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Pranab walks the tightrope

business Updated: Feb 28, 2011 16:47 IST
Gaurav Choudhury

There's likely to be a mix of some good news and some bad for you on Monday when Pranab Mukherjee presents the budget for which he has to walk the tightrope by curbing inflation and boosting growth while addressing concerns over black money.

Indications are that the finance minister will increase your income tax exemption limit while increasing service tax and excise duty on manufactured products such as cars and TV sets to plug the fiscal deficit.

To cushion the tax blows, he may help ease petrol and diesel prices a bit by announcing tax cuts on the fuels, said sources not wishing to be identified.

A wild card could be a tax immunity scheme that could draw out concealed incomes to turn them into something productive.

Mukherjee may have some good news for the salaried class, with the government considering a marginal rise in the income tax exemption limit to Rs 2 lakh per year from the existing Rs 1.60 lakh to give them more money to offset inflation, said a source.

The existing annual tax exemption limits stand at Rs 1.6 lakh for men, Rs 1.9 lakh for earning women and Rs 2.4 lakh for senior citizens.

Mukherjee is also expected to announce a 2 percentage-point hike in excise duty from 10% to 12% on 90% of all manufactured goods.

This will signal the second phase of withdrawal of the stimulus package announced in 2008 and 2009 to counter the fallout of the world economy's worst downturn in 80 years.

Last year, the government had announced a 2 percentage-point hike in excise duty for most manufactured goods, but raising it further would risk pushing up prices of products such as cars and TV sets.

Mukherjee could increase service tax from 10% to 12% and cast the net wider to expand the base from the present 117 services as part of the stimulus withdrawal package, sources indicated.

Under attack for inaction over black money allegedly stashed away in overseas tax havens, Mukherjee may also offer an immunity scheme to offenders who pay up.