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| IT sops in budget; Air travel, health check-up to be costlier | | | EARLY TIMES REPORT
NEW DELHI, Feb 28: A play-safe budget today raised the threshold income tax exemption limit from Rs 1.60 lakh to Rs 1.80 lakh that will leave at least Rs 2000 more in the hands of tax payers across the board and made changes in the service tax that will make air travel, hotel accommodation and drinking in AC restaurants costlier.
Presenting the budget for 2011-12 that will result in a net revenue loss of Rs 200 crore, Finance Minister Pranab Mukherjee imposed an excise duty of one per cent on 130 specified items which will, however, exempt food and fuel. He also gave some relief to corporates by reducing the current income tax surcharge of 7.5 per cent on domestic companies to five per cent but raised the Minimum Alternate Tax (MAT) from 18 to 18.5 per cent including developers of Special Economic Zones (SEZs) in it.
While leaving the rest of exemption slabs, surcharge and cess on income tax untouched, he reduced the qualifying age of senior citizens from 65 to 60 years, raised their exemption limit from Rs 2.40 lakh to Rs 2.50 lakh. No special benefit was announced for women whose basic exemption limit remains at Rs 1.90 lakh.
Mukherjee also created a new category of “Very Senior Citizens” of 80 years and above who will be eligible for a higher exemption limit of Rs. 5 lakhs. Budget sought to widen the ambit of the service tax net by which hotel accommodation above Rs 1,000 a day and AC restaurants that serve liquor will be included.
The scope of life insurance service is being widened to cover all services provided to any person by an insurer and legal services provided by business entity to individuals and individuals to entities but not individuals to individuals. Opposition parties flayed the budget saying it was very “disappointing and direction less” while the industry welcomed it as “positive and growth oriented”.
Hailing the “commendable job” done by his Finance Minister, Prime Minister Manmohan Singh said the signals are that this is a government which is reform oriented but admitted “you cannot please all people”. All services including diagnostic services provided by AC clinical establishments with more than 25 beds and services provided by a doctor who owns such establishments have been brought under the service tax net.
Economy class domestic travel by air will cost Rs 50 more while international travel will cost Rs 250 more. Higher class domestic travel by air attract a standard 10 per cent service tax bringing it on par with international higher class travel.
While direct tax changes are expected to result in a revenue loss of Rs 11,500 crore, the net revenue gain on account of indirect taxes is likely to be Rs 11,300 crore, including an additional Rs 4,000 crore on account of service tax changes.
The Finance Minister also proposed various measures to achieve a closer fit between the present Service Tax regime and its successor Goods and Services Tax (GST).
The Minister announced a broad set of financial sector reforms, saying he proposed to move the legislations relating to insurance laws, LIC, revised pension fund bill, banking laws amendment bill, State Bank of India Subsidiaries Bill and a bill on Factoring and Assignment of Receivables.
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