Income tax relief, more money on welfare in Pranab's budget

Further relief for individual tax payers, a steep hike in allocations for welfare schemes and infrastructure were among the high points of Union Budget for 2010-11 presented on Friday by Finance Minister Pranab Mukherjee, who said the worst was over and promised high, inclusive growth in the coming years.

Meanwhile, the Opposition led by the BJP walked out from Lok Sabha protesting FM's announcementsu00a0on tax hikes in fuel prices.

"Today, as I stand before you, I can say with some confidence we have weathered this crisis well," Mukherjee told the Lok Sabha, the lower house of parliament, while presenting the federal budget for the next fiscal.

"That is not to say that the challenges today are any less than they were nine months ago, when the UPA (United Progressive Alliance) was voted back to power under the leadership of Sonia Gandhi and Prime Minister Manmohan Singh."

The finance minister proposed the following slabs for individual tax payers: No tax for up to Rs 160,000, a rate of 10 per cent for up to Rs 500,000, then 20 per cent for up to Rs 800,000 and finally 30 per cent for high income.

"The proposal to reduce the tax slab will benefit 60 per cent of all tax payers," he said and added that he wished to hike the minimum alternate tax (MAT) to 18 per cent of book profits from the present 15 per cent.

Mukherjee said 46 per cent of the plan allocation will be set aside for infrastructure, while hiking the outlays for rural and urban development, as also for education and healthcare. He also promised to implement the direct tax code from April next year, assured a simplified foreign investment policy soon.

At the same time, he budgeted a lower fiscal deficit of 5.5 per cent of gross domestic product for the next fiscal, against the budget estimates of 6.8 per cent for this fiscal, and promised to lower it further to 4.8 per cent and 4.1 per cent over the next two years.

The finance minister said three challenges he had listed last year remained today - those of quickly reverting to a high growth path of 9 per cent and cross over to double-digit expansion; making growth more inclusive and developing infrastructure; and strengthening food security.

"We hope to breach the 10 per cent growth mark in not too distant future," he said, adding that the government will also review the fiscal stimuli to make the country's growth more broad based.

He also said Rs 35,000 crore ($7 billion) was raised by the government by way of divesting stake in public sector enterprises and that more will be accrue to the exchequer during the upcoming fiscal. The minister also promised more banking licenses for the private sector.

Mukherjee said in 2009, when he presented the interim budget in February and the regular budget in July, the Indian economy was facing grave uncertainties, the economy had slowed down and business sentiment was low.

This year, however, the budget has come against the backdrop of the Economic Survey for 2009-10, saying India's growth can go up to double digit levels in four years, with the country emerging as the fastest growing economy in the world.

The market reaction, as the finance minister read his speech was positive, with the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ruling at 16,360.90 points, against the previous day's close at 16,254.2 points, with a gain of 106.7 points or 0.65 per cent.

Those in the packed house presided over by Speaker Meira Kumar, included Prime Minister Manmohan Singh, United Progressive Alliance (UPA) chairperson Sonia Gandhi and Leader of Opposition Sushma Swaraj.

This was Mukherjee's fourth budget of his career as finance minister and the second for the United Progressive Alliance (UPA) government in its second straight term after being voted back to office in May last year.

Although the budget speech also contained some policy pronouncements and other steps directed at reforms, it is basically an annual statement of accounts for the upcoming fiscal in terms of receipts and expenditure, along with direct and indirect tax proposals.

The budget was presented after a quick meeting of the federal cabinet inside the parliament house presided over by the prime minister for a customary approval for the proposals.

Budget Highlights
' Petrol, diesel prices to go up as basic duty of 5 per cent on crude oil restored
' Income up to Rs 1.6 lakh per year exempt from income tax; up to Rs 5 lakh to be taxed at 10 pc; income of
u00a0u00a0 Rs 5-8 lakh to be taxed at 20 pc and income above Rs 8 lakh to be taxed at 30 pc
' IT returns forms for individual tax payers to be further simplified
' Taxes on large cars and SUVs increased 2 pc to 22 pc
' Tax on cigarettes, cigars and chewing tobacco increased
' Service sector tax retained at 10 pc to aid the introduction of GST; more services to be taxed
' Rs 26,000 cr revenue loss due to reduction of direct taxes
' Partial roll back of reduction in central excise duty
' Hope to breach 10 pc growth mark in not too distant future
' Govt has set in motion steps to bring down food inflation
' Need to review stimulus package; need to make growth more broad-based
' Fiscal deficit to come down to 5.5 pc in 2010-11
' Govt actively engaged in finalising structure of general sales tax regime; hopes to implement it from April 1,
u00a0u00a0 2011
' Implementation of direct tax code from April 1, 2011
' FDI flows in April-December 2009 $20.9 bn
' FDI policy to be made more user-friendly with one comprehensive document
' Roadmap for reducing public debt in six months
' Rs 35,000 cr raised from divestment in 2009-10; will be higher in 2010-11
' New banks as Indian Banking Association to give additional licences to private players
' Provision for further capital for regional rural banks
' Banking facilities to be provided to all habitations with a population of 2,000 and more
' Apex level financial stability council to be set up for banking sector
' Expenditure in 2010-11 estimated at Rs 11,l8,749 cr
' 50 pc hike in allocation for schemes for women and child development
' Rs 4,500 cr allocated for ministry of social justice and empowerment, a hike of 80 pc
' Rs 2,600 cr allocated for ministry of minorities affairs
' Rs 1,900 cr for Unique Identification Authority of India
' Rs 147,344 crore allocated for defence
' Draft Food Security Bill prepared and will be put in the public domain
' Allocation on primary education raised from Rs 26,800 cr to Rs 31,300 cr
' Rs 66,100 cr allocated for rural development in 2010-11; Rs 40,100 cr for National Rural Employment Scheme;
u00a0u00a0 Rs 48,000 cr for Bharat Nirman
' Rs 1,270 cr allocated for Rajiv Awas Yojana for slum dwellers, up from Rs 150 cr, an increase of 700 pc with
u00a0u00a0 the aim of creating a slum free India
' 46 pc of plan allocations in 2010-11 will be for infrastructure development
' Coal Regulatory Authority to be set up to benchmark standards of performance
' Allocation for new and renewable energy sector increased 61 pc from Rs 620 cr to Rs 1,000 cr in 2010-11
' National Clean Energy Fund to be established
' Govt committed to growth of SEZs
' Four-pronged strategy for growth of agricultural sector
' Rs 200 cr to be provided in 2010-11 for climate-resilient agricultural initiative
' Involvement of private sector in grain storage to continue for another two years
' In view of drought and floods, debt repayment period extended to June 2010
' New fertiliser policy from April 2010; will lead to improved productively and more income for farmers
' Economy stabilised in first quarter of 2009-10; strong rebound in second quarter; overall growth at 7.2 and
u00a0u00a0 could be higher when Q3 and Q4 are taken into account
' Export figures for January encouraging
' India has weathered global economic crisis well; Indian economy in far better position than it was a year ago.
u00a0u00a0 In 2009 Indian economy faced grave uncertainty; delay in southwest monsoon had undermined agricultural
u00a0u00a0u00a0production
' First challenge now is to quickly revert to 9 percent growth and then aim for double digit growth; need to
u00a0u00a0 make recovery more broad based
' Second challenge is to make growth more inclusive; have to strengthen food security
' Third challenge is to overcome weakness in govt's public delivery mechanism; a long way to go in this