India Budget 2011/12 What matters most!

In my last years post India Budget 2010/11 What matters most! i had said  More spending = More deficit = More inflation, I was bang on target.

Finance Minister Pranab Mukherjee presented Union Budget 2011-12 amid rising inflation, tight liquidity, high interest rate, industrial slowdown, delayed reforms and negative market sentiment. The budget this yr is mixed and a tight exercise.

I expect the FM not to meet his targets and fiscal deficit to worsen.  People will pay more through Service Tax and Inflation. I suspect that the actual inflation may be twice as much as estimated and that the govt will find it difficult to stick to its target. There is nothing about organized retail and cutting down the influence of middlemen in the food chain. This is going to be a bad yr overall.

LED TVs, Diapers, Computer parts and mobile accessories to get cheaper while Branded Garments, A/C Hospital stay, A/c Hotels with Liquor Permit Bar bills,Air tickets etc  are costlier.

The Cash based subsidy program is revolutionary, so are attempts of getting back black money is swiss banks. But will it ever see the light of day considering the enormity of  malai or kickbacks and rents involved?  I doubt if the political and the babu class of the current regime will want anything to change substantially from status quo.


upto 1.8 lakhs,
1,90,000 for women Nil,
1.8 lakhs to 5 lakhs  10%
5 lakhs to 8 lakhs  20%
above 8 lakhs  30%

Each taxpayer will save Rs 2,000 per year, considering inflation taxpayers are all at a loss.

A Salaried individual who has no other income need not file tax returns if his salary is under 5 lakhs and his other incomes are included by his employer in his form 16.

Senior Citizens start paying taxes for an income above 2,50,000.

The qualifying age for tax exemption has been reduced from 65 years to 60 years. A very senior citizen 80 yrs and above gets an exemption limit of 500000 (5 lakhs)

The senior citizens see a marginal increase in tax relief of Rs 10000. Worst off are the 10% taxpayers and the non tax payers who get hit doubly due to price rise and loss of income due to the negative savings interest rates. There is no change in SCSS rates either to cushion for inflation.

Sec 80C Benefit Continues at 1 lakh + Sec 80cc 20000
Additional Rs 20,000 deduction available for investment in infrastructure bonds.

Tax Proposals

  • Surcharge of 7.5 per cent on domestic companies proposed to be reduced to 5 per cent.
  • Rate of Minimum Alternative Tax proposed to be increased from 18 per cent to
  • 18.5 per cent of book profits.
  • Tax incentives extended to attract foreign funds for financing of infrastructure.
  • Lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.
  • Benefit of investment linked deduction extended to businesses engaged in the production of fertilisers.
  • Investment linked deduction to businesses developing affordable housing.
  • Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.
  • System of collection of information from foreign tax jurisdictions to be strengthened.
  • Government to introduce direct cash payments for those entitled to subsidies in kerosene, cooking gas and fertiliser by March, 2012.
  • FIIs allowed to invest in MF schemes
  • Some movement on GST
  • DTC to be implemented from FY12

Indirect Taxes

  • To stay on course for transition to GST.
  • Central Excise Duty to be maintained at standard rate of 10 per cent.
  • Reduction in number of exemptions in Central Excise rate structure.
  • Nominal Central Excise Duty of 1 per cent imposed on 130 items entering in the tax net.
  • Lower rate of Central Excise Duty enhanced from 4 per cent to 5 per cent.
  • Optional levy on branded garments or made up proposed to be converted into a mandatory levy at unified rate of 10 per cent.
  • Peak rate of Custom Duty held at its current level.
  • Iron ore export duty raised to 20 percent

Service Tax Scope Increased

  • Standard rate of Service Tax retained at 10 per cent, while seeking a closer fit between present regime and its GST successor.
  • Service Tax payable for  Hotel accommodation in excess of  1,000 per day and air conditioned restaurants with liquor license.
  • Tax on all services provided by hospitals with 25 or more beds with facility of central air conditioning.
  • Service Tax on air travel both domestic and international raised.
  • Services provided by life insurance companies in the area of investment and some more legal services proposed to be brought into tax net.
  • All individual and sole proprietor tax payers with a turn over upto Rs 60 lakhs (Rs 6 million) freed from the formalities of audit.
  • Penal provision for Service Tax Central Excise and Custom laws are being rationalised to encourage voluntary compliance.
  • Proposals relating to Service Tax estimated to result in net revenue gain of Rs 4,000 crore (Rs 40 billion).


  • Direct tax sops to result in revenue loss of Rs 11,500 crore
  • Net tax to Centre will be Rs 6,64,457 cr. Non-tax receipts pegged at Rs 1,25,435 crore.
  • FY 12 fiscal deficit seen at Rs 4.12 lakh crore
  • Budget estimates for 2011-12 projects Rs 9,32,440 crore – an increase of 24 per cent.
  • Net market borrowing for 2011-12 seen at Rs 3.43 trillion.
  • Revised gross market borrowing for 2010-11 at Rs 4.47 trillion
  • Net market borrowing for 2011-12 seen at Rs 3.43 trillion.
  • Revised gross market borrowing for 2010-11 at Rs 4.47 trillion.
  • Disinvestment in 2011-12 seen at Rs 400 billion

  • Fiscal deficit seen at 5.1 percent of GDP in 2010-11
  • Fiscal deficit seen at 4.6 percent of GDP in 2011-12
  • Fiscal deficit seen at 3.5 percent of GDP in 2013-14


  • Total expenditure in 2011-12 seen at 12.58 trillion rupees
  • Plan expenditure seen at Rs 4.41 trillion in 2011-12, up 18.3 percent
  • Gross tax receipts seen at Rs 9.32 trillion in 2011-12
  • Corporate tax receipts seen at Rs 3.6 trillion in 2011-12
  • Tax-to-GDP ratio seen at 10.4 percent in 2011-12; seen at 10.8 percent in 2012-13
  • Customs revenue seen at Rs 1.52 trillion in 2011-12
  • Factory gate duties seen at Rs 1.64 trillion in 2011-12
  • Non-tax revenue seen at Rs 1.25 trillion in 2011-12
  • Service tax receipts seen at Rs 82,000 crore in 2011-12
  • Telecom fees, auction of broadband spectrum to raise Es 296.5 billion in 2011-12


  • Subsidy bill in 2011-12 seen at Rs 1.44 trillion
  • Food subsidy bill in 2011-12 seen at Rs 605.7 billion
  • Revised food subsidy bill for 2010-11 at Rs 606 billion
  • Fertiliser subsidy bill in 2011-12 seen at Rs 500 billion
  • Revised fertiliser subsidy bill for 2010-11 at Rs 550 billion
  • Petroleum subsidy bill in 2011-12 seen at Rs 236.4 billion
  • Revised petroleum subsidy bill in 2010-11 at Rs 384 billion
  • State-run oil retailers to be provided with Rs 200 billion cash subsidy in 2011-12


  • Inflation seen at 5 percent in 2011-12
  • Economy expected to grow at 9 percent in 2012, plus or minus 0.25 percent.

3 thoughts on “India Budget 2011/12 What matters most!

  1. I am hoping that the loads of black money will be brought back and taxed reducing my tax burden… (day dreaming)

    the other thing i hoped for in the budget was something for small businesses – it seems strange that the system of taxation seems the same for me and an international conglomerate – a single window would be so good for companies that have a turnover under x …
    if i spend half my time in compliance – how am i supposed to generate value ?

  2. Harini , the first 10 words in ur comment reminded me of the I dream a dream speech.
    nothing much is happening and will happen on that front …Hassan Ali the largest tax defaulter has seen a lot of largess from the ED and the Tax dept… no wonder he could shake the Maharashtra political scene…

    Have u ever faced a tax scrutiny? i think not … there are double standards in this country… rules are different for different people

    U dont fund a political party .. do u ? So dont expect anything in return for paying taxes…
    it is like what a clerk in bmc once said govt hamko office aneko paisa deti hai …kam karne ke liye nahi
    one whole session went by and there was no passing of any laws ….
    compliance is a mind boggling madness kyc and crap is utter nonsense
    and a strain on our gdp…
    sad bit is to invest 15000 there are so many hurdles …
    u want to invest 15000 crores … move them thru havala and ucan white wash them
    in a week … what are PNs?

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