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Peanuts for Common Man
T.R. Ramachandran
Tribune News Service

New Delhi, February 28
Devoid of the zing of previous years, union finance minister P. Chidambaram treaded the conservative path by proposing a negligible relief of Rs 1,000 to taxpayers and Rs 2,000 to senior citizens, leaving corporate income tax unchanged, issuing tax-free bonds through state pooled finance entities for creation of urban infrastructure and a five-year tax holiday for two, three or four star hotels as well as convention centres with a seating capacity of not less than 3,000 in the National Capital Region of Delhi or the adjacent districts of Faridabad, Gurgaon, Ghaziabad or Gautam Budh Nagar during April 1, 2007, to March 31, 2010.

In unveiling the 2007-08 General Budget in the Lok Sabha today, Chidambaram stepped up the allocation for Defence to Rs 96,000 crore and sought to extend the benefit of tax holiday to undertakings in Jammu and Kashmir for another five years till March 31, 2012, coupled with continuing the weighted deduction of 150 per cent for boosting in-house research and development also for another five years.

The maximum limit of deduction on medical insurance premium to be increased to Rs 15,000 and for senior citizens to Rs 20,000. Banking cash transactions tax exemption limit for individuals and HUFs has been doubled to Rs 50,000. An additional tax of 1 per cent to be levied on taxes to fund secondary and higher education and the employees stock option plan to be brought under the fringe benefit tax.

Observing that the current slabs and rates of personal income tax were introduced only two years ago and constituted a moderate tax regime, Chidambaram considered some relief for the cooperation extended to the Revenue Department. He listed these as: (A) raising the threshold limit of exemption in the case of all assesses by Rs 10,000 thus giving every assessee a relief of Rs 1,000; (B) In the case of a woman assessee, the threshold limit be increased from Rs 1,35,000 to Rs 1,45,000 giving her a relief of Rs 1,000; and (C) the threshold limit in the case of senior citizen be increased from Rs 1,85,000 to Rs 1,95,000 giving him or her a relief of Rs 2,000.

The minister took refuge by observing that a comprehensive review should await the proposed income tax code which would be introduced in Parliament this year. However, to encourage small and medium enterprises he proposed removing the surcharge on income tax on all firms and companies with a taxable income of Rs 1 crore or less. This measure is expected to benefit about 12,00,000 firms and companies.

For improving the economic viability of the agricultural sector, 50 lakh new farmers will be brought into the banking system in the next fiscal with a target of Rs 225,000 crore as farm credit. The allocation under the accelerated irrigation benefit programme has been increased from Rs 7,121 crore to Rs 11,000 crore. Taking note of the growing demand for rural infrastructure development fund, Chidambaram proposed increasing its size to Rs 12,000 crore.

Along with the cess of 2 per cent on all taxes to fund basic education, an additional levy of 1 per cent on all taxes was on the anvil to fund secondary education and higher education as well as the expansion of capacity by 54 per cent in terms of reservation for socially and educationally backward classes.

Chidambaram said the pass-through status provided to venture capital funds, especially for start-up ventures in the knowledge intensive sectors ,will cover biotechnology, information technology relating to hardware and software development, nanotechnology, seed research and development, research and development of new chemical entities in the pharmaceutical sector, dairy and poultry industry, production of bio fuels as well as hotel-cum-convention centres of a certain description and size.

A national means-cum-merit scholarship scheme is being introduced for students from Class XI to XII under which 100,000 scholarships will be award every year. Simultaneously, the mid-day meal scheme will also cover upper primary classes in 3427 educationally backward blocks.

The finance minister proposed bringing the unorganised landless households under a safety net by providing insurance. The scheme to be called “Aam Admi Bima Yojna” will be launched by the LIC and provide death and disability insurance. The Central Government will meet 50 per cent of the premium of Rs 200 per person.

While the eight flagship programmes of the UPA government will be accorded priority with higher allocations, the National Rural Employment Guarantee Scheme will be extended to 330 districts from the current level of 200.

The dividend distribution tax has been hiked from 12.5 per cent to 15 per cent. Money market mutual funds and liquid mutual funds will attract 25 per cent dividend distribution tax. The finance minister extended service tax to new areas at the rate of 2 per cent, he also brought in ESOPs under the fringe benefit tax, which the corporate bodies had urged for a review. Chidambaram said the revenue deficit had been pegged at 1.5 per cent of the GDP at Rs 71,478 crore while the fiscal deficit had been fixed at 3.3 per cent of the GDP.

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Modernisation top priority
7,000 cr more for defence
Girja Shankar Kaura
Tribune News Service

New Delhi, February 28
Modernisation of the armed forces remains high on the agenda of the Congress-led UPA government, with the outlay for the capital expenditure again being given high priority in the Defence Budget which has been hiked by Rs 7,000 crore over last year's allocation of Rs 89,000 crore.

It amounts to an increase of more than 10.5 per cent over last year's revised estimates of Rs 85,000 crore with the Ministry of Defence having returned almost Rs 4,000 crore over last year’s proposed allocation. The money was returned as the ministry was not being able to spend the amount set aside for the capital outlay once again due to delay in decisions for various acquisitions.

While announcing the Budget estimate of Rs 96,000 crore for 2007-08, which would include an allocation of Rs 41,922 crore for capital expenditure, finance minister P. Chidambaram justified the higher allocation keeping in view the enhanced expenditure on modernisation of defence forces and pointed out that capital outlay was again a priority with the UPA government.

However, the increase in real terms is of Rs 11,000 crore over last year’s revised estimate of Rs 85,000 crore. In real terms, this year’s proposed allocation is 7.8 per cent higher over last year’s proposed allocation.

The increase in allocation in the capital outlay for the armed forces reflects an almost 12 per cent hike over last year’s allocation of Rs 37,458 crore where a provision had been made specially for the purchase of the fighter aircraft for the IAF.

However, as a result of some pending decision in acquisitions, the ministry had to return almost 3,000 crore in capital outlay section itself to peg the revised estimates at Rs 34,380 crore in the last Budget.

The government, which had in last year’s Budget announced the fulfillment of the long-standing need of retired armed forces personnel below officer rank (PBOR) for better pensionary benefits, hiked this year’s defence pensions allocation to Rs 14,648 crore.

This is an increase of Rs 843 crore over last year’s revised estimates of Rs 13,805 crore.

The government had last year allocated Rs 13,223 crore for pensions.

As has been the case in the past, this year’s Defence Budget also remains pegged at almost 3 per cent of the GDP, which is far below the country’s immediate neighbours Pakistan and China, who spend between 5 and 7 per cent of the GDP on the armed forces.

With a huge allocation on capital outlay, defence minister A.K. Antony can now go ahead with major arms acquisition programmes which have been pending.

The capital outlay funding, in fact, almost constitutes more than 44 per cent of the total Defence Budget.

The negative part on the Ministry of Defence this year has been that the unspent amount in the Budget allocation has increased to almost Rs 4,000 crore from just about over Rs 1,000 crore last year. Defence

Ministry officials, however, exuded confidence that the amount would be fully utilised with some major deals pending nod from the Cabinet Committee on Security.

However, experts pointed out that the percentage increase this year was less than the amount required to stand the effect of the general national inflation and the military deflation.

In the Indian context, a figure of about 12 to 14 per cent would have ensured the same level of Budget support for defence as the previous year at constant prices, they said.

The Defence Research and Development Organisation (DRDO) has got over 5.5 per cent hike in the new Budget with its allocation increased from last year’s revised estimates of Rs 3,030.52 crore to Rs 3202.23 crore, a jump of Rs 171.71 crore.

The Army as usual get the bulk of share in the new Budget with a 6 per cent jump in allocation to Rs 35,177.88 crore from last year’s revised estimates of Rs 33,156.07 crore, an increase of Rs 2,021.81 crore.

The share of the IAF has been hiked by 3 per cent from revised estimates of Rs 10,115.89 crore to Rs 10,428.82 crore, an increase of Rs 312.93 crore.

The Navy, the smallest of the three services, has got a hike of 2.26 per cent, with allocation increase to Rs 7048.74 crore from last year’s revised estimates of Rs 6,889.27 crore.

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