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Highlights of Union Budget 2006

  • Taxes:

  • Government to raise customs duty on vanaspati to 80%
  • The food processing industry will get duty relief
  • The Finance Minister said that value-added tax had been a resounding success, and that he expects states outside the system to join
  • Comprehensive bill for insurance in FY07
  • ATM operations to be brought under service tax net
  • FBT on hospitality for airline, shipping cos cut to 5% from 20%
  • Cash withdrawal tax to continue
  • Excise duty on manmade yarn cut to 8% from 16%
  • FBT changes: Superannuation contribution up to Rs 1 lakh exempt
  • FBT on tour & travel reduced to 5% from 20%
  • Customs duty on major bulk plastics reduced from 10% to 5%
  • FBT changes: Brand endorsement excluded
  • GST to be introduced by April 2010
  • Excise duty on cigarettes upped by 5%
  • Excise duty on instant food cut to 8%
  • 4% CVD on all imports
  • Sec.80-IA exemption extended to March 2009
  • Service tax rate increased from 10% to 12%
  • One by six scheme for filing of I-T returns abolished
  • STT rate increased by 25%
  • Minimum Alternate Tax raised to 10%
  • No new direct tax imposed
  • No change in rates of personal or corporate income tax
  • International air travel, PR service brought under service tax net
  • Cess on crude processing up from Rs 1,800/tonne to Rs 2,500/tonne
  • Customs duty on mineral products cut to 5% vs 15%
  • Excise duty on printing paper reduced to 12%
  • 8% excise duty on packaged software
  • Excise duty on footwear reduced to 8%
  • Excise duty exemption for ice cream, condensed milk
  • Excise duty on small cars, aerated drinks cut to 16% from 24%
  • Countervailing duty of 4% on most imports
  • Customs duty on anti-AIDS, anti-cancer drugs cut to 5%
  • Customs duty on packaging machines reduced to 5%
  • Customs duty on Naphtha reduced to nil
  • Customs duty peak rate reduced from 15% to 12.5%

  • Import duty on non-ferrous and ferro alloys cut to 7.5% from 10%

  • Economy:

  • Fiscal deficit in 2006/07 likely to be 3.8 percent of GDP, compared to an estimated 4.1% the previous year
  • Increase in revenue on account of tax proposals pegged at Rs 6,000 cr
  • Revenue deficit for current year to be 2.6%
  • Finance Minister says services sector expected to contribute 54% of GDP in 06/07
  • Defence spending increased to Rs 89,000 crore in 06/07 from Rs 83,000 crore in the previous year
  • Q3 GDP at 7.6% vs 7% last year
  • Savings up at 21.9% of GDP
  • GDP growth target for 10th plan at 8%
  • Gross capital formation up 30% in FY05
  • Govt determined to take country to 10% growth
  • Investment rate up from 25.3% in FY03 to 30.1% in FY05: FM
  • "FY06 prospects good if not better than FY05"
  • "Continued" buoyancy in capital formation
  • FY06 GDP growth likely to be 8.1%: FM
  • Support to Central plan: Rs 1,31,285 cr vs Rs 110,385 cr this yr
  • Gross Budgetary Support to Plans up 20.4% to Rs 1,72,728 cr

  • Financial sector:

  • Plan to let Indian mutual funds invest up to $2 billion abroad
  • Bank FDs up to 5 years included in 80-C exemption
  • Co-operative banks to come under the tax net
  • MFs can invest in overseas funds
  • FII investment in G-secs upped to $2 billion from $1.7 billion
  • To remove 10% foreign investment cap for mutual funds
  • FII investment limit in corporate bonds upped from $0.5 billion to $1.5 billion
  • Non-food credit growing by over 25%
  • Jan-Nov 2005 saw $4 billion via FDI

  • Rural investment:

  • Raises corpus for rural infrastructure development fund to Rs 10,000 crore from Rs 7,300 crore
  • Government to allocate Rs 18,696 crore for rural infrastructure projects in 2006/07
  • Mid-day meal allocation for FY07 at Rs 4,813 cr
  • Rs 14,300 cr allotted for rural employment
  • Rajiv Gandhi drinking water plan to get Rs 4,680 cr vs Rs 3,645 cr this year
  • Rs 18,696 cr allocation to Bharat Nirman project: FM
  • Rural health spending at Rs 8,207 cr
  • Special Nabard credit line for self-help groups
  • Rs 5,000 cr set aside for backward districts

  • Health and Education:

  • Education spending to be increased by 31.5 percent, and health spending by 22 percent
  • Allocation for primary education increased to Rs 10,041 crore from Rs 7,156 crore
  • 20,000 scholarship schemes for students from minority communities
  • Rs 24,115 cr allocation for education
  • Aim to eradicate polio by 2007
  • Rs 100 cr grant to Punjab Agriculture University

  • Infrastructure:

  • Comprehensive review of coal policy needed
  • Government expects investment of Rs 22,000 crore in oil refining over next few years. The government will encourage investment in refineries, pipelines and green fuel.
  • Highways development programme to receive Rs 9,945 crore in 2006/07. The government has identified three new road projects to be built under a new special purpose vehicle.
  • Indian Infrastructure Investment Company to be set up
  • 96% of Golden Quadrilateral will be completed by June: FM
  • Golden Quadrilateral project to be completed by end of 2008
  • 5,083 MW capacity to be added in FY06: FM

  • Trade and Industry:

  • Food processing sector to be treated as a priority sector for bank lending
  • Finance minister says imports in 2005/06 are "high but welcome" as they reflect growing investment and industrial activity
  • To double world export share to 1.5% by FY09
  • Export body to be set up for gems and jewellery sector

  • Agriculture:

  • Agricultural growth back to 2.1%: FM
  • Foodgrain output this year at 209.5 mt: FM
  • Rs 944 cr grant given for irrigation in Bharat Nirman: FM
  • To double farm credit in 3 years, Rs 1700 cr allocated to farmers
  • Separate window for tenant farmers to ensure loan share
  • short-term loans to farmers to be made available at 7%; limit at Rs 3 lakh

  • Others:

  • Rs 10 crore allocated for celebrating 150th anniversary of First War of Indian Independence
  • Kudiyattam, Vedic Chanting and Ramlila declared heritage art forms
  • National Fisheries Board to be constituted soon
  • Electronic bond trading net extended to mutual funds, pension, and provident funds
  • Fifteen tourist development circuits identified for development
  • 3.92 million tourists came to India in 2005-06
  • Tourism Plan spending at Rs 830 cr
  • 180 items to be de-reserved from SSI list
  • Rs 100 cr fund to help tea growers
  • India to be developed as semi-conductor manufacturing hub
  • Three investment regions to be developed for oil sector
  • Four new hotel management institutes in Chhattisgarh, Haryana and Uttaranchal
  • FY07 public sector outlay at Rs 1.23 lakh cr
  • Outcome Budget on March 17
  • To provide Rs 16,901 cr for PSU equity and Rs 2,789 cr via loans in 2006-07
  • To mull taking Hyderabad Metro under NURM plan
  • Rs 10,041 cr allocation for Sarva Shiksha Abhiyan
  • Govt to fund disaster rehabilitation
  • Manufacturing sector growth seen at 9.4% in FY07


 
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