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Indian Budget 2011-12-Full Text of Budget Speech
Shri Pranab Mukherjee, Minister of Finance- February 28, 2011


PART - B

Madam Speaker, I shall now present my tax proposals.

139. In the formulation of these proposals, my priorities are directed towards making taxes moderate, payments simple for the taxpayer and collection of taxes easy for the tax collector.

Direct Taxes

140. As Government's policy on direct taxes has been outlined in the DTC, which is before Parliament, I have limited my proposals to initiatives that require urgent attention.

141. Last year I provided relief to individual taxpayers by broadening the tax slabs. To take us closer to DTC rates, I propose to enhance the exemption limit for the general category of individual taxpayers from `1,60,000 to `1,80,000 this year. This measure will provide a uniform tax relief of `2,000 to every taxpayer of this category.

142. Senior citizens deserve our special attention. For them, I propose

to reduce the qualifying age, from 65 years to 60 years;

to enhance the exemption limit from `2,40,000 to `2,50,000;

To create a new category of Very Senior Citizens, eighty years and above, who will be eligible for a higher exemption limit of `5,00,000.



143. In the case of corporates, my initiative of phasing out the surcharge continues. I propose to reduce the current surcharge of 7.5 per cent on domestic companies to 5 per cent. Simultaneously, I propose to increase the rate of Minimum Alternate Tax (MAT) from the current rate of 18 per cent to 18.5 per cent of book profits to keep the effective rate of the MAT at the same level. As a measure to ensure equal sharing of the corporate tax liability, I propose to levy MAT on developers of Special Economic Zones as well as units operating in SEZs.

144. To attract foreign funds for financing of infrastructure, I propose to:

create special vehicles in the form of notified infrastructure debt funds;

subject interest payment on the borrowings of these funds to a reduced withholding tax rate of 5 per cent instead of the current rate of 20 per cent;

exempt the income of the fund from tax.

145. In order to promote savings and raise funds for infrastructure, an additional deduction of `20,000 for investment in long-term infrastructure bonds was notified by the Central Government in 2010-11. I propose to extend this window for one more year.

146. It has been represented that the taxation of foreign dividends in the hands of resident taxpayers at full rate is a disincentive for their repatriation to India and they continue to remain invested abroad. For the year 2011-12, I propose a lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary. I do hope these funds will now flow to India.

147. In order to give a boost to production in the agriculture sector, I propose to extend the benefit of investment linked deduction to businesses engaged in the production of fertilisers.



148. Considering the importance of housing, I also propose investment linked deduction to businesses which develop affordable housing under a notified scheme.

149. In this Decade of Innovation, I enhanced the weighted deduction on payments made to National Laboratories, universities and Institutes of technology, for scientific research, to 175 per cent in the last budget. I propose to further enhance this to 200 per cent.

150. In order to strengthen our system of collection of information from foreign tax jurisdictions, I propose to provide a toolbox of counter measures to discourage transactions with entities located in non-cooperative jurisdictions as may be notified by the Government.

151. My proposals on direct taxes are estimated to result in a net revenue loss of `11,500 crore for the year.

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