INDIA BUDGET 2010-11: What Is A Budget ?

INDIA BUDGET 2010-11
What is a Budget ?
It is an estimate of future revenues and
expenditure over specific period. Budget
are usually prepared on annual basis for
governments – Both Centre and State and
annual and monthly basis for business
enterprises
India Budget, 2010-11 on 26th
February, 2010
Dear Friends,
India Budget on 26th February, 2010-11
The Major salient features of the said bill are summarised in this
presentation.
Union Budget,
Which is a yearly affair, is a comprehensive display of the
Government’s finances. It is the most significant economic and financial
event in India
The Union Budget of India, referred to as the Annual Financial

Statement
in Article 112 of the Constitution of India, is the annual budget of the
Republic of India, presented each year on the last working day of
February
by the Finance Minister of India in Parliament.
This year 2010-11 Budget was presented by Shri. Pranab Mukherjee

CHALLENGES
The first challenge is to maintain the GDP growth rate to over 9% p.a
then find the means to cross the double digit growth barrier
To harness economic growth to consolidate the recent gains in making

development more inclusive.
To address the weaknesses in government systems, structures and

institutions at different levels of governance.
Government plan to raise more than Rs 25,000 crs through

Disinvestment of PSU’s
Infrastructure:
Railways to be allocated Rs 16,772 crore
Rs. 1.37 lakh crore for Infrastructure Development (The higher allocation for
road infrastructure and railways will be beneficial for IVRCL, Punj Lloyd, L&T, HCC
etc.)
20 km National Highway to be built everyday
Delhi-Mumbai Industrial Corridor to be set up
Coal Regulatory Authority to be set up
More than double allocation for Power Sector to 5,130 crore
NREGA Allocation at Rs 40,100 crore (The National Rural Employment

Guarantee Act (NREGA) is an Indian job guarantee scheme) - The NREGA provides
a legal guarantee for one hundred days of employment in every financial year to
adult members of any rural household willing to do public work-related unskilled
manual work at the statutory minimum wage
Agriculture:
Four-pronged agricultural strategy to be adopted. More help to Food

Processing Sector
Rs 400 crore to be allocated for Green Revolution in Eastern India, Rs

300 crore for Rashtriya Krishi Vikash Yojna, Rs 300 crore to be allocated
for Pulse Production
Extend Loan Repayment for drohught-hit Farmers
Farmers, who repay loan on time, will get a waiver of 2% , farm loan
repayment by 6 months & Farmers to get Loans at 5%
Agriculture Loan for Farmers increased to Rs 3,75,000 crore
New Food Policy from April 1, 2010

Education sector :
The Finance Minister in his Union budget 2010 speech suggested the restoration
of Right of Children to Free and Compulsory Education Act, 2009 which
formulates a legal agenda for privileges of children falling under the age group of
6 to 14 years. He also notified the achievements of Sarva Shiksha Abhiyan (SSA)
launched by the government, in the field of education and improving
infrastructure for basic educationtion sector in 2010-2011.
monetary hike for elementary education to Rs.31, 036 crore in the current fiscal
year against the previous Rs.26, 800 crore, in addition all states access to basic
education with a grant of Rs.3, 675 crore for 2010-11.
IT Sector:
Unique identification (UID) projects a major step towards corporate governance.
All BPL families to be brought under biometric smart cards. UID project to set up
online database of Indian residents. UID project allocated Rs. 1900 crores as
against Rs. 120 crores. Tech Advisory Group to set up under Nandan Nilekani
(Positive for Bartronics, CMC, TCS, Vakranjee Software )
Banking & Finance :
To allocate Rs.16,500 crore provided to ensure that the Public SectorBanks are
able to attain a minimum 8%Tier-I capital by March 31, 2011(Positive as it will
allow public banks to improve its business - Dena Bank, UCO Bank, Syndicate
Bank, Central Bank of India, OBC)
Repayment under Farm Debt Waiver - Scheme has been extended till June
2010 (Negative Bank of Baroda, Punjab National Bank)
RBI is considering giving some additional banking licenses to private sector

players. Non Banking Financial Companies could also be considered, if they meet
the RBIs eligibility criteria.
(NBFCs such as Reliance Capital, Aditya Birla Financial Services, IndiaBulls
Financial Services, Tata Capital, IDFC, M&M Financial Services, L&T Finance and
Bajaj Auto Finance, besides financial institution IFCI, are believed to be warming
up for a foray into the banking sector)
Recapitalisation of Regional Rural Banks (RRB) -

Government to provide further capital to strengthen the RRBs so that they have
adequate capital base to support increased lending to the rural economy
Exports:
Extension of existing interest subvention of 2% for one more year
forexports covering handicrafts, carpets, handlooms and small and
mediumenterprises.
(Companies impacted: JBF Industries, Alps Industries, Alok Industries,
BombayRayon, SPL Industries, SEL Manufacturing Company, Nitin
Spinners, VardhmanTextile, Gokaldas Exports, Rajesh exports and
Gitanjali)
Fertilisers:
A Nutrient Based Subsidy policy for the fertilizer sector has been
approvedby the Government and will become effective from April 1,
2010. To provide subsidy in cash instead of Bonds.
(Companies impacted: Chambal Fertilizers, GSFC, RCF, Nagarjuna
Fertilizers &Chemicals & Tata Chemicals )
Energy sector:
The Finance Minister in his speech declared a hike in the monetary incentives for
energy sector up to Rs.5,130 crore in current fiscal year against the previous
Rs.2,230 crore. The government also intends to initiate guidelines to establish "Coal
Regulatory Authority" which would assist issues such as monetary costing of coal
and setting a performance benchmark.
He has also allocated an incentive hike of 61% for the Ministry of New and
Renewable Energy from the previous Rs.620 crore to Rs.1, 000 crore in the current
FY. In addition, to deal with the problem of energy shortage in the Ladakh district of
Jammu and Kashmir, the minister has suggested establishing of solar plants and
other micro power plants at a price of Rs.500 crore.
Other benefits for energy sector
4% of reduction in central excise tariff on LED lights, energy-proficient supply of
street, homes and offices lighting.
Full central excise tax exemption on electric cars and automobiles that propose to
be an eco-friendly substitute to petrol or diesel automobiles.
4% of tariff on such vehicles have been imposed in order to neutralize the tariff
paid by the manufacturers of such components.
4% concessional excise tariff on battery-run rickshaws
Rates of tax
The Finance Minister has not proposed any change in the rates of taxes
applicable to all the classes of the assessees. However, the rate of surcharge has
been reduced for corporate assessee from existing 10% to 7.5%. The rate of
surcharge in respect of Foreign companies has not been changed. This
amendment will benefit all the corporate assessee whose income chargeable to
tax is in excess of Rs. 1 crore.
There is no amendment in respect of levy of Education Cess and Secondary &
Higher Education Cess. The said levies will remain in aggregate at 3%.
The maximum marginal tax rate in the case of all the assessees, except corporate
assessees, will be @ 30.90% and for corporate assessee @ 33.22%. The said
amendment is applicable for A.Y. 2011-12.
Rate of Tax for MAT

The rate of tax for tax payable under Minimum Alternate Tax (MAT) in respect
of corporate assessee is proposed to be increased from existing 15% to 18%. The
aggregate rate of tax for tax payable under MAT will be @ 19.93%, including
surcharge payable in case of corporate assessee having taxable income in excess
of Rs.1 crore. The proposed amendment will be applicable for A.Y.2011-12.
Income Tax Slabs
In case of individual male assesses, women assesses and senior citizen the basic
exemption limit has been kept unchanged for assessment year 2011-12. However
the changes have been made in the slab rates and the proposed changes are as
under.
Male Women Senior Rate of
citizen age Income Tax
of 65 years
NEW Old NEW Old or more Old
Slab Slab Slab Slab NEW Slab
Slab
Upto Upto Upto Upto Upto Upto NIL

Rs.1,60,000 Rs.1,60,000 Rs.1,90,000 Rs.1,80,000 Rs.2,40,000 Rs.2,10,000
Rs.1,60,001 Rs.1,60,001 Rs.1,90,001 Rs.1,90,001 Rs.2,40,001 Rs.2,10,001 10%
to to to to to to
Rs.5,00,000 Rs.3,00,000 Rs.5,00,000 Rs.3,00,000 Rs.5,00,000 Rs.3,00,000
Rs.5,00,001 Rs.3,00,001 Rs.5,00,001 Rs.3,00,001 Rs.5,00,001 Rs.3,00,001 20%
to to to to to to
Rs.8,00,000 Rs.5,00,000 Rs.8,00,000 Rs.5,00,000 Rs.8,00,000 Rs.5,00,000
Above Above Above Above Above Above 30%
Rs.8,00,000 Rs.5,00,000 Rs.8,00,000 Rs.5,00,000 Rs.8,00,000 Rs.5,00,000
Saving in taxes for individual (Example)

If Income is Male Female Senior Citizens
Rs 2 Lac Rs NIL Rs NIL Rs NIL
Rs 4 Lac Rs 10,300 Rs 10,300 Rs 10,300
Rs 5 Lac Rs 20,600 Rs 20,600 Rs 20,600
Rs 6 Lac Rs 30,900 Rs 30,900 Rs 30,900
Rs 8 Lac Rs 51,500 Rs 51,500 Rs 51,500
"Aggressive increase in slab for Personal Income tax will improve the
purchasing power of individuals and will help bring black money back
into the system. Increased purchasing power will act positive for sectors
like Auto, Retail, Entertainment, Real Estate & FMCG companies”
Direct Tax cont…
Additional Deduction in respect of subscription to Long Term
Infrastructure Bonds
In the Bill it is proposed to insert the new Section 80CCF to provide that
during the Financial Year 2010-11 subscription made to Long Term
Infrastructure Bonds (as may be notified) to the extent of Rs.20,000/- shall
be allowed as deduction while computing the total income of Individual or
Hindu Undivided Family (HUF). This deduction will be over & above the
existing overall limit of tax deductible savings upto Rs.1,00,000/- u/s 80C,
80CCC and 80CCD.
The above amendment will be applicable from A.Y. 2011-2012.
Deduction in respect of contribution to Central Government Health
Scheme
As per the existing provisions of Section 80D deduction is allowed to the
extent of Rs.15,000/- for premium paid for mediclaim policy. The said
deduction will also be available, if any, contribution made to the Central
Government Health Insurance Scheme (CGHS).
The above amendment will be applicable from A.Y. 2011-2012.
Direct Tax cont…
Corporate Taxation - No change in tax rates.
Domestic Compnay surcharge of 10% reduced to 7.5 %
Minimum Alternate Tax ( MAT) on Book Profits increased to 18% from

15% . This will reduce the net profit margin (Negatively impact many
companies like Reliance, Cairn, Bharti, RCom, Cipla, Dabur, Godrej
Consumer, JSPL, Sterlite, Reliance Power, Tata Power , Media co’s like UTV,
Adlabs and TV18) which are high on MAT payout
Tax deducted at Source [ TDS ]may be paid before the due date of filing
the return. Interest charged on late payment of TDS to attract 18% in place
of 12% pa.
SARAL-II form to be re-introduced for individual tax returns.

The bill has proposed to increase the threshold limit under various sections under which the
tax is required to be deducted at source. The amendment will be applicable from 1st July,
2010. In case of any payment for credit to the account of payee after 1/7/2010 the new
limit will be applicable. The proposed changes are :

Section Nature of Payment Existing threshold Proposed threshold

Limit of payment
limit of payment
(Rupees) (Rupees)

194B Winnings from lottery or 5,000 10,000
crossword puz

194BB Winnings from horse 2.500 5,000
race

194C Payment to contractors 20,000 (For Single

Trans.) 30,000(For Single Trans.)

50,000 (for aggregate of 75,000 (for aggregate of

Transactions during

financial Transactions during financial year)
year)
194D Insurance commission 5,000 20,000
194H Commission or 2,500 5,000

Brokerage
194-I Rent 1,20,000 1,80,000
194J Fees for professional or 20,000 30,000
technical service
Certificate of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS)
The existing provisions of Section 203(3) of the Income Tax Act, 1961 dispense with the
requirement of furnishing of TDS certificates by the deductor to the deductee on or after 1st
April, 2010. Similarly, under Section 206C(5) of the Act, a collector of tax at source will also not
be required to issue tax collection certificate to the person from whom tax has been collected on
or after 1st April, 2010. Considering the fact that the TDS/TCS certificate constitutes an
important document for the deductee/collectee, it is proposed that the deductor/collector will
continue to furnish TDS/TCS certificates to the deductee/collectee even after 1st April, 2010.
These amendments are proposed to take effect retrospectively from 1st April, 2010.
Indirect Taxes & Service Taxes
Excise - Basic Central Excise Duty on Non Petroleum Products increased from 8%
to 10% Ad Valorem (meaning Charge levied as a percentage of value of the item it is
imposed on, and not on the item's quantity, size, weight, or other such factor. Value
added tax (VAT) and, generally, import duties are ad valorem taxes.) (–ve impact on
FMCG like HUL, GlaxoSmithkline, Asian Paints)
Central Excise duty on Petrol & Diesel increased by Rs 1 per liter (Companies
impacted:IOC,BPCL,HPCL )
Ad Valorem Duty on large Cars, Multi Utility Vehicle increased by 20% to 22%
(Companies impacted: Maruti Suzuki,M&M,Tata Motors,Hero Honda,Bajaj Auto )
Reduction in Central Excise Duty on corrugated boxes and cartoons from 8% to 4%
Restore the basis duty of 5 % on crude petroleum : 7.5% on Diesel & Petrol and
10% on other refined products. (Custom duty on crude is –ve for all refiners
particularly RIL)
Indirect Taxes & Service Taxes cont….
Service Tax - Service Tax rate continues to be 10%.
Eight new taxable services introduced.
Transmission of electricity exempted from levy of service tax
Transport of Goods by Railway will also be liable to service tax wef 1.4.10 other
than exempted goods @3.09% (10.3% less 70% abatement)
The service tax rate will be retained at the current 10% levels. Plans to bring
many more services under service tax net
Import duty on silver metal to be increased to Rs 1500/kg. The duty on gold is

also increased. This is not a good sign for gold and silver related stocks.
Central Sales Tax - Central sales tax rate against prescribed declaration form
continues to be 2%.
Reduction in central excise duty on corrugated boxes and cartons from 8 per
cent to 4 per cent;
Reduction in central excise duty on latex rubber thread from 8 per cent to 4 per
cent; and
Reduction in excise duty on goods covered under the Medicinal and Toilet
Preparations Act from 16 per cent to 10 per cent.
Proposals relating to customs and central excise are estimated to result in a net
revenue gain of Rs. 43,500 crore for the year
Proposals relating to service tax are estimated to result in a net revenue gain of
Rs 3000 crore per year.
Proposals on Direct taxes estimated to result in a revenue loss of Rs 26,000

crore for the year

Proposals relating to Indirect tax estimated to result in a net revenue gain of Rs
46,500 crore for the year. Taking into account of concessions being given in the
tax proposals the net revenue gain is estimated to be Rs 20,500 crore for the
year
Hike in custom duty on Precious Metals : Rates on precious metals indexed as

follows: On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams
& On silver from Rs.1,000 per kg to Rs.1,500 per kg. (Impact on Gitanjali Gems &
Rajesh Exports)
CHEAPER PRODUCTS - CNG, Mobile, Medicines, Refrigerators, Medical

Equipments, Farm Equipments, Mobile Phones, Mobile chargers, Watches,
Readymade Garments, Microwave Ovens, Toys, Foreign Farm Equipments, Set
Top Boxes, Water Purifier, LED (Light Emitting Diode) Lights
COSTLIER PRODUCTS - Petrol, Diesel, Coals, cigarettes, Cement, Large Cars,

Jewellry, Gold, TV Sets, ACs, Silver, Pan Masala
Others :
Service Tax on Construction and Sale of Residential Property (Service Tax is a
tax levied on service providers in India. The objective behind levying service tax
is to reduce the degree of intensity of taxation on manufacturing and trade
without forcing the government to compromise on the revenue needs. As per
the budget proposal, the finance ministry has suggested 10 per cent service tax
on construction and sale of property.) Service Tax is levied only on 33 per cent of
the value
Rupee to have new Symbol

“The Finance Bill, 2010 was earlier passed by the Lok Sabha
followed by its passage by the Rajya Sabha. The Finance Bill,
2010 has been assented to by the Hon’ble President on 8-5-
2010 as Act No. 14 of 2010. With this, the Budgetary exercise
is over for the F.Y. 2010-2011.”
FINANCE BILL, 2010 BECOMES AN ACT

Finance Act, 2010
[Act No. 14 of 2010]
An Act to give effect to the financial proposals of the Central
Government for the financial year 2010-2011.
The above Presentations summaries the important

proposals included in The Finance Bill, 2010, presented
by the Honorable Finance Minister on 26th February,
2010. Whilst care has been taken in the preparation of
this document, it may contain errors for which we
should not be held responsible. The information given
in this document provides a bird’s eye view on the
changes proposed and should not be relied for the
purposes of economics decisions. Each economic
decision would call for specific reference of the relevant
statutes. Readers are advised to take professional
advice before action on the same.
Presentation by
Vipul , Adip
Trupti , Parshuram & Deep
Thanks

INDIA BUDGET 2010-11: What Is A Budget ?

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INDIA BUDGET 2010-11

India Budget on 26th February, 2010-11

The Union Budget of India, referred to as the Annual Financial

This year 2010-11 Budget was presented by Shri. Pranab Mukherjee

To harness economic growth to consolidate the recent gains in making

To address the weaknesses in government systems, structures and

Government plan to raise more than Rs 25,000 crs through

Railways to be allocated Rs 16,772 crore

20 km National Highway to be built everyday

Delhi-Mumbai Industrial Corridor to be set up

Coal Regulatory Authority to be set up

More than double allocation for Power Sector to 5,130 crore

NREGA Allocation at Rs 40,100 crore (The National Rural Employment

Four-pronged agricultural strategy to be adopted. More help to Food

Rs 400 crore to be allocated for Green Revolution in Eastern India, Rs

Extend Loan Repayment for drohught-hit Farmers

Agriculture Loan for Farmers increased to Rs 3,75,000 crore

New Food Policy from April 1, 2010

RBI is considering giving some additional banking licenses to private sector

Recapitalisation of Regional Rural Banks (RRB) -

Rate of Tax for MAT

Upto Upto Upto Upto Upto Upto NIL

Saving in taxes for individual (Example)

Rs 2 Lac Rs NIL Rs NIL Rs NIL

Rs 4 Lac Rs 10,300 Rs 10,300 Rs 10,300

Rs 5 Lac Rs 20,600 Rs 20,600 Rs 20,600

Rs 6 Lac Rs 30,900 Rs 30,900 Rs 30,900

Rs 8 Lac Rs 51,500 Rs 51,500 Rs 51,500

Domestic Compnay surcharge of 10% reduced to 7.5 %

Minimum Alternate Tax ( MAT) on Book Profits increased to 18% from

SARAL-II form to be re-introduced for individual tax returns.

194H Commission or 2,500 5,000

Reduction in Central Excise Duty on corrugated boxes and cartoons from 8% to 4%

Eight new taxable services introduced.

Transmission of electricity exempted from levy of service tax

Import duty on silver metal to be increased to Rs 1500/kg. The duty on gold is

Proposals on Direct taxes estimated to result in a revenue loss of Rs 26,000

Indirect Taxes & Service Taxes cont….

Hike in custom duty on Precious Metals : Rates on precious metals indexed as

CHEAPER PRODUCTS - CNG, Mobile, Medicines, Refrigerators, Medical

COSTLIER PRODUCTS - Petrol, Diesel, Coals, cigarettes, Cement, Large Cars,

Rupee to have new Symbol

FINANCE BILL, 2010 BECOMES AN ACT

The above Presentations summaries the important

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