M A I N   N E W S

small relief, no big-ticket reforms
n Pranab treads cautiously amid political pressure
n Living to get costlier as service tax up to 12%
Sanjeev Sharma
Tribune News Service

New Delhi, March 16
Battling a tough economic situation and severe political compulsions, Finance Minister Pranab Mukherjee did a balancing act to present a pragmatic and realistic Union Budget for 2012-13.

While tax payers got some relief in the form of increase in exemption and changes in income tax brackets, the Budget, as expected, was tax heavy for consumption as both excise and service tax went up from 10 per cent to 12 per cent. Mukherjee pointed out in his speech that the life of a finance minister is not easy. When the chips are down in the economy, he is called in to administer medicine. He quoted Shakespeare’s Hamlet, “I must be cruel only to be kind”. He has been kind on income tax and cruel on indirect taxes.

The tax net has been widened with most of the services being included except a small negative list. While only 4 per cent of the citizens are taxpayers, consumption of goods and services is done by a larger population and that’s where the Budget expects to collect revenues.

For individuals, there is relief on personal income tax with the increase in exemption limit from Rs 1.8 lakh to Rs 2 lakh. The upper end of the 20 per cent tax slab has been raised from Rs 8 lakh to 10 lakh as Direct Tax Code (DTC) slabs have been fast-tracked. An individual with an income of Rs 10 lakh or more will pay Rs 22,000 less in taxes.

In a bid to incentivize savings to flow into the stock market, Rajiv Gandhi Equity Saving Scheme has been proposed in which investments up to Rs 50,000 will enjoy tax benefit with a lock in of three years for those having income below Rs 10 lakh a year. Gold, as an asset class will be under pressure as several levies have been imposed, including doubling of import duty to check imports and make it more expensive.

The Finance Minister has sought to achieve fiscal consolidation, shown intent to control subsidies, increase revenue and kickstart growth without ruffling too many feathers. Given the fiasco over the Railway Budget, he must have heaved a sigh of relief as the Trinamool Congress called it “a tolerable budget”, implying that it may not run into too much resistance.

The increase in excise and service tax means that the cost of consumption goes up with everything from items like automobiles, consumer electronics, mobile bills, real estate, eating out and travel becoming more expensive. The TDS has been imposed on buy and sale of property which will make it more expensive. Excise on large cars has been increased from 22 to 24 per cent. Excise has been imposed on unbranded jewellery also.

While the direct tax proposals in the Budget will result in a revenue loss of Rs 4,500 crore, indirect tax proposals would result in a revenue gain of Rs 45,940 crore. Tax proposals lead to a net gain of Rs 41,440 crore. Service tax proposals alone are expected to yield an additional revenue of Rs 18,660 crore. With a view to tax Vodafone type of offshore transactions, the Budget has imposed a provision retrospectively from 1962 in which all offshore acquisitions will become taxable.

disinvestment: Govt targets Rs 30K cr

New Delhi: The government has set a target to raise Rs 30,000 crore from stake sales in public sector undertakings in 2012-13, even as it missed the target for the current fiscal by a wide margin. "In 2011-12, as against a target of Rs 40,000 crore, the government will raise about Rs 14,000 crore from disinvestment. For 2012-13, I propose to raise Rs 30,000 crore through disinvestment," Finance Minister Pranab Mukherjee said in his Budget speech. He said the government is committed to maintaining at least 51 per cent ownership and management control in the Central Public Sector Enterprises (CPSEs).

There is good news for foreign travellers as duty free baggage allowance has been raised from Rs 25,000 to Rs 35,000 and for children up to 10 years from Rs 12,000 to Rs 15,000.

The Finance Minister has sought to control the worrying fiscal deficit by raising taxes and cutting expenditure.

The fiscal deficit for this year is at 5.9 per cent, much higher than the Budget estimates of 4.6 per cent. Next year it is proposed to bring it down to 5.1 per cent.

Outlays for welfare schemes have seen modest hikes as the focus is on controlling expenditure. Allocation for road transport has been enhanced by 14 per cent. Target for agricultural credit has been raised to Rs 5.75 lakh crore. Rural drinking water and sanitation has got 27 per cent rise in allocation to Rs 14,000 crore. RTE has got Rs 25,555 crore allocation, showing an increase of 21 per cent.

thrust on Infra	Excise duty up	black money	‘cruel but kind’	corporate tax
Finance Minister Pranab Mukherjee has announced a slew of proposals, including allowing financial institutions to raise Rs 60,000 crore from tax-free bonds, to give a boost to the infrastructure sector	y Excise duty hiked to 12% from the current 10% y Pay 27% duty on large cars y ECBs proposed for aviation sector with a cap of $1 billion y Direct, indirect tax reforms to miss deadline	y Income tax return assessment up to 16 years on assets held abroad and tax deducted at source on transfer of immovable property and gold purchase. y White Paper to be presented on black money	Pranab Mukherjee invokes Shakespeare’s Hamlet to indicate the tough and, perhaps, thankless nature of his job. "I must be cruel, only to be kind," he said, to illustrate the dilemmas of his job, like the Prince of Denmark	y No change in corporate taxes but measures to enable them better access to funds y Witholding tax on external commercial borrowings reduced from 20% to 5% for power, airlines, roads, bridges, houses and fertilisers