PANEL DISCUSSION UNION BUDGET 2011 - 2012 BHAGIRATH –Agriculture And Allied Sectors & Introduction Chayan---Budget Impact On Sectors Jayati---other Taxes, Subsidies And Revenues Aakangsha---income Tax Riddihima --- Investment On Infrastructure ZubiaLaeeqh--- Women & Budget Sr. Citizen Sana Ajani ---Inflation Control Varsha --- Sops & The Budget On The State Of Governance Priyama--- Real Estate & Industries Nandita --- Reforms & Growth Shruti--- R&d & Budget Practicality Ujjaini--- Budget Impact On Sectors, NRI Investments, Fiscal Prudence Somyudata--- Health & Defence Sonakshi --- Conclusion
AGRICULTURE AND ALLIED SECTORS - BhagirathAshiya
11th Plan Vision 2007-2012 4 Broad Based, Inclusive, Faster Poverty Reduction, Bridge the Divide
9 per cent overall Growth,
4.1% growth from Agriculture and allied sector
This implies - Doubling the agricultural growth achieved
during the 9th and 10th Plan, 4
Introduction: Agri & allied activities One of the largest contributors (GDP) almost 17 % of total Providing needs of society & the raw materials for segments of Indian industry. Livelihood for almost two thirds of the work force. Agriculture to grow @ 5.4 per cent p.a. 5
UNION BUDGET 2011-12 The government of India, in latest budget proposal (2011), has allocated Rs14,744 crore The focus of most of his initiatives seem to be in strengthening existing programmes rather than creating new avenues of budgetary support. Food inflation – FM RashtriyaKrishiVikasYojana ( RKVY) Mukherjee has hiked interest rate National Mission for Protein Supplements 6
Fishery India - a major maritime / aquaculture country third position in fisheries second in aquaculture resources, ranging from ocean to cold hill streams own 10% of fish bio-diversity on the earth 6 % growth in the 11th Five Year Plan feasible. 8
Removal of supply bottlenecks in the food sector will be in focus in 2011-12 Agriculture growth key to development: Green Revolution waiting to happen in eastern region Since independence, India has become one of the largest producers of wheat, edible oil, potato, spices, rubber, tea, fishing, fruits, and vegetables in the world 9
The current storage capacity is 62.8 million tonnes, which is proving inadequate. India had record rice and wheat stocks of 65.6 million tonnes in its godowns in early June. 10
In a country where millions go hungry every day and where food prices are breaking the back of the common man, a bumper harvest is rotting in godowns. 11
Agriculture – not an option Farming no longer a livelihood option for youth, and this spells disaster for the future of our agriculture, since over 70% of the rural population is below the age of 35. As a result of all these factors, the growth rate in human numbers started exceeding agricultural growth rates . 12
13 There is no particular vision and no strategy to make agriculture an attractive option for youngsters
JAYATI GOYAL OTHER TAXES AND SUBSIDIES AND REVENUE
INDIRECT TAXES The custom duty which previously used to prevail at various rates of 2%, 2.5% and 3% has now been done with and a single rate of 2.5% is likely to prevail as a uniform rate. The service tax area has been broadened with an amendment which has included two other sectors in its purview, namely, services provided by air-conditioned licensed for serving alcohol beverages and accommodation provided by hotels, etc., for less than three months
SUBSIDIES The Finance Minister has fixed a limit of Rs.23,000 crores for the fuel subsidy which is lesser than the previous year. But with the crude prices rising to US$120/gallon, this will not be enough.
Budget 2011-12 proposes to include urea which is the most consumed fertilizer by volume, under the direct subsidy route under the Nutrient Based Subsidy (NBS) scheme.
ZUBIA LAEEQH BUDGET FOR WOMEN AND SENIOR CITIZENS
BUDGET FOR SENIOR CITIZENS (MEN) After the big Bang restructuring of the income slabs in the last BUDGET, finance minister PRANAB MUKHERJEE chose to restrict additional tax relief to the more vulnerable segments of the population, mainly the senior citizen & those at the bottom of the tax pyramid.
For the senior citizens the budget has reduced the qualifying age from 65years to 60years & increased their exemption limit from Rupees 2.4 Lakh to Rupees 2.5 Lakh.
For those who are 80years and above, it has created a new category of VERY SENIOR CITIZENS & given a higher exemption limit of Rupees 5 lakh.
In more sops senior citizens, the government has lowered the age eligibility for availing benefits through the INDIRA GANDHI NATIONAL OLD AGE PENSION SCHEME for the poor from 65years to 60years. It has increased the pension amount from Rs.200/- to Rs.500/- a month for those who are 80years and above.
KAUSHIK MUKHERJEE, Executive Director, Tax & Regulatory services, PWC India, Contended that the minimum age for very senior citizen should have been 70years, as that would have given relief to people who were neither able to invest in pension scheme introduced during the last decade, nor benefit from the post millennium economic boom.
BUDGET FOR WOMEN For Women, the finance minister has announced the creation of a women’s SHG (Self help Group) development fund with a corpus of Rupees 500 crore for small borrowers.
Women were not given any additional relief, perhaps as the direct taxes code to be implemented next year does away with gender-based tax exemption.
Female’s will continue to pay a lower tax to the higher exemption, but they do not get any benefit in the budget budget & the difference in the basic exemptions for male & female has narrowed to Rs.10,000/-
TAX SAVING IN 2011-2012 TAX PAYER PROFILE TAX SAVING 1. Women below 60years NIL 2.Men Below 60years Rs.2,060/- 3.Women above 60years to 65years Rs.6,180/- 4.Men above 60years to 65years Rs.9,270/- 5.Senior citizens (65yrs to 79yrs Rs.1,030/- 6.80years & above (Super seniors) Rs.26,780/-
PranabMukherjee, proposed an allocation of Rs.2,14,000 crore for infrastructure sector, which is 23.3% higher than current year. This amounts to 48.5% of the Gross Budgetary support to plan expenditure. In order to give a boost to infrastructure development in railways, ports, housing and highways development, it has been proposed to allow tax-free bonds of Rs.30,000 crore to be issued by various government undertakings in the year 2011-12. This includes Indian Railway Finance Corporation Rs.10,000 crore; National Highway Authority of India Rs.10,000 crore; HUDCO Rs.5000 crore and Ports Rs.5000 crore.
To attract foreign funds for infrastructure financing, the FM has proposed to create special vehicles in the form of notified infrastructure debt funds. Interest payments on the borrowings of these funds will have a reduced withholding tax rate of 5% instead of the current rate of 20%, while full exemption of income of the fund from tax has been proposed. A higher fund allocation across infrastructure development scheme Bharat Nirman has been proposed. Allocation to the tune of Rs 58,000 crore has been planned for the scheme, an increase of Rs 10,000 crore from the current year.
Full exemption from basic customs duty has been extended to bio-asphalt, an emerging green technology for the surfacing of roads, and specified machinery for its application in the construction of national highways. Tunnel-boring machines required for the construction of highways are also being included in this exemption. The finance minister also proposed to raise the corpus of rural infrastructrure development fund from Rs 16,000 crore to Rs 18,000 crore. Tax sops in infrastructure investment up to Rs 20,000 has been extended by a further one year.
UJJAINI FISCAL PRUDENCE
INTRODUCTION At the outset, let me explain, what exactly is fiscal deficit and how is it relevant. When a government's total expenditures exceed the revenue that it generates (excluding money from borrowings). Deficit differs from debt, which is an accumulation of yearly deficit A fiscal deficit is regarded by some as a positive economic event. For example, economist John Maynard Keynes believed that deficits help countries climb out of economic recession. On the other hand, fiscal conservatives feel that governments should avoid deficits in favor of a balanced budget policy
TYPES OF BUDGETARY DEFICITS The different types of budgetary deficit are explained in following points :- 1. Revenue Deficit Revenue Deficit takes place when the revenue expenditure is more than revenue receipts. The revenue receipts come from direct & indirect taxes and also by way of non-tax revenue. The revenue expenditure takes place on account of administrative expenses, interest payment, defence expenditure & subsidies. Table below indicate revenue deficit of the central government of India. From the above table it is clear that revenue deficit was Rs. 18,562 crores in 1990-91 and Rs. 94,644 crores in 2005-06. As proportion of GDP, revenue deficit increased from 1.5% in 1980-81 to 3.3% in 1990-91 and declined to 2.7% in 2005-06. The decline is due to the passing of the Fiscal Responsibility and Budget Management Act in 2002.
2. Budgetary Deficit Budgetary Deficit is the difference between all receipts and expenditure of the government, both revenue and capital. This difference is met by the net addition of the treasury bills issued by the RBI and drawing down of cash balances kept with the RBI. The budgetary deficit was called deficit financing by the government of India. This deficit adds to money supply in the economy and, therefore, it can be a major cause of inflationary rise in prices. Budgetary Deficit of central government of India was Rs. 2,576 crores in 1980-81, it went up to Rs. 11,347 crores in 1990-91 to Rs. 13,184 crores in 1996-97. The concept of budgetary deficit has lost its significance after the presentation of the 1997-98 Budget. In this budget, the practice of ad hoc treasury bills as source of finance for government was discontinued. Ad hoc treasury bills are issued by the government and held only by the RBI. They carry a low rate of interest and fund monetized deficit. These bills were replaced by ways and means advance. Budgetary deficit has not figured in union budgets since 1997-98. Since 1997-98, instead of budgetary deficit, Gross Fiscal Deficit (GFD) became the key indicator.
FISCAL 3. Fiscal Deficit Fiscal Deficit is a difference between total expenditure (both revenue and capital) and revenue receipts plus certain non-debt capital receipts like recovery of loans, proceeds from disinvestment. In other words, fiscal deficit is equal to budgetary deficit plus governments market borrowings and liabilities. This concept fully reflects the indebtedness of
the government and throws light on the extent to which the government has gone beyond its means and the ways in which it has done so. in 1980-81, fiscal deficit was Rs. 7,733 crores. Between 1980-81 and 1990-91 it increased 5 times to Rs. 37,606 crores. Since the introduction of economic reforms in 1991-92, the government has tried to restrict the growth of fiscal deficit. As percentage of GDP fiscal deficit declined from 6.2% in 2001-02 to 4.1% in 2005-06. 4. Primary Deficit The fiscal deficit may be decomposed into primary deficit and interest payment. The primary deficit is obtained by deducting interest payments from the fiscal deficit. Thus, primary deficit is equal to fiscal deficit less interest payments. It indicates the real position of the government finances as it excludes the interest burden of the loans taken in the past. Table below indicate primary deficit as a Percentage of GDP. Primary deficit of the central governent of India was 16,108 crores in 1990-91, it reduced to 14,591 crores in 2005-06.
4. Primary Deficit The fiscal deficit may be decomposed into primary deficit and interest payment. The primary deficit is obtained by deducting interest payments from the fiscal deficit. Thus, primary deficit is equal to fiscal deficit less interest payments. It indicates the real position of the government finances as it excludes the interest burden of the loans taken in the past. Table below indicate primary deficit as a Percentage of GDP. Primary deficit of the central governent of India was 16,108 crores in 1990-91, it reduced to 14,591 crores in 2005-06.
5. Monetised Deficit Monetised Deficit is the sum of the net increase in holdings of treasury bills of the RBI and its contributions to the market borrowing of the government. It shows the increase in net RBI credit to the government. It creates equivalent increase in high powered money or reserve money in the economy.
Hence… All these budgetary deficit reveal fiscal imbalance. Fiscal imbalance & budget deficit result in harmful consequences like mounting inflation, deficit inbalance of payment, etc. It has also adversely affect the growth of the economy. The government must introduce fiscal correction policies to overcome the deficit budget and fiscal crisis.
20111-2012 fiscal scenario GDP GROWTH TARGET 9%-025% FISCAL DEFICIT 4.6% OF GDP WHICH IS A POSITIVE FOR THE BOND MARKETS THE TARGET LOOKS AGGRESSIVE GIVEN THE ABSENCE OF NON TAX REVENUES (3G INCOME) THIS YEAR AND UNDERESTIMATED SUBSIDIES
TARGET TO REACH 4.1 % IN 2012-2013 AND 3.5 % IN 2013-14 WELCOMEED FISCAL DEFICIT * Fiscal deficit seen at 5.1 percent of GDP in 2010-11 * Fiscal deficit seen at 4.6 percent of GDP in 2011-12 * Fiscal deficit seen at 3.5 percent of GDP in 2013-14
AS PER THE NEWSPAPERS… Led by higher than expected non-tax revenue like auction of 3G spectrum, finance minister PranabMukherjee today pegged the fiscal deficit at 5.1 per cent for the current financial year, and further reduced the estimates to 4.6 per cent for 2011-12. Mukherjee said the revenues from 3G and Broadband Wireless Access (BWA) spectrum auction (that garnered Rs 1.08 lakhcrore) has helped government reduce the fiscal deficit for the current fiscal, from 5.5 per cent estimated earlier.
"Due to the higher than anticipated non-tax revenue from 3 G spectrum auction... I have brought down the fiscal deficit from 5.5 per cent to 5.1 per cent of the GDP for 2010-11," Mukherjee said in his 2011-12 Budget speech. "During the course of 2010-11, I had the opportunity to bring in improvement in fiscal balance", he said. "For the year 2011-12 I have kept it (fiscal deficit) at 4.6 per cent of GDP which improve upon my own target of 2011-12 indicated in the fiscal roadmap presented in the last budget," Mukherjee said.
The pre-budget Economic Survey Survey tabled in Parliament last week had pegged the fiscal deficit for the current fiscal at 4.8 per cent. India's fiscal deficit had ballooned to 6.3 per cent of the GDP in 2009-10 in view of stimulus spending worth billions of dollars to combat global financial meltdown. In the medium term fiscal policy, Mukherjee pegged the rolling target of fiscal deficit at 4.1 per cent for 2012-13, and 3.5 per cent for 2013-14. In his Budget speech, Mukherjee pegged the revenue deficit for the current fiscal and 2011-12 at 2.3 per cent and 1.8 per cent respectively. The government had in 2010 mobilised Rs 1.08 lakhcrore from auctioning of spectrum for 3G and broadband wireless access (BWA) services.
Besides, it also followed the path of consolidation during April-December of 2010-11, as it partially withdrew the sops given to the industry in 2008 and 2009. Stimulus package provided by the government at the time of financial meltdown helped India to grow by 6.8 per cent in 2008-09, and by 8 per cent in 2009-10.
OIL AND GAS
AAKANGSHA INCOME TAX
INTRODUCTION WHAT IS INCOME TAX? An income tax is a tax levied on the income of individuals or businesses (corporations or other legal entities). Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax. Individual income taxes often tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income (the difference between gross receipts, expenses, and additional write-offs). Various systems define income differently, and often allow notional reductions of income (such as a reduction based on number of children supported).
now extended to * Standard rate of excise duty held at 10 percent; no change in CENVAT rates * Personal income tax exemption limit raised to Rs 180,000 from Rs 160,000 for individual tax payers *For senior citizens, the qualifying age reduced to 60 years and exemption limit raised to Rs 2.50 lakh. *Citizens over 80 years to have exemption limit of Rs 5 lakh. * To reduce surcharge on domestic companies to 5 percent from 7.5 percent. * A new revised income tax return form 'Sugam' to be introduced for small tax papers. * To raise minimum alternate tax to 18.5 percent from 18 percent * Direct tax proposals to cause 115 billion rupees in revenue loss * Service tax rate kept at 10 percent * Customs and excise proposals to result in net revenue gain of 73 billion rupees
* Iron ore export duty raised to 20 percent *Nominal one per cent central excise duty on 130 items entering the tax net. Basic food and fuel and precious stones, gold and silver jewellery will be exempted. *Peak rate of customs duty maintained at 10 per cent in view of the global economic situation. *Basic customs duty on agricultural machinery reduced to 4.5 per cent from 5 per cent. *Service tax widened to cover hotel accommodation above Rs 1,000 per day, A/C restaurants serving liquor, some category of hospitals, diagnostic tests. *Service tax on air travel increased by Rs 50 for domestic travel and Rs 250 for international travel in economy class. On higher classes, it will be ten per cent flat. * Electronic filing of TDS returns at source stabilised; simplified forms to be introduced for small taxpayers. * Works of art exempt from customs when imported for exhibition in state-run institutions; this private institutions.
VARSHA ON THE STATE OF GOVERNANCE
Union Budget & Governance
Progress In Critical Institutions : Retail Banking Telecom Insurance Tourism
Food Inflation Feb 2010 – 20.3% Week of June 11 – 9.13% General inflation – 9.06% Country may face a period of double digit inflation.
Private Investments Made FDI policy more user friendly Permission given to SEBI registered Mutual Funds to accept subscriptions from foreign investors who meet the KYC requirements. The FII limit for investment in corporate bonds increased from US$ 20 billion to US$ 25 billion.
Economy is back to the pre-crisis trajectory
2008 – 7.3%
2009 – 7.4%
2010 – 8.4%
Projected GR for FY’11 – 8.75 – 9.25
Inclusive Development Service sector- continues to have growth in double digits Resources- not a major concern in medium term Debt target for FY’11 – 23.4% of GDP
National Knowledge Network
Environment and Climate Change
Varsha G II HEPP N10P1984
SHRUTI RESEARCH AND DEVELOPMENT
Introduction Department of Scientific & Industrial Research (DSIR) is the nodal department for granting recognition to in-house R&D units in Industry, Scientific and Industrial Research Organizations (SIROs); and registration to Public funded research Institutions, universities, IIT?s, IISc, Regional Engineering College (RECs), other than hospitals. Secretary, DSIR is the prescribed authority vide Gazette notification No.S.O.85 (E) dated 31st January, 2001 issued by Department of Revenue, Ministry of Finance for granting approval to commercial R&D companies Under Section 80IB (8A) of I.T. Act, 1961; also approval to in-house R&D Centres under Section 35(2AB) of I.T Act 1961 for Weighted Tax Deduction.
Key Features of Union Budget 2010-2011 Relevant to Research and Development To further encourage R&D across all sectors of the economy, weighted deduction on expenditure incurred on approved in-house R&D units under section 35(2AB) of Income tax Act, enhanced from 150 per cent to 200 per cent. Weighted deduction on payments made to National Laboratories, Universities or IITs or a specified person, with a specific direction that the said sum shall be used for scientific research undertaken under an approved programme u/s 35(2AA) of Income tax Act, enhanced from 125 per cent to 175 per cent.
In-house R&D units recognized by DSIR in the area of pharmaceutical and bio-technology sector are eligible for duty free import of specified goods (comprising of analytical and specialty equipment as per list 28) for R&D as per notification No. 26/2003-customs dated 1st March, 2003 (item at Sl. No. 248(1); and duty free import of specified goods (comprising of analytical and specialty equipment as per list 28) for production as per notification No.26/2003-customs dated 1st March, 2003 (item at serial No.248(2); and duty free import of pharmaceutical reference standards as per notification No.26/2003-Customs dated 1st March, 2003 (item at serial No.138); and also the in-house R&D units engaged in the research and development in the area of chemical, drugs pharmaceuticals, (including clinical trials), bio-technology, electronic equipments, computers, telecommunication equipments, aircrafts and helicopters are eligible for weighted tax deduction of a sum of equal to one and one-half times of any expenditure incurred on scientific research (not being expenditure in the nature of cost of any land building) as approved by the prescribed authority i.e. Secretary, DSIR. In case of dispute, Secretary, DSIR is also prescribed authority in concurrence with Director General of Income-Tax (Exemption) for deciding cases of R&D expenditure made on Capital Equipment and related R&D activities under Section 35 of Income-Tax Act, 1961 referred by Central Board of Direct Taxes. rposes.
A few more incentives introduced by the Government to encourage R&D by industry include write off of revenue and capital expenditure on R&D, weighted tax deduction on sponsored research programmes of industry with National Laboratories/Universities /IITs; accelerated depreciation allowance on plant and machinery set up indigenous technology, custom duty exemption on goods imported for use in Government funded R&D projects, excise duty waiver for 3 years on goods produced based on indigenous technologies and duly patented in any two of the countries out of India, European Union(One Country), USA and Japan. Scientific & Industrial Research Organizations in the area of Medical Agriculture, Natural and Applied Sciences and Social Sciences recognized by DSIR are eligible for notification under Section 35 (1) (ii)(iii) of I.T Act 1961 and also for availing Custom and Excise duty exemption. Commercial R&D companies approved by DSIR before 1st April, 2004 are eligible for 10 years tax holidays. Public Funded R&D Institutions registered by DSIR are eligible for availing custom duty exemption on import of equipment, spares and accessories and consumables as per notification No.51/96-Customs dated July, 23, 1996 and also for availing Central Excise Duty Waiver on purchase of indigenously manufactured items as per notification No. 10/97- Central Excise dated March 1, 1997 for scientific research pu
Objectives The broad objectives are to: Bring in-house R&D into sharper focus; Strengthen R&D infrastructure in industry and SIROs; Promote R&D initiatives of the industry and SIROs ; Ensure that the contributions made by the in-house R&D centres and SIROs dovetail adequately in the overall context of technological & industrial development Fiscal Incentives Key Features of Union Budget 2010-2011 Relevant to Research and Development [12 MAR 10] Click Here for details of Fiscal Incentives PROCEDURE AND REVISED GUIDELINES FOR APPROVAL OF IN-HOUSE R&D CENTRES AND REPORTING OF EXPENDITURE UNDER SECTION 35(2AB) OF IT ACT 1961 PDF RTF [16 JUN 10] The revised guidelines contain specific guidelines for Seed Industries. Updated Text of section 35(2AB) of IT Act. The Eleventh Schedule of IT Act. Annexure-IV and V of the earlier guidelines (May, 2009) have been restructured and combined in the revised guidelines and is appearing as Annexure- IV to facilitate submissions for report in Form 3CL.
RIDDHIMA INVESTMENTS ON INFRASTRUCTURE
Budget 2011 doled out quite a few measures both tax and non-tax in order to boost investment in infrastructure sector. Key non-tax proposals include issuance of tax-free bonds to the tune of Rs 300 billion, extension of tax exemption by a year on tax-saving infrastructure bonds, proposal to introduce special infrastructure debt funds to attract foreign financing in infrastructure sector and hike in FII investment limit by an additional USD 20 billion for investment in infrastructure-related sectors.
On the direct tax side, extending tax holiday for power by a year was pretty much on expected lines. On the indirect taxes side there are material changes which may have far reaching impact for the infrastructure sector, such as significant revamp of CENVAT credit scheme necessitating a relook at prevailing tax positions; change in levy of service tax from receipt to accrual basis and introductionof prosecution provisions. On the future roadmap towards Goods & Services Tax ("GST") - Constitutional amendment bill to be introduced in the current Budget Session; work of drafting of model GST legislations underway; IT infrastructure to be soon put into place; though no specific date of implementation of GST announced.
Implementation of draft Direct Taxes Code ("DTC") along with sectoral reforms is likely to muster right ingredients for the infrastructure sector.