The Union Budget 2011 made some changes to India's tax provisions. Indirect tax rates remained largely unchanged, though 130 items previously exempt from excise tax would now be taxed at 1%. Income tax exemption limits were increased for individuals under 60 years old and seniors aged 60-80. However, corporate tax rates remained at 30% despite calls for a reduction to 25%. The budget aimed to balance priorities like growth, lower taxes, inflation and the budget deficit.

1. Union Budget 2011 (India):
Tax Provisions
2011

2. Union Budget 2011 (India): Tax Provisions
Union Budget 2011 was being approached by much curiosity, anxiety, and skeptism.
FM Pranab Mukherjee presented the Budget for FY 2011-12 in the Parliament earlier
today. As the provisions were rolled out, the Bill turned out to be a mixed bag. The
FM had a tough task of balancing the conflicting goals of lower taxation, lower
inflation, growth impetus, and budget deficit. Some of the major changes were
proposed in the fiscal provisions, as highlighted below.
Indirect Taxes
The indirect tax proposals were designed mainly to hedge the losses arising from the altered
direct tax rates. Certain provisions are likely to impact the pockets of an average Indian,
nullifying some of the direct tax benefits. Some of the expected changes from the industry
point of view have not been considered.
 Peak Customs Duty remains unaltered at 10%. Export duty on iron ore is
enhanced to 20%, while Custom levy on some agricultural equipment is lowered
by 0.5% to 4.5%.
 On one hand, the FM has kept the Central Excise rate at 10%, while on the
other Excise exemption is rolled back from 130 items. These will be subject to
1% rate for now.
 The CENVAT rates also remain unchanged.
 Mukherjee has decided to continue some of the economic stimulus for the
coming year.
 You will still be paying service tax at 10%, but on 320 services against 117
earlier. The additional services include hotel rent above 1,000 per day, air-
conditioned restrobars and large a/c hospitals.
Direct Taxes
Individuals and HUF
Apparently, Income tax revisions are something to cheer about. The FM has set the grounds
for a convergence with the proposed Direct Tax Code, to be implemented in 2012.
 The exemption limit for males under 60 years has been increased from Rs.
1,60,000 to Rs. 1,80,000.
 Women have to contend with the same tax slabs.
 There is some good news for taxpayers above 60 as the qualifying age for
Senior citizens is reduced from 65 years to 60 years of age. The tax exemption
for this section has been extended to Rs. 2,50,000.
 Taxpayers at 80 and above will be now called ‘Very Senior Citizens’ and they
can avail exemption up to Rs. 5,00,000.
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3. Union Budget 2011 (India): Tax Provisions
Male taxpayers below 60 years
0 – Rs. 1,80,000 Nil
1,80,001 – 5,00,000 10%
5,00,001 – 8,00,000 20%
8,00,001 and above 30%
Female taxpayers below 60 years
0 – Rs. 1,90,000 Nil
1,90,001 – 5,00,000 10%
5,00,001 – 8,00,000 20%
8,00,001 and above 30%
Senior citizens (60 years and above)
0 – Rs. 2,50,000 Nil
2,50,001 – 5,00,000 10%
5,00,001 – 8,00,000 20%
8,00,001 and above 30%
 Tax Deduction of Rs. 20,000 on long-term infrastructure bonds under section 80
CCF continues.
Corporate Taxpayers
 Tax net of MAT (Minimum Alternate Tax) is widened to include developers of
Special Economic zones. Mat rate is enhanced from 18% to 18.5%.
 Tax surcharge of 7.5% on domestic entities is reduced to 5%.
 Despite industry lobbying for a reduction in corporate tax to 25%, the FM has
retained the rate at 30%.
 The withholding tax on notified infrastructure funds is lower to 5%.
 Tax deductions are extended to companies operating in economy homebuilding
and fertilizers sectors.
 Tax on dividend repatriated from foreign subsidiaries is reduced to 15%.
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