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Union Budget 2010: 10 key measures

Feb 26, 2010

The Finance Minister has just completed his speech for the Union Budget 2010. Here are the 10 measures he has announced that we believe are the most important takeaways from this budget.

  • Introduction of DTC and GST by April 2011: Given the wide-ranging discussions already on for the Direct Tax Code (DTC), the Government will be in a position to implement the same from April 1, 2011. Also, the central government is actively engaged with the Empowered Committee of State Finance Ministers to finalise the structure of Goods and Services Tax (GST) as well as the modalities of its fast implementation. The aim is to introduce GST by April, 2011.

  • Capitalising PSU banks: With respect to the banking sector, the RBI is considering giving additional banking licenses to private sector players and non banking financial companies (NBFCs), if they meet the RBI's eligibility criteria. The Budget also talked about providing a sum of Rs 165 bn to PSU banks as a way of capitalising them better to meet increased credit needs in FY11. This amount is likely to help these PSU banks to attain a minimum 8% Tier-I capital by March 31, 2011.

  • Stimulus to continue for small exporters: With respect to the continuation of fiscal stimulus for small exporters, the government has extended existing interest subvention/subsidy of 2% for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.

  • Infrastructure development gets a fillip: The government will provide a sum of Rs 1,735 bn for infrastructure development. This is around 46% of the total plan allocation for FY11. Further, allocation for road transport has been increased by over 13%. India Infrastructure Finance Company Ltd.'s (IIFCL) disbursements are expected to touch Rs 90 bn by end March 2010 and around Rs 200 bn by March 2011.

  • Focus on power strengthened: The Budget has allocated higher funds for the development of the power sector with a view of speeding up the expansion of new generation capacities. Plan allocation for power sector (excluding RGGVY) has been doubled to Rs 51 bn in FY11. Also, the government has proposed to introduce a competitive bidding process for allocating coal blocks for captive mining to ensure greater transparency and increased participation in production from these blocks. Then, a 'coal regulatory authority' is proposed to be set up to take care of issues regarding pricing and performance of coal mining companies. Also, the outlay for renewable energy has been increased by 61%.

  • Rural & urban development get their due share: The Budget has provided Rs 661 bn for rural development. Allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme has been stepped up to Rs 401 bn in FY11. Further, an amount of Rs 480 bn has been allocated for rural infrastructure programmes under Bharat Nirman. As for urban development, the allocation for the same has been increased by more than 75% in FY11. Allocation for housing and urban poverty alleviation has also been raised by almost 18% in FY11. Further, the scheme of 1% interest subvention on housing loan up to Rs 10 lakh, where the cost of the house does not exceed Rs 20 lakh has been extended up to March 31, 2011.

  • Fiscal deficit roadmap unveiled: One of the most important announcements of today's Budget was the unveiling of a roadmap for reducing India's fiscal deficit over the next few years. As against an estimated figure of 6.9% and 5.5% of GDP in FY10 and FY11 respectively, the rolling targets for fiscal deficit are pegged at 4.8% and 4.1% for FY12 and FY13 respectively. Also, as the Budget notes, taking into account the various other financing items for fiscal deficit, the actual net market borrowing of the government in FY11 would be around Rs 3,450 bn, which would leave enough space to meet the credit needs of the private sector.

  • Relief for individual tax payers: The Budget brings some relief for individual tax payers. First will be the introduction of a much simpler two-page Saral-2 return forms that will make tax preparation much easier. And then, the Finance Minister has also lowered the tax rates. The revised slabs are as hereunder.

    Calculation for savings of tax for taxable income up to Rs 10 lakh
    Existing Revised  
    Slab (Rs) Rate % Tax Amt. Slab (Rs) Rate % Tax Amt. Savings in Tax
    Less than 160,000 0 - Less than 160,000 0 -  
    160,001 300,000 10 14,000 160,001 500,000 10 34,000 20,000
    300,001 500,000 20 54,000 500,001 800,000 20 94,000  
    500,001 1,000,000 30 204,000 800,001 1,000,000 30 154,000 50,000

    These new slabs are likely to offer relief to around 60% to taxpayers. Further, an additional deduction of Rs 20,000 has been allowed on long-term infrastructure bonds for income tax payers. This is above the Rs 1 lakh on saving instruments allowed already.

  • MAT hiked, surcharge reduced for companies: The Budget has reduced surcharge of 10% on domestic companies to 7.5%. However, it has raised the rate of Minimum Alternate Tax (MAT) from the current rate of 15% to 18% of book profits.

  • Partial rollback of fiscal stimulus: The Budget has partially rolled back some rate reduction in Central Excise duties. The standard excise duty on all non-petroleum products has been enhanced from 8% to 10%. The duty benefits have also been withdrawn from cement and cement clinker, large cars, multi-utility vehicles and sports-utility vehicles, crude petroleum, and diesel & petrol. Central excise duty on petrol and diesel has been enhanced by Re 1 per litre each. However, as a way of continuing the stimulus to the services sector, the Budget has maintained the service tax rate at 10% to pave the way forward for GST.

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3 Responses to "Union Budget 2010: 10 key measures"


Jun 12, 2010

Goods and Services Tax (GST) to introduce GST by April, 2011.
GST is a form of tax on goods and items, on all goods use
by a person or a gift to another person whether living or not living.Therefore need not to encourage.



Feb 26, 2010

An excellent sum-up of budget for every-one. In point No. 8, against Tax Slab-Rs. 3-5 lakhs, you may mention that the tax saving is Rs. 20000/-.



Feb 26, 2010

Very crisp and clearly defined summary of budget highlights!

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