BUDGET 2003-04

HIGHLIGHTS

Budget objectives:

Through Budget 2003-2004, the Government has made an effort to address the following five objectives (called 'Panch Priorities'), for citizens and for the economic security of the country:

• poverty eradication; addressing the 'life time concerns' of our citizens, covering health, housing, education and employment;
• infrastructure development;
• fiscal consolidation through tax reforms and progressive elimination of budgetary drags, including reform of the additional excise duty, introduction of service tax, and introduction of Value Added Tax (VAT) from April 1, 2003 at the State level.
• agriculture and related aspects including irrigation; and
• enhancing manufacturing sector efficiency, including promotion of exports and further acceleration of the reform process.
  
  The segment-wise highlights of the budget are as under:
  
  Economy
• Fiscal deficit is estimated at 5.6 per cent of GDP at Rs 1,53,637 crore for for 2003-04. Fiscal deficit for 2002-03 is expected at the target level of 5.3% as against 5.9% a year ago.
• Interest commitment of Rs 1,15,653 crore (during 2002-03) constituted 48.8% of the revenue earnings.
• Losses on account of introduction of VAT from April 01, 2003 for States will be compensated in phases.
• Government intends to continue prepayment of high cost World Bank and ADB loans in the face of burgeoning foreign exchange reserves and low domestic interest rates. About 3 $ billion dollars have already been repaid during December 2002.
• 12th Finance Commission to address the high-debt burden of states. Government has decided to allow debt- swap scheme to avail of the lower interest rate benefits.
• Disinvestment target has been kept at Rs.13200 cr.
  
  Savings & Banking
• Interest rate on small savings schemes and public provident fund has been reduced by 1%.
• Interest rate of saving bank deposits reduced from 4% to 3.5% wef March 03, 2003
• Repo rate reduced from 5.5% to 5%, wef March 03, 2003.
• Banking Act to be amended to allow M&As in PSU banks
• Foreign Direct Investment ceiling of 49 per cent for subsidiaries of foreign banks as well as private banks has been raised to 74 per cent.
• Repayment of External Commercial Borrowing up to 100 million dollars put under automatic route.
• RBI has given instructions to enhance repayment period of medium term loan to nine years
• Private banks will encouraged to open branches in rural sector to provide credit for farm equipment including tractors.
• Bank credit for 50,000 self-help groups to be provided. (Rs 598 crore already spent on 25,000 self-help groups as on January 3 this year).
• An India Development initiative to be set up in the Finance Ministry to attract investment.
• Dividend tax abolished in hands of recipient
• New pension scheme with equal contribution from employers and Govt
• Special pension policy with 9% guaranteed returns for those over 55 yrs
• 2% interest rate bank above and below PLR for fully secured loans to agriculture and SSI.
  
  Direct Tax
  
• Simple one page income tax return form is being re-introduced.
• Additional deduction for dividend earnings has been raised from Rs 9,000 to Rs 12,000.
• Total deduction under section 80-l would be Rs 15,000 including Rs 3,000 for investment in government securities.
• 10% surcharge to be levied on income over Rs 8.5 lakh per annum.
• Income Tax exemption limit has been retained at the present level of Rs 50,000 but 5% surcharge on personal income tax has been abolished.
• Standard deduction for salaried class will be upto 40 per cent of the salary or Rs 30,000 whichever is lower, for Income up to Rs 5 lakh. Above Rs 5 lakh, the standard deduction will be Rs 20,000.
• Senior citizens with an income of Rs 1,53,000 exempt from income tax. With the standard deduction of Rs 30,000 the real exemption will go up to Rs 1,83,000.
• The income tax interest deduction on housing loans upto Rs 1,50,000 for self-occupied houses will continue.
• Education expenses up to Rs 12,000 per two children per family will be entitled to Sec 88 benefit under Income Tax act
• Disabled to get a deduction of Rs 50,000 and an enhanced deduction of Rs 75000 for permanently disabled
• VRS up to Rs 5 lakh exempt from income tax
• No change in corporate tax slabs and rates, surcharge halved from 5% to 2.5%
• Corporate continues to pay tax @ 35%. Surcharge reduced from 5% to 2.5%. The companies are subject to pay dividend tax on the income distributed by way of dividend. However, shares holders are spared from tax on dividend income.
• Income from mutual fund and units of UTI are exempt in the hands of the recipient.
• The provisions of tax deduction at source is not applicable to individuals and HUF as long as the payments which are subject matter of relevant TDS provisions are made for personal activities.
  
  Custom duty:
  
• Customs duty on personal baggage reduced from 60 to 50 per cent.
• Peak customs duty rates reduced from 30 per cent to 25 per cent except on agriculture and dairy products.
• Duty on gold reduced from Rs. 250 per 10 grams to Rs. 100 subject to conditions.
  
  Excise Duty
  
• Items attracting 4% CENVAT at present, to be totally exempted from excise duty.
• A three-tier excise duty structure of 8, 16 and 24 per cent would be introduced. This would not cover petroleum, tobacco and pan masala products. Excise duty on motor cars has been reduced from 32 per cent to 24 per cent.
  
  Industry & Trade
  
• 75 more items have been dereserved from Small Scale industries including leather and chemical.
• SSI exemption withdrawn for readymade garments, shoddy and woolen yarn, ceramic tiles, stainless steel pattis, specific articles of apparel.
• Value of exempted goods (other than exports) to be included while calculating eligibility limit of Rs. 3 crore for SSI units.
  
  Service Tax
  
• Service tax raised from 5% to 8 % and 10 more items would be covered under it including coaching centres and internet café.
• Service tax to be integrated with other tax during 2003- 04 to boost revenue of states.
  
  Agriculture
  
• It is Government's resolve to encourage diversification of Horticulture and Floriculture.
• A new central sector scheme to promote hi-tech horticulture and precision farming.
• Ministries of Food and Finance would jointly address the problem of sugar industry.
  
  Receipts and payment - from where come and where do go ?
  
• Receipts - Borrowing and other liabilities 30%, excise 19%, customs 10%, Income tax 9%, corporate tax 10%, non-tax revenue 14%, non-debt capital receipt 6% other taxes 2%.
• Payments- Interest 24%, subsidies 10%, Central plan 14%, defence 13%, States' share of taxes and duties 13%, other non-plan expenditure 12%, non-plan assistance to States and UT 4%
• (The allocations are almost same as for the budget 2002-03)

  
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