BUDGET 2009

Tax Windfall Unveiled by Budget 2009

Jul 6, 2009


As the FM had the cushion created by the extremely robust gross domestic product (GDP) growth of 8.7 per cent, the chances of unveiling a landmark Budget increased tremendously. The delivery was suitably attractive.

Last year Finance Minister P. Chidambaram put a lot of money in the pockets of taxpayers, simply by lowering taxes. The amounts were nothing to sneeze at, aside from the big farm loan waiver and the various outlays on the social sector.

What the FM had given was a saving of Rs 4,000 per taxpayer. The threshold on which income tax is levied was increased from Rs 1.1 lakh to Rs 1.5 lakh (you don't pay any tax on this amount of your income). This was for men, for women the exemption limit was Rs 1.45 lakh and this has been increased to Rs 1.8 lakh. Those for senior citizens, above the age of 65, both men and women, the benefits were the best – being raised to Rs 2.25 lakh from Rs 1.95 lakh earlier.

Tax slabs too were raised to Rs 5 lakh from Rs 2.5 lakh. Which means, if a person earns over Rs 5 lakh per year, then he will be put in the highest tax slab of 30 per cent, Earlier this was applied to those earning over Rs 2.5 lakh -- a person with an income of Rs 4 lakh saved Rs 35,000.

Stock exchange traders and those who indulge in trading on a regular basis, however, had reason to worry as they were taxed more. The rate of short-term capital gains tax was increased to 15 per cent from 10 per cent. Commodity traders were also brought under the Securities Transaction Tax (STT) at the rate of 0.125 per cent. What the government takes with its left, sometimes it gives back a little with its right.

The banking cash transaction tax (BCCT) was scrapped, applicable from the next financial year. An administrative procedure was streamlined that made the carrying out of all financial transactions possible only on the submission of a permanent account number (PAN) card.

The Budget also looked to make the life of the common citizen of the country a little easier by promising to control inflation, ease supply side constraints, provide a better functioning infrastructure that includes power, roads, healthcare and potable water.

Here are the highlights of the General Budget for the fiscal 2008-09 unveiled by then Union Finance Minister P Chidambaram:

•Personal income tax exemption limit hiked from Rs 1.1 lakh to Rs 1.5 lakh
•Personal income tax exemption for women increased from Rs 1.45 lakh to Rs 1.8 lakh
•Senior citizens, both men and women, had their threshold tax limit increased from Rs 1,95,000 to Rs 2,25,000
•The new applicable tax slabs are: 10% for 1,50,000 to 3,00,000, 20% for 3,00,000 to 5,00,000 and 30% above 5,00,000
•Securities market to recognize PAN as the sole identification
•Excise duty reduced two-, three-wheelers
•Hybrid cars excise duty cut from 24% to 14%
•No excise duty on anti-Aids drugs
•Small cars excise duty cut to 12% from 16%
•Duty on life saving drugs cut
•Cheaper set-top boxes
•Excise duty on refrigerating equipments waived
•Defence allocation hiked from Rs 96,000 cr to Rs 1,05,600 cr, up by 10%
•Debt waiver scheme and relief to small and marginal farmers
•Sixth Pay Commission to submit report by March 2008
•Upgradation of 300 ITIs to be done at cost of Rs 750 crore
•Central sales tax cut to 2% from 3%
•Banking transaction tax withdrawn
•Peak customs duty left unchaged
•Indirect taxation’s revenue implication to be 5900 cr
•Levy on STT to be confined to option premiums
•Surcharge on corporate tax left unchanged
•Commodities transaction tax unveiled
•Changes made in direct taxation to be revenue neutral
•Tax on short term capital gains at 15%
•Service tax to apply to money changers and tour operators
•Planned expenditure estimates at Rs 2,43,086 cr and non-planned at Rs 57,409 cr
•Tax to GDP ratio up at 12.5% in 2007-08 from 9.2% in 2004
•Revenue Deficit put at 1% of GDP (Rs 55,184 cr) and fiscal deficit at 3.1% of GDP (Rs 1,33,287 cr)
•Steel customs duty removed
•Agri loans waived (by rural banks, RRBs and cooperative banks) -- Rs 50,000 cr under the waiver and Rs 10,000 cr under one time settlement plan
•Vitamin pre-mixes customs duty lowered to 20% from 30%
•Rs 12966 cr set aside for National Highway development programme
•National Housing Bank given Rs 1,200 cr for refinancing purpose
•Commercial banks must add 250 rural household accounts every year
•Power reforms outlay at Rs 8000 cr: states encouraged to start 5 ultra mega power projects
•Insurance scheme to cover 17 lakh farmers and weavers; outlay at Rs 340 cr
•Transmission and distribution reforms for power sector gets national fund
•NHDP allocation jumps to Rs 12,966 cr
•FII inflow put at over $18 billion; Apr-Dec FDI at $12.7 billion
•Irrigation & Water Resource Finance Corp set up
•Micro irrigation scheme to cover 4,00,000 more hectares, allocated Rs 500 cr
•Rural health services improvement allocated Rs 12050 cr
•Schedule Commercial Banks farm credit at 75%
•Women & child development allocation hiked by 24%
•15% hike on healthcare allocation
•One IIScR each and 2 colleges of art for Bhopal and Tripura
•Stress to be laid on controlling inflation
•Bihar, AP, and Rajasthan to get 3 IITs
•Supply side constraints to be ironed out on food and markets
•Agri credit target for 2008-09 pegged at Rs 2,80,000 cr
•Outlay on schemes for women set at Rs 1,460 cr
•Share in total investment of agriculture rises to 16% during the 11th Plan, from 10.2% in 2003-04
•Outlay on child related schemes pegged at Rs 33,434 cr
•Rajiv Gandhi felicitation programme allocated Rs 75 cr for 2008-09
•Outlay on Rajiv Gandhi drinking water mission at Rs 7,300 cr
•SC/STs schemes get Rs 3,966 cr
•8% growth rate chalked up by India in over 12 successive quarters till December 2007
•Total agricultural production at all time high at 219.32 mn tones -- average annual growth at just 2.6%
•Outlay on providing potable water system, in areas of scarcity, in each school at Rs 200 cr; Outlay on sanitation at Rs1,200 cr
•NREGS to be expanded into 596 rural districts -- outlay at Rs 16,000 cr
•16 additional central universities to be unveiled
•6,000 model high schools to be set up
•Angan Bari workers’ pay increased to Rs 1,500 per month
•Polio and AIDS allocation hiked
•Gross Budgetary support hiked by Rs 38,286 cr to Rs 2,43,386 cr
•Agriculture credit estimated at 2,40,000 cr
•Allocation on Bharat Nirman hiked to Rs 31,280 cr from Rs 24,603 cr
•Food grain self-sufficiency underlined as focus area

Source:valueresearch