paramilitary forces killed in the course of operational duties have been exempt from income tax. “This is my humble salute to their supreme sacrifice,” the Finance Minister observed.
Following up on the farm credit package announced recently, Mr Chidambaram announced that a “task force” would be a constituted to recommend reform measures in the cooperative banking sector. Simultaneously, the sponsor bank of each Regional Rural Bank (RRB) would be held accountable for the performance of RRBs under its control.
Irrigation, an important determinant of rural empowerment, has been identified as a critical growth area with the “truly last mile projects” that can be completed by March 2005, being given overriding priority. A sum of Rs 2800 crore has been earmarked for the Accelerated Irrigation Benefit Programme (AIBP).
A corpus of Rs 8000 crore has been set aside for the rural infrastructure development fund (RIDF) for the current financial year.
Mr Chidambaram said a major scheme would be launched to repair, renovate and restore all water bodies directly linked to agriculture. Initially to be undertaken on a pilot basis, the government will launch the National Water Resources Development Project with a completion time frame of seven to 10 years. This will be supplemented with a nationwide water harvesting scheme involving an estimated investment of Rs 100 crore.
In an endeavour to bridge the gap between the laggard and the developed states, a Backward State Grant Fund with a corpus of Rs 25,000 crore has been set up. The fund will become operational from 2005-06.
While the existing Backward Districts Initiative Scheme with an annual outlay of about Rs 1800 crore will be merged into this Backward State Grant Fund, the balance amount required will be earmarked from out of the total Central support to the Plan.
In addition, a provision of Rs 3225 crore has been made for Bihar through the Rashtriya Sam Vikas Yojana. The North-eastern region will receive an additional sum of Rs 650 crore from the Central pool of resources for specific projects, while a provision of Rs 300 crore has been made for Jammu and Kashmir to enable the state to smoothly transit from the current overdraft management with the Bank of Jammu and Kashmir to the Ways and Means scheme of the RBI.
The Finance Minister proposed a change in the existing regime of tax on dividends. Equity-oriented mutual funds will continue to be exempt from tax. In the debt-oriented mutual funds, which are now required to withhold 12.5 per cent of the income distributed to unit holders, corporate unit holders will now have to pay 20 per cent.
On the indirect tax front, the Finance Minister made it clear the government’s intention is to align the rates to ASEAN levels.
While the peak rate of customs duty has been left untouched at 20 per cent, some rationalisation has been undertaken in the excise tax regime.
The total expenditure in the
the Budget estimates for 2004-05 is estimated at Rs 477,829 crore of which Rs 145,590 core is for Plan and Rs 332,239 crore for non-Plan. Total revenue receipts of the Central government is expected to be Rs 309,322 crore and revenue expenditure Rs 385,493 crore. Consequently, the revenue deficit is estimated at Rs 76,171 crore which is equivalent to 2.5 per cent of the GDP, 1 per cent below the corresponding estimate of 3.5 per cent of the GDP in 2003-2004.