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|UNION BUDGET 2011-2012
UNION BUDGET 2011-2012
|NEW PROPOSALS IMPACTING FDI: |
Foreign Direct Investment
Foreign Institutional Investors
- Discussions underway to further liberalise the FDI policy.
Tax incentives extended to attract foreign funds for financing of infrastructure.
- SEBI registered mutual funds permitted to accept subscription from foreign investors who meet KYC requirements for equity schemes.
- To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds issued in infrastructure sector being raised.
NEW PROPOSALS IMPACTING DIRECT TAXES:
- Current surcharge of 7.5 per cent on domestic companies proposed to be reduced to 5 per cent.
- Rate of Minimum Alternative Tax proposed to be increased from 18 per cent to 18.5 per cent of book profits.
- Lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.
- Investment linked deduction to businesses developing affordable housing.
- Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.
- System of collection of information from foreign tax jurisdictions to be strengthened.
- Benefit of investment linked deduction extended to businesses engaged in the production of fertilisers.
- The FM announced that Direct Tax Code will be implemented from April, 2012
- Various IT initiatives taken for efficient tax administration. These include e-filing and e-payment of taxes, adoption of 'Sevottam' concept by CBEC and CBDT, web based facility for tax payers to track the resolution of refunds and credit for pre-paid taxes and augmentation of processing capacity.
- Three more benches of Settlement Commission to be set up to fast track the disposal of cases.
- Steps initiated to reduce litigation and focus attention on high revenue cases.
NEW PROPOSALS IMPACTING INDIRECT TAXES:
- Exemption limit for the general category of individual taxpayers enhanced from Rs 1,60,000 to Rs 1,80,000.
- Rs 5,00,000 lakh tax exemption limit for individuals above 80 years of age
- Additional deduction of Rs 20,000 for investment in long-term infrastructure bonds proposed to be extended for one more year.
- Exemption limit enhanced and qualifying age reduced for senior citizens. Age for being classified as senior citizen cut to 60 years from 65 years.
- To stay on course for transition to GST.
- Central Excise Duty to be maintained at standard rate of 10 per cent.
- Nominal Central Excise Duty of 1 per cent imposed on 130 items entering in the tax net.
- Lower rate of Central Excise Duty enhanced from 4 per cent to 5 per cent.
- Optional levy on branded garments or made up proposed to be converted into a mandatory levy at unified rate of 10 per cent.
NEW PROPOSALS FOR INDIRECT TAXES:
- Parallel Excise Duty exemption for domestic suppliers producing capital goods needed for expansion of existing mega or ultra mega power projects.
- Full exemption from basic Customs Duty to bio-asphalt and specified machinery for application in the construction of national highways.
Agriculture and Related Sectors
- Scope of exemptions from Excise Duty enlarged to include equipments needed for storage and warehouse facilities on agricultural produce.
- Basic Custom Duty reduced for specified agricultural machinery from 5 per cent to 2.5 per cent.
- Basic Custom Duty reduced on micro-irrigation equipment from 7.5 per cent to 5 per cent.
- De-oiled rice bran cake to be fully exempted from basic Custom Duty. Export Duty of 10 per cent to be levied on its export.
- Basic Custom Duty reduced for various items to encourage domestic value addition vis-á-vis imports, to remove duty inversion and anomalies and to provide a level playing field to the domestic industry.
- Rate of Export Duty for all types of iron ore enhanced and unified at 20 per cent ad valorem. Full exemption from Export Duty to iron ore pellets.
- Basic Custom duty on two critical raw materials of cement industry viz. petcoke and gypsum is proposed to be reduced to 2.5 percent.
- Cash dispensers fully exempt from basic customs duty.
- Full exemption from basic Customs Duty and a concessional rate of Central Excise Duty extended to batteries imported by manufacturers of electrical vehicles.
- Concessional Excise Duty of 10 per cent to vehicles based on Fuel cell technology.
- Exemption granted from basic custom duty and special CVD to critical parts/assemblies needed for Hybrid vehicles.
- Reduction in Excise Duty on kits used for conversion of fossil fuel vehicles into Hybrid vehicles.
- Excise Duty on LEDs reduced to 5 per cent and special CVD being fully exempted.
- Basic Customs Duty on solar lantern reduced from 10 to 5 per cent.
- Full exemption from basic Customs Duty to Crude Palm Stearin used in manufacture of laundry soap.
- Hotel accommodation in excess of 1,000 per day and service provided by air conditioned restaurants that have license to serve liquor added as new services for levying Service Tax.
- Tax on all services provided by hospitals with 25 or more beds with facility of central air conditioning.
- Services provided by life insurance companies in the area of investment.
- Service Tax on air travel both domestic and international raised.
- Some more legal services proposed to be brought into tax net.
- The services provided or to be provided to any person by a business entity in relation to advise, consultancy or assistance in any breach of law.
- To any business entity, by any person in relation to representational service before any court, tribunal or authority.
- To any business entity, by an arbitral tribunal, in respect of arbitration.
SECTOR WISE ANALYSIS:
Financial Sector Legislative Initiatives
- Allocation of Rs 2,14,000 crore for infrastructure in 2011-12. This is an increase of 23.3 per cent over 2010-11. This also amounts to 48.5 per cent of total plan allocation.
- Government to come up with a comprehensive policy for further developing PPP projects.
- IIFCL to achieve cumulative disbursement target of Rs 20,000 crore by March 31, 2011 and Rs 25,000 crore by March 31, 2012.
- Under take out financing scheme, seven projects sanctioned with debt of Rs 1,500 crore. Another Rs 5,000 crore will be sanctioned during 2011-12.
- To boost infrastructure development, tax free bonds of Rs 30,000 crore proposed to be issued by Government undertakings during 2011-12.
Public Sector Bank Capitalisation
- To take the process of financial sector reforms further, various legislations proposed in 2011-12.
- Amendments proposed to the Banking Regulation Act in the context of additional banking licences to private sector players.
Recapitalisation of Regional Rural Banks
- Rs 6,000 crore to be provided during 2011-12 to enable public sector banks to maintain a minimum of Tier I CRAR of 8 per cent.
Micro Finance Institutions
- Rs 500 crore to be provided to enable Regional Rural Banks to maintain a CRAR of at least 9 per cent as on March 31, 2012.
Rural Infrastructure Development Fund
- "India Microfinance Equity Fund" of 100 crore to be created with SIDBI. Government considering putting in place appropriate regulatory framework to protect the interest of small borrowers.
- "Women's SHG's Development Fund" to be created with a corpus of 500 crore.
Micro Small and Medium Enterprises
- Corpus of RIDF XVII to be raised from '16,000 crore to ' 18,000 crore.
- Rs 5,000 crore to be provided to SIDBI for refinancing incremental lending by banks to these enterprises.
- Rs 3,000 crore to be provided to NABARD to provide support to handloom
Bringing Green Revolution to Eastern Region
- Removal of production and distribution bottlenecks for items like fruits and vegetables, milk, meat, poultry and fish to be the focus of attention this year.
- Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from Rs 6,755 crore to Rs 7,860 crore.
Integrated Development of 60,000 pulses villages in rainfed areas
- To improve rice based cropping system in this region, allocation of Rs 400 crore has been made.
- Allocation of 300 crore to promote 60,000 pulses villages in rainfed areas.
Sarva Shiksha Abhiyan
- Allocation for education increased by 24 per cent over current year.
National Knowledge Network
- Rs 21,000 crore allocated, which is 40 per cent higher than Budget for 2010-11.
- Pre-matric scholarship scheme to be introduced for needy SC/ST students studying in classes IX and X.
- Connectivity to all 1,500 institutions of Higher Learning and Research through optical fiber backbone to be provided by March,2012.
- National Innovation Council set up to prepare road map for innovations in India.
NEW PROPOSALS FOR EXPORT:
- Of 23 suggestions made by Task Force on Transaction Cost, constituted by the Department of Commerce, 21 suggestions already implemented. Action to be taken on the remaining two suggestions. Transaction Cost of Rs 2,100 crore will thus be mitigated.
- Self assessment to be introduced in Customs to modernize the Customs administration.
- Proposal to introduce scheme for refund of taxes paid on services used for export of goods.
- Mega Cluster Scheme to be extended for leather products. Seven mega leather clusters to be set up during 2011-12.
- Jodhpur to be included for the development of a handicraft mega cluster.
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