Union Budget 2012 - Highlights

Courtesy: NDTV

New Delhi: Today's Budget is one of the biggest challenges of Pranab Mukherjee's long political career and the Finance Minister set the tone for it when he described the year gone by as a "year of recovery interrupted." He began with listing grim ground realities - the global economic scenario, the battle with double digit inflation and said it was time for tough decisions. Here are the highlights of this fiscal's financial budget.

Income tax exemption limit raised to Rs.2 lakh to provide relief of relief of Rs.2,000 for all assessees; 20 per cent tax on income over Rs.10 lakh, up from Rs.8 lakh.

Deduction of up to Rs.10,000 from interest from savings bank accounts.

Defence to get Rs.1.93 lakh crore during 2012-13.

Service tax rate raised from 10 per cent to 12 per cent to bring in Rs.18,660 crore.

Number of proactive steps taken on black money (stashed away abroad); information has started flowing in, prosecution to be initiated; White Paper in current session.

No change in corporate taxes but measures to enable them better access funds.

Withholding tax on external commercial borrowings reduced from 20 per cent to five per cent for power, airlines, roads, bridges, affordable houses and fertiliser sectors.

National Skill Development Fund allocated Rs.1,000 crore.

Four thousand residential quarters to be constructed for paramilitary forces with an allocation of Rs.1,185 crore.

National Population Register to be completed in two years.

Excise duty raised from 10 to 12 per cent.

Cinema industry exempted from service tax.

Branded silver jewellery fully exempt from excise duty.

Customs duty on warning systems/track upgrade equipment for railways reduced from 10 per cent to 7.5 per cent.

Import duty on equipment for iron ore mining reduced from 7.5 to 2.5 per cent.

Allocation of Rs.200 crore for research on climate change.

Irrigation and water resource company to be operationalised.

National mission on food processing to be started in cooperation with state governments.

Integrated Child Development Scheme to be strengthened and restructured with allocation of Rs.15,850 crore.

Allocation of Rs.14,000 crore for rural water supply and sanitation.

Infusion of Rs.15,888 crore in public sector banks, regional rural banks and NABARD in 2012-13.

Infrastructure will require Rs.50 lakh crore in 12th Plan, half of this from the private sector.

Completion of highway projects 44 per cent higher than in previous fiscal.

External commercial borrowing of up to $1 billion permitted for airline sector.

External commercial borrowings permitted to low-cost housing sector.

From 2012-13, full subsidies for providing food security; in other sectors to the extent the economy can bear this.

Hope to raise Rs.30,000 crore from disinvestments.

New equity savings scheme to provide for income tax deduction of 50 per cent for those who invest Rs.50,000 in equity and whose annual income is less than Rs.10 lakh.

Corporate market reforms to be initiated.

Bills on micro-finance institutions, national land bank and public debt management among those to be introduced in 2012-13.

Addressing malnutrition, black money and corruption in public life among five priorities in year ahead.

India's inflation structural, driven largely by agricultural constraints.

Current account deficit 3.6 per cent in 2011-12; this put pressure on exchange rate.

Growth in 2012-13 estimated at 7.6 per cent; expect inflation to be lower.

Better monitoring of expenditure on government schemes.

Fiscal 2011-12 year of recovery interrupted; reality turned out to be different.

GDP growth in 2011-12 estimated at 6.9 per cent; had to battle double digit inflation for two years.

Good news: agriculture and services continued to perform well; economy is now turning around; recovery in core sectors.

Now at juncture where it is necessary to take hard decisions; have to accelerate pace of reforms.

Courtesy:ECONOMIC TIMES

APPROACH TO THE BUDGET
> For Indian economy, recovery was interrupted this year due to intensification of debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan.
> GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4 per cent in preceding two years.
> India however remains front runner in economic growth in any cross-country comparison.
> Monetary and fiscal policy response for better part of past 2 years aimed at taming domestic inflationary pressure.
> Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays.
> Indicators suggest that economy is turning around as core sectors and manufacturing show signs of recovery.

> At this juncture, it is necessary to take hard decision to improve macroeconomic environment and strengthen domestic growth drivers.
> Twelfth Five Year Plan to be launched with the aim of "faster, sustainable and more inclusive growth". Five objectives identified to be addressed effectively in ensuing fiscal year.
> If India can build on its economic strength, it can be a source of stability for world economy and a safe destination for restless global capital.

OVERVIEW OF THE ECONOMY
> GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison to preceding two years is primarily due to deceleration in industrial growth.
> Headline inflation expected to moderate further in next few months and remain stable thereafter.
> Steps taken to bridge gaps in distribution, storage and marketing systems have helped in more effective management of inflation.
> Developments in India's external trade in the first half of current year have been encouraging. Diversification in export and import market achieved.
> Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate.
> India's GDP growth in 2012-13 expected to be 7.6 per cent +/- 0.25 per cent.
> Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and increased subsidies.

Courtesy:INDIA TODAY

Finance Minister Pranab Mukherjee presents his seventh federal budget in the Lok Sabha on Friday, with a reference to the state of the global economy and its impact on India. Ahead of the presentation, Prime Minister Manmohan Singh and senior cabinet colleagues had cleared the proposals in a short meeting inside Parliament House.

The key proposals of the budget are:

Custom duty on cycle parts hiked.
Cars to ad valorem rate of 27 per cent.
Branded silver to cost less.
School Education exempted from service tax.
Custom duty on LCD and LED panels exempted.
Hike in excise duty of cigarettes.
No custom duty on import of tyres and aircarft parts.
Full exemption on natural gas, LNG for power.
Mobile phones will cost cheaper.
Big cars to get expensive due to hiked excise duty.
TV sets to get cheaper.
Compulsory reports of assets held abroad.
Service tax rate hiked from 10 per cent to 12 per cent.
Excise duty on big cars hiked to 27 per cent.
Standard excise duty hiked to 12 per cent.
Deduction of up to Rs.10,000 from interest from savings bank accounts.
Total debt of central government to be 45 per cent of GDP.
Cinematography in cinema exempted from tax.
30 per cent tax on individuals having income above Rs 30 lakh.
20 per cent tax on individuals having income of Rs 5-10 lakh.
10 per cent tax on individuals having income of Rs 2-5 lakh.
Exemption limit of individuals hiked from Rs 1.8 lakh to 2 lakh.
Govt met 99% of the 11th plan outlay.
Rural development fund of Rs 20,000 crores.
Disability pension hiked to Rs 300 per month.
White paper on black money soon.
Allocation of Rs 25,555 cr for right to education.
NRHM allocation hiked to 20,820 crores.
Aim to build Rs 9,000 km new roads.
Allocation of funds for mid-day meal Rs 11,937 cr.
Rs 5,000 cr venture fund for small and micro sector.
Agriculture outlay increased by 18 per cent.
No New polio case reported in last one year.
Kisan credit cards can be used at ATMs.
To allocate Rs 14232 cr to UID project, up 13 per cent in FY 13.
10000 crores allocated to NABARD to fund RRBs.
Agri credit target for FY13 seen at Rs 5.75 lakh crore, up 1 lakh crore.
Rs 300 crore for intensified irrigation programme.
New public distribution system by Dec 2012.
Pranab allows direct import of jet aviation fuel.
Interest subvention of 3 per cent for farmers who repay loan on time.
Borrowing cap set at $1 billion.
Foreign funds allowed for cheap housing.
Interest subvention of 3 per cent for farmers who repay loan on time.
Borrowing cap set at $1 billion.
FDI welcome in defence manufaturing.
Infra sector to open up for foreign investments.
Rs 15,888 cr to refinance PSU banks and RRBs.
IPOs over Rs 10 cr through electronic route.
Tax free bonds to fetch Rs 60,000 cr.
PPP scheme for infrastructure investment.
Foreign investors can enter bond markets.
New equity savings scheme to provide for income tax deduction of 50 per cent for those who invest Rs 50,000 in equity and whose annual income is less than Rs 10 lakh.
Bills on micro-finance institutions, national land bank and public debt management among those to be introduced in 2012-13.
Corporate market reforms to be initiated.
Proposed introduction of new Rajiv Gandhi Equity scheme.
Food Security Act will be fully provided for and subsidy to be 2 per cent of GDP for next two years
Pilot project for direct transfer of subsidiary for kerosene has been initiated in Alwar, Rajasthan.
Reduction of taxes after implementation of DTC and GST (Goods and Services Tax).
GST to come into force in August 2012.
Govt to raise Rs 30,000 crore in 2012-13 from disinvestment of stake in PSUs.
Efforts on to arrive at broad-based consensus with state governments on allowing FDI in multibrand retail up to 51 per cent.
Govt to fully fund food subsidy and food security act in 2012-13 .
Food and fertiliser subsidies to continue.
Direct Tax Code (DTC) Bill to be enacted at the earliest.
India's inflation structural, driven largely by agricultural constraints.
Current account deficit 3.6 per cent in 2011-12; this put pressure on exchange rate.
Growth in 2012-13 estimated at 7.6 per cent; expect inflation to be lower.
Better monitoring of expenditure on government schemes.
Fiscal 2011-12 year of recovery interrupted; reality turned out to be different.
Economy is now turning around, manufacturing appears to be on revival.
Expect average inflation to be lower next year; expect current account deficit to be lower next year.
Amendments to FRBM Act part of the Budget.
Need to improve supply side of the economy.
A mobile-based fertiliser system designed to come up this year.
We have to expedite decisions to improve delivery systems to address problems of black money and corruption.
Slow industrial growth has affected GDP.
GDP to grow by 7.6 per cent in 2012-13; plus, minus 0.25 per cent.
West Asia turmoil affected India.
Headline inflation to moderate further in next few months and remain stable thereafter.
Have identified five areas for Budget. Five areas include Growth, Energy, Transportation, Malnutrition.
India's recovery was good amid slowdown.
Crude prices have risen due to turmoil in Middle-East.
Good news: agriculture and services continued to perform well; economy is now turning around; recovery in core sectors.
Now at juncture where it is necessary to take hard decisions; have to accelerate pace of reforms.
Fiscal 2011-12 year of recovery interrupted; reality turned out to be different.
This year's performance disappointing. GDP growth in 2011-12 estimated at 6.9 per cent; had to battle double digit inflation for two years.

Courtesy:REUTERS

Finance Minister Pranab Mukherjee (2nd L) poses as he leaves his office to present the 2012/13 budget in New Delhi on March 16, 2012.

FISCAL DEFICIT

* Fiscal deficit seen at 5.9 percent of GDP in 2011-12

* Fiscal deficit seen at 5.1 percent of GDP in 2012-13

BORROWING

* Net market borrowing seen at 4.8 trillion rupees in 2012-13

SPENDING

* Total expenditure in 2012-13 seen at 14.9 trillion rupees, up 29 percent

* Plan expenditure budgeted at 521.25 billion rupees in 2012/13, up 18 percent

SUBSIDIES

* To keep 2012/13 subsidies under 2 percent of GDP

* Major subsidies bill estimated at 1.8 trillion rupees in 2012-13

* Food subsidy bill in 2012-13 seen at 750 billion rupees

* Fertilizer subsidy bill in 2012-13 seen at 609.7 billion rupees

* Petroleum subsidy bill in 2012-13 seen at 435.8 billion rupees

* Revised petroleum subsidy bill for 2011-12 at 684.8 billion rupees

* To inject 159 billion rupees to capitalize state-run banks in 2012/13

REVENUE AND TAXES

* Gross tax receipts seen at 10.8 trillion rupees in 2012-13

* Non-tax revenue seen at 1.64 trillion rupees in 2012-13

* Proposes to levy tax on all services except 17 items in the negative list from 2012/13

* Proposes to raise service tax rate to 12 percent from 10 percent

* No change in corporate tax rates

* To enhance tax exemption limit to 200,000 rupees for individuals income in 2012/13

* Proposes to provide full exemption on import duty of thermal coal for power plants

* Proposes to double basic customs duty on gold

GROWTH AND INFLATION EXPECTATIONS

* Expect headline inflation to moderate in next few months and remain stable thereafter

* Economy expected to grow at 7.6 percent in 2012/13

* Economy expected to grow at 6.9 percent in 2011/12

* Signs of economy turning around in March quarter

POLICY REFORMS

* Allow external commercial borrowing of up to $1 bln to raise working capital for airlines industry for 1 year

* To allow qualified foreign investors in Indian corporate debt markets

* To allow external commercial borrowing to part finance rupee debt in power projects

* Proposes to remove sector-specific restriction on venture capital fund investments

* Hope to achieve "broad-based consensus" to open multi-sector to foreign investors

SECTOR SPENDING

* Allocates 1.94 trillion rupees for defence in 2012/13, up 18 percent

INFRASTRUCTURE DEVELOPMENT

* To award contracts to build 8,800 km of roads in 2012/13

* Government doubles allocation for tax-free bonds to 600 billion rupees for financing infrastructure projects in 2012/13

DISINVESTMENT

* Disinvestment target in 2012-13 of 300 billion rupees

AGRICULTURE

* Expects country to become self-sufficient in urea production in five years

* Proposes to raise agricultural credit target in 2012/13 to 5.75 trillion rupees

CURRENT ACCOUNT

* Current account deficit seen at 3.6 percent of GDP in 2011/12

* Expect smaller current account deficit in 2012/13

FINANCE MINISTER COMMENTS

"We have to accelerate the pace of reforms and improve supply side management of the economy."

"Economic policy, as medical treatment, often requires us to do something which in the short run may be painful but is good for us in the long run."

"As Hamlet, the Prince of Denmark, said in Shakespeare's immortal words, 'I must be cruel only to be kind'."

Courtesy:ICAI/CA CLUB

· Budget identifies five objectives relating to growth recovery, private investment, supply bottlenecks, malnutrition and governance matters

· GDP growth to be 7.6 per cent (+ 0.25 percent) during 2012-13

· Amendment to the FRBM Act proposed as part of Finance Bill. New concepts of “Effective Revenue Deficit” and “Medium Term Expenditure Framework” introduced

· Central subsidies to be kept under 2 per cent of GDP; to be further brought down to 1.75 per cent of GDP over the next 3 years.

· Proposed: Mobile based fertilizer management system; LPG transparency portal; scaling up and rolling out of Aadhar enabled payment for government schemes in at least 50 districts.

· Rs. 30,000 crore to be raised through disinvestment

· Efforts to reach broadbased consensus on FDI in multi-brand retail

· Rajiv Gandhi Equity Saving Scheme: to allow income tax deduction to retail investors on investing in equities

· Rs. 15,888 crore to be provided for capitalization of public sector banks and financial institutions

· A central “Know Your Customer” depository to be developed

· Swabhimaan: remaining habitations to be covered; to be extended to more habitations; ultra small branches to be set up in Swabhimaan habitations

· Investment in 12^th Plan in infrastructure to go uptoRs. 50,00,000 crore; half of this is expected from private sector

· Tax Free Bonds of Rs. 60,000 crore to be allowed for financial infrastructure projects

· Allocation of Road Transport and Highways Ministry enhanced by 14 per cent to Rs. 25,360 crore

· Financial package of Rs. 3,884 crore for waiver of loans to handloom weavers and their cooperative societies; mega handloom clusters in Andhra, Jharkhand; weaver service centres in Mizoram, Nagaland and Jharkhand ; powerloom mega cluster in Maharashtra; Rs. 500 crore pilot schemes for geo-textiles in North-Eastern region

· Rs. 5,000 crore India Opportunities Venture Fund to help small enterprises

· Allocation to agriculture enhanced; RKVY gets Rs. 9,217 crore; BGREI gets Rs. 1,000 crore; Rs.2242 crore project to improve dairy productivity; Rs. 500 crore for coastal aquaculture

· Various other agricultural activities merged into 5 missions

· Target for agricultural credit raised to Rs. 5,75,000 crore

· Interest subvention for short-term crop loans to farmers at 7 per cent interest continues; additional 3 per cent for prompt paying farmers

· Rs. 200 crore for awards to incentivise agricultural research

· Provisions under rural housing fund increased to Rs. 4,000 crore from Rs. 3,000 crore

· Interest subvention of 1 percent on housing loans uptoRs. 15 lakh extended for one more year

· AIBP allocation raised by 13 per cent to Rs. 14,242 crore

· National Mission on Food Processing to be started in cooperation with State Governments

· Scheduled Caste Sub Plan allocation increases by 18 per cent to Rs. 37,113 crore; Tribal Sub Plan by 17.6 per cent to Rs. 21,710 crore

· Multi-sectoralprogramme to address maternal and child malnutrition in 200 high burden districts

· 58 per cent rise in allocation to ICDS, at Rs. 15,850 crore

· Rural drinking water and sanitation gets 27 per cent rise in allocation to Rs. 14,000 crore; PMGSY gets 20 per cent rise to Rs. 24,000 crore

· Projects covering length of 8800 km to be awarded under NHDP against 7,300 km during 2011-12

· RTE-SSA gets Rs. 25,555 crore allocation, showing an increase of 21 per cent; 6000 schools to be set up at block level as model schools in the 12^th Plan; Credit Guarantee Fund to be set up for better flow of credit to students

· National Urban Health Mission is being launched

· 34 per cent increase in allocation to National Rural Livelihood Mission, to Rs. 3915 crore

· Rs. 1000 crore allocated for National Skill Development Fund

· Bharat Livelihood Foundation to be established to support livelihood interventions particularly in tribal areas

· Widow pension and disability pension raised from Rs. 200 to Rs. 300 per month

· Grant on death of primary breadwinner of a BPL family in the age group 18-64 years doubled to Rs. 20,000

· Defence services get Rs. 193407 crore; any further requirement to be met

· 4000 residential quarters to be constructed for Central Armed Police Forces

· UID-Aadhar to get adequate funds for enrolment of 40 crore persons, in addition to the 20 crore persons already enrolled

· White Paper on Black Money to be laid in the current session of Parliament

· Tax proposals mark progress in the direction of movement towards DTC and GST

· Income tax exemption limit raised from Rs.1,80,000 to Rs.2,00,000; upper limit of 20 per cent tax slab raised from Rs.8 lakh to Rs.10 lakh

· Interest from savings bank accounts deductible upto Rs.10,000; deduction of upto Rs.5,000 for preventive health check-up

· Senior citizens without business income exempt from advance tax

· Investment linked deduction of capital expenditure enhanced for certain businesses; new sectors eligible for investment linked deduction

· Turnover limit for compulsory tax audit for SMEs raised from Rs.60 lakh to Rs.1 crore

· STT on cash delivery reduced by 25 per cent to 0.1%

· General Anti Avoidance Rule being introduced to counter aggressive tax avoidance

· A number of measures proposed to deter generation and use of unaccounted money

· All services to attract service tax except those in the negative list

· Central Excise and Service Tax being harmonized

· Standard rate of excise duty raised from 10 per cent to 12 per cent; service tax rates raised from 10 per cent to 12 per cent; no change in peak customs duty of 10 per cent on non-agricultural goods

· Relief in indirect taxes to sectors under stress; agriculture, infrastructure, mining, railways, roads, civil aviation, manufacturing, health and nutrition, and environment get duty relief

· Certain cigarettes and bidis attract higher excise duty; large cars attract higher customs duty

· Excise imposed on unbranded jewellery also; measures to minimize impact on small artisans and goldsmiths; branded silver jewellery exempted from excise duty

· Net gain of Rs.41,440 crore due to taxation proposals

· Total expenditure budgeted at Rs. 14,90,925 crore; plan expenditure at Rs. 5,21,025 crore – 18 per cent higher than 2011-12 budget; non plan expenditure at Rs. 9,69,900 crore

· Fiscal deficit targeted at 5.1 per cent of GDP, as against 5.9 per cent in revised estimates for 2011-12

· Central Government debt at 45.5 per cent of GDP as compared to Thirteenth Finance Commission target of 50.5 per cent

· Medium-term Expenditure Framework Statement to be introduced; will set forth 3-year rolling target for expenditure indicators

ATAL BAJPAI

Budget Highlights 2012-13 : Indian Union

Union Budget 2012 - Highlights