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BUDGET 2012 |
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Wary budget reflects nation’s mood
He may have raised the tax exemption limit but the increase in sevice tax & duty has levelled it
Samiran Saha
New Delhi
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Illustration: Vikram Nongmaithem
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IN THE end, both the union budget 2012 presented by finance minister Pranab Mukherjee in parliament on Friday and the much-awaited 100th international century by Sachin Tendulkar, lacked fizz. But we were relieved that they were done and finished with.
Mukherjee raised the tax exemption limit for individuals to Rs 2 lakh from Rs 1.8 lakh thus putting in an additional Rs 2,000 per month in the aam aadmi’s pocket. But he then proposed to take it back by increasing the service tax and excise duty to 12 per cent from 10 per cent, thus making everything — from car, combs, dining out and smoking to gold jewellery — dearer.
This went against the common request from different industry bodies in pre-budget memoranda asking Mukherjee not to hike excise duty. The hike could fetch the government Rs 45,950 crore and by modifying income tax slabs, the government might lose just Rs 4,500 crore. In effect, the government stands to earn 10 times more.
The proposed tax slabs are: Exempt up to Rs 2 lakh, 10 per cent between Rs 2 lakh and Rs 5 lakh, 20 per cent between Rs 5 lakh and Rs 10 lakh, and 30 per cent on income above Rs 10 lakh. Mukherjee’s proposal to tax mores services at a higher rate could fetch Rs 1.24 lakh crore against the revised estimate of Rs 95,000 crore in 2011-12.
Mukherjee, whose budget was seen as flat, said he would further liberalise capital markets and announced a new equity savings scheme — the Rajiv Gandhi Equity Saving Scheme — to extend income tax deduction of 50 per cent to those who invest up to Rs 50,000 in equities while their annual income is less than Rs 10 lakh. The minister also promised to cut subsidies to 2 per cent of the GDP from the current 2.4 per cent.
Mukherjee’s budget also gives hope to infrastructure, for which he has announced Rs 50 lakh crore during the 12th Five year Plan, and the now bleeding civil aviation sector that would be allowed external commercial borrowings of up to $1 billion.
The economy is at the cusp of revival, Mukherjee said, but blamed industrial performance for the slowdown.
Samiran Saha is Assistant Editor, Business with Tehelka.
samiran@tehelka.com
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