Budget 2012 Live: Pranab ups individual tax exemption limit to Rs 2 lakh,stresses reforms

Defence Budget hiked by more than 17%; import duty on large cars,MUVs,SUVs hiked.

Written by Agencies | New Delhi | Published:March 16, 2012 11:02 am

Presenting Union Budget 2012-13,Finance Minister Pranab Mukherjee marginally raised the individual income tax exemption limit to Rs 2 lakh and announced tax on income up to Rs 10 lakh per annum would be 20 per cent.

Mukherjee was upbeat about the economy,stating it was expected to grow at 7.6 per cent in 2012-13.

He also observed that ”the economy was now turning around” and manufacturing appears to be on the revival.

The Finance Minister warned the pace of reforms must be accelerated,and delivery systems improved to address problems of black money and corruption.

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He assured that headline inflation would moderate in the next few months and remain stable thereafter. He expects average inflation and current account deficit to be lower next year.

Tell us: Will Pranab Mukherjee present a ‘game changing’ Budget?

Mukherjee said the government will fully provide for the Food Subsidy and the Food Security Act in 2012-13. ”Food Security Act will be fully provided for and the subsidy will be 2 per cent of GDP for next two years,” he said.

Pilot projects for direct transfer of subsidiary for kerosene has been initiated in Alwar,Rajasthan,he informed the House.

Mukherjee also said the Direct Tax Code (DTC) Bill would be enacted at the earliest.

He said the government would raise Rs 30,000 crore in 2012-13 from disinvestment of stake in PSUs.

Salient proposals in Budget 2012:

On governance

We have to accelerate the pace of reforms.

Growth and inflation expectations

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

* Economy expected to grow at 7.6 per cent in 2012/13,plus or minus 0.25 per cent

* Economy expected to grow at 6.9 per cent in 201-/12

* Signs of economy turning around in March quarter

Policy reforms

* To allow qualified foreign investors in Indian corporate debt markets

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

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

Infrastructure spending

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

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

Disinvestment

* Disinvestment target in 2012-13 of Rs 30,000 crore

Agriculture

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

* Proposes to raise agricultural credit target in 2012/13 to 5,75,000 crore rupees

Subsidies

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

* To inject 15,888 crore rupees to capitalise state-run banks in 2012-13

Current account

* Current account deficit seen at 3.6 per cent of GDP in 2011-12

* Expect smaller current account deficit in 2012-13

Sector spending

Allocates 1.94 trillion rupees for defence in 2012-13,up from 1.64 trillion rupees in previous year

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

* 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

Revenue

* 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 raise service tax rate to 12 per cent from 10 per cent

* 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

* No change in corporate tax rates

* To enhance tax exemption limit to Rs 2 lakh for individuals income in 2012-13

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

Borrowing

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

Mukherjee’s Budget comes at a time when the country’s mounting fiscal deficit is a worry,particularly amid cooling economic growth and his own government’s coalition headaches.

The economy is coming to the end of a tough fiscal year that is expected to see growth slow to about 6.9 per cent,far below the nearly 9 per cent target set in last year’s budget.

High inflation forced the Reserve Bank of India to continue raising interest rates even as its counterparts elsewhere turned their focus towards reviving growth. While inflation is no longer near double digits,it rose to 6.95 per cent annually in February.

On Thursday,RBI disappointed market hopes that it would begin cutting interest rates after 13 increases between March 2010 and October 2011,and warned of renewed inflationary risks from high oil prices,a depreciation of the rupee and fiscal slippage,a reference to the government’s deficit.

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