Finance Minister P Chidambaram, while presenting his General Budget for the year 2013~14 to the Indian Parliament on February 28 this year, has offered no major tax sops, but instead has socked the super-rich with a surcharge, raised duties on mobile phones, cigarettes and imported luxury vehicles, and introduced tax deduction at source (TDS), on sales of property above INR. 50 Lakhs. This last fullfledged budget of UPA-II just ahead of the forthcoming 2014 General Elections seeks to garner additional resources to balance the budget, while at the same time ensuring that adequate room is there for poll-populism. FM Chidambaram has thus striven to balance growth imperatives with fiscal prudence, by stepping up expenditure in social sectors and cutting subsidies. He pegs the fiscal deficit at 5.2% of GDP in 2013- 14, and wants to take it down to 4.8% in 2014-15. Defence allocation has risen marginally, by 14%, to INR. 2 Trillion.
Without tinkering with the basic slabs in income tax, the FM has given a benefit of INR. 2,000 to individuals with a taxable income of upto INR. 5 Lakhs. First-time home buyers get an additional interest deduction of INR. 1 Lakh for home loans above INR 25 Lakhs and INR. 1.5 Lakhs for home loans upto INR, 25 Lakhs. This is over and above the current INR. 1 Lakh deduction allowed for self-occupation. The ‘Super-rich’, or persons with income of over INR. 1 Crore, have to pay a 10% surcharge, and likewise, for corporate entities with a taxable income of INR. 10 Crore, the surcharge has been raised from 5 to 10%. Foreign companies will now pay an increased surcharge of 5%, up from 2%. The Budget proposes that the surcharges will be in existence for just a year, while continuing the 3% educa-tion Cess on all tax payers. The Finance Minister has also proposed a TDS of 1% on all transfers of immovable properties for a consideration of above INR. 50 Lakhs. Agricultural land, however, is exempt. While Securities Transaction Tax (STT) has been marginally reduced, the Minister has introduced a new Commodities Transaction Tax (CTT) on nonagricultural commodities futures. The Budget does not make any changes in the peak Customs and Excise Duties or Service Tax, but it has notched up import duty on high-end luxury cars, motorcycles and yachts from 75 to 100%, and excise duty on SUVs from 27 to 30%. Cigarettes, cigars, cigarillos and cheroots will attract an additional 18% excise duty. Dining at air-conditioned restaurants will cost more, as service tax has been extended to such establishments that were earlier exempted if they did not serve liquor. Mobile phones costing above INR. 2,000 will attract a 6% excise duty instead of the current 1%. Marbles and silver manufactured from smelting zinc or lead, and readyto- wear garments, carpets and floor-coverings made of Coir and Jute will become cheaper. Vocational courses in state-aided institutions and agricultural- testing facilities have been exempted from service tax. One million service tax defaulters have been offered a voluntary compliance encouragement scheme under which penalty and interest will be waived for returning to the tax fold.
Chidambaram has also hiked outlays for health, water and sanitation, for SCs/STs and Tribals, and for Rural Development. He has pegged the total expenditure at INR. 16.653 Trillion, with Plan expenditure accounting for INR. 5.55 Trillion, while non-plan expenditure is estimated at INR.