2011 General Budget Highlights

Category: Education

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Budget Background:

Budget Background (3) Interesting budget statistics (3.1) Peak Customs Duty in 1991: 300%. In 2011: Just 10%. (3.2) Since 1991, peak income tax rate is down by about 50%. (3.3) Morarji Desai presented the budget 8 times. Maximum by any minister in India. (3.4) Inflation was 13+ % in 1991 compared to 7+% in 2011. (3.5) Foreign Direct Investments (FDI) in 1991: $130 million. FDI in 2010: $35+ billion. (3.6) Excellent Growth in Forex (Foreign Exchange) Reserves - In 1991: Forex reserves were $1.2 billion (enough for just 3 weeks of essential imports). - In 2011: Reserves have grown to $300+ billion. (1) Frequency of Budget Presentation: (1.1) Presented each year on last working day of February by Indian Finance Minister in Parliament. (1.2) This year, budget was presented by Pranab Mukherjee on 28th February, 2011. (2) Changes Effective From: (2.1) Changes proposed in the budget are debated and passed after any amendments. (2.2) Changes come into effect on Apr 1, the start of the new financial year in India.

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(1) More Savings / Personal Income Tax Liability Down Slightly (1.1) Annual Tax Savings of Rs. 2060 to Rs. 9200 depending upon your tax and age bracket. (1.2) Tax exemption limit raised by Rs. 20,000 to Rs. 1,80,000. (1.3) For Senior Citizens, exemption raised from 2.4 to 2.5 lakhs. (1.4) New category for 'Very Senior Citizens' over 80 years, exemption raised to 5 lakhs. (1.5) New Tax Slabs - Upto Rs. 1.8 lakh (Rs. 1.9 lakh for females)  Tax:      0% - Rs. 1.8+ (1.9 lakh for females) to Rs. 5 lakh Tax: 10.3% - Rs. 5+ lakh to Rs. 8 lakh                                    Tax: 20.6% - Rs. 8+ lakh                                                           Tax: 30.9% ( 2) Senior Citizen qualification age reduced from 65 to 60 years. (3) No Change in Central Excise Duty of 10%. (4) Indian Mutual Funds allowed to raise money from foreign investors. Fantastic / Good

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(6) Education budget allocation increased by 24% over current year. (5) Cheaper: (5.1) Gadgets: Mobile Phones, Refrigerators, LED TVs/Lights. (5.2) Steel, Paper, Raw Silk, Agarbattis. (5.3) Personal hygiene products: Soaps, Sanitary Napkins, Diapers. (5.4) Hybrid/Electric Cars. (5.5) Gold and Silver Jewellery. (5.6) Life Saving Drugs, Homeopathic medicines. (7) Infrastructure budget allocation increased by more than 23% over current year. (8) Corporate surcharge on Indian companies reduced from 7.5% to 5%. (9) Disinvestment Target- Rs. 40,000 crore this year from PSU equity sell-off. (10) Economy expected to grow 9% in 2011-12.

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(11) Fiscal deficit reduced from 5.5% to 5.1% of GDP. Target 4.6% for FY 2011-12. (12) No change in Peak Customs Duty of 10%. (13) FII (Foreign money) allowed to invest in unlisted bonds. (14) No need to file returns if income upto Rs. 5 lakh and tax deducted at source. (15) New simplified IT Return Form called 'Sugam' for small businesses . (16) No service tax audit for individual/sole proprietors if turnover upto Rs. 60 lakhs. (17) More Metro projects and line extensions (18.1) Rs. 1550+ crore allocated for 4 proposed Metro projects. (18.2) Projects in Delhi, Bengaluru, Chennai and Kolkata.

Oh No / Not So Good:

Oh No / Not So Good (1) More Expensive: ( 1.1) Air Travel: Service tax increased. Rs. 50 on domestic & Rs. 250 on international air travel. (1.2) AC Restaurants serving liquor to get 3% costly. (1.3) Hotel Stay: Service Tax on hotels above Rs. 1000/- per day. (1.4) Tea, Coffee, Pastries/Cakes, Biscuits, Bicycles, Footwear, Fruit Juices. (1.5) Stationery: Pencils etc, Kitchenware: Cookers, Water Purifiers etc (1.6) Health Checkups, AC hospitals, Pathlabs, Doctors, Lawyers under service tax. (1.7) Branded Clothes, Spectacles, Lenses. (1.8) 10% service tax on unrecognized courses in coaching centres. (1.9) Plan to levy 1% excise duty on 130 consumer items. (2) No change in FDI in RETAIL sector. (3) Rate of MAT increased from 18% to 18.5% of book profits.

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(4) Tax holiday for IT companies over. MAT imposed on SEZs also. (5) No 100% privatization of non-strategic PSUs Govt. wants to retain 51% in PSUs. (6) Some initiatives proposed but 'aggressive' ones to tackle BLACK money missing

Budget Terminology Explained:

Budget Terminology Explained (1) Fiscal Deficit: (1.1) Measure of how much government needs to borrow from the market to meet its expenditure when its revenues are not adequate. (2) Excise Duty: (2.1) Tax charged on goods produced within the country (as opposed to customs duty that is charged on goods from outside the country).

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(3) MAT (Minimum Alternative Tax): (3.1) The Indian Income Tax Act contains large number of exemptions, deductions and allowable depreciation from total income. (3.2) This results in the emergence of Zero tax companies which inspite of having high book profit are able to reduce their taxable income to nil. (3.3) So MAT was introduced under which a company is required to pay a minimum tax of book profit. (4) Infrastructure Bonds: (4.1) Saving instruments offered by government with 5.5 to 6% interest rate. (4.2) Money is locked for a period of 5 to 10 years.

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