Union budget 2011-12

 HIGHLIGHTS OF UNION BUDGET
         (2011-12) 

DIRECT TAXES:

A.  FOR INDIVIDUALS-

1. The basic exemption limit in the case of individuals increased from Rs.1.60 lacs to Rs.1.80 lacs giving a megre Rs 170 PM benefit to belegueared Middle Class. 

2. No increase in basic exemption limit for Resident Women who is below 60 years which continue to be fixed at Rs.               same as before.
 
3. The qualifying age limit for senior citizens has been lowered from 65 years to 60 years and  increase in the current exemption limit under two categories: 
a. Category -1 - Age between 60 to 80 years: exemption limit is increased from Rs.2.40 lacs to Rs.2.50 lacs 
b. Category -2- Age beyond 80 years or more: exemption limit is Rs.5.00 lacs.
(this new category is a welcome step as beyond 80years of age the working capacity goes down and the medical bill increases. Also with increased life expectency the category of tax payees beyond 80 years is continuously increasing.)

 
B. FOR COMPANIES-
 
1. Minimum Alternative Tax has been introduced for Limited Liability Partnership (LLP) in line with MAT on companies with effect from the Assessment Year 2012 – 2013.
 
2. The Government exempts assessees having no other income other than salary from furnishing the return of income by notification. The proposed amendment shall be effective from 1st June, 2011.
 
3. The SEZ developers are required to pay dividend distribution tax on dividends declared / distributed on or after 1st June, 2011.
 
4. The definition of charitable purpose u/s 2 (15) includes “the advancement of any other object of general public utility”. The monetary limit in respect of such activities has been enhanced from Rs.10.00 lacs Rs.25.00 lacs.
 
5. The amount paid by an assessee as an employer by way of contribution towards pension scheme, as referred to in sec 80CCD(2) on account of an employee to the extent it doesn’t exceed 10% of the salary of employee in the previous year, shall be allowed as a deduction u/s 36 in computing the income under the head profit and gains of business or profession.
 
6. Investment linked deduction to businesses developing affordable housing.
 
7. The additional deduction of Rs.20,000 u/s 80CCF to investment in notified long term infrastructure bonds extended for the A.Y. 2012-13 also.
 
8. Liaison offices of a company will be required to file Annual Information in the prescribed form with in the 60 days from the end of the financial year.
 
9. It is proposed to omit the requirement of quoting of Documentary Identification Number in notices / order / correspondences issued by Income tax department.
 
10. The tax holiday for power sector has been extended for further period of one year i.e. upto 31.03.2012.
 
11. Direct Tax Code (DTC) proposed to be effective from 1st April 2012.
 
12. Weighted deduction on payments made to National Laboratories, Universities and Institute of Technology enhanced from 175% to 200%.
 
13. Tax incentives extended to attract foreign funds for financing of infrastructure.
 
14. System of collection of information from foreign tax jurisdictions to be strengthened.
 
15. Proposals relating to Direct Taxes estimated to result in a revenue loss of Rs.11,500 crore.

16. For domestic companies the surcharge has been reduced from Rs.7.5% to 5%.

17. For other than domestic companies the surcharge has been reduced from 2.5% to 2%.

18. Lower rate of 15 per cent on dividends received by an Indian Company from its foreign subsidiary as against 30% plus surcharge earlier.

19. The rate of MAT is increased to 18.5% from the existing rate of 18% of book profit.

20. New Corporate Tax rate for domestic companies marginally reduced from 33.22% to 32.445% consequent to reduction in the surcharge.
 
 
 
INDIRECT TAXES:

  
A. SERVICE TAX-
 
1. The following new services / increase have been proposed : 
a. Restaurants having AC bars; and 
b. Hotels / inns / clubs / guest houses etc. above Rs 1000 per day,
c. Health checkup and medical tests in private hospitals with 25 or more beds with facility of central air conditioning.
d. .Life Insurance services providers in the area of investment and some more legal services proposed to be brought into tax net.
e. Increased on Air travel, both domestic and international.
 
2. Service tax Rate remains 10%, seeking a closer fit between present regime and its GST successor.
 
3. The monetary limit for adjustment of excess service tax paid is increased from Rs. 1.00 lacs to Rs.2.00 lacs.
 
4. The penalty for delayed payment of service tax u/s 76 has been reduced from 2% to 1% per month or Rs.100 per day whichever is higher.
 
5. The maximum penalty reduced to 50% of the tax.
 
6. The rate of interest is reduced by 3% for assesses with turnover of upto 60 lacs.
 
7. The maximum penalty for delay in filing of return increased from Rs.2,000 to Rs.20,000.
 
8. All individual and sole proprietor tax payers with a turnover up to Rs.60 lacs freed from the formalities of audit.
 
9. Proposals relating to Service Tax estimated to result in net revenue of Rs. 4,000 crore.
 

B. EXCISE and CUSTOM DUTY

a. General:
 
1. Reduction in number of exemptions in Central Excise rate structure.

2. General Excise Duty remains 10%. Basic Excise rate raised from 4% to 5%.

3. Optional levy on branded garments or made up, proposed to be converted into a mandatory levy at unified rate of 10 per cent.

4. Nominal Central Excise Duty of 1 per cent imposed on 130 items entering in the tax net.

5. Peak rate of Custom Duty held at its current level.

6. Proposals relating to Customs and Central Excise estimated to result in a net revenue gain of Rs.7,300 crore.

 
b. AGRICULTURE AND RELATED SECTOR:
 
1. Scope of exemptions from Excise Duty enlarged to include equipments needed for storage and warehouse facilities on agricultural produce.

2. Basic Custom Duty reduced for specified agricultural machinery from 5 per cent to 2.5 per cent.

3. Basic Custom Duty reduced on micro-irrigation equipment from 7.5 per cent to 5 per cent.

4. 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.
 
 
c. Manufacturing Sector
 
1. Basic Custom Duty reduced for various items to encourage domestic value addition vis-a-vis imports, to remove duty inversion and anomalies and to provide a level playing field to the domestic industry.

2. 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.

3. Basic Custom Duty on two critical raw materials of cement industry viz. petcoke and gypsum is proposed to be reduced to 2.5 per cent.

4. Cash dispensers fully exempt from basic Customs Duty. It common parlance it means ATM machines

  
d. Environment
 
1. Full exemption from basic Customs Duty and a concessional rate of Central Excise Duty extended to batteries imported by manufacturers of electrical vehicles.

2. Concessional Excise Duty of 10 per cent to vehicles based on Fuel cell technology.

3. Exemption granted from basic custom duty and special CVD to critical parts/assemblies needed for Hybrid vehicles.

4. Reduction in Excise Duty on kits used for conversion of fossil fuel vehicles into Hybrid vehicles.

5. Excise Duty on LEDs reduced to 5 per cent and special CVD being fully exempted.

6. Basic Customs Duty on solar lantern reduced from 10 to 5 per cent.

7. Full exemption from basic Customs Duty to Crude Palm Stearin used in manufacture of laundry soap.

8. Full exemption from basic Excise Duty granted to enzyme based preparation for pre-tanning.
 
 
e. Infrastructure
 
1. Parallel Excise Duty exemption for domestic suppliers producing capital goods needed for expansion of existing mega or ultra mega power projects.

2. Full exemption from basic Customs Duty to bio-asphalt and specified machinery for application in the construction of national highways.
 
 
f. Other Proposals
 
1. Scope of exemptions from basic Customs Duty for work of art and antiquities extended to apply for exhibition or display in private art galleries open to the general public.

2. Exemption from Import Duty for spares and capital goods required for ship repair units extended to import by ship owners.

3. Concessional basic Custom Duty of 5 per cent and CVD of 5 per cent available to newspaper establishments for high speed printing presses extended to mailroom equipment.

4. Jumbo rolls of cinematographic film fully exempted from CVD by providing full exemption from Excise Duty.

5. Out right concession to factory-built ambulances from Excise Duty.

6. Relief measures proposed for raw pistachio, bamboo for agarbatti, lactose for the manufacture of homoeopathic medicines, sanitary napkins, baby and adult diapers.
 
 
CRITICAL ANALYSIS OF THE BUDGET:
 
Sandwiched between a high dose of inflation and a string of scams hitting UPA II, the Union Finance Minister Pranab Mukherjee on Monday presented a predictable Budget lacking any big ticket economic reforms.

It is an eyewash and window dressing to woo electorates in poll-bound Tamil Nadu, Puducherry, Kerala, Assam and West Bengal in the coming months. 

It appeared that ruling Congress party chief Sonia Gandhi and her more leftist advisors had won over reformist prime minister who is beleagured and engulfed in corruption scandals.
 
Except for announcing tax initiatives and direct transfer of cash subsidies on fuel, food, kerosene and cooking gas to people living below the poverty line, which has to be implemented by 2012, Mukherjee and the Congress party were in no mood to go big on reforms that could raise the manufacturing and commerce sector.
 
The finance Minister has proposed increased allocation for social sector at 17 per cent amounting to Rs.1,60,887 crore.

He has proposed schemes worth Rs.9,760 crore to boo st farm productivity.

FM has proposed to allocate Rs.4.75 lakh crore for agriculture and credit for small farmers. But looking at the corruption and scam after scam in congress reign, everybody knows that where this money will end up.

Government hopes buoyant tax revenues from near-nine percent economic growth will reduce fiscal deficit from 5.1 percent of GDP this fiscal year to 4.6 percent of GDP in 2011-12. These figures it seems are too optimistic. 

Both the borrowing and fiscal deficit numbers have been worked out taking into account the most optimistic macro-economic scenarios, which in all likelihood is not going to be the real situation.
 
The levy of Service Tax at ‘Accrual Basis’ on Chartered Accountants is not justifiable. The professional fees are received by them after long gaps since raising of bills, whether it is Bank, PSU, other Audit or work. It would be a hardship on accountants to pay service tax from their own pocket without it’s actual receipt from the client. Many times such fees are never received.
 
Special package was increased for Jammu and Kashmir, but no attention was given to UP's eastern region.
 
There is nothing worth mentioning in this budget particularly for the small and medium scale industries.
 
Food Security Bill has sparked worries over its huge cost.
 
 
As much as 40 percent of India's fruit and vegetable production is wasted because of poor networks and a lack of cold storage facilities, with much product still sold on flat-bottomed carts by smallholders even in the centre of cities like Delhi. But no care is taken for it.
 
Inadequate power, roads and other infrastructure act as bottlenecks to growth and push up costs.
 
The increase in prices of note-book, ball-pen ink, colour-box and geometrical items etc would adversely affect the child education.
 
The 5% Service tax on treatment and Medical Tests at Private Hospitals would increase the cost of treatment and will also lead to corruption at these private hospitals which already exploits the patients.
 
There is nothing to curb the Inflation in Food and Daily need Items.
 
There is nothing to curb the corruption and scams by the Government itself, its Ministers and Beaurecrates.
 
No concrete step has been taken to bring the “Black Money” back to India from foreign Banks. The so-called 5 step strategy is to pass on the time and make people fool.
 
The youth is very much frustrated and agitated as the Budget has failed to provide anything for their upliftment and job opportunities.
 
Their is absolutely nothing in the Budget for the working class Women in Urban areas..