exemption limit raised to 1 lakh,
New Delhi, February
Announcing an immediate relief of Rs 3,645 crore for the tsunami victims, Mr Chidambaram said the Planning Commission would come out with a comprehensive package of Rs 10,216 crore for the tsunami-affected families.
He projected a GDP growth rate of 6.9 per cent in the current fiscal with 8.9 per cent growth in the manufacturing sector. Mr Chidambaram said inflation had been moderated to 5 per cent. The Gross Budgetary Support has been fixed at Rs 172,500 crore for 2005-06.
In a major relief to tax payers, the Union Budget for 2005-06 today raised income tax exemption limit to Rs 1 lakh, restructured tax slabs, lowered corporate tax to 30 per cent and slashed excise and customs duties on several commodities, including petrol and diesel.
Presenting the Budget, Finance Minister P. Chidambaram raised the exemption limit for women and senior citizens, but slapped a 0.1 per cent tax on cash withdrawals of Rs 10,000 a day from banks as an "anti-black money" measure, but announced no amnesty scheme for evaders.
The securities transaction tax, introduced last year, has been raised from 0.15 per cent to 0.2 per cent. While excise duty on automobile and aerated water was left untouched at 24 per cent, he levied 10 per cent specified excise duty on cigarettes and tobacco products like gutkha.
His direct proposals were to yield additional Rs 6,000 crore a year. The indirect proposals are broadly revenue neutral. In a major overhaul of direct taxes and to provide stability in the medium term, Chidambaram raised the basic income tax exemption limit to Rs 1 lakh from the present Rs 50,000.
Income of Rs 1-1.5 lakh will now attract 10 per cent tax, Rs 1.5-2.5 lakh 20 per cent and above Rs 2.5 lakh 30 per cent. Further 10 per cent surcharge will apply for incomes above Rs 10 lakh.
Given the higher exemption limits and scaling up of tax brackets, the Finance Minister removed the standard deduction and reduced the plethora of exemptions to six as a clean-up operation.
In addition to basic exemption limits, the Budget allows every income tax payer a cosolidated limit of Rs 1 lakh for savings to be deducted from income before tax is calculated. It removed all sectoral caps, eliminated rebate under Section 88 and abolished section 80-L to reflect regime.
Besides Rs 1 lakh, the six deductions, including interest paid on housing loans for self-occupied property, medical insurance premia and deductions in respect of loans on higher studies will continue to receive same tax treatment.
Taking note of many perquisites disguised as fringe benefits to escape tax, the Budget now proposed 30 per cent Fringe Benefit Tax to be levied on employers where the benefits are usually enjoyed collectively and cannot be attributed to individual employers barring conveyance and subsidised canteen.
The present position of where the benefits fully attributable to employees and taxed in his hands will continue. Chidambaram also modified one by six scheme for filing of income tax returns by removing mobile telephone and included payment of electricity bill of Rs 50,000 annually.
Maintaining the service tax of 10 per cent, the Finance Minister exempted small service providers with gross turnover upto Rs 4 lakh, which will exempt 80 per cent of the present service tax payers.
He brought into service tax net eight more items, including pipeline transport of goods, site formation demolition and like services, membership fees of clubs and associations and packaging and specialised mailing services.
This takes the total number of services covered to 79. Coming to Budget estimates for 2005-06, Chidambaram pegged the defence expenditure at Rs 83,000 crore, which will include an allocaton of Rs 34,375 crore for capital expenditure. In the current year, the defence allocation was Rs 77,000 crore.
The plan expenditure has been raised to Rs 1,72,500 crore from Rs 1,43,497 crore. Non-plan expenditure for the coming year is expected to be Rs 3,70,847 crore.
Estimating the total expenditure at Rs 5,14,344 crore for the coming year, the minister placed the total revenue receipts at Rs 3,51,200 crore and the revenue expenditure at Rs 4,46,412 crore. Consequently, the revenue deficit at Rs 95,312 crore is equal to 2.7 per cent of GDP. The fiscal deficit is estimated at Rs 1,51,144 crore, which is 4.3 per cent of GDP.
On account of accepting the 12th Finance Commission's recommendations and drastic change in pattern of devolution and funding, Chidambaram said there has been a considerable strain in his Budget making. "I was left with no option but to press the pause button vis-a-vis the fiscal responsibility and Budget management act. I am relieved that we have not been forced to go in the opposite direction.
"I may add we are perilously close to the limits of fiscal prudence and there is no more room for spending beyond our means. I am confident we can resume the process of fiscal correction with effect from 2006-07 and achieve FRBM goals by 2008-09," he said. Announcing a number of initiatives for rural developmnet and an assault on poverty and unemployment, Chidambaram said the national food for work programme has been converted into National Employment Guarantee scheme with an allocation of Rs 11,000 crore.
A national rural health mission will be launched for training health volunteers, providing more medicines and strengthening primary and community health systems. Coverage of Antyodhya Anna Yojana will be extended to 2.5 crore families. The integrated child development scheme will be expanded with creation of 1,88,168 additional Anganwadi centres.A financial special purpose vehicle will be established to fund infrastructure projects that are financially viable. A few growth poles applying the principle provisions of urban amenities in rural area clusters will be taken up in 2005-06 as pilot projects. An outlay of Rs 5,500 crore has been made under the national urban renewal mission to cover the seven mega cities and some other towns with one million population.
Touching on banking sector reforms, the Finance Minister proposed introduction of some amendments to the banking regulation act to remove lower and upper bounds to the statutory liquidity ratio and allow banking companies to issue preferential shares.
An Amendment will also be introduced to the RBI Act to remove the limits of cash reserve ratio. Announcing steps to strengthen capital markets, Chidambaram said financial institution investors will be permitted to submit appropriate collateral when trading in derivatives on the domestic market.
SEBI will be asked to introduce gold exchange traded funds for enabling any household to buy and sell gold in units for as little as Rs 100. An additional Rs 100 crore will be provided to the Indian Institute of Sceince, Bangalore.
Gross budgetary support for plan in 2005-06 works out to Rs 1,72,500 crore, representing an increase of 16.9 per cent. Support for central plan has been enhanced to Rs 1,10,385 crore, an increase of 25.6 per cent.
On priority sectors and flagship programmes falling under the national common minimum programme, an additional sum of Rs 25,000 crore has been proposed for next year. Allocation for education will be Rs 18,337 crore and rural development Rs 18,334 crore. For Health sector, it will be Rs 10,280 crore. — PTI, UNI