| Proposal |
Impact |
Remark |
| Income Tax |
Upward revision of tax slabs:
|
| ▪ |
Up to Rs. 160,000 |
|
Nil |
| ▪ |
Rs. 160,000 - 500,000 |
|
10% |
| ▪ |
Rs. 500,001 - 800,000 |
|
20% |
| ▪ |
Above Rs. 800,000 |
|
30% |
| For women, basic exemption limit: |
Rs. 190,000 |
| For senior citizens, basic exemption limit: |
Rs. 240,000 |
|
Positive
 |
Help in tax savings for income between Rs. 3 lakhs and 8 lakhs. In real terms, savings of up to Rs. 51,500 p.a. (including cess).
People will have more disposable income in hand to spend. |
| Additional deduction up to Rs. 20,000 from income for investment in notified infrastructure bonds. |
Positive
|
This benefit under new Section 80CCF is in addition to deduction of Rs. 100,000 p.a. under Section 80C. Will enable taxpayers to invest with resultant tax benefit of up to Rs. 6,180 p.a.
These investments would spur infrastructure projects. |
| Corporate Tax |
| Surcharge of domestic companies reduced from 10% to 7.5%. |
Neutral
|
Tax rate of domestic companies would marginally reduce from 33.99% to 33.22%. Dividend Distribution Tax rate will also be reduced to 16.609% from 16.995%. |
| Minimum Alternate Tax (MAT) increased from 15% to 18% - the effective rate including surcharge and cess will be 19.931% for domestic companies and 19.004% for foreign companies. |
Negative
|
The increase in MAT outweighs the reduction in surcharge. |
| Custom Duty |
| Peak rate of basic customs duty (BCD) for non-agricultural goods remain at 10% with changes for specific sectors. |
Neutral
|
No impact by and large. |
Customs duty on crude oil restored at 5%.
Customs duty on petrol and diesel increased to 7.5% from 2.5%.
Customs duty on other petroleum products raised from 5% to 10%. |
Negative
|
Will increase the fuel cost and inflationary expectations. |
| Exemption from basic customs duty and special additional duty for specified parts of electric vehicles. |
Positive
|
Will promote development & introduction of environment-friendly vehicles. |
| Excise Duty |
Standard Excise duty rate increased from 8% to 10%.
Excise duty on large cars, multi-utility vehicles and sports utility vehicles and chassis thereof increased from 20% to 22%. |
Neutral
|
OEMs would pass on the increase to the consumers, resulting in price hikes.
However, big savings in personal income tax will sustain growth momentum.
|
| Increase in the excise duty on Petrol and Diesel by Re. 1 per litre. |
Negative
|
Will result in an increase in prices of commodities in general and contribute to the inflationary trends in the economy, besides hurting the auto market, though not significantly, in the immediate run. |
| Service Tax |
| Eight new services are proposed to be brought within the tax net. |
|
Since services sector accounts for 57% of India's GDP, the objective is to increase the share of service tax in the tax collections. Not surprisingly, number of services covered under the Service Tax has been steadily increasing over the years. |
Explicitly provided that the activity of 'renting' itself for commercial or business use is a taxable service. The change has been given retrospective effect from 01.06.2007, negating the judgement of Delhi High Court.
Also, vacant land given on lease or license for construction of building or structure at a later date is considered taxable from 01/06/2007. |
Negative
|
The retrospective amendment, overriding the legal position held by the High Court creates uncertainty for tax payers, in addition to placing huge financial burden on businesses. Likely to lead to more litigation. |
| Other Proposals |
| Renewed thrust on infrastructure development, social & rural sectors including housing, health, R&D, education, skill development and social security for workers in unorganized sector. |
Positive
|
The budget seeks to promote all-inclusive growth. Will improve connectivity, agriculture, rural economy, health care, education, R&D, manufacturing and other allied sectors, leading to more income and demand generation. |
Roadmap for fiscal consolidation –
Fiscal deficit for 2010-11, 2011-12 and 2012-13 capped at 5.5%, 4.8% and 4.1 %, respectively. |
Positive
|
Fiscal discipline is imperative for sustained growth. |
| Budget overall |
Positive
|
The budget, while aiming at inclusive growth seeks to strike a good balance between growth and fiscal discipline. |
