BUDGET 2012

Income Tax	Corporate Tax	Service Tax
Indirect Tax	Other Tax provisions	Tax Reforms
Growth & Divestment	Black Money	Fiscal Health & Estimates
Farm & Food	Inflation	Financial Sector & Banks
Infrastructure	Subsidy	Children & Education
Rural Development	Health	Employment & Skill Development
Defence & Security

Income Tax

Tax collection up 15%

Income Tax proposals:

Personal Income Tax slabs for individuals relaxed
Exemption limit enhanced from Rs 1.8 lakh to Rs 2 lakh
Upper limit of 20% tax raised from Rs 8 lakh to Rs 10 lakh
New Slabs as follows:

Upto Rs 2 lakh - Nil
Rs 2-5 lakh - 10%
Rs 5–10 lakh – 20%
Above Rs 10 lakh – 30%
Interest from savings account up to Rs 10,000 to be exempt from tax
In addition to medical insurance, an additional Rs 5000 to be exempted for preventive health check-ups
Senior Citizens exempted from filing advance tax
Compulsory reporting of assets sold abroad

Corporate Tax

Corporate Tax structure left unchanged
Withholding tax on certain overseas borrowings reduced to 5% from 20%
Securities Transaction Tax cut by 20% for stock market orders

Service Tax

Service Tax rate up from 10% to 12%
Higher Service Tax to add Rs 186.6 bn in revenue
Duty-free baggage allowance for Indians increased to Rs 35,000
Duty-free baggage allowance for children increased to Rs 15,000

Proposal to tax all services except negative list

Exempted services include:
Government services
Pre-school, school education, recognised education at higher levels and approved vocational education
Renting of residential dwellings, entertainment and amusement services to be exempt
Public transportation to be exempt from service tax
Agricultural activities and animal husbandry to be exempt from service tax
Health care
Charities, religious persons
Sportspersons
Performing artists in folk and classical arts
Individual advocates providing services to non-business entities
Independent journalists
Services related with animal care and car parking
Services of business facilitators and correspondents to banks and insurance companies
Construction services relating to specified infrastructure, canals, irrigation works, post-harvest infrastructure, residential dwelling, and low-cost mass housing up

to an area of 60 sq. mtr.
Exemption for the monthly charges payable by a member to a housing societyup from Rs 3,000 to Rs 5,000
Industry related with cinematographic films
To set up a Study Team to examine the possibility of a common tax code for service tax and central excise
New scheme to simplify refunds

Indirect Taxes

Other Indirect Taxes

Standard Excise duty raised from 10% to 12 %
Merit Excise duty raised from 5% to 6 %
Lower merit rate raised from 1% to 2 %
Lower merit rate for coal, fertilisers, mobile phones and precious metal jewellery retained at 1%
Excise duty on large cars up from 22% to 24%
Customs duty cut to 2.5% on sugarcane planter, root or tuber crop harvesting machine and rotary tiller and weeder
Customs duty cut to 5% on specified coffee plantation and processing machinery
To extend project import benefit to green house and protected cultivation for horticulture and floriculture
Customs duty cut to 5% on some water soluble fertilisers and liquid fertilisers
Customs duty cut to 2.5% on urea
To extend concessional import duty for Mechanised Handling Systems and Pallet Racking Systems in mandis or warehouses for horticultural produce
Imports of equipment for initial setting up or expansion of fertiliser projects fully exempt for three years
Steam coal fully exempt, concessional CVD of 1% for two years
Natural Gas and Liquified Natural Gas exempt
Uranium concentrate, Sintered Uranium Dioxide in natural and pellet form exempt
Customs Duty on Mining machinery cut to 2.5%
Customs Duty on Railways safety equipment cut to 7.5%
Import Duty on road, tunnel boring equipment fully exempt
Parts of aircraft, testing equipment and tyres exempt
Customs Duty on coating material for manufacture of electrical steel cut to 5 %
Nickel ore and concentrate and nickel oxide/ hydroxide fully exempt
Customs Duty on non-alloy, flat-rolled up at 7.5%
Automatic shuttle-less looms fully exempt
Automatic silk reeling and processing machinery fully exempt
Second-hand textile machinery to attract basic duty of 7.5 %
Duty on wool waste and wool tops cut to 5%
Duty on Titanium dioxide cut to 7.5%
Aramid yarn and fabric used for the manufacture of bullet proof helmets fully exempt
Duty on branded ready-made garments up at 12 %
Waste Paper fully exempt
LCD and LED TV panels fully exempt
Memory card for mobile phones fully exempt
Duty on Adult diapers cut to 5%
Duty on bicycles increased to 30%
Duty on bicycle parts increased to 20%
Excise Duty on hand-made matches cut to 6%
Six specified life-saving drugs/ vaccines for HIV-AIDS, renal cancer etc fully exempt
Customs Duty on Soya protein concentrate and isolated soya protein cut to 15% and 10% respectively
Iodised salt to have concessional basic customs duty of 2.5%
Customs Duty on Probiotics cut to 5%
Solar energy equipment to be fully exempt
Excise duty on LED lamps cut to 6 %
Hybrid vehicle batteries to be fully exempt
Customs duty on gold bars, gold coins increased to 4%
Customs duty on non-standard gold increased to 10%
Customs duty on platinum increased to 4%
Basic duty on gold ore, concentrate and dore bars increased to 2%
Excise duty on refined gold increased to 3 %
Polished, coloured gem stones to attract 2% duty
Excise duty on cigarettes to attract ad valorem component of 10% on existing rates
Excise duty on hand-rolled beedis increased to Rs 10 per thousand
Excise duty on machine-rolled beedis increased to Rs 21 per thousand
Duty increased on pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco in pouches
Cess on Crude petroleum oil increased to Rs 4,500 per metric tonne
Customs Duty on large cars/ MUVs/ SUVs with value exceeding USD 40,000 enhanced from 60 per cent to 75 per cent ad valorem
Packaged cement to have unified rate of 12 % + Rs 120 PMT for non-mini cement plants and 6 % + Rs 120 PMT for mini-cement plants
Non-branded jewellery to attract excise duty of 1%
Branded silver jewellery fully exempt
Building of commercial vehicle bodies to attract an ad valorem rate of 3%

Other Tax provisions

Rate of withholding tax on interest payments on ECBs to be cut to 5 % for 3 years in following sectors:

Restriction on Venture Capital Funds to invest only in nine specified sectors to be removed

To remove cascading effect of Dividend Distribution Tax in a multi-tier corporate structure

Continue to allow repatriation of dividends from foreign subsidiaries of Indian companies to India at a lower tax rate of 15 % for one more year

Investment linked deduction of capital expenditure incurred to be provided at 150 % for:

New sectors to be added for investment linked deduction:

To extend the weighted deduction of 200% for R&D expenditure for further five years

Weighted deduction of 150% on expenditure incurred for agri-extension services

Turnover limit for compulsory tax audit of accounts as well as for presumptive taxation is proposed to be raised from Rs 6 mn to 10 mn for SMEs

Exemption of capital gains tax on sale of a residential property, if the sale consideration used for subscription in equity of a manufacturing SME company

Weighted deduction at the rate of 150% of expenditure incurred on skill development in manufacturing sector

Securities Transaction Tax cut by by 20 per cent (from 0.125 per cent to 0.1 per cent) on cash delivery transactions

To extend the levy of Alternate Minimum Tax on all persons other than companies, claiming profit linked deductions

To introduce a General Anti Avoidance Rule in order to counter aggressive tax avoidance schemes

Tax Reforms

Advanced pricing agreement in DTC to be in Financial Bill
New tax exemption on individual share invest with lock-in
GST network to become operational from Aug
GST under progress, talks on with states for drafting law
To examine Parliamentary panel report on Direct Tax Code
Rajiv Gandhi Equity Saving Scheme launched
Rajiv plan equity invest lock-in period to be 3 years
Rs 50,000 tax exempt for share invest in new Rajiv plan
Tax exemption on individual share invest below a million rupees
Tax free infra bonds Rs 600 bn to be issued in FY 13
To allow Rs 100 bn NHAI tax free bonds in FY 13
To allow Rs 100 bn IRFC tax free bonds in FY 13
To allow Rs 50 bn HUDCO tax free bonds in FY 13
To allow Rs 50 bn SIDBI tax free bonds in FY 13
To allow Rs 100 bn power sector tax free bonds in FY 13
To okay Rs 50 bn National Housing Bank tax free bonds
1% loan sop plan for home loans up to Rs 2.5 mn
Interest subvention on low cost homes extended by a year

Growth and Divestment

Past year was supposed to be year of recovery
This year’s performance turned out to be disappointing
We were facing several challenges; global situation a dampener
GDP estimated to grow 6.9% in 2011-12
FY 13 GDP seen 7.6%, plus or minus 0.25%
Proposes Mid-term fiscal goals
Aim to raise Rs 300 bn through sales of stakes in state run companies next fiscal
Aim to raise Rs 140 bn through sales of stakes in state companies this fiscal
Agri, Services performing well
Industry pulled down growth in past two years
Industry now showing signs of recovery
FY 12 Services growth at 9.4%
FY 12 Industry growth at 3.9%
FY 12 Agri growth at 2.5%
Need to improve supply side of economy
India still front runner in world in terms of growth; share of trade has increased
Crude oil prices to cross USD 115/barrel

Five main objectives:

Focus on domestic demand driven growth recovery

Create conditions for rapid revival of high growth in private investment

Address supply bottlenecks in agriculture, energy and transport sectors, particularly in coal, power, national highways, railways and civil aviation

Intervene decisively to address the problem of malnutrition especially in the 200 high-burden districts

Expedite coordinated implementation of decisions being taken to improve delivery systems, governance, and transparency; and address the problem of black

money and corruption in public life

Black Money

82 Double Taxation Avoidance Agreements

17 Tax Information Exchange Agreements

Compulsory to declare sale of assets abroad

Dedicated exchange of information cell for speedy exchange of tax information with treaty countries

India 33rd signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters

Directorate of Income Tax Criminal Investigation established in CBDT

To lay on the table of the House a white paper on Black Money in the current session of Parliament

Allowing for reopening of assessment upto 16 years in relation to assets held abroad

Tax collection at source on purchase in cash of bullion or jewellery in excess of Rs 200,000:

Tax deduction at source on transfer of immovable property (other than agricultural land) above a specified threshold

Tax collection at source on trading in coal, lignite and iron ore

Increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value

Taxation of unexplained money, credits, investments, expenditures etc., at the highest rate of 30 per cent irrespective of the slab of income

Fiscal Health & Estimates

Aim to trim fiscal deficit

To make amendments to Fiscal Responsibility and Budget Management Act (FRBM Act)

Current account deficit 3.6%

Fiscal deficit 5.9% of GDP this FY

Expect fiscal deficit at 5.1% of GDP next FY

Concept of effective revenue deficit to be fiscal parameter

Expect gross tax receipts at Rs 10.78 tn next FY, up 15.6%

As a percentage of GDP, gross taxes to be 10.6 % in FY 13

Total spending Rs 14.49 tn next FY

Non-Plan spending Rs 9.69 tn next FY, 8.7% higher than revised estimates

Net tax to Centre in FY 13 at Rs 7.71 tn

Expect non-tax revenue at Rs 1.64 tn next FY

Non-debt Capital Receipts at Rs 416.50 bn

Plan expenditure at Rs 5.21 tn, 18% higher than estimates

Direct tax collection fell short by Rs 320 bn

Total Debt stock at 45.5 % of GDP

Effective Revenue Deficit at Rs 1.85 tn or 1.8% of GDP

Farm & Food

Agri to be on govt priority list

To increases outlay for agriculture by 18% to Rs 202.08 bn

India to be self sufficient in urea manufacturing in 5 years

Announces 2 new handloom mega clusters

To set up 3 technical assistance centres for textiles

Allot Rs 700 mn for Maharashtra power loom cluster

East Indian states produced 7 mn tones more of paddy

Rs 5 bn pilot plan in 12th plan for geo textiles in NE

Allocated Rs 3 bn for FY 13 irrigation plans

Allot Rs 10 bn to up kharif output in NE FY 13

Allot Rs 4 bn to up kharif output in NE FY 12

Allot 5 bn for aquaculture FY 13

NABARD to give rural banks Rs 100 bn for short term loans

To move bill for NABARD Act amendment

3% rate subvention for farmers repaying loans on time

Rs 5.75 tn farm credit target in FY 13

Rs 2 bn for R&D of seeds and farm research

Allocation to farm development plan RKVY hiked to Rs 92.17 bn

To set up govt owned irrigation promotion company

To add 5 mn tones grain storage capacity in FY 13

To start national food processing mission in FY 13

Micro-irrigation allotment up 13% to Rs 142.42 bn

Inflation

Headline inflation was major cause of concern

Inflation likely to moderate in FY 13

Inflation largely structural in nature

Headline inflation is beginning to stabalize

Prolonged period of high inflation tends to get generalized

Inflation driven by farm supply constraints

Financial Sector & Banks

India Opportunity Venture Fund via SIDBI of Rs 50 bn

To issue revised norms for banks' priority sector lending

To set up financial holding company for recapitalization of banks

To move National Housing Bank Amendment Bill

To move Regional Rural Bank Amendment Bill

Rs 158.88 bn for capitalization of PSU banks in FY 13

Propose electronic voting to up shareholder involvement

IPOs of over Rs 100 mn to be in electronic form

Infrastructure

12th plan invest for infra at Rs 50 tn

ECBs allowed to part finance rupee debt of power projects

Coal India told to to sign coal supply pacts with power companies

Inter ministerial panel to monitor allocated coal mines

Targetting 8800 km projects under NHDP FY 13

Irrigation including dams under viability gap funding FY 13

Irrigation, fertilizer, terminal market under viability gap funding

Viability gap funding for oil, gas pipelines, storage

Telecom towers to get viability gap funding in FY 13

Inadequate infra strain on growth

Extend plan to capitalize regional rural banks by 2 years

To give Rs 40 bn FY 13 for rural housing Vs Rs 30 bn in FY 12

Realtors can borrow overseas for low cost home projects

To move bill for Public Debt Management

Foreign airline investment of 49% under consideration

Budget approves overseas borrowing of upto USD 1 bln for airlines' working capital needs

To allow 1 year ECBs of USD 1 bn for airline companies

Allowed direct import of ATF by airlines

Foreign borrow for capex to maintain, operate toll roads

Up NHDP allocation 14% to Rs 253.6 bn in FY 13

Subsidy

To keep Subsidies under 2% of GDP over next 3 years

Subsidy for food security to be fully provided for Some subsidies inevitable

Fiscal policy had to absorb subsidy payments

Aim to directly transfer kerosene subsidy to individuals

Testing kerosene subsidy transfer in Rajasthan

Direct transfer subsidy pilot for 50 districts

Aim to directly transfer subsidy on LPG to consumers
Direct transfer of fertilizer subsidy to retailer, farmers soon

Direct transfer subsidy to be rolled out gradually

Children and Education

Allocated Rs 255.55 bn under Right to Education

Integrated Child Development Services (ICDS) scheme to be re-structured

Allocated Rs 158.50 bn for child development in FY 13

Allocated Rs 119.37 bn for mid-day meal plan FY 13

Allocated Rs 7.5 bn for empowerment of adolescent girls

Credit guarantee fund proposed for poor students

Allocated Rs 31.24 bn for secondary education

Rs 250 mn for the Institute of Rural Management, Anand

Rs 500 mn to establish a world-class centre for water quality with focus on arsenic contamination in Kolkata

Rs 1 bn for Kerala Agricultural University

Rs 500 mn for University of Agricultural Sciences Dharwad, Karnataka

Rs 500 mn for Chaudhary Charan Singh Haryana Agricultural University, Hisar

Rs 500 mn for Orissa University of Agriculture and Technology

Rs 1 bn for Acharya NG Ranga Agricultural University in Hyderabad

Rs 150 mn for National Council for Applied Economic Research

Rs 100 mn for Rajiv Gandhi University, Department of Economics, Itanagar

Rs 100 mn for Siddharth Vihar Trust Gulbarga, to establish a Pali language Research Centre

Rural Development

Rs 250 mn for rural management institute Anand

Allocated Rs 208.22 bn under rural health plan FY 13

Allocated Rs 120.4 for backward region growth

Allocated Rs 50 bn for warehousing facility FY 13

Allocated Rs 200 bn for rural infra development in FY 13

Allocated Rs 240 bn under rural road project

Allocated Rs 140 bn for rural drinking water

Initiative proposed to strengthen Panchayats

Health

No new case of polio

NRHM allocation up Rs 181.15 bn to Rs 208.22 bn

National Urban Health Mission being launched

National Urban Health Mission to focus on primary healthcare needs in urban areas

Seven government medical colleges to be upgraded

Employment and Skill Development

National Rural Livelihood Mission (NRLM) allocation

increased to Rs 39 bn

Women’s SHG’s Development Fund corpus enlarged to Rs 30 bn

Interest subvention to Women SHGs to avail loans up to Rs 3 lakh at 7% p.a.

Women SHGs that repay loans in time to get 3% subvention more

Prime Minister’s Employment Generation Programme allocation at Rs 12 bn in 2012-13

National Skill Development Corporation (NSDC) allocated Rs 10 billion

To set up separate Credit Guarantee Fund

Defence and Security

Provision of Rs 1.93 tn for Defence Services

Efforts to increase availability of residential quarters to defence forces

To construct nearly 4,000 residential quarters for Central Armed Police Forces

Provision of Rs 32.80 bn for construction of office buildings including land acquisition and barracks to accommodate 27,000 personnel

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BUDGET 2012 - HIGHLIGHTS