2011 Union Budget of India

The Union Budget of India for 2011-2012 was present by Pranab Mukherjee, the Finance Minister of India on 28th February, 2011.^[1] This budgetary proposals would be applicable from 1st April 2011 to 31st March 2012.

Highlights

Some salient features^{[2][3][4][5][6]}

• Individual income tax exempt slab increased from 1.6 lacs to 1.8 lacs.
• Food inflation, corruption still a concern
• Targets: To keep inflation at 5%, fiscal deficit at 4.6% while fiscal deficit for previous year was 5.1%, revenue deficit at 1.8%.Indian economy expected to grow at 9%.
• Overall social sector spending up by 17%, education spending up by 24%.
• Direct transfer of subsidy for BPL people for kerosene and LPG
• Govt provides subsidy on food, electricity to provide for the common man. This to continue
• FDI Policy: All procedures consolidated as a single document
• SEBI-registered mutual funds can accept foreign investors
• FII investment in corporate bonds will be raised to USD 40 billion
• Legislative amendments in Banking Laws soon
• 6,000 crore (US$1.14 billion) to Public sector banks to maintain CRAR (Capital to Risk Weighted Assets Ratio)
• Women SHG development fund to be set up
• Rural Infrastructure Development fund to be raised 18,000 crore (US$3.42 billion)
• 3,000 crore (US$570 million) to NABARD for textile development
• 15 mega food parks for vegetables
• 900 crores towards pulses, protein production
• 107 cold storage project has been approved to minimize food wastage. Cold storage will be recognised as infrastructure sub-sector
• Tax free bonds of 30,000 crore (US$5.7 billion) for infrastructure building in roadways, railways
• National Mission for Electric and Hybrid vehicle to be launched
• Self assessment in customs to be introduced
• Seven mega leather clusters will be set up, Jodhpur to have handicraft mega cluster
• Govt put into operation 5-point agenda with legislation to curb black money, 11 tax information exchange treaty signed
• A comprehensive national policy in narcotic drug trafficking in near future
• 160,807 crore (US$30.55 billion) for food security. This forms 36 per cent of budget allocation
• 58,000 crore (US$11.02 billion) for various schemes on rural development
• Telecom connectivity to all panchayats
• Anganwadi workers will get higher remuneration of 3000 per month. 1500 for Anganwadi helpers
• 52,057 crore (US$9.89 billion) allocated for education
• 21,000 crore (US$3.99 billion) for primary education to implement free and compulsory education for children
• National Knowledge Network will link 1500 institutes by 2012
• 500+ crores to various Universities across the country
• 500 crore for National Skill Development Fund
• Eligibility of old age pension for BPL reduced to 60 years. Pension amount for people aged above 80 years increased to 500
• 1,000 crore (US$190 million) for Judiciary
• Caste based census will be carried out as a separate exercise in June 2011
• 80 years above will come under very senior citizen - a new category with tax exemption up to 5,00,000
• MAT increased to 18.5 %
• Concessional excise duty of 10% for hybrid vehicles
• Customs duty on solar lanterns reduced to 5 per cent
• Nominal one per cent central excise duty on 130 items entering the tax net. Earlier there were 370 items which were under the bracket of state VAT but were exempted from Central Excise. Out of these 130 come under the bracket from now. Rest are expected to be included from the induction of GST
• Defence budget hiked to 164,000 crore (US$31.16 billion)

Taxation

Main tax-related changes:

1. The basic exemption limit in the case of individuals increased from 1.60 lacs to 1.80 lacs. However, there is no increase in basic exemption limit in the case of Resident Women who is below 60 years at any time during the previous year.
2. The qualifying age limit for senior citizens has been lowered from 65 years to 60 years and increased the current exemption limit under two categories.
3. Category -1 - Age of Individual – 60 years or more but less than 80 years at any time during the previous year. The basic exemption limit is increased from 2.40 lacs to 2.50 lacs.
4. Category – 2 - Age of Individual beyond 80 years or more at any time during the previous year. The basic exemption limit is 5.00 lakhs.
5. No need to file returns if the Income is less than or equal 5.00 Lakhs.
6. In the case of domestic companies the surcharge has been reduced from 7.5% to 5%.
7. In the companies other than domestic companies the surcharge has been reduced from 2.5% to 2%.
8. The definition of charitable purpose u/s 2 (15) includes “the advancement of any other object of general public utility”. The monetary limit in respect of such activities has been enhanced from 10.00 Lakhs to 25.00 Lakhs.
9. The amount paid by an assessee as an employer by way of contribution towards pension scheme, as referred to in sec 80CCD(2) on account of an employee to the extent it doesn’t exceed 10% of the salary of employee in the previous year, shall be allowed as a deduction u/s 36 in computing the income under the head profit and gains of business or profession.
10. The Indian company which receives foreign dividend from foreign subsidiary company such dividend is taxable at the 15% as against 30% plus applicable surcharge.
11. The rate of MAT is increased to 18.5% from the existing rate of 18% of such book profit.
12. Minimum Alternative Tax has been introduced for Limited Liability Partnership (LLP) in line with MAT on companies with effect from the Assessment Year 2012 – 2013.
13. The Government exempts assesses having no other income other than salary from furnishing the return of income by notification. The proposed amendment shall be effective from 1st June, 2011.
14. It is proposed to omit the requirement of quoting of Documentary Identification Number in notices / order / correspondences issued by Income tax department.
15. The SEZ developers are required to pay dividend distribution tax on dividends declared / distributed on or after 1st June, 2011.
16. The deduction u/s 80CCF to investment in notified long term infrastructure bonds extended for the A.Y. 2012-13 also.
17. Liaison offices of a company will be required to file Annual Information in the prescribed form with in the 60 days from the end of the financial year.
18. The tax holiday for power sector has been extended for further period of one year i.e. up to 31.03.2012.

Service tax

1. The following two new services have been proposed
   1. Services by air conditioned restaurants having licence to serve liquor; and
   2. short term accommodation hotels / inns / clubs / guest houses etc.
2. The monetary limit for adjustment of excess service tax paid is increased from 1.00 lacs to 2.00 lacs.
3. The penalty for delayed payment of service tax u/s 76 has been reduced from 2% to 1% per month or 100 per day whichever is higher.
4. The maximum penalty reduced to 50% of the tax.
5. The rate of interest is reduced by 3% for assesses with turnover of up to 60 lacs.
6. The maximum penalty for delay in filing of return increased from 2,000 to 20,000.

References

External links

• Government of India - Union Budget and Economic Survey