The Union Budget on Thursday hiked Income Tax exemption limit to Rs 1 Lakh but imposed a two per cent education cess on all central taxes to raise upto Rs 5,000 crore a year and raised service tax rate to 10 per cent while bringing in 15 more services into the net.
Presenting the Budget for 2004-05 in the Lok Sabha, Finance Minister P Chidambaram also announced that there would be no change in interest rates on small savings schemes and raised sectoral cap for FDI in telecom, civil aviation and insurance sector to boost foreign investment.
In telecommunication, the FDI limit has been raised from 49 per cent to 74 per cent, civil aviation from 40 per cent to 49 per cent and insurance sector from 26 per cent to 49 per cent.
The investment ceiling for foreign institutional investrors in debt funds has been stepped up from $1 billion to $1.75 billion.
While the new direct tax proposals will net an additional Rs 2,000 crore, the indirect tax proposals are revenue neutral.
Abolishing the long-term capital gains tax on securities transactions, the Finance Minister replaced it with a tax on transaction and slashed the short-term capital gains to 10 per cent.
{{/usCountry}}Abolishing the long-term capital gains tax on securities transactions, the Finance Minister replaced it with a tax on transaction and slashed the short-term capital gains to 10 per cent.
{{/usCountry}}In a bid to boost agriculture, he exempted tractors, dairy machinery and hand tools like spades from excise duty and halved the excise duty on preparation of meat, poultry and fish to eight per cent.
Computers would be fully exempted from excise duty and LPG gas stoves costing less than Rs 2000 and footwear upto Rs 250 will get excise relief.
To boost industrial growth, Chidambaram proposed to establish an investment commission and took out 85 items from the reserved list for small scale industries.
Automobile industry will be entitled to 150 per cent deduction of expenditure on in-house R&D facilities and request of shipping industry for levy tonnage tax has been accepted.
New hospitals with 100 beds or more set up in rural areas will get tax benefit.
- Benefit for salaried class, Income Tax exemption doubled to Rs 1 lakh
- Tax slabs and rates unchanged for others
- Two per cent education cess imposed on income tax, Corporation tax, excise duties, Custom duties and Service Tax
- Service tax rate hiked to 10 per cent from eight per cent
- No change in interest rates on small saving like PPF, GPF and special deposit scheme
- FDI in telecom increased to 74 per cent from 49 per cent
- FDI in civil aviation hiked to 49 per cent from 40 per cent
- FDI in insurance sector up at 49 per cent from 26 per cent
- Investment Commission to be established
- Computers to be fully exempted from excise duty
- Fiscal deficit pegged at 4.4 per cent, down from 4.8 per