Highlights of Union Budget
Table of Contents
S. No. Particulars
2 Fiscal and Economic Review
3 Key Policy Announcements
4 Budget 2010 – Proposals
- Direct Taxes
- Indirect Taxes
6 Expert Viewpoint
8 Contact Us
The Finance Minister presented the union budget before the within a period of two years. It is a positive and balanced
Foreword Parliament for the year 2010-11 recalling the hard days of budget except some hike in petrol and diesel prices. The
past two years but with an assurance that worst was over for Budget has incentives to promote in-house R&D and
the economy and the days ahead are promising though not partnership with scientific research associations with
without challenges. The three challenges for the growth are exemption from excise duty on solar photo voltaic and solar
Fiscal & Economic rural infrastructure development, making growth more thermal plants. There is also proposal for social sector
Review inclusive and strengthening food security. spending like education, health and rural development. To
strengthen investment environment, Govt. has proposed to
Post the significant slowdown in the growth rate in the
set up financial stability and development council to have
Key Policy second half of 2008-09, following the financial crisis; there
macro level mechanism and inter-regulatory coordination.
was high uncertainty on economic growth in the financial
Announcements There was an attempt to reduce individual taxation which
year 2009-10. A delayed monsoon added to the overall
will drive consumption. The increase in Minimum Alternate
uncertainty. However, over the span of one year, Indian
Tax to eighteen percent leads to burden on corporate sector.
economy posted remarkable recovery leading to optimism in
Direct Tax the medium to long term. As per the advanced estimates of On the regulatory reforms front, the policy statement on
GDP for 2009-10, released by CSO (Central Statistical Direct Tax Code and the Goods and Services Tax is a
Organisation), the economy is expected to grow at 7.2% in welcome step.
2009-10. The Indian economy remains the second fastest
growing economy in the world today, only behind China. Unless otherwise specified the amendments to the direct
Indirect Tax taxes will come into force for the assessment year 2011-12
The United Progressive Alliance government had major and all the indirect & service tax amendments will come into
challenge of striving towards inclusive growth controlling force with effect from the date of such notification after the
fiscal deficit and inflation. The Minister presented the enactment of the Bill.
Expert Viewpoint budget with fiscal deficit of 5.5% of GDP as he pegged total
expenditure at around INR 11 lakh Cr. Growth and Fiscal
stability have been carefully balanced with Government
borrowing with a road map to reduce fiscal deficit upto 4.1%
FISCAL AND ECONOMIC REVIEW
During the FY 2008-09 and first half of 2009-10 Indian The projected growth rates for FY 2010-11 and 2011-12 are
economy had to tackle the economic slowdown. This 8.2% and 9% respectively.
resulted in the GDP growth rate slowing down from an
average of 9% achieved in the last five years to 6.7%. But Fiscal Deficit:
Fiscal & Economic the Growth Rate marginally improved in 2009-10 to 7.2%
Though the above mentioned moves undertaken by
Review from 6.7% in 2008-09 but was still lower than its average
Government for fiscal expansion to overcome the economic
growth rate of 8.8% over the last five years (2003-04 to
slowdown, have resulted in improving the growth rate, this
2007-08). Because of the governments cautious moves in
also had the adverse effect of increase in the fiscal deficit.
warding off a sustained economic slowdown by
The net result was an increase in fiscal deficit from 5.9% of
Key Policy increasing disposable income in the hands of the people
the revised GDP in 2008-09 (provisional) to 6.5% in the
Announcements by reducing the rates of indirect taxes and by increasing
budget estimates for 2009-10. The current target of the
expenditure on programs like National Rural Employment
government is to reduce this fiscal deficit. The target is to
Guarantee Act (NREGA) and on rural infrastructure. The
reduce it further to 4.8% and 4.1% for FY 2011-12 and FY
implementation of the Sixth Pay Commission
2012-13, respectively. The fiscal deficit of 5.5% of GDP in FY
recommendations and the debt relief to farmers also
Direct Tax 2010-11 amounts to INR 3,81,408 Cr.
contributed to this end.
This way India was one of the first countries to emerge
from the global crisis, but Asia’s third largest economy is A major concern during the year 2009-10, especially in the
now facing policy trade-offs earlier than other countries second half, was the emergence of double-digit food
Indirect Tax inflation. On a year-on-year basis, wholesale price index
and should return to its longer-term reform agenda,
according to the IMF. (WPI) headline inflation in December 2009 was 7.3% but for
food items (primary and manufactured) with a combined
weight of 25.4% in the WPI basket, it was 19.8%. A
significant part of this inflation can be explained by supply-
Expert Viewpoint side bottlenecks in some of the essential commodities,
precipitated by the delayed and sub-normal southwest
monsoons. India, which is already on the path to recovery,
there are challenges emanating from increased capital flows
with ramifications for monetary growth, inflation and
Contact Us exchange rate uncertainty, along with policy implications for
the capital account.
KEY POLICY ANNOUNCEMENTS
Agricultural Initiatives: Infrastructure Initiatives:
Foreword Agriculture credit flow target has been raised to INR Allocation of INR 1,73,552 Cr. for infrastructure
3,75,000 Cr. from INR 3,25,000 Cr. in the current year. development (46% of total plan allocation); INR 19,894
Five more mega food parks would be established to Cr. for road transport (up by 13%) and INR 16,752 Cr. for
provide latest infrastructure facilities to give impetus to railways.
Fiscal & Economic food processing.
Review Education Initiatives:
One more strategy of budget is to extend the green
revolution to the eastern region of the country. Plan allocation for school education increased by 16 %
from INR 26,800 Cr. to INR 31,036 Cr.
To avoid import and overcome the deficit of pulses and
Key Policy oil seeds, 60,000 "pulses and oil seed villages" in non- In continuation to this, States will have access to INR
Announcements irrigated areas are proposed to be organised during 2010- 3,675 Cr. for elementary education under the thirteenth
11 in order to raise output. In this regard, INR 300 Cr. finance commission grants.
proposed in the budget and said the initiative will be an
Financial Sector Initiatives:
integral part of the INR 25,000 Cr. Rashtriya Krishi Vikas
Yojana. Additional banking licenses to be provided to private
sector players and to eligible Non Banking Finance
Health Initiatives: Companies.
As a proposal for the Ministry of Health and Family Allocation of INR 16,500 Cr. to Public Sector Banks to
Indirect Tax Welfare for 2010-11 India's health allocation is increased attain a minimum 8% Tier-I capital by 31 March 2011.
from INR 19,534 Cr to INR 22,300 Cr.
Expert Viewpoint Government to introduce a competitive bidding process
for allocating coal blocks for captive mining to ensure
greater transparency. In this a “Coal Regulatory
Authority” is proposed to be set up.
Contact Us Solar, small hydro and micro power projects at a cost of
about INR 500 Cr. to be set up in Ladakh region of J&K.
Personal Taxation: Other Proposals:
Foreword Income tax slabs have been revised upwards, tax rates & Enhanced the scope of scientific research association to
basic exemption limits remaining unchanged include an approved university, college for research in
Investment in notified long term infrastructure bonds for social science or statistical research
individuals / HUF prescribed for additional deduction of up Disallowance under Section 40a(ia) relaxed. The same will
Fiscal & Economic to INR 20,000. be attracted, if tax deducted during the previous year, but
New simplified SARAL II forms for salaried employees not remitted on or before the due date of filing return
Contribution made to the “Central Government Health Effective 1 July, 2010, the thresholds for deducting tax at
Scheme” now included in scope for deduction u/s. 80D source on payments to residents is to be revised as under:
Announcements Corporate Taxation:
Section Existing Proposed
Surcharge on domestic companies slashed to 7.5% threshold (INR) threshold (INR)
Weighted deduction under section 35 on in house Winnings from lottery or
expenditure incurred towards Research & Development 5000 10000
Direct Tax crossword puzzle
(R&D) increased to 200% from 150%.
Winnings from horse race 2500 5000
Deduction of capital expenditure under section 35 AD is
extended to hotels of two star category and above. Payment to contractors
(for single transaction)
Indirect Tax Transfer of shares of a closely held company for without or
inadequate consideration to another closely held company Payment to contractors
or a firm is proposed to be taxed. (aggregate of transactions 50000 75000
during the financial year)
Minimum Alternate Tax (MAT) raised from 15 %to 18 %.
Insurance commission 5000 20000
International Taxation: Commission or brokerage 2500 5000
To reduce ambiguity, more clarifications to the
Rent 120000 180000
explanations to Section 9(1) clause (V), (VI) and (VII) of
Income Tax Act, 1961 are introduced Fees for professional or 30000
Contact Us 20000
Bank related and other information about assets outside
India of resident Indians are to become more transparent.
Other Proposals Contd….
Foreword Interest on failure to deposit the tax deducted will now be Time limit for passing order u/s. 245D is extended
levied at 1.5% per month – for the month or part of the
High Courts to admit an appeal filed after the due date in case
month from the date on which tax was deducted to the
of sufficient cause
date on which tax is deposited
Fiscal & Economic The definition of property as per explanation to Section 56(2)
Relief to the charitable trusts carrying on other activities
is proposed to be amended
Review provided that the gross receipts do not exceed of INR 10
Income tax authority is required to allot a computer generated
lakhs from such activities
Document Identification Number before issue of any notice,
The threshold limit for getting the accounts audited in case
Key Policy of persons carrying on business increased to INR 60 lakhs
Announcements In computing the taxable income of a non-life insurance
from INR 40 lakhs and in case of persons carrying on a
business, adjustment is to be made for any gain or loss on the
profession to INR 15 lakhs from INR 10 lakhs
realization of investments
Penalty leviable for failure to get accounts audited or to
furnish audit report raised from INR 1 lakh to INR 1.5 lakhs.
Direct Tax Wealth Tax:
Taxation of LLP (Limited Liability Partnership) is on the
Definition of “Case” U/s. 22A is enlarged to include search
same lines as applicable to partnership firms
and other amendments.
Scope of settlement commission widened to admit
The current time limit for passing order U/s. 22D available to
applications with respect to assessment or reassessment
Indirect Tax settlement commission is extended from 12 months to 18
resulting from search or as a result of requisition of books
months. Amendment proposed to take effect from 1st June
of account or other documents or any assets.
Increase in the limit of additional amount of income tax High Courts to admit an appeal after the due date in case of
payable on the income disclosed in application to make
before settlement commission
Relief extended to the charitable organizations carrying on
other activities, provided that the gross receipts from such
activities do not exceed of INR 10 lakhs
Deductor & Collector of TDS/TCS to continue to issue
TDS/TCS certificates even after 1st April, 2010
Customs Duty Service Tax
Foreword There is no change in the over all basic customs duty. There is no change in the rate of service tax; it continues to
However the effective rate would increase due to change remain at 10%.
in the excise (CVD) rates. Service Tax net is extended to 8 new services from the date
Proposed full exemption from customs duty to notified later.
Fiscal & Economic
refrigeration units required for the manufacture of - Services of promoting, marketing or organizing of
refrigerated vans or trucks. games of chance, including Lottery
Customs duty on gold ores and concentrates for use in - Health services undertaken by hospitals or medical
manufacture of gold is being fully exempted. These goods establishments for the employees of business
Key Policy will, however, be levied concessional CVD at the rate of INR organizations and health services provided under
Announcements 140 per 10 gms of gold content. Gold ore is also being fully health insurance schemes offered by insurance
exempted from additional duty of customs (special CVD). companies.
Basic Customs duty is being fully exempt on special grade - Services provided for maintenance of medical records
Direct Tax stainless steel, Titanium Alloys, Cobalt-Chrome Alloys and of employees of a business entity
High-Density Polyethylene, used for the manufacture of
- Promoting a ‘brand’ of goods, services, events,
business entity etc.
- Services of permitting commercial use or exploitation
Indirect Tax of any event organized by a person or an organization.
Standard rate on all non-petroleum products enhanced
- Services provided by Electricity Exchanges.
from 8 % to 10%.
- Services related to two types of copyrights not
Advalorem component of excise duty on large cars, multi-
covered under existing taxable service ‘Intellectual
utility vehicles and sports-utility vehicles increased to 22%.
Expert Viewpoint Property Right (IPR)’, namely, that on cinematographic
Central Excise duty on petrol and diesel enhanced by Re.1
films and sound recording are covered now.
per liter each.
- Special services provided by builder etc. to the
Central Excise duty on LED lights, Cartons, boxes and cases
prospective buyers such as providing preferential
of corrugated paper or paperboard manufactured by
Contact Us location or external or internal development of
Standalone manufacturers, latex rubber thread reduced
complexes on extra charges.
from 8 % to 4 % at par with Compact Fluorescent Lamps.
Foreword The existing rate of 2% continues.
Fiscal & Economic Endeavour to introduce GST by April, 2011.
Foreword Budget Impact on Various Sectors
The ‘aam aadmi’ and corporate taxpayers were under the
hope that the Finance Minister will be the much sought Positive Negative Neutral
‘Jinni’, who would emerge out of the proverbial bottle to
Household Airport Auto Components &
fulfill his ‘master’s’ expectations from Budget 2010-11, Appliances Infrastructure Tyres
Fiscal & Economic
which he has primarily fulfilled.
Review Media and Cement Automobiles
The Finance Minister has given a surprising gift to ‘aam Entertainment Information Banking and finance
aadmi’ in the form of significant expansion of income tax Technology
Oil and Gas Construction
Key Policy slabs. Ports
Most Indian corporates have reason to be happy with the Hotels
surcharge on corporate tax coming down from 10% to 7.5%,
even if some among them will be unhappy about the
minimum alternate tax (MAT) being hiked from 15% to 18%. Paper
On the Indirect taxes front, as expected, the fiscal stimulus
was partly withdrawn by across the board increasing the Pharmaceuticals
excise duty rate from 8 to 10 %. The increase of excise duty Power
Indirect Tax on petrol and diesel was somewhat surprising, given the Real Estate
inflationary tendency prevailing in the economy in food & Residential
non food prices. Steel
The Budget seems to be well intended towards returning to Sugar
Expert Viewpoint the path to fiscal rectitude and giving the taxpayers the Source: CRISIL
much awaited relief.
Foreword This presentation summarizes various amendments proposed in the final union budget 2010-11.
The information containing herewith is general in nature & should neither be regarded as comprehensive nor sufficient for
Fiscal & Economic This presentation is not an offer, invitation or solicitation of any kind.
While all reasonable care has been taken in the preparation of this presentation, we accept no responsibility for any errors crept
in due to negligence or other wise.
Key Policy Unless otherwise specified the amendments specified herein are effective from the assessment year 2011-12. While these are
the proposals put forward before the Lok Sabha by the Finance Minister, there may be changes, major or minor as the bill passes
through the Parliament and eventually becomes Finance Act.
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