Here are highlights of the budget for 2006-07 (April-March):
Big Picture
Taxes: what's in it for you
Finance Minister P Chidambaram has kept both individuals and corporates happy by keeping the tax rates intact and not introducing any new direct tax.
He has indirectly hit both the categories by raising the services tax rate to 12 per cent from 10 per cent. So now, you would need to pay a little more if you dine out or buy some luxury good. More services are to be brought under the tax net.
If you are a stockmarket investor, you would need to pay a little more as the securities transaction tax (STT) has been raised by 25 per cent.
The cash transaction tax has also been retained.
However, he has introduced some sops for certain category of people by abolishing the one-by-six scheme under the Income Tax Act for filing returns.
Chidambaram has proposed to include investments in fixed deposits in scheduled banks for a term of not less than five years in Section 80C of the Income Tax Act, thus responding to the demand for tax exemption on FDs of certain tenure.
He has also proposed to remove the limit of Rs 10,000 in respect of contribution to certain pension funds in Section 80CC, subject to the overall ceiling of Rs 1 lakh.
The Finance Minister has also proposed to remove the exemption under Section 10(23G), which he said, was not relevant when interest rates are moderate.
Chidambaram's decision to keep the personal and corporate taxes intact may also have stemmed from a healthier fiscal situation than anticipated. The Government sees its revenue deficit for 2005-06 at 2.6 per cent of GDP compared to budgeted 2.7 per cent.
The Finance Minister hopes to raise an additional Rs 6000 crore from the tax proposals.
Industry captains lauded the Finance Minister for measures to bring in fiscal discipline and cut deficit but had a mixed view on new tax proposals burdening the capital market.
"The industry will be happy as there are no major negatives. It has cut down customs duty and has covered lot of industries as well," CII chief mentor Tarun Das said.
JM Morgan Stanley chairman Nimesh Kampani termed the budget as a good development on fiscal side. "I think the Minister has done a great job in fiscal deficit, which will be 3.8 per cent of GDP in 2006-07," he said.
Kotak Mahindra Bank vice-chairman Uday Kotak also welcomed the budget saying it was a positive budget at micro-level and was good for long term investors.
However, Ruchir Sharma of Morgan Stanley said it was an "innocuous budget" and there were no policy initiatives to take the market to higher levels.
"The market hoped much more than reforms... even the Prime Minister had talked about out of the box thinking," he regretted.
Big Picture
- Finance minister says economic prospects for 2005/06 just as good as last year
- GDP growth likely to be 8.1 percent in 05/06
- Government aims to raise GDP growth to 10 percent
- Gross budgetary support for 2006/07 at 1.73 trillion
- rupees
- FDI inflows up to November 2005 at $4 billion
- Farm sector output likely to grow 2.3 per cent in 2005-06
- Government to spend Rs 117 billion ($2.60 billion) on rural jobs guarantee scheme in 05/06
- Government to allocate 186.96 billion rupees for rural infrastructure projects in 2007-07
- Banks to raise farm credit to Rs 1.75 trillion in 06-07 from 1.42 trillion
- Farmers to receive short-term credit at 7 per cent
- Education spending to be increased by 31.5 per cent, and health spending by 22 per cent
- Allocation for primary education increased to Rs 100.41 billion from 71.56 billion.
- Allocates more funds for education of minorities, schemes for lower caste people
- Government to promote textiles, automobiles, leather, food processing and tourism for job creation
- Food processing sector to be treated as a priority sector for bank lending
- Petroleum, chemicals and petro-chemicals investment zones to be set up
- India to be promoted as a semiconductor manufacturing hub
- Government aims to raise power generation capacity by 15,000 megawatts by March 2007
- Comprehensive review of coal policy needed
- Government expects investment of 220 billion rupees in oil refining over next few years. The government will encourage investment in refineries, pipelines and green fuel.
- Highways development programme to receive Rs 99.45 billion in 2006-07. The government has identified three new road projects to be built under a new special purpose vehicle.
Taxes: what's in it for you
Finance Minister P Chidambaram has kept both individuals and corporates happy by keeping the tax rates intact and not introducing any new direct tax.
He has indirectly hit both the categories by raising the services tax rate to 12 per cent from 10 per cent. So now, you would need to pay a little more if you dine out or buy some luxury good. More services are to be brought under the tax net.
If you are a stockmarket investor, you would need to pay a little more as the securities transaction tax (STT) has been raised by 25 per cent.
The cash transaction tax has also been retained.
However, he has introduced some sops for certain category of people by abolishing the one-by-six scheme under the Income Tax Act for filing returns.
Chidambaram has proposed to include investments in fixed deposits in scheduled banks for a term of not less than five years in Section 80C of the Income Tax Act, thus responding to the demand for tax exemption on FDs of certain tenure.
He has also proposed to remove the limit of Rs 10,000 in respect of contribution to certain pension funds in Section 80CC, subject to the overall ceiling of Rs 1 lakh.
The Finance Minister has also proposed to remove the exemption under Section 10(23G), which he said, was not relevant when interest rates are moderate.
Chidambaram's decision to keep the personal and corporate taxes intact may also have stemmed from a healthier fiscal situation than anticipated. The Government sees its revenue deficit for 2005-06 at 2.6 per cent of GDP compared to budgeted 2.7 per cent.
The Finance Minister hopes to raise an additional Rs 6000 crore from the tax proposals.
Industry captains lauded the Finance Minister for measures to bring in fiscal discipline and cut deficit but had a mixed view on new tax proposals burdening the capital market.
"The industry will be happy as there are no major negatives. It has cut down customs duty and has covered lot of industries as well," CII chief mentor Tarun Das said.
JM Morgan Stanley chairman Nimesh Kampani termed the budget as a good development on fiscal side. "I think the Minister has done a great job in fiscal deficit, which will be 3.8 per cent of GDP in 2006-07," he said.
Kotak Mahindra Bank vice-chairman Uday Kotak also welcomed the budget saying it was a positive budget at micro-level and was good for long term investors.
However, Ruchir Sharma of Morgan Stanley said it was an "innocuous budget" and there were no policy initiatives to take the market to higher levels.
"The market hoped much more than reforms... even the Prime Minister had talked about out of the box thinking," he regretted.
