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March 1, 2001 - March 1, 2001

Part II - FM's SPEECH on UNION BUDGET 2001-2002 Thursday, March 1, 2001

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BUDGET estimates


Revised Estimates for 2000-2001



  • We have been able to adhere to
    the Budget target of fiscal deficit despite pressures on public finances
    on account of deceleration in disinvestment programme, natural
    calamities and the relief to consumers of petroleum products. The
    revised estimates for the current fiscal year show a marginal decrease
    in expenditure of Rs 2,965 crore as compared to the Budget
    estimates.



  • Net tax revenues for the Centre
    are estimated to be Rs 1,44,403 crore compared to the Budget estimates
    of Rs 1,46,209 crore, thereby reflecting a shortfall of Rs 1806 crore.
    The shortfall is mainly due to lower collection of Customs and Union
    Excise duties which were reduced to provide relief to POL consumers. Non
    tax revenue is estimated at Rs 61,763 crore, Rs 4299 crore more than the
    estimated level of Rs 57,464 crore. However, disinvestment receipts are
    expected to be lower at Rs 2500 crore against the Budget target of Rs
    10,000 crore.



  • The fiscal deficit as a percentage
    of the GDP is expected to be on target at 5.1 per
    cent.


Budget Estimates for 2001-2002



  • In the budget estimates for
    2001-2002, the total expenditure is estimated at Rs 3,75,223 crore, of
    which Rs 100,100 crore is for plan and
    Rs 275,123 crore for
    non-plan.


Plan Expenditure



  • The budget support for
    Central, State and UT Plans has been placed at Rs 100,100 crore, an
    increase of Rs 13,862 crore over revised estimates 2000-2001. This
    amounts to an increase of 16 per cent. Gross budgetary support for the
    Central Plan is being enhanced from Rs 48,269 crore in the revised
    estimates 2000-2001 to Rs 59,456 crore in 2001-2002. Central Plan
    assistance to States and Union Territories in 2001-2002 is also proposed
    to be increased to Rs 40,644 crore from Rs 37,969 crore in the revised
    estimates 2000-2001.


Non Plan Expenditure



  • Non-plan expenditure in
    2001-2002 is estimated to be Rs 2,75,123 crore compared to Rs 2,49,284
    crore in Revised estimates for 2000-2001. The increase in non-plan
    expenditure is mainly in interest payments (Rs 11,633 crores), defence
    (Rs 7,539 crore) and Grants to State Governments (Rs 2,221
    crore).



  • In order to practice greater
    accountability and transparency, I am attaching with the budget papers
    this year a new report on "Implementation of Budget Announcements,
    1999-2000 and 2000-01".


Sir, I now present my tax
proposals, indirect taxes first.




  • In my earlier budgets, I have
    endeavoured to ensure a continuity of approach in framing my revenue
    proposals. The principles that have guided me have been the need for
    growth in revenues, simplification and rationalization of the tax
    regime, and effective tax compliance through measures, which are
    friendly for the honest taxpayer, and a deterrent to the evader. I have
    reduced the number of rates in both customs and excise duties,
    simplified procedures and introduced measures to improve tax compliance.
    I have given up my discretionary power to grant excise and customs duty
    exemptions in individual cases thus saving hundreds of crore of revenue
    for Government. The policy of penalties against tax evaders has also
    been made non-discretionary. With all these steps I have sought to put
    an end to a system that pressure groups or lobbies could influence. My
    attempt this year is to take this process to its logical
    conclusion.



  • In my last budget, I had
    introduced the rate of 16% as the rate of Central Value Added Tax
    (CENVAT). I had also rationalized the rates of special excise duty to
    three, namely, 8%, 16% and 24%. The single rate of CENVAT now
    contributes about 68% of the total excise revenues from ad valorem
    duties. 



  • I now propose to reduce the three
    rates of special excise duty to a single rate of 16%. As a consequence,
    I propose to abolish the 8% special excise duty on the following
    items:





(1) Glazed tiles


(2) Mattresses and articles of
bedding


(3) Carpets and floor
coverings


(4) Painted canvas, studio
back cloth, etc


(5) Linoleum and textile wall
coverings etc.


(6) Scooters and motorcycles,
and


(7)
Taxis


These items will now be charged to
CENVAT only at the rate of 16%.




  • White cement and other special
    cements, yachts and pleasure boats, arms and ammunition for private use
    and articles of fur skins, will attract SED of 16% and a total duty of
    32%.



  • The special excise duty on aerated
    soft drinks, soft drink concentrates supplied to vending machines, and
    motorcars will be reduced to 16%, thus putting an end to the rate of 24%
    special excise duty. These items also will now bear a total duty of 32%.
    There will be no change in respect of products, which already attract
    this rate of 32%.



  • There are a few items that
    currently attract CENVAT at half the rate, namely, 8%. All these items
    will henceforth be charged to the normal rate of 16% except cotton yarn
    including sewing thread, LPG, kerosene and diesel engines up to 10 HP,
    which I am leaving at 8% for the present in the larger public
    interest.



  • After these rationalization
    measures about 80% of the revenue in respect of ad valorem duties will
    come from the single rate of 16% and about 17% from the combined rate of
    32%.



  • India is the world’s second
    largest producer of fruits and vegetables. However, most of these are
    wasted in the absence of proper storage and processing facilities.
    Food-processing industry dealing in perishable fruits and vegetables
    needs special support. I, therefore, propose to exempt food preparations
    based on fruits and vegetables completely from excise duty. This will
    include a very wide range of products of common use like pickles,
    sauces, ketchup and juices, etc. This, along with the support I have
    given to creation of better storage facilities will give a fillip to the
    food processing industry and will go a long way in improving the rural
    economy of our country.



  • The Eleventh Finance Commission
    has recommended a special levy for the replenishment of the National
    Calamity Contingency Fund. As an ad hoc measure, this was provided for
    in the current year through a special surcharge on corporate taxes. I
    propose to establish this funding on a regular basis through a special
    surcharge of excise on a range of products the use of which should be
    discouraged on health grounds. I propose to levy a surcharge of 15% on
    cigarettes. The duty on biris would increase from Rs 6 to Rs 7 per
    thousand biris. The total duty on pan masala would be 55%/60%.
    Miscellaneous tobacco products like chewing tobacco would be charged to
    a total duty of 60%.



  • Excise duty on High Speed Diesel
    was reduced from 16% to 12% in September last year. I propose to restore
    it to the normal CENVAT rate of 16%. I also propose to restore special
    excise duty on motor spirit to the previous rate of 16%. The burden of
    increase in duty is not proposed to be passed on to the consumers except
    for any technical corrections.



  • LPG is charged to excise duty at
    8%. I propose to apply the same rate of duty to Compressed Natural Gas,
    which is exempt at present.



  • A special scheme of charging
    excise duty from independent textile processors on compounding basis was
    introduced in December 1998. The working of this scheme has resulted in
    serious distortions. I have therefore decided to revert to the ad
    valorem duty structure for independent textile processors with effect
    from 1, March 2001. Independent processors would be allowed to take
    CENVAT credit of the duty paid on inputs on a deemed basis.


  • There is no economic logic to continue with
    excise duty exemption on garments sold under a registered trade name. I
    propose to impose a duty of 16% on such garments.



  • Products of SSI units are exempt
    from excise duty up to Rs one crore. This exemption is intended to
    provide fiscal support to the genuinely small producers. I propose to
    withdraw this exemption in respect of the following items, in which
    misuse of the exemption is more than likely:





Cotton yarn


Ball or roller
bearings


Arms and ammunition for
private use



  • The excise duty structure on matches
    comprises rates of duty ranging from 25 paise to Rs 2.40 per hundred
    boxes of 50 sticks each. I propose to rationalise the existing rates to
    a more rational structure with a duty rate of 50 paise for the handmade
    sector, Re.1 for the middle sector, Rs 2 for the semi-mechanized sector
    and Rs 3 for the mechanized sector.



  • Mr. Speaker, Sir, in the matter of
    rates of duties of excise I have almost achieved the ultimate with only
    one basic rate of CENVAT and one rate of special excise duty. The
    procedures in excise have also been made modern. I can humbly claim that
    excise duty is now a model of value added tax up to the manufacturing
    stage.



  • The only issue, which remains to
    be tackled now, is the issue of individual exemptions. The regime of
    exemptions is incompatible with a simple, equitable and rational tax
    structure that has now been put in place. I am not doing away with the
    exemptions altogether, realizing that this may come as a sudden shock to
    those who are accustomed to exemptions. However, I will like to give
    notice to them to be prepared to pay duties like anyone else. For the
    present, I am making a modest beginning by imposing a nominal duty of 4%
    on some items like goggles, imitation jewellery, rubberized mattresses
    etc. which in four equal annual installments will be taken to 16%. More
    and more items will be put on this escalator every year.



  • Structural changes have taken
    place in the economy with the service sector growing faster than other
    sectors. I am expanding the net of service tax and I propose to add the
    following services to the list of taxable services:





l Specified Banking and
Financial Services


l Authorized Service Stations
for servicing of vehicles including two wheelers


l Port Services


l Broadcasting
Services


l Photographic
Services


l Convention
Services


l Sound Recording
Services


l Scientific and Technical
Consulting Services


l Telex Services


l Telegraph
Services


l Facsimile
Services


l On-line Information &
Data Base Retrieval services


l Video Tape Production
Services





l Services auxiliary to
Insurance




  • I propose to bring the service
    provided to lease circuit line holders also in the tax net.



  • I now turn to my proposals
    relating to customs duties.



  • In my previous budgets, I have
    reduced the total number of major customs duty rates to four, that is,
    35%, 25%, 15% and 5%. I do not wish to propose any further reduction in
    the number of customs duty rates this year. However, I propose to
    discontinue the surcharge of 10%. With this, peak level of customs duty
    will decline marginally from 38.5% to 35%.



  • All agricultural produce already
    attracts the peak rate of duty of 35% or more. Current tariffs on major
    cereals are: Wheat (50%), Rice (70%/80%) and Maize (50%). I now propose
    to increase the customs duty on tea, coffee, copra, and coconut and
    desiccated coconut from the present 35% to 70%.



  • Similarly, I propose to increase
    the rate of duty on crude edible oils ranging from 35% to 55% at present
    to a uniform rate of 75% and on refined oils from 45%/65% to 85%. A
    lower rate of 45% would apply to soyabean oil on account of WTO binding.
    I also propose to enhance the rate of customs duty on the import of
    crude palm oil by vanaspati manufacturers from 25% to 55% and restrict
    this concession to sick vanaspati units only. The others will pay 75%. I
    wish to assure the House that in order to safeguard the interest of our
    farmers we shall move swiftly whenever any perceptible threat on account
    of imports is noticed.



  • The House is aware that Government
    has committed itself to abolish customs duty on IT and telecom products
    and their inputs and components under the ITA 1 Schedule by 2003. The
    customs duty on these products is proposed to be reduced to 15% from 1,
    March 2001 from current levels.



  • Mr. Speaker, Sir, with the
    abolition of the remaining Quantitative Restrictions in April this year
    second hand cars will also become freely importable. To allay the fears
    of surge in import of second hand cars, the rate of basic customs duty
    on their import will be raised to 105%, which is three times the peak
    rate. The total duty now applicable to second hand cars will be more
    than 180%. I propose a similar structure of duty for the import of old
    multi utility vehicles, scooters and motor cycles.



  • In order to provide a level
    playing field for domestic liquor producers, I propose to levy CVD at a
    suitable rate on imported liquor, taking into account the levies of
    state excise on domestic production.



  • Our textile industry has to
    modernize itself and acquire the latest technology in order to face
    global competition and attain high quality of production. I propose to
    reduce the basic customs duty on specified textile machines, including
    shuttle-less looms, from 15% to 5%. As a measure of further relief to
    the textile sector, I propose, to reduce the customs duty on silk waste,
    cotton waste and flax fibre from 35% /25% to 15%.



  • There are some cases of anomaly in
    customs duty between raw materials and intermediate goods on the one
    hand, and intermediate goods and final products on the other. DMT, PTA,
    MEG and Caprolactum are raw materials for production of man-made fibers
    and yarns. However, the customs duty on these materials is higher than
    the rate applicable to fibers and yarn. I propose to reduce the customs
    duty on DMT, PTA, MEG and Caprolactum from 25% to 20%, which is the WTO
    bound rate for synthetic fibers and yarns. Similarly, soda ash is an
    input for the production of glassware, detergents etc. and currently
    attracts the peak customs duty of 35% along with the final products. I
    propose to reduce it to 20%. I also propose to reduce the customs duty
    on polyester chips and nylon chips for the manufacture of fibers and
    yarns from 35% to 25%.


  • On the same analogy, the customs duty on
    high quality DBM, seawater magnesia and fused magnesia is being reduced
    from 25% to 15%.



  • Gems and jewellery have
    considerable potential for export. I propose to reduce the customs duty
    on cut and polished coloured gem stones from 35% to 15%. I also propose
    to reduce the customs duty on specified equipment when imported by
    training institutes sponsored by the Gem and Jewellery Export Promotion
    Council from 25% to 15%. The rate of customs duty on rough diamonds
    would now be 5%.



  • CNG kits and their parts attract
    low duty at 5%. I propose to extend the same treatment to LPG conversion
    kits and their parts.



  • LNG is not produced in India. The
    burden of CVD on the import of LNG adds to the cost of LNG projects. I
    therefore propose to exempt LNG from CVD.



  • For the same reason, I also
    propose to exempt wattle extract from the application of CVD.



  • I propose to reduce the customs
    duty on cement, and clinkers from 35% to 25%. I am confident that this
    reduction would help softening of domestic prices of cement for the
    benefit of consumers.



  • Mr. Speaker, Sir, accredited
    pressmen and cameramen are allowed to import cameras, computers, fax
    machine etc. up to a value of one lakh rupees for their professional use
    without payment of customs duty once in five years. In view of many good
    photographs they have taken of use, I propose to reduce this long
    waiting period from five years to two years.



  • In order to encourage better
    quality of cinematography I propose to reduce the customs duty on
    cinematographic cameras, projectors and certain other related equipment
    used by the film industry from 25% to 15%.



  • In order to discourage smuggling I
    propose to reduce the duty on gold from Rs 400 per 10 grams to Rs 250
    per 10 grams.



  • Several industry associations have
    pointed out that the CVD on the imported consumer products should also
    be charged on the basis of maximum retail price; otherwise it does not
    provide a level playing field. I accept the logic of their argument. The
    Finance Bill contains the enabling provision to implement this
    decision.



  • I propose to withdraw the
    exemption from customs duty on a few items and impose on them a nominal
    duty of 5%.


  • I have already promised that our customs
    tariff would be brought down to East Asian levels. I will like to move
    progressively within three years to reduce the number of rates to the
    minimum with a peak rate of 20%. The modalities for this will be worked
    out in time for the next budget.


  • Sir, a number of steps are also being taken
    for greater procedural and administrative efficiency.



  • A new Manual of Procedures and
    Instructions on Central Excise and Customs would be brought out by 1,
    September 2001. The emphasis would be on simplicity, brevity and
    transparency. I also propose to simplify the central excise rules to
    make them user friendly.



  • My proposals on the excise side
    are estimated to result in a revenue gain of Rs 4677 crore in a year. On
    the customs side my proposals are estimated to result in a revenue loss
    of Rs 2128 crore. I estimate that the indirect tax revenue next year
    would be Rs 1,40,992 crore. 



  • Copies of the notifications issued
    to give effect to the changes in excise and customs duties shall be laid
    on the Table of the House in due course.



  • In Direct Taxes, my thrust during
    the last three years has been on providing stability of tax rates,
    widening the tax base, rationalizing and simplifying the tax laws and
    giving impetus to economic growth. These efforts have resulted in
    increasing the direct tax revenue from Rs 46,428 crore in 1998-99 to an
    estimated Rs 74,467 crore this year. In addition, the number of
    assessees has increased significantly from a little over one crore in
    March 1998 to 2.3 crore at the beginning of this year. I, therefore,
    propose to continue with the same rates this year also. Co-operative
    Societies, however, will henceforth pay 30% tax instead of
    35%.



  • While imposing the surcharge of 10
    % on corporates and non-corporates in my budget of 1999-2000, I had
    promised that this would be a temporary levy. However, I was constrained
    to increase the surcharge on non-corporate tax payers at the higher
    income levels to 15% due to the unexpected expenditure burden of Kargil.
    During the course of this financial year I had further levied a surchage
    of 1% on corporates towards the National Calamity Contingency Fund and
    an additional 2% on all tax payers for the Gujarat Earthquake relief. I
    now propose to remove all surcharges payable by corporates and
    non-corporates except the surcharge of 2 % for relief to quake hit areas
    of Gujarat. Individuals having an income of up to Rs 60,000/- will not
    be subject to this surcharge.



  • As a welfare measure, Sir, I
    propose to allow 100% deduction for donations to the National Trust for
    welfare of persons with autism, cerebral palsy, mental retardation and
    multiple disabilities.



  • Hon’ble Members are aware that the
    modified one-by-six scheme, which I introduced in the Finance Act, 1998
    to identify potential income-tax assessees and to bring them into the
    tax net, has paid rich dividends. I, therefore, propose to extend the
    one-by-six scheme to all urban areas in the country as defined by the
    1991 Census. Changes arising out of the 2001 census will be incorporated
    subsequently.



  • Certain companies are not filing
    their returns of income, presumably on the plea that they are not having
    any taxable income. These companies go out of fiscal discipline and
    their financial transactions during the initial years escape scrutiny. I
    therefore, propose that all companies should file their returns even if
    they incur a loss.



  • Sir, another effective measure of
    widening the tax base is to further enlarge the scope of deduction of
    tax at source. Income tax at source will henceforth be deductible at the
    rate of 10 % on income by way of commission or brokerage exceeding Rs
    2,500/-, except on transactions relating to shares and
    securities.



  • Winnings from lotteries, crossword
    puzzles etc. are currently taxed at 40%. As the marginal personal income
    tax rates have now stabilized at 30%, this income will also now be taxed
    at 30%. Television game shows are very popular these days. I wish the
    winners well. At the same time, I propose that income tax at the rate of
    30% will be deducted at source from the winnings of these and all
    similar game shows.



  • At present, tax is deducted at
    source on income from interest on time deposits only if such income
    exceeds Rs 10,000/- in respect of deposits with a Bank or Housing
    Finance Company and Rs 5,000/- in other cases. These threshold limits
    have led to the erosion of tax base and under-reporting of taxable
    income due to splitting up of deposits. I, therefore, propose to lower
    this limit to Rs 2,500/- in all cases.



  • With economic liberalization, the
    pay package of salaried class is undergoing many changes. It is being
    divided into various components and the forms of perquisites and
    benefits or amenities provided by the employers are assuming new
    dimensions. To align our tax system with the present structure of pay
    packages, I propose that the value of perquisites, benefits or amenities
    shall be determined on the basis of their cost to the employer, except
    in respect of houses and cars where different criteria will be adopted
    for simplicity.



  • Sir, I also propose to provide
    relief to salaried persons in the lower income range having income up to
    rupees one lakh. Such persons will get an enhanced tax rebate at the
    rate of 30% in respect of their eligible investments under section 88 of
    the Income Tax Act, as against 20% at present.



  • In the case of Export Oriented
    Units, and units located in Export Processing Zones, Free Trade Zones
    and Software Technology Parks 25% of their sales in the domestic market
    are currently tax exempt. I propose to provide for the taxation of
    profits from these domestic sales of such units.



  • I.T. Sector continues to do well
    and should be encouraged to do better. I, therefore, propose that
    profits derived by the units located in the software technology parks
    from the export of "on-site" services will be eligible for deduction
    like their other export income. Units located outside these zones will
    also get the benefit of tax exemption on such export earnings. I further
    propose that the condition relating to transfer of ownership of
    companies in sections 10A and 10B of the Income-tax Act shall not apply
    in respect of companies in which public are substantially
    interested.



  • The income of NABARD, National
    Housing Bank and Small Industries Development Bank of India (SIDBI) was
    exempted from tax in order to provide fiscal support in the initial
    years of their functioning. Now these institutions have come of age and
    are working on commercial lines. I, therefore, propose to withdraw the
    tax exemption available to these institutions.



  • The interest payable on certain
    External Commercial Borrowings (ECBs) is currently exempt from tax.
    Having regard to the fact that interest received by the lender is
    taxable in the country of his residence and he would get a credit for
    any tax paid by him in India, any exemption from tax liability in the
    host country does not benefit the lender but only results in reducing
    our tax revenues. I, therefore, propose that the tax exemption in
    respect of interest paid on such External Commercial Borrowings will not
    be available for such borrowings made on or after the first day of June
    2001.



  • Certain interest income up to a
    limit of Rs 12,000 is deductible at present under section 80L. In
    addition, income from Government securities is also deductible up to Rs
    3,000. I propose to reduce the maximum limit of this deduction to Rs
    9,000.



  • The tax payable on the
    distribution of dividends of domestic companies and income in respect of
    Units of Mutual Funds and UTI was increased from 10% to 20% last year.
    To provide a stimulus to the growth of capital market, I propose to
    reduce this tax to 10%.



  • To help revive investor-interest
    in primary issues I propose to exempt long-term capital gains arising
    from the sale of securities and Units if such gains are reinvested in
    primary issues of shares of public companies.



  • Sir, the tax incentives in the
    form of tax holidays for infrastructure facilities are proposed to be
    further rationalized and enlarged. For the core sectors of
    infrastructure namely, roads, highways, rail system, water treatment and
    supply, irrigation, sanitation and solid waste management systems, I now
    propose a ten-year tax holiday which may be availed of during the
    initial twenty years. In the case of airports, ports, inland ports and
    waterways, industrial parks and generation and distribution of power,
    which also become commercially viable only in the long run, a tax
    holiday of ten years is being proposed to be availed of during the
    initial fifteen years. The period of commencement of business for power
    and industrial parks is also being extended up to 31, March
    2006.



  • The five-year tax holiday and 30 %
    deduction for next five years was available to the telecommunications
    sector till 31, March 2000. I propose to reintroduce this concession
    retrospectively for the units commencing their operations on or before
    31, March 2003. These concessions will also be extended to internet
    service providers and broadband networks.



  • Sir, in addition to the tax
    holiday proposed for development of infrastructure, tax incentives have
    also been provided for the investors providing long-term finance or
    investing in the equity capital of the enterprises engaged in
    infrastructure facility. Any income by way of interest, dividends or
    long-term capital gains from such investments is fully exempt. I propose
    to extend this concession to guarantee commissions and credit
    enhancement fees earned by financial institutions from infrastructure
    enterprises. Co-operative Banks will also be eligible for exemption of
    their income from investments in approved infrastructure
    facilities.



  • To be globally competitive, our
    companies need to increase their investment and expenditure for Research
    and Development. Currently, a weighted deduction of 150% of the
    expenditure on in-house research and development in certain areas is
    allowed to companies. Sir, I propose to extend this weighted deduction
    to biotechnology as well for clinical trials, filing patents and
    obtaining regulatory approvals. I also propose that the entire amount
    paid to specified projects under the India Millennium Mission, 2020 will
    be eligible for 125 % weighted deduction.



  • To encourage development of
    industrial infrastructure, I had provided 100% deduction of export
    profits for a period of ten years to units operating in the Special
    Economic Zones last year. I now propose to give further tax incentives
    for the development of these zones. The concessions available for
    infrastructure by way of a 10-year tax holiday will be available to the
    developers of Special Economic Zones on the same lines as developers of
    industrial parks. The income of investors making long term investment
    for the development of SEZs will also be exempt.



  • The storage of food grains and
    their transportation are our major concern. Sir, I propose to provide a
    tax holiday for five years and 30% deduction of profits for the next
    five years to the enterprises engaged in the integrated business of
    handling, transportation and storage of food-grains.



  • Sir, for promoting the industry
    that provides the cup that cheers, I propose to increase the development
    allowance available for tea from 20% to 40%. This additional allowance
    will be used only for re-plantation, rejuvenation, and modernization of
    tea plantations and processing facilities.



  • There has been a long-standing
    demand from the Shipping Industry that the rate of depreciation
    available in respect of ships and inland water vessels may be increased.
    I propose to increase this rate of depreciation to 25%.



  • To encourage investments in
    weaving, processing and garment sectors of the textile industry, I
    propose to allow accelerated depreciation at the rate of 50% on plants
    and machinery purchased under the Technology Up-gradation Fund
    Scheme.



  • In order to give a boost to the
    commercial vehicles sector presently facing recession, I propose to
    allow accelerated depreciation at the rate of 50% on new commercial
    vehicles for one year.



  • Each of my past three budgets has
    provided for increasing tax incentives for the housing sector. Sir,
    continuing with this practice, I propose to further increase the maximum
    amount of deduction available for interest payable on housing loans for
    self-occupied houses from rupees one lakh to rupees one and a half
    lakhs.



  • For persons having income from
    house property, the present deduction of 25 % of annual value for
    repairs etc. is proposed to be enhanced to 30%. However, there will be
    no further deductions, except for the expenditure incurred by way of
    interest payment on housing loans.



  • I propose to extend the tax
    incentives allowed by way of deduction or rebate on payments of LIC
    premium to all insurance companies that have been approved by the
    Insurance Regulatory and Development Authority.



  • The presence of multinational
    enterprises in India and their ability to allocate profits in different
    jurisdictions by controlling prices in intra-group transactions has made
    the issue of transfer pricing a matter of serious concern. I had set up
    an Expert Group in November 1999 to examine the issues relating to
    transfer pricing. Their report has been received, proposing a detailed
    structure for transfer pricing legislation. Necessary legislative
    changes are being made in the Finance Bill based on these
    recommendations.



  • The foreign telecasting channels
    will henceforth be taxed in India, on their income computed in
    accordance with the provisions of the Income-tax Act.



  • Sir, I propose to bring about a
    number of measures that will be friendly to the taxpayer. The time
    limits for issue of refunds, reassessment and reopening of assessments
    by the Income-tax Department are proposed to be reduced. The Department
    will also no longer have power to withhold the refund due to an
    assessee. Similarly, there will be no requirement to obtain a Tax
    Clearance Certificate under section 230A from the Assessing Officer
    before transfer of immovable property. I also propose to remove the
    discretion presently available in deciding the quantum of penalties.
    Henceforth, a fixed amount of penalty will be leviable for most of the
    defaults.



  • Certain educational and medical
    institutions are required to be approved for claiming tax exemption. At
    present, these institutions have to file their application for approval
    to the Central Board of Direct Taxes. Sir, I propose to delegate this
    power to Chief Commissioners of Income-tax.



  • To sum up, Sir, my proposals made
    in this Budget on the Direct Taxes will result in a revenue loss of Rs
    5,500 crore, which I propose to make up with tax buoyancy and increased
    voluntary compliance. I estimate that the direct tax revenue in
    2001-2002 would be Rs 84,800 crore.



  • Mr. Speaker, Sir, with these
    proposals I estimate total tax revenue receipts for the Centre at Rs
    163031 crore and the fiscal deficit at Rs 116314 crore or 4.7% of GDP. I
    could have managed a lesser fiscal deficit but that would have been
    possible only at the cost of growth, which was unacceptable.



  • This is a budget for carrying
    forward the second generation of economic reforms. This is a budget for
    growth. This is a budget for equity with efficiency. This is a budget
    for a new deal to the people of India in the new millennium.



  • Mr. Speaker, Sir, with these
    words, I commend the budget to this august house.



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Budget sends BSE Sensex zooming Thursday, March 1, 2001

MUMBAI, Feb 28 (Narad Online): On rumours of resolution of payment crisis and market-friendly budget proposals the battered IT sector received a major boost, driving equities up to score sharp gains that in turn lifted the sensex by a whopping 177 points at close on the Bombay Stock Exchange (BSE) on Wednesday.

The BSE Sensitive Index opened fractionally up at 4070.37 and later gradually moved upwards to the day's high of 4264.02 before closing at 4247.04 as against Tuesday's close of 4069.68, showing a net rise of 177.36 points or 4.36 per cent.

Riding piggyback on growth-oriented budget proposals for software industry, operators rushed to cover short positions in almost all the IT counters.

Market sources also attributed the turnaround to rumours that Unit Trust of India absorbed a sizeable chunk of shares of Himachal Futuristic and Global Telesystem from a leading bull reportedly trapped in default.

Sources said Himachal Futuristic, Global Tele and Zee Tele that touched lower circuit filter of 8 per cent at early stages, later made a strong comeback and even hit higher price band at close once operators were relieved of fears of payment crisis.

HLL, Tata Tea and bank shares also strengthened on positive proposals, while stocks of tobacco, steel and power sectors suffered a marked setback on fears that certain budget proposals would affect the bottom-line of companies.

In specified group, 107 counters including 21 index-based shares registered sharp gains while 35 others showed marked to moderate losses.

The BSE-200 Index and the dollex were quoted sharply up at 462.36 and 165.16 compared with previous close of 444.02 and 158.40 respectively. The BSE-500 Index shot up by 53.34 points to 1367.22 from yesterday's close of 1313.88.

Infosys Technologies was the most active scrip having recorded the highest turnover of Rs 715.97 crore followed by Satyam Computer (Rs 693.20 crore), Himachal Futuristic (Rs 593.88 crore), RIL (Rs 327.72 crore) and Wipro by (Rs 327.40 crore).

The market leader Infosys Tech flared up by 563.15 to 6258.50. Satyam Computer was up by 39.35 at 347, Himachal Futuristic by 92.05 at 670.40, RIL by 11.35 at 414.10, Wipro by 176.15 at 2544.80, Grasim by 21.45 at 320.40, HLL by 22.85 at 229.40, ICICI by 13.95 at 108.60, Nestle by 30.35 at 545.70, NIIT by 60.35 at 1242.60, Ranbaxy by 18.90 at 689.75, SBI by 21 at 245.75, Telco by 3.05 at 102.35, TVS Suzuki by 28.40 at 206.05 Corp Bank by 17.70 at 128.60, Global Tele by 51.10 at 404.25, Silverline by 23.15 at 185.20, Hero Honda by 83.10 at 812.85, Tata Tea by 24.80 at 268.30, Digital by 68.90 at 710.80 and SSI Ltd by 114.20 at 1272.45.

However, Tata power dipped by 12.25 to 145.80, BSES by 16.15 to 220.75, MTNL by 10.35 to 147.60, ITC by 51.85 to 777.80 and ACC by 4.65 to 177.85.

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Trade circles in Rajkot find Budget directionless Thursday, March 1, 2001

RAJKOT: While the trade and commerce circles in Rajkot on Wednesday termed Union finance minister Yashwant Sinha's Budget as 'directionless', the head of the economics department of the Saurashtra University Prof K K Khakkar, called it 'pragmatic'.

According to Khakkar, the finance minister asking all companies to file income-tax returns is a step in the right direction. However, the decision to slash interest rates on provident fund and small savings is uncalled for and perhaps made as government's liabilities have increased. At the same time Sinha has proposed that income between Rs 40,000 and Rs 1 lakh will get 30 per cent exemption. Thus Sinha has given a level playing field to everyone."

"The best part of the budgetary proposals is that the government has realised the need to downsize its staff. The second best thing is the announcement about unviable public sector units to be closed down," Prof Khakkar said.

Daxesh Kothari, taxation and financial consultant termed it as "a Budget with a vision. It is a genuine effort to make our economy an integral part of the global one. The proposed labour laws reforms, cut in small savings rates, cut in customs tariffs are the important facets of the Budget. On the financial front, the direct taxes, the reforms to develop the debt market, abolition of surcharge is the reflection of a stable tax regime which has brought credibility to the tax system. Further, the reduction of dividend tax, higher deduction for housing loans interest, removal of procedural anomalies in refund, tax clearance certificates are also a welcome move. Overall the Budget is a confidence-building and a positive one for the capital market, tax payers and businesses in general. The only fear is the political fall-out of the proposals", he opined.

Pravin Garala, president of the Rajkot Engineering Association said, "It seems that Sinha is in a hurry to take the country to the WTO. He is not sure in which direction he wants to go. Nor is there any mention of how he proposes to bridge the huge deficit gap. The decision to lower interest rate on small savings will prove suicidal in the long run."

"No incentives have been provided to the small-scale sector. Besides the single window system for excise will do more harm than good to the trade and business community", he said.

President of Rajkot Chamber of Commerce and Industry Dhirubhai Vithlani called the budget a balanced one as sectors like agriculture, industry and the share market would get a fillip. He welcomed the decision to roll back dividend tax to 10 per cent and giving incentives to entertainment industry. He felt that the excise structure would prove beneficial for the diesel engine industry in Saurashtra.

Rajkot Mayor Ashok Dangar felt that "the budget lacked reality". Sinha has not kept expectations of the middle class, the small -scale sector and small and marginal farmers in mind. The finance minister has tried to juggle figures. And the figures do not match with ground realities."

Rajendra Dhruv, spokesman for the Bharatiya Janata Party for Saurashtra and Kutch said, "the budget gives a glimpse of Gandhian philosophy. It is a great job keeping in view the tight-rope walking the finance minister has had to do because of natural calamities. He has spared the common man from heavy tax burden, Dhruv said.

Prashant Vora, leading share market player in the city said, "the finance minister must be given 10 upon 10. The market situation will improve further. The information technology sector will also get necessary boost."

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Slash in interest rates of small savings irks people Thursday, March 1, 2001

RAJKOT: Union finance minister Yashwant Sinha, who had hinted at a 'harsh budget' has presented a 'lacklustre and directionless' budget for 2001-2" is the common man's general reaction to budgetary proposals.

Said Dhirendra Patel, a small-time shopkeeper, "The finance minister had not done justice by slashing the provident fund and interest rates on small savings. "These savings actually act as a buffer in times of crisis and the finance minister has chosen to hit at it."

Rashmi Shethia feels, "The finance minister did not realise what harm he was doing to the common man's domestic budget when he raised the prices of sugar to be sold through the public distribution system. There was no need to hit the common man below the belt. The common man's cup of tea has turned bitter with this proposal".

Rashmi Patel, a housewife said, "It is difficult to understand what Sinha is trying to say. His budget makes it evident that his hands and feet are tied in view of electoral prospects for the party. We expected him to announce some measures to improve the standard of living, but he has let us down for the second year in succession."

Sanjay Patel, a hotel owner said, "the finance minister has taken a bold step in giving some tax benefit to those earning upto Rs 1 lakh but there is nothing for those earning above that. He is also silent on the standard deduction and hike in income-tax limit."

Rajendra Mehta, a chain smoker, is terribly upset with the announcement of 15 per cent special surcharge on cigarettes. "That will make smoking a hell of an expensive thing. We will have to rethink our priorities."

Kishanlal Pandya, an agriculturist in the city, termed the budget as a "green patch in the otherwise arid desert of the Vajpayee government". The incentives to agriculture sector would speed up agricultural reforms. But Sinha should have announced some tax cuts for the farming community which is passing through a bad patch because of the second consecutive year of drought."

The proposal for downsizing the government machinery is the best part of the budget, most feel.

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Diamond industry welcomes Sinha's incentives on gems Thursday, March 1, 2001

SURAT: A step towards fulfilling its commitment to the WTO pact to which India is a signatory, is the initial reaction that emerged from the diamond industry on the imposition of five per cent duty on import of rough diamonds by those not holding the import licence, as proposed in the annual Budget on Wednesday.

Talking to The Times of India, chairman of the Gem and Jewellery Export Promotion Council Sanjay Kothari said the budget being a export-oriented one had kept in mind that a level playing field was made available to the industry. Those without export-import licence could now import rough diamonds by paying a five per cent import duty, he added.

The reduction of duty from 25 per cent to 15 per cent on the coloured gem and jewellery would be beneficial for the industry as it would enhance the trade volume, though it was too early to envisage any impact in terms of quantitative effect, was the reaction of Gem and Jewellery Export Promotion Council regional convenor Chandrakant Sanghvi. But, what change the proposals would bring about, could only be decided in the long run.

Duty on import of machinery being reduced from 25 per cent to 15 per cent would help several training centres to import quality equipment on par with international standards, said director of the Indian Diamond Institute K K Sharma.

However, the general reaction of diamond merchants in the city was indifferent. When questioned about the bid to put an end to licences for import of rough diamonds and export of polished products, they said it would hardly change the number game being played in the industry with a trade volume of around Rs 36,000 crore.

The picture that the Budget had painted was that India too was committed to its global obligations, said Sharma.


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