The Union Budget 2007 - 08

The India Inc., taxpayers and the IT sector had high expectations from the union budget. However, their hopes vanished when Finance Minister P. Chidambaram rolled out the budget 07 - 08 in Lok Sabha. The FM has proposed a marginal increase of Rs 10,000 in threshold tax exemption limit, while imposing an additional one per cent education cess on the taxpayers. There are benefits for farm sector, rural people, women and senior citizens. However, the overall budget is not satisfactory and the BSE Sensex crashed down immediately after the budget speech.

Here are the key highlights of the budget:

• Gross budgetary support to be increased from Rs. 172,728 crore to Rs. 205,100 crore.
• Non-plan expenditure to go up by 6.5% to Rs.435,421 crore allocation for Bharat Nirman increased by 31.6% to Rs. 24,603 crore allocation for education increased by 34.2% and for health and family welfare by 21.9%
• Mid-Day meal scheme to cover children of upper primary classes in 3,427 educationally backward blocks national means-cum-merit scholarship scheme introduced for students from class IX to XII
• 100,000 scholarships to be awarded every year under national rural employment guarantee scheme to be expanded from the current 200 to 330 districts allocation for SCs and STs substantially increased provision of Rs.108 crore for multi-sector development
• Introduction of minority-oriented programs in district level
• National agricultural insurance scheme to continue in present form
• Death and disability insurance cover through LIC to be extended to rural landless households under Aam Admi Bima Yojana
• Limit of loans under differential rate of interest scheme for weaker sections raised
• National Housing Bank to introduce reverse mortgage for senior citizens
• Allocation for defence increased to Rs. 96,000 crore
• Allocation for e-governance increased from Rs.395 crore to Rs.719 crore
• Government to support creation of about 100,000 jobs every year for physically challenged.
• For current year revenue deficit to be 2% and fiscal deficit 3.7%
• Revenue deficit for 2007-08 estimated at 1.5% of GDP and fiscal deficit at 3.3% of GDP
• Peak rate for customs duties for non-agricultural products reduced from 12.5% to 10%
• Custom duties on most chemicals and plastics reduced from 12.5% to 7.5%
• No change in general Cenvat or service tax rates
• Ad valorem component of excise duty on petrol and diesel reduced from 8% to 6%
• Excise duty exemption limit for small scale industry increased from Rs.1 crore to Rs.1.5 crore
• Service tax exemption limit for small service providers raised from Rs.400,000 to Rs.800,000
• Service tax extended to some new areas central sales tax to be reduced from 4 to 3%
• No change in personal income tax rates.
• Threshold limit of exemption in all cases increased by Rs. 10,000
• Maximum limit of deduction in respect of medical insurance premium to be increased to Rs.15,000; for senior citizens the limit is Rs. 20,000
• Corporate income tax rate remains unchanged; surcharge on income tax on all firms and companies with a taxable income of Rs. 1 crore or less removed
• Five year income tax holiday for new hotels
• Tax holiday for undertakings in Jammu and Kashmir extended up to march 31, 2012
• Rate of dividend distribution tax raised from 12.5% to 15% on dividends distributed by companies and to 25% on dividends paid by money market
• Mutual funds and liquid mutual funds banking cash transactions tax exemption limit for individuals and HUFs increased from Rs.25,000 to Rs.50,000
• Additional cess of 1% levied on taxes to fund secondary and higher education
• Employees' stock option plan to be brought under fringe benefit tax.