The Union Budget was eagerly awaited in the IT circles. Largely, because many of us awaited the Tax sops. To us it seems like a mixed and assorted package primarily to the IT, SMBs and enterprises apart from the benefits it carries along for the commoners.
Where rural sector has been largely talked off, defence sector also has stolen the limelight with the Sixth Pay Commission. Interestingly, fringe benefit tax and commodity transaction tax has been abolished, Government has decided to extend fiscal benefits available to the industry under Section 10A/10B for one year.
Many industry veterans have welcomed the Government’s decision to retain the current excise and custom duty levels on IT products and components.
Another major step has been the launch of Unique Identification Authority of India (UIDAI). We all hear Mr. Nandan Nilekani has been tagged with on this portfolio and Rs 120 crores have been earmarked for this project.
Disinvestment has been a pet bet and this time too it has been taken care of, but will be taken care of, according to the market conditions.
Let’s now sum up on its salient features:
• Packaged software exempt from 8% excise & countervailing duty
• R&D tax benefit cheer spreads to all sectors
• Small businesses exempt from advance tax
• GST to come into effect from April 01, 2010
• 10% surcharge on direct taxes has been removed
• Government hopes to collect Rs 35,000 crores from 3G spectrum auction
• Surcharge on personal Income Tax slashed by 10%
Individuals in the low-to-middle-income groups will save at least Rs 1,030 in tax, benefitting from the Rs 10,000 increase in the income tax exemption limit. Also, for senior citizens the exemption limit is increase by Rs 15,000 and will pay at least Rs 1,545 less. The filing of tax returns is also set to become simpler, particularly for the salaried, as the government plans to re-introduce ‘Saral’ forms.
Other salient features:
• Mobiles, TV companies to benefit from Customs tweaks
• MAT hiked to 15% of book profit
• FM goes easy on personal tax; makes products cheaper
• Power Sector: More funds, but it is still a blackout for power cos
• Tax sword hangs on non-lifers
• Limited liability partnership (LLP) to be taxed like general partnerships
• Direct fertilizer subsidy scheme kicks in, finally
• Farmers get 1% rate cut for timely payment
• Unique ID project to roll out in 12-18 months and Rs 120 crores have been earmarked for this project.
• The government has hiked the allocation for its flagship rural job scheme by 144% to Rs 39,000 crores.
• Indirect Tax changes to yield Rs 2000 crores in 2009/10
• 2009/10 gross market borrowing seen at Rs 4.51 trillion
• Full exemption for branded gold, silver jewellery from excise duty
• State-owned India Infrastructure Finance Company (IIFCL) to raise Rs 100,000 crores for the development of the infrastructure sector including telecom, power sector.
The government’s proposals to help the rural poor, comes with a heavy cost. Due to lower tax collections, the government will now borrow an additional $93 billion this year, pushing the federal deficit to 6.8% of the country’s $1.2 trillion GDP.
Mukherjee aimed 9% growth rate, like in 2006 and 2007, which would boost by tax revenues, eventually allowing the government to reduce its deficit to about 4% by 2011.