Budget 06-07,India Budget 2006-07,Union Budget 06-07,Budget Announcement,Indian Budget 2006-07,Budget 2006-2007,Budget Announcement 2007

BUDGET UPDATE

BUDGET ESTIMATES 2006-07

Plan Expenditure: estimated at Rs. 172,728 crore, up by 20.4%.
Non-Plan Expenditure: estimated at Rs. 391,263 crore, up by 5.5%
Revenue Deficit: estimated at Rs. 84,727 crore, 2.1% of the GDP.
Fiscal Deficit: estimated at Rs. 148,686 crore, 3.8% of the GDP.

OVERVIEW OF THE ECONOMY

2004-05: growth rate 7.5% with manufacturing sector at 8.1%; gross domestic saving increased t 29.1% of GDP and the rate of gross capital formation, 30.1% of GDP.
2005-06: GDP growth likely 8.1% with manufacturing sector to 9.4%; agricultural growth 2.3%; inflation as on 11th February'06 was 4.02%; non-food credit growing by over 25%.

TAX PROPOSAL

Direct Tax

The rates remain same on personal income tax and corporate income tax. Further, no new taxes have been imposed.
1/6 scheme will stand abolished.
There is a marginal revision in certain tax rates. Minimum Alternative Tax (MAT) rate is increased to 10% from the present 7.5%; long-term capital gains arising out of securities is included in calculating book profits; the credit perion for MAT has been increased to seven years.
There is an increase of 25%, across the board, on all rates of STT.
Section 80IA of the Income Tax Act applies to infrastructure facilities; the terminal date for developing an industrial park extended to March 31, 2009 and for the power sector to March 31, 2010.
Investments in fixed deposits in scheduled banks included in section 80C provided the term is not less than 5 years; limit of Rs. 10,000 for the contribution of certain pension funds is removed from 80CCC subject to overall ceiling of Rs. 1,00,000.
Open-ended and close-ended equity-oriented schemes to be treated on par fro exemption from dividend distribution tax.
Exemption under section 10(23G) removed.
Primary Agricultural Credit Societies and Primary Cooperative Agricultural and Rural Development Banks is still exempt from tax under section 80P; all other cooperative banks are excluded.
Benefit of section 54ED withdrawn w.e.f. April 1, 2006; scope of section 54EC restricted to two institutions, viz., NHAI and REC; for NABARD, SIDBI and NHB route of zero coupon bonds to raise low cost funds already opened.
Donations to wholly charitable institutions to be taxed at the highest marginal rate; such donations to partly religious and partly charitable institutions/trusts to be taxed only if the donation is specifically for an educational or medical purpose.
Banking Cash Transaction Tax (BCTT) to continue until the Annual Information Returns (AIR) system can capture all significant financial transactions.
Fringe Benefit Tax (FBT) introduces last year is proposed for the following changes:
- FBT on 'tour and travel' reduced to 5%. - For airline companies and shipping industry, value benefit in the form of 'hospitality' and 'use of hotel boarding and lodging facilities,' at 5% instead of 20%.
- Expenses on free samples of medicines and medical equipment distributed to doctors excluded.
- Under section 115WB(1)(c) contribution by an employer to an employee per year a threshold of Rs. 1,00,000 has been prescribed to attract FBT.

Indirect Tax

Customs

Non-agricultural products peak rate reduced to 12.5% from 15%; duty of alloy steel and primary and secondary non-ferrous metals reduced to 7.5% from 10% (also includes duty for ferro alloys); on steel melting scrap, the duty raised to 5%.
Apart from few exceptions, the duty on mineral products reduced to 5%.
Duty on ores and concentrates reduced to 2% from 5%.
On refractories and number of materials for manufacture of refractories reduced to 7.5%.
On basic inorganic chemicals reduced to 10% from 15%; on basic cyclic and acyclic hydrocarbons and their derivatives to 5%; on catalysts the duty to be reduced to 7.5% from 10%.
Duty reduced to 5% from 10% on major bulk plastics such as PVC, LDPE and PP; on naptha for plastics it is nil; on raw materials of plastics like styrene, EDC and VCM, the duty is 2%.
On 10 anti-AIDS and 14 anti-cancer drugs customs duty has been reduced to 5%; on certain life saving drugs, kits and equipment it is reduced to 5% from 15%; these drugs are exempted from excise duty and CVD.
On packaging machines, duty reduced to 5% from 15%.
Concessional project rate of 10% is to be extended to pipeline projects for the transportation of natural gas, crude petroleum and petroleum products.
4% CVD on all imports with few exceptions.
On vanaspati, custom duty to be increased to 80%.
Reduction of import duty on all man-made fibres and yarns, and raw materials lik DMT, PTA and MEG to 10% from 15% and on paraxylene to 2%.

Excise

Reduction of excise duty on all man-made fibre yarn and filament yarn to 8% from 16%.
Duty on aerated drinks and small cars to be reduced to 16%.
Customised software and software packages downloaded from the internet, DVD Drives, Flahs Drives and Combo Drives is to be fully exempted from excise duty but 8% duty to be imposed on packaged software sold over the counter.
Duty on ready-to-eat packaged foods and instant food mixes such as dosa and idli mixes to be reduced to 8% from 16% where as condensed milk, ice cream, preparations of meat, fish and poultry, pectins, pasta and yeast is fully exempted. · Extracts of vegetable tanning such as quebracho and chestnut is exempted while duty of footwear with retail price between Rs. 250 to Rs. 750 is reduced to 8% from 16%.
To all LPG stoves, concessional rate of 8% to be extended.
Duty to be reduced to 8% from 16% on compact fluorescent lamps.
Increase in excise duty on cigarettes by 5%.

Service Tax

Service tax rate increased to 12% from 10%.
New services to be included like ATM operations, maintenance and management, share transfer agents, sale of space or time (other than print media), sponsorship of events (other than sports events), ship management, etc.
Leasing and hire purchase to be treated as loan transactions.
Proposal to set April 1, 2010 as the date for introducing Goods and Service Tax (GST).

VAT and CST

To moderate the price, LPC has been included in the list of 'declared goods' under the CST Act.

INFRASTRUCTUTE

Telecommunication: by December'07 to reach 250 million connections. In three years over 50 million rural connections to be rolled out.
Power: 5 ultra mega power projects of 4,000 MW each to be awarded before December 31, 2006; Rs. 597 crore provided for non-conventional energy resources; 10,000 villages in 2005-06 and 40,000 more to be electrified in 2006-07.
Coal: reserves of 20 billion tonnes to be de-blocked for power projects.
Petroleum: Rs. 22,000 crore expected in the refinery sector in next few years.
Road Transport: NHDP enhanced by Rs. 9,320 crore to Rs. 9,945 crore in 2006-07; allocation of Rs. 550 crore for North Eastern region.; 1,000 kms of access-controlles Expressways to be developed on Design, Build, Finance and Operate (DBFO) model.
Maritime Development: plan allocation for Department of Shipping increased by 37% to Rs. 735 crore.

FINANCIAL SECTOR

Banking, Insurance and Pensions: net capital support to banking sector stands to be Rs. 22,808 crore, it has to be restructured; Bill on insurance to be introduced in 2006-07.
Capital Market: limit on FII investment in Government securities to be increased to $2 billion from $1.75 billion; limit to FII investment in corporate debt to be $1.5 billion from $0.5 billion; ceiling on aggregate investment by mutual funds in overseas instruments is to be raised to $2 billion from $1 billion with removal of requirements of 10% reciprocal share holding.

AGRICULTURE

Irrigation: outlay of 2006-07 increased to Rs. 7,121 crore with grant of Rs. 2,350; 20,000 water bodies of 1.47 millions hectares identified, renovation and restoration cost estimated Rs. 4,481 crore.
Credit: increased to Rs. 175,000 crore in 2006-07; 50 lakh farmers will be benefited; loan taken for kharif and rabi in 2005-06 will be reimbursed.
W.e.f from Kharif 2006-07, farmers will receive short-term credit at 7% with upper limit of Rs. 300,000 on the principal amount.
Sanctions under Rural Infrastructure Development Fund XII to increase to Rs. 10,000 crore.

FISCAL CONSOLIDATION

Twelfth Finance Commission: Rs. 94,402 crore to be released as states' share in gross tax revenues.

MANUFACTURING

Employment: 5 industries, namely textiles, food processing, petroleum, chemicals and petro-chemicals, leather and automobiles, with employment opportunities identified in the manufacturing sector.
Textiles: fund allocation for Technology Upgradation Fund (TUF) enhanced to Rs. 535 crore from Rs. 435 crore; Rs. 189 crore allocated for Scheme for Integrated Textiles Parks (SITP); Jute Technology Mission to be launched; a National Jute Board to be established.
Handlooms: 100 more clusters to be added to Cluster Development at a cost of Rs. 50 crore; provisions for this sector to be increased to Rs. 241 crore from Rs. 195 crore; a 'handloom' mark to be launched.
Food Processing Industry: NABARD to create a refinancing window with a corpus of Rs. 1,000 crore. National Institute of Food Technology Entrepreneurship and Management to be set up.
Small and Medium Enterprises: 180 items identified for dereservation; corpus of Credit Guarantee Fund to be raised to Rs. 2,500 crore from Rs. 1,132 in five years; Credit Guarantee Trust for Small Industries to be proposed to reduce guarantee fee from 2.5% to 1.5% for all loans; 10 schemes drawn up under five-year National Manufacturing Competitiveness Programme.

SERVICES SECTOR

Tourism: development of 15 tourist destinations and circuits to be undertaken; 50 villages with core competency in handicrafts and other related work to be identified and developed; 4 new institutes of hotel management to come up in Uttaranchal, Chhattisgarh, Haryana and Jharkhand; plan allocation is increased to Rs. 830 crore from Rs. 786 crore.
Foreign Trade: the share in exports to be doubled by 2008-09.

INVESTMENT

Equity support from the Government of Rs. 16,901 crore and loans of Rs. 2,789 crore to Central PSEs, including Railways; to make india a hub for gems and jewelry.

BHARAT NIRMAN

In the first year of implementation, 2005-06: 600,000 hectares of irrigation potential to be created this year
Rs. 18,696 crore to be provided this year for the programme, which is an increase of 54% against Rs 12,160 crore in the current year.

FLAGSHIP PROGRAMMES

Fund allocation for 8 flagship programmes increased by 43.2%.
North Eastern Region (NER): allocation of Rs. 4,870; total it comes to Rs. 12,041 with 10% of Plan Budget of each Ministry/Department.
Sarva Siksha Abhiyan: 500,000 additional class rooms to be constructed and 150,000 more teachers to be appointed; from revenues through education cess, Rs. 8,746 crore to be transferred to the Prarambhik Siksha Kosh.
Mid-day Meal Scheme: allocation to be enhanced to Rs. 4,813 crore from Rs. 3,010.
Drinking Water and Sanitation: non-recurring assistance of Rs. 213 crore to be provided this year for setting up district-level water testing laboratories adn field-level water testing kits; Rajiv Gandhi National Drinking Water Mission to be increased to Rs. 4,680 crore from Rs. 3,645 crore; for Rural Sanitation Campaign it is to be increased to Rs. 720 crore from Rs. 630 crore.
National Rural Health Mission: allocation increased to Rs. 8,207.
Integrated Child Development Services: total allocation increased to Rs. 4,087 crore.
National Rural Employment Guarantee Scheme: allocation of Rs. 14,300 crore.
Jawaharlal Nehru National Urban Renewal Mission: estimated outlay of Rs. 6,250 crore for 2006-07.
Kasturba Gandhi Balika Vidyalaya Scheme: 1,000 new residential schools for girls from SC, ST, OBC and minority communitites to come up; a girl child who passes the VIII standard examination and enrols in a secondary school, a sum of Rs. 3,000 to be deposited in her name, withdrawal at the age of 18 years.
Minorities: corpus of Maulana Azad Educational Foundation to be doubled to Rs. 200 crore.
National Social Assistance Programme: old age pension for above the age 65 years is to increase to Rs. 200 per month; Rs. 1,430 crore provided in the this year.

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