Pranab Mukherjee Presents Union Budget, Tax Exemption Limit Raised

New Delhi, Mar 16 (IANS): Tax relief to individuals, promise to curb black money, major push on infrastructure, capital market reforms and huge subsidy cut were among proposals listed by Finance Minister Pranab Mukherjee in the federal budget for 2012-13.

The proposals will give some direct tax relief to individuals, even as eating out, buying luxury cars, air travel, availing some professional services and investing in gold jewellery will become costlier.

Presenting his 7th budget in the Lok Sabha Friday, the finance minister said the exemption limit for personal income tax was being enhanced from Rs.1,80,000 to Rs.2,00,000, even as the limit for peak rate was being raised to Rs.10,00,000 from Rs.8,00,000.

"This will provide tax relief of Rs.2,000 to every tax payer," the finance minister said, adding: "My proposal on direct taxes will result in a revenue loss of Rs.4,500 crore."

He also announced new tax slabs under which incomes up to Rs.2,00,000 would be totally exempt, levy 10 percent for Rs.2,00,000 to Rs.5,00,000, then 20 percent for Rs.5,00,000 to Rs.10,00,000 and 30 percent for incomes above Rs.10,00,000.

For the corporate sector, he said, while the tax rates were remaining unchanged, he assured cheaper access to funds for expansion, even as he tinkered with the excise rates and customs duties for specific items.

He proposed to raise the service tax rate to 12 percent from the present 10 percent.

In the speech, which started exactly at 11 a.m. and lasted 110 minutes, Mukherjee listed a slew of proposals that ranged from social welfare schemes and incentivising industry to fiscal consolidation and sector-specific reforms.

Assuring further liberalisation of capital markets, he announced a new equity savings scheme to extend income tax deduction of 50 percent to those who invest up to Rs.50,000 in equities and whose annual income is less than Rs.10 lakh.

The finance minister started his speech with the cascading effect of the global slowdown on India, but yet assuring people that there were clear signs of a recovery which should see the country grow at 7.6 percent in 2012-12, against 6.9 percent this fiscal.

"The global crisis has affected us. India's gross domestic product (GDP) is expected to grow at 6.9 percent in 2011-12, after having grown at 8.4 percent in each of the two preceding years," the finance minister said.

"Though we have been able to limit the adverse impact of the slowdown in our economy, this year's performance has been disappointing. But it is also a fact that in any cross-country comparison, India still remains among the front-runners in economic growth."

At the same time, Mukherjee also said the Indian economy was at the cusp of a revival, as agriculture and services have continued to grow at a decent pace. It was industrial performance that was acting as a drag.

"While we do not have the aggregate figures for the last quarter of 2011-12, numerous indicators pertaining to this period suggest that the economy is now turning around. There are signs of recovery in coal, fertiliser, cement and electricity sectors."

Prominent highlights of 2012-13 budget

* Income tax exemption limit raised to Rs.2 lakh to provide relief of relief of Rs.2,000 for all assessees; 20 percent tax on income over Rs.10 lakh, up from Rs.8 lakh.

* Deduction of up to Rs.10,000 from interest from savings bank accounts.

* Defence to get Rs.1.93 lakh crore during 2012-13.

* Service tax rate raised from 10 percent to 12 percent to bring in Rs.18,660 crore.

* Number of proactive steps taken on black money (stashed away abroad); information has started flowing in, prosecution to be initiated; White Paper in current session.

* No change in corporate taxes but measures to enable them better access funds.

* Withholding tax on external commercial borrowings reduced from 20 percent to five percent for power, airlines, roads, bridges, affordable houses and fertiliser sectors.

* National Skill Development Fund allocated Rs.1,000 crore.

* Four thousand residential quarters to be constructed for paramilitary forces with an allocation of Rs.1,185 crore.

* National Population Register to be completed in two years.

* Excise duty raised from 10 to 12 percent.

* Cinema industry exempted from service tax.

* Branded silver jewellery fully exempt from excise duty.

* Customs duty on warning systems/track upgrade equipment for railways reduced from 10 percent to 7.5 percent.

* Import duty on equipment for iron ore mining reduced from 7.5 to 2.5 percent.

* Allocation of Rs.200 crore for research on climate change.

* Irrigation and water resource company to be operationalised.

* National mission on food processing to be started in cooperation with state governments.

* Integrated Child Development Scheme to be strengthened and restructured with allocation of Rs.15,850 crore.

* Allocation of Rs.14,000 crore for rural water supply and sanitation.

* Infusion of Rs.15,888 crore in public sector banks, regional rural banks and NABARD in 2012-13.

* Infrastructure will require Rs.50 lakh crore in 12th Plan, half of this from the private sector.

* Completion of highway projects 44 percent higher than in previous fiscal.

* External commercial borrowing of up to $1 billion permitted for airline sector.

* External commercial borrowings permitted to low-cost housing sector.

* From 2012-13, full subsidies for providing food security; in other sectors to the extent the economy can bear this.

* Hope to raise Rs.30,000 crore from disinvestments.

* New equity savings scheme to provide for income tax deduction of 50 percent for those who invest Rs.50,000 in equity and whose annual income is less than Rs.10 lakh.

* Corporate market reforms to be initiated.

* Bills on micro-finance institutions, national land bank and public debt management among those to be introduced in 2012-13.

* Addressing malnutrition, black money and corruption in public life among five priorities in year ahead.

* India's inflation structural, driven largely by agricultural constraints.

* Current account deficit 3.6 percent in 2011-12; this put pressure on exchange rate.

* Growth in 2012-13 estimated at 7.6 percent; expect inflation to be lower.

* Better monitoring of expenditure on government schemes.

* Fiscal 2011-12 year of recovery interrupted; reality turned out to be different.

* GDP growth in 2011-12 estimated at 6.9 percent; had to battle double digit inflation for two years.

* Good news: agriculture and services continued to perform well; economy is now turning around; recovery in core sectors.

* Now at juncture where it is necessary to take hard decisions; have to accelerate pace of reforms.