Indian Budget; Fiscal Deficit Pegged At 5.5% Of GDP; IT Limits Unchanged News Wireupdated Feb 26, 2010TweetAt GET.com we maintain complete editorial integrity on our content & provide transparent & unbiased information. Companies don't pay us to include their products although we receive a compensation when you successfully apply to products from our partners. See how we make money here.At GET.com we maintain complete editorial integrity. (RTTNews) - Indian Finance Minister, Pranab Mukherjee, while presenting his budget of the United Progressive Alliance or UPA government for the year 2010-11, estimated lower fiscal deficit over last year. The budget estimates focused on inclusive growth, insuring food security, strengthening of infrastructure, introducing new income-tax slab rates, besides giving relief in customs and excise duties on variety of goods.Mukherjee said the budget for the fiscal year 2011 would have a total expenditure of Rs.11,08,749 crore, an increase of 8.6% over the total expenditure in Budget Estimates in 2009-10. The Plan and non-Plan expenditure are estimated at Rs.373,092 crore and Rs.7,35,657 crore respectively. The Plan expenditure rose by 15%, while there is only 6% increase in non-Plan expenditure.The actual net market borrowing of the government in 2010-11 is estimated at Rs.3,45,010 crore. With this, the Finance Minister expressed hope, that there would be enough space to meet the credit needs of the private-sector. The borrowing program will be planned in consultation with the Reserve Bank of India, he said. Gross tax revenue receipts are budgeted at Rs.7,46,651 crore, while non-tax revenue receipts estimated at Rs.1,48,118 crore. The net tax revenue to the Centre as well as the expenditure provisions in 2010-11 have been estimated with reference to the recommendations of the Thirteenth Finance Commission. The fiscal deficit as a percentage of GDP is projected at 5.5%, compared to 7.8% in 2008-09 and 6.9% as per the revised estimates for 2009-10. At this growth, the fiscal deficit in 2010-11 works out to Rs. 3,81,408 crore. The Minister has fixed the rolling targets for fiscal deficit at 4.8% and 4.1% for 2011-12 and 2012-13 respectively. These projections improve upon the recommendations of the Thirteenth Finance Commission.Growth TrendThe Finance Minister said the immediate task now was to quickly revert to a high GDP growth of 9%, saying that the country had withstood the economic crisis and the Indian economy was now in a better position than it was a year ago. After a fall in GDP growth in 2008-09 to 6.7%, it had built up and 7.2% growth was expected by this fiscal end. The Budget continues to address the three challenges facing the economy--to quickly revert to the high GDP growth path of 9%, to consolidate recent gains in making development more inclusive and to remove weaknesses at different levels of governance and to improve public delivery mechanism.Mukherjee expressed the hope that the economy would reach 10% growth in not a too distant a future.Infrastructure To maintain thrust of upgrading the infrastructure of the country, he proposed a total investment of Rs.173,552 crore accounting for over 46% of the total Plan allocation. Disbursement by Infrastructure Finance Co. Ltd. or IIFCL is expected to reach Rs.20,000 crore in 2010-11, compared to Rs.9,000 crore this year. IIFCL authorised to refinance infrastructure projects and expected to be more than double in 2010-11.Power Plan allocation for power sector has been more than doubled from Rs.2,230 crore in 2009-10 to Rs.5,130 crore in 2010-11. A Coal Regulatory Authority is proposed to be set up for creating level-playing field in the coal sector and resolving various issues. Rural and Social Sector DevelopmentA provision of Rs 66,100 crore has been made in the budget for rural development, while outlay for social sectors pegged at Rs.1,37,674 crore, accounting for 37% of the total Plan allocation.Allocation for National Rural Employment Guarantee Scheme stepped up to Rs 40,100 crore in 2010-11, whereas allocation for urban development increased by 75% to Rs.5,400 crore.One per cent interest subvention loan for houses costing up to Rs. 20 lakh extended to March 31, 2011, and a sum of Rs.700 crore is provided on this count.To provide one time interim relief to the housing and real estate sector, which was impacted by the global recession, pending projects to be completed within five years instead of four years for claiming a deduction on their profits.AgricultureCredit outlay for agriculture raised to Rs.3.75 lakh crore from Rs.3.25 lakh crore and farm loan waiver scheme extended up to December 31, 2010. Similarly, the period for repayment of loans under the Debt Waiver and Debt Relief Scheme is being extended by six months to June 30,2010. Besides, the interest subvention for timely repayment of crop loans is being raised from one per cent to 2%, bringing the effective rate of interest to 5%. The minister said the nutrient based fertilizer subsidy scheme would come into force from April 1. Fiscal Consolidation Mukherjee said as the recovery had taken roots, there was a need to review public spending, mobilize resources and gear them toward building the productivity of the economy.The government will follow the recommendations of the Thirteenth Finance Commission by capping the government debt. The Commission has recommended a capping of the combined debt of the Centre and the States at 68% of the GDP to be achieved by 2014-15. For the first time, the government would target an explicit reduction in its domestic public debt-GDP ratio. A status paper would be brought out within six months, giving a detailed analysis of the situation and a road map for curtailing the overall public debt. This would be followed by an annual report on the subject.Research and Development In order to boost the research and development (R&D) activity across all sectors of economy, the weighted deduction on expenditure incurred on in-house R&D has been enhanced to 200% from 150%. Similarly, weighted deduction on payments made to national laboratories, research associations, colleges, universities and other institutions for scientific research has been enhanced to 175% from 125%.Payment made to an approved association engaged in research in Social Sciences or Statistical Research will be allowed as a weighted deduction of 125 per cent. The income of such approved research association shall be exempted from tax. ExportsThe government proposed to extend the interest subvention of 2% for one more year for exports covering handicraft, carpets, hand looms and small and medium enterprises. Earlier, the government had provided interest subvention of 2 per cent in pre-shipment export credit up to March 31, 2010 in certain sectors. Direct TaxThe Finance Minister has not proposed any hike in the income tax exemption limits, except introducing new tax slabs. He has not proposed any change in corporate tax rate. Additional deduction of Rs.20,000 allowed on long-term infrastructure bonds, in addition to the existing limit of Rs.1 lakh for specified savings.Contributions to the Central Government Health Scheme have also been allowed as deductions within the overall ceiling for tax rebate, besides contributions to health insurance schemes, which are currently allowed as deductions under the Income Tax Act. The surcharge on domestic companies is being reduced from 10% to 7.5%. However, the minimum alternate tax (MAT) on book profits is being increased from 15% to 18%To provide one time interim relief to the housing and real estate sector which was impacted by the global recession, he proposed to allow pending projects to be completed within five years instead of four years for claiming a deduction on their profits. No capital gains tax on conversion of a business entity into Limited Liability Partnership, says Mukherjee.Indirect TaxOn the indirect tax front, the Finance Minister has proposed to partially roll back the rate deduction in Central Excise duties and enhance the standard rate on all non-petroleum products from 8% to 10% ad valorem. The specific rates of duty applicable to Portland cement and cement clinker are also being adjusted upwards proportionately. Similarly, the ad valorem component of excise duty on large cars, multi-utility vehicles and sports utility vehicles which was reduced as part of the first stimulus package, is being increased by 2 percentage points to 22%.The basic duty of 5% on crude petroleum; 7.5% on diesel and petrol and 10% on other refined products is being enhanced. Central Excise Duty on petrol and diesel is being enhanced by Rs.1 per litre. Customs duty on gold has been reduced.Excise duty on non-smoking tobacco is being enhanced. In addition a compounded levy scheme is being introduced by chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch making machines. Besides, a number of duty concessions are being proposed to support agriculture and allied sector. The rate of tax on services has been retained at 10% to pave the way forward for Goods and Services Tax (GST).Mukherjee said all services were not being brought under service tax at this stage. He, however, announced that certain services hitherto untaxed would be brought within the purview of service tax levy. These services will be notified separately, he added.The Finance Minister said the tax proposals on direct taxes will have a revenue deficit of Rs.26,000 crore, whereas indirect taxes will have a net revenue gain of Rs.46,500 for the year. To ameliorate the negative environmental consequences and increased pollution levels associated with industrialization and urbanization, a number of proactive steps have been proposed in the Budget 2010-11.The Finance Minister expressed the hope that a broad consensus would be achieved on the Direct Tax Code and the GST and these would be introduced from April 2011.For comments and feedback: contact email@example.com Copyright(c) 2010 RTTNews.com, Inc. 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