Finance Minister Arun Jaitley in his first full-year Budget did not provide tax breaks to the middle class disappointing millions. Currently, income up to Rs 2.50 lakh is not taxed.
However, Mr Jaitley proposed raising health insurance premium deduction from Rs 15,000 to Rs 25,000 and transport allowance from Rs 800 per month to Rs 1,600 per month, considered to be a small relief to the salaried class.
"Tax payers will benefit to the extent Rs 4,44,200 from the exemptions announced," Mr Jaitley said.
The proposed hike in service tax and education cess from 12 per cent to 14 per cent will make many services costlier. Making phone calls would be costlier; eating out in restaurants will also become expensive. (Read: Phone calls, pizzas, houses to cost more)
Excise on cigarettes has been raised to 15 per cent and 25 per cent for different categories. This will make cigarettes costlier.
Mr Jaitley also scrapped wealth tax but introduced a "super-rich surcharge" on those who earn Rs. 1 crore or more a year. (Read: Additional tax on super-rich)
Meanwhile, the Finance Minister has reduced tax on corporates to 25 per cent over four years from the current 30 per cent. This will boost spending and job creation, he said.
India's corporate tax of 33.99 per cent, including various surcharges, was higher than Asia's average corporate tax rate of 21.91 per cent in 2014, and a global average of 23.64 per cent, according to consultant KPMG.
The announcement on corporate tax, followed by the postponement of the General Anti-Avoidance Rules or GAAR by two years, caused the Sensex to hit an intraday high during Mr Jaitley's Budget speech. It had dipped briefly earlier because the Finance Minister said the government will meet the fiscal roadmap to reduce deficit to 3 per cent of GDP in three years instead of two years.
But as Mr Jaitley ended his speech, the Sensex was falling again and was soon trading with an over 300-point loss. (Read more)
The Budget presented today has been described by analysts as growth-oriented as the Finance Minister committed additional funds for infrastructure development.
Other main announcements were:
- GDP growth seen at between 8 per cent and 8.5 per cent in 2015-16
- Aim to reach double digit growth rate
- Disinvestment target will be Rs 41,000 crore
- A comprehensive new law on black money soon
- Proposal to create a universal social security system for all Indians
- Investment in infrastructure will go up by Rs 70,000 crore
- Government to provide Rs 7,940 crore capital infusion to state-run banks
- Government to develop a sovereign gold bond and introduce Indian-made gold coin
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