2006 Budget Highlights

  • Fringe Benefit Tax modified. Threshold limits raised, but FBT will remain as it is justified for ensuring horizontal equity.
  • More items to be brought under annual information return reporting to check tax evasion.
  • Proposals under direct taxes estimated to yield Rs.4000 crores in 2006-07 and under indirect taxes Rs.2000 crores.
  • Banking cash transaction tax introduced last year will continue. In one bank branch in Chandni Chowk, laundering to the tune of Rs.1,500 crore was detected.
  • More transactions to come under PAN.
  • Constituency allowances of MLAs to be treated as constituency allowances of MPs for income tax purposes.
  • Donations to only religious institutions will be exempted from tax.
  • Fixed deposits in scheduled commercial banks with at least five year maturity will get tax exemption for savings under section 80C of Income Tax Act.
  • The Rs.10,000 exemption limit for investment in pension funds under Section 80CCC has been removed but these investments would be brought under Sec.80C subject to a ceiling of Rs. One lakh.
  • 25 per cent across the board increase in securities transaction tax.
  • Cooperative lending banks and rural development banks to be exempted from taxes under Section 80(B).
    No new taxes on income.
  • No change in the rates of personal income tax.
  • One by six scheme for filing of income tax returns has been abolished.
  • Services tax net to be increased which include ATM operations, maintenance and management, share transfers, registration, international air travel excluding economy class, sponsorship other sports events, auctioneers, ship management and travel on cruise.
  • 25 per cent across the board increase in securities transaction tax.
  • Planning Commission to draw up a programme to reconstruct the damaged infrastructure in calamity-hit areas.
  • GDP growth to be 8.1 per cent this year with manufacturing growing at 9.4 per cent and agriculture bouncing back to 2.6 per cent with all sectors doing well.
  • With over 7.5 per cent growth in the last three years, it is possible that the average annual growth will be over seven per cent in the 10th plan.
  • Government’s aim is to ensure monetary stability and managing external debt.
  • Rs 11,700 crore to be spent on rural employment in the current year.
  • Several indicators point to buoyancy in capital formation in the current year.
  • Highway construction speeded up, progressing at 4.48 kms per day as against 1.86 kms in 2004.
  • Ninety-six per cent of the golden quadrilateral would be completed by June 2006 and the corridor would be completed by the end of 2008.
  • Six lakh hectares of irrigation potential expected to be created this year. Rs 944 crore released this year under the Accelerated Irrigated Benefit Programme.
  • Allocation on education increased by 31.5 per cent to over Rs 24,150 crore and that for healthcare raised by 22 per cent to Rs 12, 546 crore.
  • Entire Rs 1,100 crore for rural electrification released this year and 10,366 villages to be electrified.
  • A massive immunisation programme will be launched to eradicate polio completely by 2007.
  • Larger budgetary support to Bharat Nirmal Programme. Rs 18696 crore to be given which represents a hike of 54 per cent.
  • Allocation for mid-day meal scheme to be enhanced to Rs 4813 crore next fiscal as against Rs 3014 crore this year.
  • Gross budgetary support for annual plan
    expenditure has been raised to Rs 1,74,725 crore for 2006/07 as against Rs 1,43,497 crore, an increase of 20.4 per cent.
  • Likewise for the central plan increased to Rs 1,31,285 crore next fiscal as against Rs 1.10,385 crore in the current year.
  • Eight flagship programmes of the UPA including Sarva Shiksha Abhiyan and Mid-Day Meal Scheme will get a total allocation of Rs 60,015 crore in 2006/07 as against Rs 34,927 crore in the current year.
  • Metro in Hyderabad to be considered.
  • Old age pension to be increased to Rs 200 per month for above 75 years of age.
  • Allocation for it put at Rs 1430 crore from the Centre and the state government to provide matching contribution.
  • Rajiv Gandhi drinking water programme to get Rs 4680 crore next year as against Rs 3645 crore this year.
  • National Health Mission allocation increased to Rs 8207 crore in next fiscal from Rs 6,553 crore this year.
  • Rs 14,300 crore for rural employment programme during 2006/07, out of which Rs 11,300 crore for NREG programme and Rs 3,000 crore for SGRY.
  • New towns to be established on specific themes.
  • Rs 28,737 crore has been allocated for gender budgeting under various heads.
  • Special schemes for STs and SCs for their development.
  • India to be made a manufacturing hub for textiles, steel, metals and petroleum products.
  • Maulana Azad Educational Foundation corpus doubled to Rs 200 crore for greater financial support to organisations involved in minority welfare.
  • A girl child will get Rs 3,000 deposited in a bank account after she enrols for eighth class examination and the amount would be given when she becomes a major.
  • One thousand schools for girls of SCs, STs, OBCs and minorities to be set up.
  • Separate window for tenant farmers to ensure loan share. Agri credit proposed to be increased to RS 175,000 crore next year as against Rs 1,41,500 crore, covering additional 50 lakh farmers.
  • Farmers to receive short term credit at 7 per cent.
  • Budgetary loan for PSEs has been fixed at Rs 16901 crore including RS 2791 for Railways.
  • The performance budget based on the first outcome budget presented last year will be tabled by the end of the budget session.
  • The outcome budget for 2006-07 will be presented before March 17 this year.
  • Agricultural insurance scheme to continue. Tea fund to get initial contribution of Rs 100 crore for tea growing states.
  • FDI flow put at 4 billion dollars upto November, 2005 without counting the re-investment and the liberalised regime this year is expected to increase the flow substantially in the coming year.
  • Central horticulture institute to set up in Nagaland and a national fisheries development board will also to be set up.
  • Rs 4,481 crore allocated for improving 20,000 water bodies in the coming year. This would provide irrigation to 14.7 lakh hectares of command areas.
  • Multilateral agencies to be approached for funding.
  • Two percent of the borrowers interest liability upto Rs one lakh principal of crop loans taken for kharif and rabi this year is to be reimbursed to farmers before March 31 this year as an exceptional gesture.
  • This would cost the exchequer Rs 1,700 crore.
  • Allocation for Rural Infrastructure Devlopment Fund has been stepped up to Rs 10,000 crore in 2006/07.
  • Textile upgradation fund allocatio
    n to be raised to Rs 55 crore in 2006-07 from Rs 455 crore following good response in the last two years.
  • Government also announced setting up of 12 textile industry parks of which 7 have been approved and ten more in the pipeline.
  • An allocation of Rs 189 crore provided for this.
  • A National Jute Board to be set up.
  • Like woolmark, there will be a handloom mark to certify its quality.
  • A window to be created for equity participation and viability gap funding for the growth of sunrise IT sector. The window to be kept open for three years.
  • Food Processing Sector would be treated as a priority sector for bank credit.
  • Services sector put on par with manufacturing sector.
  • SMEs in service sector to get the status of SSI in manufacturing sector. To fund them a corpus will be raised by SIDBI for Rs 2500 crore from the present Rs 1122 crore in the next five years.
  • An empowered group of ministers to be set up for the development of industrial clusters in the country.
  • India‘s foreign tourist arrivals increased to 3.92 million last year. Fifteen tourist development circuits identified for development.
  • Four new institutes of hotel management will be set up in Chhattisgarh, Haryana, Jharkhand and Uttaranchal.
  • Rs 1,500 crore to be allocated for Universal Services obligations Fund under the telecom sector.
  • A bill on cellular telephony in rural areas to be brought in Parliament by the Communications Ministry.
  • 40,000 more villages to be electrified under Rajiv Gandhi Gramin Vidhyutikaran Yojana.
  • 82 power projects are in various stages of implementation in the country to overcome power shortage. This when completed in 1 to 3 years will generate 33,000 mws of power in PSUs and 6500 mws in private sector.Of this, 15,000 mw of power generation is to be installed by March 2007.
  • Five mega power projects of Rs 4000 crore each is to be set up for which clearance is to be given by March 31, 2006. Of this, one each will come in Chhattisgarh and MP. The remaining three will be in coastal areas of Maharashtra, Karnataka and Gujarat.
  • NHAI to be reconstituted to make it more effective.
  • An Investors Protection Fund will be set up and funded by fines and penalties to safeguard the interests of retail investors.
  • FII investment limit in stock markets will be raised from 1.75 billion dollars to two billion dollars to deepen, strengthen and broaden the market.
  • Raise in the aggregate investment of overseas investors from one billion to two billion dollars.
  • Rs.50 crore each to be given to universities of Calcutta, Mumbai and Madras for celebrating their 150th year of existence.
  • Rs 100 crore special grant for Punjab Agricultural University as a centre of excellence for its commendable work in agricutural research.
  • 500 ITIs to be upgraded in five years. Work has already started in 100 ITIs and would be taken up in the remaining 400 institutes soon. Rs 97 crore allocated in 2006-07.
  • The defence budget raised to Rs 89,000 crore in 2006-07 from Rs 83,000 crore in the current year. Of this Rs 37,458 crore would be capital expenditure.
  • Special assistance of Rs 848 crore for Jammu and Kashmir for its reconstruction fund, including Rs 230 crore for Baglihar project. This will be in addition to 2006-07 state plan of Rs 2,300 crore.
  • Rs 10 crore allocated for preparatory work for celebrating the 150th anniversary of the First War of Independence of 1857 in a befitting manner.
  • To safeguard old art forms, Vedic chanting and Ram Lila have been declared UNESCO heritage and will be granted Rs five crore.
  • In the backdrop of C Rangarajan Committee report, Government urges for consensus in Parliament on subsidies in fertiliser, petrol and food.
  • The allocation to the states from the central pool of revenue as per the 12th Finance Commission has been stepped up to RS 1,03,710 crore in 2006-07 as against Rs 94,402 crore in 2005-06.
  • With the implementation of the 12th Finance Commission recommendations, state finances have substantially improved.
  • The compensation provision for loss of revenue to states with the implementation of VAT has been put at RS 3000 crore.
  • Revenue deficit to be 2.1 per cent of GDP. Fiscal deficit 3.8 per cent of GDP in 2006-07.
  • After 20 years gross fiscal deficit is less that gross budgetary deficit.
  • Plan expenditure has gone up to 30.6 per cent.
  • Peak customs duty for non agriculture products reduced from 15 to 12.5 per cent.
  • Customs Duty on primary and non-primary steel and alloy products reduced from 10 per cent to 7.5 per cent.
  • Duties on mineral products reduced from 15 to five per cent, barring some items.
  • Duty on ores and concentrates reduced from five to two per cent.
  • Duty on refractories reduced to 7.5 per cent.
  • Customs duty reduced on ten anti-AIDS drugs and 14 anti-Cancer drugs to five per cent.
  • Customs duty on packaging machines reduced from 15 per cent to five per cent.
  • Four per cent contervaling duty on all imports to be levied with few exceptions.
  • Customs duty on bulk plastics reduced from 10 per cent to five per cent.
  • To protect vanaspati industry, customs duty to be increased to 80 per cent on its imports.
  • Import duty on all man made fibre has been reduced from 15 per cent to 10 per cent.
  • Excise duties on man-made fibres and filament yarn reduced from 16 per cent to eight 8 per cent, since it provides growth and employment.
  • Eight per cent special additional duty on aerated soft drinks and small cars withdrawn and they will attract only 16 per cent Cenvat excise duty instead of 24 per cent earlier.
  • Reduction of duty on footwear priced between Rs 250 and Rs 750 from 16 per cent to eight per cent.
  • Duty on specialised writing paper reduced form 16 to 12 per cent.
  • Excise duty on compact fluorescent lamps reduced from 16 to eight per cent.
  • Cess on domestically produced petroleum crude has been raised from Rs.1800 per tonne to Rs.2500 per tonne but the entire amount to be absorbed by oil producing companies.
  • Excise duty on cigarettes increased by five per cent.
  • Many tax exemptions in customs and excise to be removed barring SSI.
  • April 1,2010 has been fixed as the date for introduction of goods and services tax.

~ by Vibhu on March 2, 2006.

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