PM: Union Budget is 'outstanding'
New Delhi: Prime Minister Manmohan Singh rated Budget 2005-06 as "outstanding".

"He has done an outstanding job and worked very hard to produce a Budget which measures up to the challenges of our time. He deserves all the credit," said Singh. Singh said the newly-announced 'Bharat Nirman' scheme would change the face of rural India and the Centre would work with state governments to make life in villages "liveable."

"There must be close cooperation between Centre and the states. When one crore hectares come under irrigation, it will change the face of rural India beyond recognition," he said.

The Prime Minister said the focus would be on infrastructure development and telephone connectivity in rural areas.
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Budget 2005-06: Major tax reforms unveiled
New Delhi: In a major relief to tax payers, the Union Budget for 2005-06 has raised the income tax exemption limit to Rs1 lakh. It has also restructured tax slabs, lowered corporate tax to 30 per cent and slashed excise and customs duties on several commodities, including petrol and diesel. Finance Minister P Chidambaram also raised the exemption limit for women and senior citizens.

In a major overhaul of direct taxes and to provide stability in the medium term, Chidambaram raised the basic income tax exemption limit to Rs1 lakh from the present Rs50,000. Income of Rs1-1.5 lakh will now attract 10 per cent tax, Rs1.5-2.5 lakh 20 per cent and above Rs2.5 lakh, 30 per cent. A further 10 per cent surcharge will apply for incomes above Rs10 lakh.

Given the higher exemption limits and scaling up of tax brackets, the Finance Minister has also removed the standard deduction and reduced the plethora of exemptions. Besides Rs1 lakh, six deductions will continue to receive the same tax treatment. These include interest paid on housing loans for self-occupied property, medical insurance premia and deductions in respect of loans on higher studies.

Taking note of many perquisites disguised as fringe benefits to escape tax, the budget has also proposed 30 per cent Fringe Benefit Tax. The securities transaction tax, introduced last year, has been raised from 0.15 per cent to 0.2 per cent.

The Finance Minister also raised the exemption limit for women and senior citizens. He also slapped a 0.1 per cent tax on cash withdrawals of Rs10,000 a day from banks as an "anti-black money" measure but announced no amnesty scheme for evaders. His direct proposals are expected to yield additional Rs6,000 crore a year. The indirect proposals are broadly revenue neutral.

Chidambaram also modified the one by six scheme for filing of income tax returns by removing mobile telephones and included payment of electricity bill of Rs50,000 annually.

In indirect taxes, Chidambaram reduced the CENVAT rate on polyster filament yarn, tyres and air conditioners from 24 to 16 per cent. The peak customs rate duty has been brought down on non-agricultural products from 20 per cent to 15 per cent to move towards East Asian levels. It will be nil on LPG for domestic consumption and subsidised for kerosene. Excise duty on both these products will also be nil. Chidambaram also announced sops for raw material imports, textile, leather, footwear, pharmaceuticals and IT. Duty was levied on mosaic tiles.

Maintaining the service tax of 10 per cent, the Finance Minister has exempted small service providers with a gross turnover of up to Rsfour lakh. This will exempt 80 per cent of the present service tax payers. He also brought into the service tax net eight more items. These include pipeline transport of goods, membership fees of clubs, packaging and specialised mailing services.

As for the budget estimates for 2005-06, the plan expenditure has been raised to Rs1,72,500 crore from Rs1,43,497 crore. Non-plan expenditure for the coming year is expected to be Rs3,70,847 crore. Estimating the total expenditure at Rs5,14,344 crore for the coming year, the minister has placed the total revenue receipts at Rs3,51,200 crore and the revenue expenditure at Rs4,46,412 crore.

Consequently, the revenue deficit at Rs95,312 crore is equal to 2.7 per cent of GDP. The fiscal deficit is estimated at Rs1,51,144 crore, which is 4.3 per cent of GDP.
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Budget 2005-06: Thrust on rural regeneration
New Delhi: Spelling out the goals of the 'Bharat Nirman' plan for building rural infrastructure over the next four years, the Finance Minister has said that this will include bringing additional one crore hectares under assured irrigation. All villages with population 1000 will be connected with roads. Construction of 60 lakh additional houses for the poor and providing drinking water to villages will also be taken up.

On the rural front, the Finance Minister has announced a number of initiatives:

• The national food for work programme has been converted into a National Employment Guarantee scheme with an allocation of Rs11,000 crore.
  
• A national rural health mission will be launched for training health volunteers, providing more medicines and strengthening primary and community health systems.
  
• Coverage of Antyodhya Anna Yojana will be extended to 2.5 crore families.
  
• The integrated child development scheme will be expanded with creation of 1,88,168 additional anganwadi centres.
  
• Allocation under the mid-meal scheme will be increased from Rs1675 crore in 2004-05 to Rs3010 crore in 2005-06.
  
• Announcing a special package of Rs450 crore for highway development in the northeastern region, the Finance Minister proposed a corpus of Rs8,000 crore for rural infrastructure fund.

Agriculture credit of Rs1,08,500 crore will be disbursed in the current year and credit flows will increase by another 30 per cent in 2005-06. A sum of Rs100 crore will be provided for the rural infrastructure development fund.

The National Highway Development project-3 will be launched to target select high-density highways. Over 15 lakh houses will constructed under the Indira Awaas Yojana for which allocation has been increased to Rs 2,750 crore.

The Budget 2005-06 has also taken note of the tele-density in the country currently at 8.75 per cent and has expressed concern at the low rural tele-density. The Budgetary allocation for Universal Service Obligation of the Government to provide telephone connectivity in remote and rural areas, however, remains at Rs1200 crore in 2005-06, the same as last fiscal.

"So far the Government has released Rs 1700 crore to the Universal Service Obligation (USO) fund which has been fully utilised. A provision of Rs 1200 crore has been made for 2005-06. 1687 sub-divisions will get support under the USO Fund for rural household telephones", the Finance Minister said.

The USO Fund had released Rs200 crore in Rs2003-04 and Rs300 crore in 2002-03 for telephone connectivity in rural areas.

As many as 5.2 lakh village public telephones have been installed so far and BSNL has undertaken to provide VPTs in the next three years to the remaining 66,822 villages.
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Budget 2005-06: Cash withdrawals of Rs10,000 to be taxed
New Delhi: In order to check tax evasion, the government has proposed a tax at the rate of 0.1 per cent on cash withdrawals of over Rs10,000 or more from banks on a single day.

This is being done "since it is felt that large cash transactions become part of black money," Finance Minister P Chidambaram said presenting the 2005-06 General Budget in the Lok Sabha.

Accordingly a person withdrawing Rs10,000 in cash would have to pay a sum of Rs10 as tax. Chidambaram said another measure required the banks to report to the Government all deposits, which are exempt from TDS on interest.
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Budget 2005-06: SPV to finance infrastructure projects
New Delhi: In a major thrust to infrastructure development, Finance Minister P Chidambaram has announced a Special Purpose Vehicle (SPV) for financing large road, port and airport projects. The cess on petrol and diesel will also be deployed for highway development. The cess on petrol and diesel has been raised to Rs2 per litre from Rs1.50 a litre currently to fund the National Highway development scheme.

The SPV would lend Rs10,000 crore during 2005-06 for infrastructure projects in roads, ports, airports and tourism. The projects would be appraised by an Inter-Institutional Group of banks and financial institutions.

The SPV will lend funds, especially debt of longer term maturity, directly to eligible projects to supplement other loans from banks and financial institutions.

Government will communicate the borrowing limit to the SPV at the beginning of each fiscal year. For 2005-06, the Finance Minister fixed the borrowing limit at Rs10,000 crore.

The Budget also made a provision of Rs1500 crore for "viability gap" funding for infrastructure projects. That mechanism would be used in conjunction with the funding mechanism through the SPV.
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Budget 2005-06: Customs and excise duties slashed
New Delhi: Presenting the Union Budget for 2005-06, Finance Minister P Chidamabaram slashed customs and excise duties across the board.

Customs duty on crude has been cut from 10 per cent to 5 per cent, on refrigerated vans is down from 20 per cent to 10 per cent and on footwear has been brought down to 10 per cent from 20 per cent. Battery-operated road vehicles will face customs duty of 10 per cent as against the earlier 20 per cent. Customs duty on Coking coal, yarns and textiles has been brought down to 5 per cent, 15 per cent and 10 per cent respectively.

Peak rate of customs on non-agro products has been reduced from the earlier 20 per cent, to 15 per cent. Industrial raw materials will face a customs duty of 10 per cent.
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Budget 2005-06: Mid-day meal allocations boosted
New Delhi: Allocation in the union budget for 2005-06, for mid-day meal schemes for school children has been raised to Rs3,010 crore for the coming fiscal, from Rs.1,675 crore in 2004-05.

At present, 11 crore children are being covered under the scheme and the Centre is now providing the cost of food grains as well as the conversion cost at the rate of Rsone per child.

To meet the objective of universalizing the Integrated Child Development Scheme (ICDS), Finance Minister Chidambaram has proposed to expand the programme and create 1,88,168 additional Anganwadi centres across the country. At present, there are 6,49,000 such centres. Chidambaram said the allocation for ICDS is proposed to be increased from Rs 1,623 crore in 2004-05 to Rs 3,142 crore in the budget proposals for the coming fiscal.

Stating that 47 per cent of children in the age group of 0-3 years are under weight and supplementary nutrition is an integral part of ICDS, the Finance Minister also proposed to double the supplementary nutrition norms and share one-half of the states' cost for this purpose.
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Budget 2005-06: Fiscal Deficit to come down marginally
New Delhi: Finance Minister P Chidambaram sought to raise revenues by a robust 17 per cent and limited hikes in spendings to a marginal 1.7 per cent in a bid to control government's deficit in 2005-06.

He said that the Govt. will have to take recourse to a higher borrowing and other liabilities by nine per cent at Rs1,51,144 crore to keep fiscal deficit marginally lower at 4.3 per cent of the GDP in 2005-06.

The Union Budget aims to keep its revenue deficit at 2.7 per cent of GDP for 2005-06, same as the revised estimate for 2004-05. The Govt. has overshot its revenue deficit target marginally by 0.2 per cent from 2.5 per cent budgeted for 2004-05, while failing to rein in fiscal deficit to the budgeted level of 4.4 per cent, which was revised up to 4.5 per cent.

For 2005-06, total revenue receipts has been budgeted at Rs3,51,200 crore as against revised estimate of Rs3,00,904 crore and budget estimate of Rs3,09,322 crore for 2004-05.

Of the total revenue receipts, tax collections is slated to grow by over 21 per cent to Rs2,73,466 crore next fiscal from the revised estimate of Rs2,25,804 crore. Non-tax revenues will go up marginally to Rs77,734 crore next fiscal from the estimated Rs75,100 crore in 2004-05.

Capital receipts is targeted lower at Rs1,63,144 crore next fiscal as against Rs2,04,887 crore in 2004-05 despite hike in borrowing and other liabilities.
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Budget 2005-06: Defence Budget hiked to Rs83,000 crore
New Delhi: Signaling that the current modernisation drive in the armed forces would continue, the union budget has hiked the country's Defence Budget to Rs83,000 crores for the year 2005-06 from Rs77,000 crores, an increase of 7.8 per cent.

The highlight of this year's defence spending would be a steep allocation of Rs34,472 crores made towards capital outlay.

In real terms it marks an increase of only about Rs1,000 crores over last year's funding of Rs33,472 crores. But in actual terms it amounts to fresh allocation as the Ministry for the first time in five years has been able to spend all the allocated funds under the head last year.

With this allocation on capital outlay, Defence Minister Pranab Mukherjee can now go ahead with major arms acquisition programmes, which would include buying killer-hunter Scorpene Submarines from France, the long range Smerch rocket systems from Russia and low-level transportable radars, all of which have been pending for more than a year.

The capital outlay funding in fact almost constitutes 41.4 per cent of the total defence budget.

Though there is an increase of Rs6,000 crore in defence allocation, India with a defence spending of 2.5 per cent of the GDP still is lowest in the region. Pakistan and China's defence expenditure almost ran upto to 5 per cent and 8 per cent of their respective GDP.
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