Budget 2011-12- Quick Highlights

Finance Minister Pranab Mukherjee presented the Union Budget 2010-11 in parliament on Monday Just Now.

Quick Highlights. . .

• FY11 fiscal consolidation impressive, said the finance minister.
• Personal Income Tax exemption limit hiked from Rs 1,60,000 to Rs 180,000.
• For senior citizens, tax exemption limit increased to Rs 2,50,000.
• For senior citizens above 80, the tax exemption limit has been raised to Rs 500,000.
• Eligibility age for senior citizens is now 60 years against 65 years earlier
• Exemption limit for women remains the same at Rs 1,90,000.
• Corporate Tax Surcharge reduced to 5% from 7.5%
• MAT has been increased to 18.5% from 18%. Effective rate is 20.0077%
• No MAT exemption to SEZ developers & SEZ units
• 15% Tax on Foreign Company dividend
• FII making investment in Infrastructure SPV will get tax benefit
• New CPC coming in Maneswar , Pune & Kolkata
• Service tax remains at 10%
• New services included are Hotel Accommodation, Bars& Restaurants, A/C Hospitals, Diagnostic Center, Air Travel. LIC. Legal Services with abetment.
• Services sector continues to grow in double digits.
• We are reaching the end of a remarkable financial year, he said.
• Reaching the end of a remarkable fiscal era, said Mukherjee.
• Black money: Task force will be formed to deal with black money.
• Govt will start campaign against illicit funds.
• GoM has been formed to tackle corruption
• Money laundering cases to be dealt effectively, assured Mukherjee
• Gross domestic product rose by 8.2 per cent for the December, 2010, quarter as against 7.3 per cent in the corresponding period of the previous year.
• Taxes, tariff procedures will be simplified, said Mukherjee.
• To reconcile environment concerns, growth needs, Budget will set the tone for a vibrant Indian economy.
• The finance minister stressed on the need to ensure balanced demand and supply.
• Next Budget will be more transparent, he said.
• The finance minister stressed on the need to improve agricultural demand.
• Food inflation at 20.2 per cent in February, he said.
• Development of external sector has been encouraging, said the finance minister while presenting the Budget.
• Cutting bureaucratic delays, improving response times is a priority, he said.
• Direct Taxes Code will moderate rates and ensure better compliance.
• Current account deficit poses a concern.
• 13th Finance Commission has worked out fiscal consolidation roadmap.
• Agriculture growth at 5.4 per cent, industry at 8.1 per cent in 2010-11.
• Expect the average inflation to be down next year
• The high gap between wholesale and retail prices is unacceptable.
• Work is underway for states’ goods and services tax, stated the finance minister.
• Pilot portal to be set up before the roll out of GST in the country, announced Mukherjee.
• Significant progress on the GST network has been made
• Government’s principle concern is high food prices; food prices were high for cereals, there was a spurt in prices of onions and milk, said Mukherjee.
• I see Budget 2011-12 as transition towards more transparent and result-oriented economic management, said the finance minister.
• In current year, overall economic growth is expected at 8.6 per cent, agriculture growth at 5.4 per cent, industry at 8.1 percent and services 9.3 per cent, said the finance minister.
• The economy has shown remarkable resilience, Mukherjee said.
• To introduce Public Debt Management Bill in 2012.
• States to cut down fiscal deficit to 3 percent of Gross State GDP by 2014.
• Goods and services tax rounds with states making considerable progress.
• Availability of fertilisers has improved post new policy.
• Working on ensuring better delivery for urea, kerosene.
• Nutrient based fertiliser policy for urea under consideration.
• FIIs allowed to invest in MF schemes.
• FII limit in corporate bonds has been raised by $20 billion.
• FY12 Divestment target at Rs 40,000 crore (Rs 400 billion).
• FDI regulations consolidated into one comprehensive document.
• States to cut down fiscal deficit to 3 per cent of Gross State GDP by 2014.
• Cash subsidy for urea, kerosene.
• Mulling nutrient based subsidy policy for urea.
• LPG, kerosene and fertilisers will be transferred directly to BPL beneficiaries.
• New companies bill to be introduced in this session
• Earmarked Rs 2,000 crore (Rs 20 billion) each for warehousing and manufacturing.
• More banking licenses to be given.
• To allocate Rs 6,000 crore (Rs 60 billion) for some PSU banks to help them maintain Tier-I capital at 8 per cent.
• To prevent fraud in loan cases: The govt has set up Central electronic Registry.
• Rural housing fund increased by Rs 1,000 crore (Rs 10 billion) to Rs 3,000 crore (Rs 30 billion).
• Rs 3,000 crore (Rs 30 billion) earmarked to National Bank for Agricultural and Rural Development for handloom weavers.
• Cap infusion of Rs 20,157 crore (Rs 201.57 billion) in PSU Banks.
• Self-help group fund to empower women.
• Task force working on oil subsidy plans.
• Rs 600 crore (6 billion) to public sector banks to maintain mandatory cash reserve ratio.
• Liberalisation of FDI policy
• Govt committed to retain 51 per cent holding in PSUs.
• Portfolio investment would be permitted in Sebi registered mutual funds from foreign subscriptions.
• Liberalisation of foreign direct investment policy.
• Govt committed to retaining 51 per cent holding in PSUs.
• The domestic prod of edible oil only meet 50 per cent demand.
• Interest subvention of 1per cent extended from Rs 5 lakh crore (Rs 5 trillion) to Rs 20 lakh crore (Rs 20 trillion).
• 1 per cent interest subvention on home loans up to Rs 15 lakhs (Rs 1.5 million).
• Removal of bottlenecks in the transportation of essential food items.
• New companies bill to be introduced in this session.
• Earmarks Rs 2,000 crore (Rs 20 billion) each for warehousing and manufacturing.
• More banking licenses to be given
• To allocate Rs 6,000 crore (Rs 60 billion) for some PSU banks to help them maintain Tier-I capital at 8 per cent.
• To prevent fraud in loan cases: govt has set up Central Electronic Registry.
• Rural housing fund increased by Rs 1,000 crore (Rs 10 billion) to Rs 3,000 crore (Rs 30 billion).
• Rs 3,000 crore earmarked to NABARD for handloom weavers.
• New companies bill to be introduced.
• Rs 100 crore (Rs 1 billion) equity fund for MFIs.
• To provide Rs 300 crore (Rs 3 billion) to improve production of pulses.
• Agricultural credit limit raised to Rs 475,000 crore (Rs 4,750 billion).
• To provide Rs 300 crore to improve production of pulses.
• Allocation for farm development increased to Rs 7,860 crore (Rs 78.6 billion).
• Rs 300 crore for the allocation of fodder.
• Subvention of 3per cent on farmers paying loans before time.
• Allocation for farm development increased to Rs 7,860 crore (Rs 78.6 billion)
• Short term interest to farmers will continue to be at 7 per cent.
• New companies bill to be introduced.
• Rs 100 crore (Rs 1 billion) equity fund for MFIs.
• Financial sector reforms to move forward; Insurance amendment bill, LIC bill and Pension Development Authority Bill to be presented in the current session, said the finance minister.
• Boost to infra development: Tax free bonds of Rs 30,000 crore (Rs 300 billion) to be introduced.
• Allocation for farm development raised to Rs 7,860 crore (Rs 78.6 billion).
• Storage capacity has been fast tracked.
• 15 mega food parks to be set up.

Quick Update on Direct Tax

01.    Section 282 in respect of Document Identification number has been     omitted.

02.    Section 194LA had been introduced which deals with TDS of FIIs investment in Infrastructure debt fund @ 5%

03.    In section 115-0, the benefit of DDT exemption to SEZ developer & SEZ units has been omitted. Now they have to pay DDT on their declared dividends.

04.  Special Provisions relating to certain limited Liability Partnership were added in Chapter XII – BA, the details of the same will be provided in due course . The main impact is that it is being subject to MAT. Now there is no benefit in creating LLP.

05.   In section 115 – JB, Now SEZ developer & Units are no more exempted. They have to pay MAT now.

06.  A new section 94A had been introduced which deals with Special measures in respect of transactions with persons located in Juridictional area.  Analysis of the same will be provided later.

07.   There are certain amendments in Transfer pricing also. The analysis will be provided later.

08.     The benefit of Section 80- IA has been extended for one more year. Please note that same will not applicable once DTC is going to be effective.

09. In section 36(iva) an employer is going to be allowed deduction in respect of contribution towards pension scheme max upto 10% of Salary ( Salary & DA)

10.  In section 35AD, New plant for production of fertilizer has also be added.

11.   In section 35, deduction for making donation to National Laboratory become double now i.e. 200%.

12. Section 80 CCF – Additional deduction of ` 20,000 for investment in long-term infrastructure bond proposed to be extended for one more year.

13. Cess will be 3%. There is no change on that.

14.  There is no upliftment of Slab for women. It is Rs. 1,90,000/- only.

15.  Sunset of Tax holidays for certain undertaking engaged in commercial production of mineral oil.

16.    Rationalisation of Tax on income distributed to units holders under section 115- R of

17.   Very soon salaried income person not need to file income tax return.

18. Reporting of activities of Liason Offices.

CA Manish Agarwal

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