Home > Banking, Economic Growth, Infrastructure, Taxation > Highlights of Union Budget 2011-12

Highlights of Union Budget 2011-12

Basic Thrust

  • Seeks to provide a fresh impetus to the growth momentum
  • Makes an attempt to tackle the gaps in the supply side, the main source of inflationary pressures in the economy
  • Designs a growth strategy which relies on investment
  • Focus on infrastructure creation, especially investment in agricultural infrastructure
  • Emphasises on equity and inclusion
  • Begins process of fiscal consolidation
  • Begins process of implementing tax reforms: Constitution Amendment Bill to be introduced as precursor to rolling out Goods and Services Tax;  Direct Tax Code to be effective April 1, 2012
  • Payment of subsidy will be made directly to people living below the poverty line for better delivery of LPG, kerosene and fertilizer subsidies

Basic Numbers

  • Total expenditure up 3.4% to Rs12,57,729 crore in 2011-12
  • Gross tax revenues up 24.9% to Rs 9,32440 crore in 2011-12
  • Net market borrowings in 2011-12: Rs 3.43 lakh crore, Disinvestment target retained at Rs 40,000 crore (against actual Rs22,144 crore in 2010-11).
  • Fiscal deficit for 2011-12 pegged at 4.6%, of GDP
  • Defence allocation pegged at Rs 1,64,415 crore

Fiscal Position

  • GST and Direct Tax Code to be implemented by April 2012
  • Fiscal consolidation flagged off, government to move towards direct transfer of cash subsidy to people living below poverty line
  • 13th Finance Commission recommendations for financial consolidation to be followed
  • Independent Debt Management Office to come up in Finance Ministry.

Banking

  • Druing 2011-12, Rs 6,000 crore would be provided to Public Sector Banks so as to help them maintain Tier I CRAR at 8%. In the financial year 2010-11, it is a sum of Rs 20,157 crore.
  • RBI will issue guidelines before March 31, 2011, for issue of new banking licences.

FDI and FII 

  • Discussions on to liberalise the FDI policy.
  • Mutual Funds registered with SEBI are allowed to take subscription from foreign investors provided they meet the KYC norms for equity schemes.
  • FII limit for investment in corporate bonds raised by an additional $20 billion to $25 billion, taking the total limit for FIIs investing in corporate bonds to $40 billion. As an additional sweetener, the withholding tax on dividend payment has been reduced from 20% to 5%

Micro Finance Institutions

  • A Rs 100 crore, India Microfinance Equity Fund would be created with SIDBI.
  • A Rs 500 crore, Women’s Self Help Group’s Development Fund would be created.

Agriculture

  • A further allocation of Rs 400 crore to extend Green Revolution to Eastern India. In the last budget also, the same amount was provided.
  • Allocation increased by Rs 1,105 crore under Rashtriya Krishi Vikas Yoyana (RKVY) to reach Rs 7,860 crore for removing bottlenecks related to production and distribution of items such as fruits and vegetables, milk, poultry, fish, and meat.
  • Rs 300 crore each has been provided for the following:
    • 60,000 pulses villages in rainfed areas
    • To bring 60,000 hectares under oil palm plantations
    • To provide quality vegetable at competitive prices
    • To promote higher production of Bajra, Jowar, Ragi and other other millets
    • To promote animal based protein production
    • For Accelerated Fodder Development Programme
  • Interest subvention improved from 2% to 3 % for timely repayment of loans. Effective subvention rate: 4%.
  • Credit flow target to the farmers raised from Rs 3, 75,000crore to Rs 4, 75,000 crore. Banks have been asked to enhance direct lending for agriculture and credit to marginal farmers.

Infrastructure

  • Total allocation of Rs 2.14 lakh crore (48.5% of planned allocation)
  • Government to come up with a comprehensive policy for further developing PPP projects.
  • IIFCL to disburse Rs25,000 crore by March 31, 2012 from Rs 20,000 crore in 2010-11.
  • Tax free bonds of Rs 30,000 crore to be issued by Government undertakings
  • Allocation for Bharat Nirman programme increased by Rs 10,000 crore to Rs 58,000 crore
  • To provide Rural Broadband Connectivity to all 2.5 lakh Panchayats in the country within three years
  • Corpus of Rural Infrastructure Development Fund XVII raised from Rs 16,000 crore to Rs 18,000 crore.

Environmentally Friendly

  • Allocation to National Clean Energy Fund at Rs 200 crore for Forest Management
  • Another Rs 200 crore for Environmental Remediation Programmes
  • Cleaning up of important lakes and rivers other than Ganga is allocated Rs 200 crore

Social Sector Schemes

  • Allocation  for Bharat Nirman Programme  increased by Rs 10,000  to Rs 58,000 crore
  • Plan to provide broadband connectivity to all 2,50,000 Pachayats in the country in three years.

       Remuneration increase

  • Anganwadi workers Rs 1,500-3,000 per month
  • Anganwadi Helpers Rs 750-1,500 per month.

Direct Tax

  • Income up to Rs 1.8 lakh will attract 0% tax.
  • Rs 1.8-5 lakh : 10% I-T
  • Rs 5-8 lakh : 20% I-T
  • Above Rs 8 lakh: 30% I-T
  • Tax exemption on up to Rs20,000 in long term infra bonds( above the existing 80C limit of 1 lakh) extended for FY11-12.
  • For senior citizens of 80 years and above, the exemption limit has been raised to Rs 5 lakh
  • Surcharge on corporate tax reduced from 7.5% to 5%.
  • Rate of Minimum Alternative Tax  increased from 18% to 18.5%.
  • Tax rate on dividends received by Indian companies from its foreign subsidiary reduced to 15%.
  • Direct taxes proposal will lead to loss of  Rs 11,500 crore. 

Indirect Taxes

  • Standard excise duty rate maintained at 10%
  • Excise exemption on 130 items removed; 1% duty to be levied
  • Cement: Basic Custom Duty on petcoke and gypsum reduced to 2.5% which will reduce cost of production for cement manufacturers and will be positive for the industry.
  • Capital goods for expansion of existing mega or ultra mega power projects provided by domestic suppliers exempt from excise. Level playing ground for domestic companies like BHEL and L&T.
  • Full exemption from basic customs duty to bio-asphalt and specified machinery for application in the construction of national highways. Will reduce overall cost for constructing highways.
  • Exemption from import duty for spares and capital goods required for ship repair units by ship owners.
  • Standard rate of service tax retained at 10%
  • Hotel accommodation in excess of `1,000 per day and service provided by air conditioned restaurants with licence to serve liquor added to service tax net.
  • Service tax on air travel both domestic and international raised. Air travel to become dearer.
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