Budget in India is a very important annual fiscal exercise. Though over the years the sheen has eroded to some extent as many of the important decisions which the Union government used to take through budget were – in the realm of deregulation and decontrol started to be taken outside the budget exercise.
This time there was lots of expectations as this time the government did not have the left parties to stop them. Also this being the first of the five years of the budget of a party that had romped back to power couple of months back – it was expected to be ‘big ticket’ ‘dream’ budget.
But whatever the expectations, Pranab Mukherjee as finance minister presenting the union budget after 25 years (he was the finance minister of India under Indra Gandhi in the 1980s), remained steady – reemphasizing that fiscal and budget exercise are not the glamourous sisters of news channels.
The major proposals apart from the macro-economic observations of the budget – relating particularly to infrastructure and tax are as follows
1) Indian Infrastructure Financial Corporation Limited (IIFCL) to give increased support to infrastructure projects. It will re-finance commercial bank loans upto 60% in critical projects through public-private partnership to the tune of Rs1,00,000 crore
2) Allocations for highways being stepped up by 23%. This is an important measure as the highways are the very important part of the economic lifeline of the country and still the highways in many parts of the country are in dismal condition.
3) Emphasis on housing and basic amenities for the urban poor and increased allocation in these sector of urban renwal
4) Increased assistance for storm-water drainage projects.
5) For a country in which even today, neary 60% of population is dependent on the agricultural sector for sustenance directly or indirectly – agriculture credit raised to Rs3,25,000 crore in 2009-10 from Rs2,87,000 crore. Also, farmers would be given incentive in interest in form of interest subsidy for timely pay back of agricultural loans
6) Some of the government support relating to schemes – the duration of these have been extended like Export Credit Guarantee scheme. Extension of stimulus package for print media by another six months etc
7) Subsidy regime for fertilisers to change to nutrient-based rather than price-based.
8 ) The finance minister indicated return of simpler Income Tax return forms in the shape of Saral Form 2. This has to be seen with caution – because the current IT return forms were doing quite good – even though these were ‘huge’ – but most of that was simply nil entry! It has also to be seen how this would affect efiling of returns.
9) It is now clear that the PSU Banks and insurance companies would remain the public sector. This would help to remove the uncertainty among the employees that was adversely hampering the performance of these companies. However this is a disappointment for the Stock Market people who wanted that the PSUs to be privatised.
10) The focus on education is clear in the budget with increased allocation for various government education schemes – and also initiatives like full interest subsidy for students taking courses in approved institutions. Also, Income tax incentives on educational loans has been expanded to cover vocational studies after schooling.
11) Though it has been spelled that the (government) employment exchanges would be made online and modernised – it is doubtful what kind of benefit it would provide to the youth.
12) An important thing relates to the allocation and priority given to the Unique ID system that the country is slated to have. First Unique Identification Card to citizens is to roll out in 12-18 months.
13) Total budget expenditure proposal for 2009-10 is Rs10,28,032 crore, crossing the Rs10 lakh crore mark for the first time since independence. The Fiscal deficit in 2009-10 is proposed at 6.8% of GDP.
14) Changes in the Authority for Advance Rulings for the Direct Taxes and Indirect Taxes.
15) Tax Rates: There has been no change in corporate tax rates. However the Personal income tax exemption limits have been increased only slightly. It would have been much better if this limit would have been increased – as that would have led to greater expenditure and added as a boost to the economic upturn. However the Ten per cent surcharge on personal income tax has been removed. But this would impact only the ‘rich’ class as the surcharge on personal income tax was imposed only on those having income above Rs. 10 lakhs.
16) Fringe Benefit Tax has been abolished from the next financial year ie. 1.4.2010. This would come as a relief for most of the corporates. However this again opens up a pandora box of balance sheet management by the business entities to reduce their tax burden!
17) There is proposal to start investment-linked tax benefits in areas of agriculture and national grid.
18) The Minimum Alternate Tax on book profits increased to 15% from 10%.
19) There is proposal for 100% tax deduction for donations to electoral funds to improve transparency in political funding.
20) There is another interesting proposal of Small businesses who have upto Rs40 lakh turnover to be exempted from filing advance tax returns. This is a very good move.
21) The proposal that would affect thousands of small businesses is the Presumptive Taxation of 8% on businesses of turnover of up to Rs40 lakh. Till now this was applicable only for a few areas like civil contractor. However extending it to all, would relieve these people from maintenance of any books of accounts – which took up too much unnecessary time for these businesses.
22) Among various proposals for the Indirect taxes – the Customs duty on gold and silver import increased leading to the prices of these would be on the upside. However, there would be full exemption from excise duty on branded jewellery.
23) Service tax has been exempted for exporters on select services – but the Service Tax to be extended to lawyers on technical advice – however the individual lawyers would not get covered by this.
There are various proposals – the above is just a gist of some of the important ones.
The full details of the budget may be looked at the Govt of India’s official budget website.
