Finance Minister Pranab Mukherjee Gave Relief to Tax Payers

Finance Minister Pranab Mukherjee, who presented budget for 2012-13 in the Lok Sabha, is expected to raise the income tax exemption limit to at least Rs.2 lakh in his key proposals. The finance minister marginally raised the slabs in other tax brackets of 10 percent, 20 percent and 30 percent. The Direct Taxes Code (DTC) Bill has also made a mention of it. The DTC, which will replace the Income Tax 1961, however, will only come into force from 2013-14 and the minister may make a formal announcement on it in his budget speech. The Standing Committee of Parliament that has scrutinised the DTC Bill has already submitted its report to the Lok Sabha Speaker. With limited space for giveaways, the Budget has balanced populism with some tough measures to check tax evasion and generation of black money. However, in view of reverses in the recently concluded state assembly elections, Mukherjee went slow on economic reforms like FDI in multibrand retail and further opening of the insurance sector to foreign investment. There is bad news for prospective car buyers as government hiked duties on luxury items to raise resources. “With agriculture and services continuing to perform well, India’s slowdown can be attributed almost entirely to weakening industrial growth,” - according to the Economic Survey tabled in the Parliament. Further, the government is facing the challenge of reining in fiscal deficit. The target of 4.6 percent deficit for the current financial year would not be met, mainly on account of rise in subsidies and lower realisation from disinvestments. Overall inflation inched up to 6.95 percent in February compared to 6.55 percent in the previous month. However, the government is optimistic it would come down to about 6.5 percent by March end. The Reserve Bank of India (RBI) left the key rates unchanged while asserting that future policy action would be determined by the movement in inflation. The RBI reduced Cash Reserve Ratio (CRR) -- the percentage of deposits banks have to keep with the apex bank -- to 4.75 percent from 5.5 percent. On the other hand, the government’s effort to raise money through disinvestments this fiscal has not met with much success. So far, only about Rs.14,000 crore has been mopped up by way of divestments in public sector undertakings (PSUs) as against the target of Rs.40,000 crore. While Rs.1,145 crore was raised through a followon public offer (FPO) of PFC, Rs.12,767 crore came from 5 percent stake auction in ONGC.