Budget highlights: Income Tax and Macro-economy

Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and GST in the budget 2012-13

 DTC rates proposed to be introduced for personal income tax.

 Exemption limit for the general category of individual taxpayers proposed to be enhanced from `1,80,000 to `2,00,000 giving tax relief of `2,000.

 Upper limit of 20 per cent tax slab proposed to be raised from `8 lakh to `10 lakh.

 Proposal to allow individual tax payers, a deduction of upto `10,000 for interest from savings bank accounts.

 Proposal to allow deduction of upto `5,000 for preventive health check up.

 Senior citizens not having income from business proposed to be exempted from payment of advance tax.

 To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20 per cent to 5 per cent for 3 years for certain sectors.

 Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed.

 Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent upto 31.3.2013.

 Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 per cent.

 New sectors to be added for the purposes of investment linked deduction.

 Proposal to extend weighted deduction of 200 per cent for R&D expenditure in an in-house facility for a further period of 5 years beyond March 31, 2012.

 Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services.

 Proposal to extend the sunset date for setting up power sector undertakings by one year for claiming 100 per cent deduction of profits for 10 years.

 Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from `60 lakhs to `1 crore.

 Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery.

 Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector.

 Reduction in securities transaction tax by 20 per cent on cash delivery transactions.

 Proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions.

 Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme.

 Measures proposed to deter the generation and use of unaccounted money.

 A net revenue loss of `4,500 crore estimated as a result of Direct Tax proposals.


 GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4 per cent in preceding two years.

 India however remains front runner in economic growth in any cross-country comparison.

 Monetary and fiscal policy response for better part of past 2 years aimed at taming domestic inflationary pressure.

 Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays.

 Indicators suggest that economy is turning around as core sectors and manufacturing show signs of recovery.

 At this juncture, it is necessary to take hard decision to improve macroeconomic environment and strengthen domestic growth drivers.

 Twelfth Five Year Plan to be launched with the aim of “faster, sustainable and more inclusive growth”. Five objectives identified to be addressed effectively in ensuing fiscal year.

 If India can build on its economic strength, it can be a source of stability for world economy and a safe destination for restless global capital.

 Headline inflation expected to moderate further in next few months and remain stable thereafter.

 Steps taken to bridge gaps in distribution, storage and marketing systems have helped in more effective management of inflation.

 Developments in India’s external trade in the first half of current year have been encouraging. Diversification in export and import market achieved.

 Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate.

 GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison to preceding two years is primarily due to deceleration in industrial growth.

 India’s GDP growth in 2012-13 expected to be 7.6 per cent +/- 0.25 per cent.

 Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and increased subsidies.