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Income up to Rs 2 lakh would be tax free; income from Rs 2 to 5 lakh would be taxed at 10%; from Rs 5 to 10 lakh at 20%; and income above Rs 10 lakh would attract tax of 30%.
Monetary policy was geared towards containing inflation
Thermal power plants have been exempted from customs duty for two years.
Power projects can partly finance their rupee debt through external commercial borrowings, which is an attempt to make funds available to companies at cheaper rates.
The amount of tax-free bonds to finance infrastructure projects have been doubled this year to Rs 60,000 crore. Rs 10,000 crore will be used for power sector. This is an important measure since most banks have already reached the maximum limit of how much they can lend to the infrastructure industry.
The custom duties on coal mining has also been taken off. Sanjeev Zarbade, Vice President(Private Client Group Research), Kotak Securities says, “This is positive for power producers like Reliance Power and NTPC who can also get into captive mining. They will be exempt from mining taxes.”
Budget proposes to allow external commercial borrowings of up to USD 1 billion to help meet immediate funding needs. The finance minister also said that a proposal to allow foreign direct investment by airlines is under “active consideration.”
The budget was quiet on tax on diesel cars, as was widely feared by the market, nor was there a reduction in fuel subsidy.
Raised excise duty on non-cigarette tobacco products. ITC will benefit.
Service Tax rate up from 10% to 12%
Oil explorers such as Oil & Natural Gas , Oil India and Cairn India will be hit after the budget proposed to raise cess on crude oil to Rs 4,500 per tonne from Rs 2,500 per tonne.
Basic customs duty on gold doubled.
Budget proposes to raise excise duty to 12% from 10%.
What does not seem right
Mukherjee’s assumptions in projecting fiscal deficit target at 5.1 percent for 2012-13 may once again prove a mirage, say economists at foreign banks and independent analysts.
According to economist Jim Walker, founder of Asianomics, Mukherjee will almost certainly overshoot the fiscal deficit target of 5.1 percent of GDP.
The Union Budget 2012 is silent on taxation of onsite software services, a key demand of the software industry following tax notices issued to many India headquartered software firms.