Budget Highlights for Financial Year 2007-2008

Direct Taxes
• No change in rate personal income tax
• No new direct tax imposed
• 1/6 criteria for filing income tax returns abolished
• No change in corporate tax
• Minimum Alternate Tax increased from 7.5% to 10%
• MAT credit period increased to 7 years
• Rate of STT rate increased by 25%
• Cash Withdrawal Tax to continue
• Bank FDs of over 5 years brought under tax exemption under section 80C of IT Act
• 10,000 rupee ceiling on pension contribution removed
• Open, close-end equity MFs on par for div distribution tax
• PAN needed for more transactions
• To continue with cash withdrawal tax
• Hopes debate on FBT ends; FBT is justified
• Announce changes in computation of fringe benefit tax
• Lauds cash withdrawal tax role in curbing money laundering
• Retirement contribution cap of 100,000 rupees for FBT
• To issue statement of revenue foregone
• Include LPG under declared goods for CST
• States taxing LPG at high rates
• Direct tax proposals to yield 40 bln rupees more FY-07

Fringe Benefit Tax
• FBT justified, but changes to be brought in computation
• Value benefit on tour and travel cut to 5% from 20%
• Value the benefit in the form of hospitality and use of hotel boarding and lodging facilities in the case of airlines companies and shipping industry at 5% instead of 20%
• Expenses on free sample of medicines and of medical equipment distributed to doctors excluded
• Brand Endorsement excluded
• Announce changes in computation of fringe benefit tax
• Superannuation in excess of Rs 1 lakh per year per employee to attract FBT

Economy
• Growth is antidote to poverty
• FM attributes success to CMP and vision of PM
• FY05 GDP growth was 7.5% with manufacturing growing at 8.1%
• GDP to grow at 8.1% in 2006-07
• Govt determined to achieve 10% growth rate
• Gross saving up at 21.9%

Fiscal
• Gross Tax: GDP ratio increased to 10.5% Vs 9.8% year ago, will increase to 11.2% in FY-07
• Fiscal deficit at 4.1% Vs 4.3%; to be further lowered to 3.8%
• FY-06 Revenue deficit revised to 2.6 % Vs 2.7%
• Gross capital formation at 30% in FY-05
• Non-food credit growing at 25%
• Govt provided interim relief for calamities & drought. Money for relief & rehabilitation
• Investment rate up from 25.3% in FY-03 to 30.1% in FY-05
• Manufacturing at 9.4% in FY 07
• Agriculture bounced back at 2.3%
• Rs 1,72,700 crore budget support for plan, up 20.4% in FY-07
• Support to Central Plan at 1,31,285 crore
• Increased allocation for North-East at Rs 12041 crore
• Outcome Budget to be presented on March 17
• Provide Rs 16901 crore equity support to Central PSUs
• Public sector outlay at Rs 1.23 lakh crore
• Rs 10000 crore corpus for RIDF-XII in FY07
• Separate window for rural roads under RIDF
• To unwind special securities by converting to SLR papers
• Rs 89000 crore for Defence up from Rs 83000 crore
• VAT a resounding success
• Next stage of reforms depends on all states implementing VAT
• To provide Rs 3000 crore as VAT compensation to states
• States revenue share up at Rs 94400 crore for FY-07
• Gross fiscal deficit lower than gross budgetary support plan
• Non plan expenditure at Rs 391000 crore
• Total expenditure for FY-07 pegged at Rs 563900 crore

Agriculture
• Food grain output up at 209.5 mt up 5 mn tonnes over last year
• Farm credit increased to Rs 1,75,000 crore in FY-07
• Special sops for farms
• Banks asked to add 50 lakh more farmers to credit portfolio
• Interest subsidy of 2% for farm loans taken in FY-06
• To provide Rs 1700 crore for farmers relief
• Farmers to receive short-term credit at 7% with an upper limit of Rs 3 lakh w.e.f. Kharif 2006-07
• New NABARD credit lines for self help groups
• Central Institute of Horticulture to be set up in Nagaland
• Food Processing to be priority sector for bank credit
• NABARD to set up Rs 1000 crore centre for food processing

Industry
• All sectors improve performance barring mining
• Special purpose tea fund formed with corpus of Rs 100 crore in 2005-06
• National Fisheries Board to be constituted soon
• Rs 535 crore in FY-07 for textile upgradation scheme
• Rs 189 crore for textile parks
• Jute Technology Mission to be set up
• National Jute Board to be set up
• Govt proposes Handlooom Mark
• To develop 3 investment regions for oil sector in FY-07
• 180 SSI items to be de-reserved
• To recognize small, medium enterprises in services sector • For cut in SSI credit guarantee fee to 1.5% Vs 2.5%

Infrastructure
• Highway schemes progressing at 4.4 km/day
• 96% of GQ project to be completed by June 2006
• Plans of 1000 km of access control highway on BOT basis
• 5083 MW capacity to be added in FY06
• Govt determined to execute Bharat Nirman programme
• To increase budgetary provision for Bharat Nirman to Rs 18,696 crore in FY-07
• 8,70,000 rural houses built under Bharat Nirman
• 71,182 villages got telephones under Bharat Nirman
• Education allocation increased by 31.5% to Rs 24,154 crore
• Rs 10,041 crore for Sarva Siksha Abhiyan
• Mid-Day meal allocation at Rs 4813 crore
• Rural Employment to cost Rs 11700 crore in FY07
• FY07 Drinking Water outlay at Rs 4680 crore Vs Rs 3645 crore
• Rs 4595 crore outlay for National Urban Mission in FY-07
• 20,000 water bodies to be covered under renewal plan
• India Infrastructure Investment Company to be set up
• 3.92 million foreign tourist arrived
• Four new hotel management institutes Chhatisgarh, Jharkhand, Haryana and Uttaranchal
• Allocation for Tourism at Rs 830 cr for FY-07
• 15 tourism sites to be developed
• Empowered Ministers Group on Cluster Development Sectors
• Committed to strong, efficient public sector
• Expert body to look into gems, jewellery sector taxation
• 2000 crore tonne coal to be de-blocked for power sector by 2012
• 45 coal blocks allocated for power, coal and steel sectors
• 22000 crore rupee investment expected in refinery sector
• To introduce comprehensive bill on insurance in FY-07

Debt Markets
• Cap on FII in gilts raised to USD 2 billion
• Cap on FII investment in corp debt raised to USD 1.5 billion
• To remove 10% cap on overseas investment by mutual funds
• NDS-OM to be extended to some MFS, PFs, pension funds
• To create unified exchange traded market for corporate bonds

Social Sector
• To eliminate polio by December 2007
• Leprosy to be eliminated by December 2006
• 4595 crore rupee outlay for National Urban Mission in FY07
• To raise old age pension to Rs 200 per month Vs Rs 75
• Allocation for SC/STs raised 14.5% to Rs 2902 crore
• 20,000 merit scholarships for minority students
• Rs 16.4 crore for National Minorities Development Corporation
• Rs 50 crore to 3 Universities to begin with; on conclusion another grant of Rs 50 crore
• New grants to Calcutta, Madras, Mumbai universities
• To allocate 970 mln rupees for upgrading ITIs in FY07
• 50 bln rupees for new fund under Panchayati Raj in FY07
• 13 bln rupees special aid to J&K for power reforms
• Rs 100 crore for Punjab Agriculture University in Ludhiana
• Rs 8207 crore for Rural Health

External Sector
• FDI estimated at USD 4 billion till Nov 2005
• Confident of more FDI, especially in infrastructure
• To double world export share to 1.5% by FY09

Taxation
• Tax rates should be moderate • Tax revenue increased 19.9%

Indirect Taxes

Customs Duty
• Peak rate on non-agri imports reduced from 15% to 12.5%
• Customs duty on ferrous alloy reduced to 7.5% from 10%
• Customs on steel melting scrap raised to 5%
• Import duty on ores, concentrates cut to 2% from 5%
• Customs duty on inorganic chemicals cut to 10% from 15%
• Customs on steel melting scrap raised to 5%
• Import duty on ores, concentrates cut to 2% from 5%
• Customs on mineral products cut to 5% Vs 15%
• Duty on catalysts cut to 7% from 7.5%
• Customs duty on inorganic chemicals cut to 10% from 15%
• Customs duty on anti-AIDS, anti-cancer drugs cut to 5%
• Customs on packaging machines cut to 5% Vs 15%
• To impose countervailing duty of 4% on oil imports
• Customs duty on vanaspati raised to 18%
• Import duty on man-made fibre yarn cut to 8% Vs 18%
• Basic Plastics reduced to 5%
• Duty on Naphtha reduced to Nil

Excise Duty
• Aerated Drinks reduced to 16% from 24%
• Small Cars excise cut to 16% from 24%
• Ice Cream, Condensed Milk, Chocolates, Yeast, Pasta reduced to Nil
• Instant Food cut to 8%
• Compact fluorescent lamps cut to 8%
• 16% Excise on STBs but Customs Duty reduced to NIL
• Excise on Cigarettes increased by 5%
• Footwear cut to 8%

Service Tax
• Service Sector to contribute 54% to GDP in FY-06
• Service tax raised to 12% from 10%
• More services brought under service tax net
• ATM operation, maintenance and management to come under service tax
• Registrars, share transfer agents and bankers to an issue to come under service tax net
• Sale of space and time other than in print media for advertisement to come under service tax net
• Sponsorship of Events other than Sports by companies included under service tax
• International Air Travel barring Economy Class to come under service tax
• Container Services on Rail excluding the Railway Free Charges to come under service tax
• Business support services, Auctioneering, Recovery Agents, Ship Management Services,
• Travel on Cruise ships and Public Relations brought under service tax
• Apr 1, 2010 deadline for national level goods, services tax