| Budget 2002-2003
Speech of
Shri Yashwant Sinha
Minister of Finance
28th February, 2002
PART B
101. Sir, I now present my tax proposals.
102. I have formulated my tax proposals against the backdrop of
the current economic slow-down. My tax proposals are intended to revive demand, promote
investment, accelerate economic growth and enhance productivity. They are also aimed at
widening the tax base, rationalization and simplification of tax structures and
encouraging voluntary compliance.
103. I present my indirect tax proposals first.
104. Sir, in my earlier budgets I have made strenuous efforts to
address the issues of cascading, distortions, anomalies and inequities in the commodity
tax structure. I have achieved significant rationalization of tax structures relating to
both excise and customs duties. The number of rates are few, and procedures more
transparent than before. The service tax, though confined to limited number of services,
has gained ground.
105. In 2000-2001, I had introduced the rate of 16% as the rate
of Central Value Added Tax (CENVAT) in the excise duty structure. Last year, I had reduced
the three rates of special excise duty to a single rate of 16%. This rationalization in
the duty structure has considerably reduced disputes and litigation and the cost of
compliance to the assessees. Above all, it has put in place a system, which is stable,
just and rational. We only need to refine it further.
106. I propose to abolish the 16% special excise duty on a
number of items. Henceforth, the special excise duty shall be confined to the following 8
items only:
‰ Polyester Filament Yarn
‰ Motor cars
‰ Multi Utility Vehicles
‰ Tyres for replacement
‰ Aerated soft drinks and soft drink concentrates
‰ Air conditioners
‰ Pan Masala, and
‰ Chewing Tobacco & miscellaneous tobacco preparations
107. I propose to do away with the concessional rate of 8%
excise duty applicable to LPG, kerosene, auto CNG and diesel engines upto 10 HP which will
now attract the cenvat rate of 16%.
108. Mr. Speaker Sir, the rates of excise duty have now been
considerably moderated. However, several exemptions still continue. In my last budget I
had imposed excise duty at a moderate rate of 4% on a few items. I propose to increase
this rate from 4% to the next slab of 8% this year. Simultaneously, I propose to impose
excise duty at 4% on a few more items, which have remained exempted so far.
109. Cigars, cheroots and cigarillos of tobacco or tobacco
substitutes which have been exempt so far shall attract 16% CENVAT.
110. In view of the abolition of Administered Price Mechanism on
petroleum products and in order to provide for the subsidy on LPG and kerosene oil, I
propose to make some changes in the duty structure of petroleum products. The rate of cess
applicable to indigenous crude oil under the Oil Industry (Development) Act will be
increased from Rs 900 per metric tonne to Rs 1800 per metric tonne with effect from 1st
March 2002. I propose to reduce the ad valorem rate of excise duty applicable to
motor spirit from 90% to 32%. However, I propose to impose on it a surcharge of six rupees
per litre. But the surcharge on ethanol doped motor spirit will be five rupees and twenty
five paise per litre.
111. Mr. Speaker, Sir, the Indian textile industry occupies an
important place in our economy. It is the second largest provider of employment after
agriculture. The Multi Fibre Agreement will be phased out by 2004. Domestic market has
already been opened up. Our textile industry has to prepare itself for the challenges
ahead.
112. I have carved out a special package of incentives for the
textile industry.
113. I propose to maintain the excise duty rates on yarns. At
present, cotton hank yarn is exempt from excise duty but is being widely misused. In order
to ensure that the benefit accrues only to the handloom weavers I propose to bring hank
yarn within the net of excise duty at 8%, but at the same time, provide for appropriate
subsidy on the price of hank yarn purchased by them. This will put an end to misuse and
target the subsidy better. The Ministry of Textiles would announce the details of the
subsidy scheme.
114. In order to enable the weavers to avail of CENVAT credit
scheme,
I propose to allow the weavers of grey fabrics to pay excise duty on an optional basis. I
propose to extend a similar option to the knitting sector.
115. Mr. Speaker, Sir, in all humility, I can claim credit for
introducing the CENVAT rate of 16% in the excise duty structure. However, in the case of
textiles, I am making an exception and granting a remission of 4%. The rate of excise duty
on fabrics, made ups and garments would be 12%. This special dispensation shall continue
upto 28.2.2005. Industrial fabrics would however continue at 16%.
116. At present, hand processing of textile fabrics by
independent processors is exempt from excise duty even if power is used on 12 specified
processes in the case of cotton fabrics or 7 specified processes in the case of man made
fabrics. I propose to confine this exemption to only 3 processes, namely, scouring,
hydro-extraction and calendering.
117. I propose to abolish the compounded levy scheme for
independent power processors as it is incongruous with the reduced rate of duty that I
have proposed.
118. Handloom sector is not affected by my budget proposals.
Excise duty exemption on handloom fabrics continues. I now propose to grant exemption to
handloom garments also from excise duty subject to certification by Handloom Export
Promotion Council.
119. In order to enable the textile industry to modernize itself
and acquire new technology, I propose to exempt excise duty on automatic shuttleless
looms. I also propose to exempt excise duty on specified processing machinery and
specified silk reeling, weaving and twisting machinery. The customs duty on such machinery
is also proposed to be reduced from 25% to 10%. I also propose to exempt specified jute
machinery from excise duty. I hope this package will enable the textile industry to face
global competition.
120. My proposals include special dispensation of excise duty
structure for the petroleum refineries located in the North East Region. With effect from
1st March 2002, the petroleum products produced by all these refineries shall be charged
to excise duty at half of the normal rates of excise duty otherwise applicable to
petroleum products.
121. Inland Air Travel Tax is exempted for air travel within the
North East States. I propose to extend this exemption on air travel to and from North East
States.
122. Tea industry is currently facing a number of problems in
the domestic as well as international markets for a variety of reasons. In order to
promote the interest of tea growers, I propose to reduce the excise duty on tea from Rs 2
per kg to Re.1 per kg.
123. We have to face the menace of HIV-AIDS with determination.
I propose to exempt specified anti-AIDS drugs from excise duty with effect from 1st March
2002.
124. Specified cold chain equipment are exempt from excise duty.
I propose to add three more equipment to this list to promote the preservation of fruits
and vegetables.
125. The excise duty exemption scheme for the small-scale sector
is applicable to granite. In view of the fact that it is not available to marble, I
propose to withdraw this exemption from granite also.
126. The scheme of excise duty assessment based on Maximum
Retail Price of goods has resolved valuation disputes in a dramatic way. I propose to
extend this scheme to 9 more categories of items this year, thus raising the number to 92
categories of items.
127. Mr. Speaker, Sir, the justification of taxing more services
does not require any elaboration. This year, I propose to extend the service tax to the
following services:
- Life insurance, including insurance auxiliary services relating to life insurance
- Inland cargo handling
- Storage and warehousing services (except for agriculture produce and cold storages)
- Event management
- Rail travel agents
- Health Clubs & Fitness Centres
- Beauty parlours
- Fashion designers
- Cable operators
- Dry cleaning services
128. Service tax is applicable to specified services provided by
banks and non-banking financial companies. I propose to extend the service tax to
corporate bodies that provide similar services.
129. The tax on these services shall come into force from a
notified date.
130. Our tourism industry has been adversely affected by recent
events. In December 2001, I had announced exemption from service tax on the services
provided by hotels. The exemption expires on 31st March 2002. I propose to extend this
exemption for one more year upto 31st March 2003.
131. Sir, I now present my proposals relating to customs duties.
132. The House may recall that, in my last budget, I had
announced that I would move progressively to reduce the peak rate of customs duty to 20%
within three years. I had also said that the modalities for this would be worked out in
time for the next budget. I had accordingly set up an Inter-Ministerial Working Group to
recommend the modalities. The Group has suggested a road map for this starting with this
year’s budget. After careful consideration of the Group’s report, I have decided
that, by the year 2004-05, there would be only two basic rates of customs duties, namely,
10% covering generally raw materials, intermediates and components and 20% covering
generally final products. The existing rates would be adjusted and subsumed in these two
basic rates with some exceptions on account of WTO bindings or higher tariffs for
agricultural products. In accordance with the road map, I propose to reduce the peak rate
from 35% to 30% this year. I also propose to make some changes to take care of some
current problems.
133. Our steel industry has been affected by slowdown in demand
and has suffered large losses. In order to reduce its cost of production I propose to
lower customs duty on a number of refractory raw materials by 10%. These include natural
graphite powder, silicon metal, sintered alumina, fused zirconia and boron carbide. I also
propose to reduce the duty on graphite electrodes of above 24 inches diameter from 25% to
15%.
134. Ships imported for breaking are charged to customs duty at
5% along with CVD and special additional duty. I propose to revise this by increasing the
basic duty on ships for breaking from 5% to 15% and exempting them from CVD and special
additional duty. This is to reduce the disparity between rolled products produced by the
steel plants and cheaper products produced from ship breaking.
135. The steel industry is troubled by imports of seconds and
defectives at cheaper prices. In order to address their concern I propose to increase the
basic customs duty on seconds and defectives of steel to the bound rate of 40%.
136. Non-ferrous metals are used for large number of
applications by different segments of industry. I propose to reduce the customs duty on
copper, zinc and lead from 35% to 25% and on aluminium and tin from 25% to 15%.
137. In the EXIM policy for the year 2000-2001, my colleague,
the Minister of Commerce and Industry announced the scheme of setting up Special Economic
Zones that are intended to provide comprehensive facilities at one place for export
production. Special Economic Zones would be entitled to procure duty free equipment, raw
materials, components, etc. whether imported or purchased locally. The benefit of such
exemption shall be applicable to both the developers of Special Economic Zones as well as
the units located therein.
138. In order to encourage development of world class
infrastructure facilities, I propose to reduce the customs duty on specified equipment for
Ports and Airports to 10%.
139. In view of the difficulties being faced by the civil
aviation sector, I propose to exempt duty on aeroplanes, helicopters, gliders, simulators
of aeroplanes and their parts and raw materials.
140. Mr. Speaker, Sir, India is signatory to the Information
Technology Agreement. The House may recall that, in 1998, I had announced that zero duty
regime on IT products would be preponed and implemented by 2003. However, the local
manufacturers have urged me strongly that it may be made effective only from the year
2005. This would give them an opportunity to gear up to meet the challenge of
international competition. I have decided to accept their demand. As a further measure of
assistance to indigenous industry, I propose to reduce the customs duty on a number of
hardware inputs to 5% and on certain capital goods to 15%. The duty on certain IT items
would be reduced to 10% or 5% as per the WTO binding.
141. The use of cellular phones is increasing by leaps and
bounds but import through unauthorized channels is a matter of concern. I therefore,
propose to exempt cellular phones and pagers from CVD. The basic customs duty is, however,
being increased from 5% to 10%.
142. Sir, I have repeatedly assured the House that our customs
tariffs would be pegged at appropriate levels to protect the interest of the farmers. In
my last budget I had increased the customs duty on tea, coffee, copra, coconut and
desiccated coconut to 70%. This year, I propose to increase the customs duty on tea and
coffee to 100% and on natural rubber, poppy seeds, pepper, cloves and cardamom to 70%. I
also propose to increase the duty on pulses from 5% to 10%.
143. I propose to reduce the customs duty on agricultural
machinery and implements from 25% to 15% to encourage our farmers to acquire new and
efficient technology.
144. A number of drugs are exempt from customs duty. I propose
to include eight more drugs used for treatment of cancer and some other critical diseases
in the list of fully exempted drugs. Vaccine for immunisation against Japanese
Encephalitis shall also be exempt from customs duty. It has been reported that certain
drugs that are presently exempted from customs duty are now made indigenously. In order to
provide reasonable incentive to the domestic manufacturers of these drugs, I propose to
impose a basic customs duty of 5% on these drugs.
145. India has a large number of diabetic patients. They have to
undergo frequent blood sugar tests. In order to provide some relief to them, I propose to
reduce the customs duty on Glucometers and test strips from 25% to 10%.
146. As a measure of rationalization and removal of anomaly I
propose to reduce the customs duty on non-PDS kerosene from 35% to 20% and increase the
customs duty on kerosene sold under the PDS scheme from 5% to 10%.
147. In order to promote interest in science, I propose to
reduce the customs duty on planetarium equipments, parts and accessories to 15% and also
exempt them from CVD and special additional duty of customs.
148. India has the technical capability to become an uplinking
hub for television channels for the SAARC countries. In order to promote state-of-the-art
uplinking facilities at competitive costs, I propose to reduce customs duty on certain
earth station equipment and studio equipment from 35% to 25%.
149. I propose to reduce the customs duty on cement and clinkers
from 25% to 20%. This should help in keeping the domestic prices under control.
150. The customs duty on imported liquors is bound at 182% for
the current year under the WTO. Accordingly, I propose to reduce the customs duty on these
items from 210% to 182%. I also propose to rationalize the rates of CVD applicable to
liquors and wines to 75% for value upto US $ 25 per case and 50% for others.
151. Passengers returning from abroad on transfer of residence
are allowed certain items of personal use on payment of customs duty at a flat rate of
35%. I propose to reduce this rate to 30% and also add a few more items like lap top
computers, portable photocopy machines, digital video disc players, video cassette disc
players in the eligible list of items. The overall limit is also being raised from Rs 1.5
lakh to Rs 5 lakh.
152. I propose to impose nominal customs duty of 5% on some of
the items that are exempt at present. I also propose to impose special additional duty on
certain other items that are currently subjected to 5% customs duty.
153. I have proposed a few other changes that are of a minor
nature. I have also proposed some legislative changes with regard to customs, excise and
service tax laws that are contained in the Finance Bill. I do not wish to take the time of
the House in elaborating on them in detail.
154. Mr. Speaker, Sir, the customs and excise duty structures
have been greatly simplified in the past few years. With the changes that I have proposed
the revenue from 16% CENVAT will be more than 85% of the total revenue from ad valorem
duties. In the next two years it can be reduced to one, namely 16%. The customs tariff
will also comprise of only two basic rates in three years’ time.
155. In my previous budgets, I have also made considerable
efforts to simplify procedures. However, the task is not yet complete. Our tax
administration needs to take full advantage of information technology. Our tax systems
need to encourage voluntary compliance, provide efficient service to the taxpayers,
eliminate unproductive work and enhance efficiency. The discretionary powers need to be
replaced by rule-based mechanism. All these aspects of tax administration deserve to be
examined in their entirety. I propose to set up an Expert Committee to make a
comprehensive study of these aspects.
156. My proposals on the excise side are estimated to result in
a revenue gain of about Rs 6700 crore in a year. On the customs side my proposals are
estimated to result in a revenue loss of about Rs 2200 crore. However, I anticipate
buoyancy in indirect tax revenue and estimate that the total collection next year would be
Rs 1,43,702 crore.
157. 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.
158. I now turn to Direct Taxes.
159. Personal Income tax rates have been at 10%, 20% and 30% and
corporation tax at 35% for several years. They are reasonable and therefore, I have left
them unchanged in my last four budgets. I do not propose to change them this year also.
160. At the same time, it is important to recognise the need for
specific interventions to provide a stimulus for industrial growth. I outline these now.
161. I have already mentioned the need to provide incentives for
fresh investments in the industrial sector. To give impetus to such investment, I propose
to allow additional depreciation at the rate of 15% on new plant and machinery acquired on
or after 1st April, 2002 for setting up a new industrial unit, or for expanding the
installed capacity of existing units by at least 25%.
162. There is disparity between the rates of Corporation tax
applicable to foreign companies and domestic companies. This disparity arose in the past
partly due to certain levies like surcharge being applicable to domestic companies but not
to foreign companies. To correct this, I propose to reduce the rate applicable to foreign
companies from 48% to 40%.
163. The small-scale industry sector has been making an
important contribution to economic growth, and deserves continued support. In order to
enable the Small Industries Development Bank of India (SIDBI) to augment its resources and
provide cheaper credit to the small scale sector, I propose to allow capital gains
exemption under section 54EC of the Income-tax Act to amounts invested in bonds issued by
SIDBI.
164. In my Budget for 2000-2001, I had announced the setting up
of a Credit Guarantee scheme for small-scale industries. Accordingly, the Credit Guarantee
Fund Trust for Small Industries has been constituted. I propose to grant full exemption
from tax to the income of this Trust.
165. Continuing the thrust given to the housing sector over the
last four years, I propose to allow the deduction for interest payable on housing loans
for self-occupied houses even where such houses are acquired or constructed after 31st
March 2003, as long as the acquisition or construction is completed within three years
from the end of the financial year in which the loan was taken. For giving a further
impetus to investment in the housing sector, I propose to extend the capital gains
exemption provided in section 54EC of the Income-tax Act to bonds issued by the National
Housing Bank.
166. The shipping industry in India is internationally
competitive and is capable of further growth. In my Budget for 2000-2001, I had provided
for a deduction of the entire profits of a shipping company if the amount deducted was
kept in a reserve for purchase of new ships. However, the aggregate of the amounts that
can be transferred to such reserve is limited to twice the amount of the paid up share
capital of the company. I propose to extend it to cover share premium reserve and general
reserve also. This reserve will not be considered while computing the book profits and
shipping companies would thus be out of the purview of minimum alternate tax (MAT).
167. Presently, banks are allowed to deduct upto 5% of their
total income against provisions made by them for bad and doubtful debts. In order to
strengthen the financial position of banks I propose to increase this allowance to 7.5% of
the total income. Further, in my budget for the year 1999-2000, I had granted an option to
banks to deduct upto 5% of their NPAs falling in the category of loss or doubtful assets
as on the last day of the accounting year. I propose to enhance this optional deduction to
10%, and also allow a similar option of deduction upto 10% of loss or doubtful assets to
public financial institutions.
168. There has been a persistent demand that the benefit of
carry forward and set off of past losses in cases of mergers of companies owning
industrial undertakings, should be extended to more sectors. The telecommunication sector,
in particular, is undergoing a phase of rapid consolidation and expansion. With a view to
encourage its growth, I propose to extend this benefit to companies providing telecom
services and eligible for deduction under section 80-IA. I also propose to constitute an
expert group to examine the extension of this benefit to other companies in the services
sector, including the financial services sector.
169. In order to provide further fiscal relief to the tourism
sector, I propose to take the following measures:-
Expenditure Tax on hotels will, henceforth, apply only to room
charges, and will be payable only where such charges are Rs 3,000 or more per day, as
against the existing threshold of Rs 2000 per day.
The deduction available under section 80HHD of the Income-tax Act in
respect of foreign exchange earnings of hotels or tour operators will be enhanced to bring
it in line with the deduction available to exporters under section 80 HHC.
A deduction of 50% of the profits earned by units setting up and
operating large convention centres will be allowed for 5 years under section 80-IB.
170. I have emphasised the importance of the entertainment
industry in Part A of my speech. To give a further boost to this fast-growing sector, I
propose to allow, for the next five years, a deduction of 50% of the profits earned by
units constructing and operating multiplex theatres in non-metropolitan towns.
171. As a measure for protection and regeneration of our
environment,
I propose to provide for an incentive by way of tax deduction under section 35AC of the
Income-tax Act in respect of amounts paid to a company or institution approved by the
National Committee for Social and Economic Welfare, for carrying out projects of softwood
plantation on degraded non-forest land. A deduction under this section will also be
available in respect of payments towards conservation of natural resources and
afforestation.
172. Last year, for ensuring a degree of transparency in the
affairs of charitable and religious trusts as well as certain other institutions claiming
exemption under section 10(23C), I had introduced provisions requiring them to publish
their accounts in a local newspaper, if their total receipts during a year exceeded Rs 1
crore. I have received a large number of representations pointing out the possibility of
misuse of such information by anti-social elements. In view of these representations, I
propose to delete this requirement. I further propose to rationalise certain provisions
relating to these trusts and institutions so as to allow the accumulation of any part of
their income only upto a maximum period of five years and to clarify that inter-trust
donations may only be made either from the corpus or from the current year’s income.
173. Following the Gujarat earthquake last year, I had granted a
100% tax deduction to donations made to certain approved charitable trusts and
institutions that were to be applied before 31st March 2002 in relief work. As such relief
work is still going on in many areas, I propose to extend the terminal date for
utilisation of such donations from 31st March 2002 to 31st March 2003.
174. Last year, I had rationalised the rules for valuation of
perquisites on the basis of their cost to the employer, except in respect of houses and
cars where different criteria are adopted for simplicity. To relieve the burden on lower
salaried employees, I propose to provide that no perquisites will be assessed for the
assessment year 2002-2003 in the case of employees whose taxable salary, excluding
perquisites, is upto Rs 1,00,000. For subsequent years, I propose to give an option to the
employer to pay the tax on perquisites on behalf of the employees.
175. Under section 89 of the Income-tax Act, a tax relief is
provided in case of additional tax burden imposed in any one year due to receipt of
arrears of salary. As a welfare measure, I propose to allow this relief also in cases
where family pension is received in arrears.
176. In continuation with the taxpayer friendly measures brought
about by me in my earlier Budgets, I propose to abolish the provisions of Chapter XXC of
the Income-tax Act, which require a clearance to be obtained from the Appropriate
Authority before registering a transfer of an immovable property.
177. Sir, some of the exemptions and deductions currently
provided in the Income-tax Act have become redundant and are not in harmony with the
moderate tax regime that we have in India. The Advisory Group on Tax Policy and tax
Administration for the 10th Plan has recommended deletion of a number of such exemptions.
I have carefully examined each recommendation of the Group and have come to the conclusion
that some of these exemptions are indeed unnecessary. I, therefore, propose to withdraw or
discontinue the exemptions, which are not required any longer.
178. The Advisory Group has also recommended deletion of various
exemptions granted to incomes of approved or notified bodies or institutions, including
educational and medical institutions. I do not think that the exemptions allowed to these
institutions and bodies, which are fulfilling social objectives, should be withdrawn.
However, I propose to require all such bodies and institutions to file returns of income
every year so as to enable a periodical verification of whether the prescribed conditions,
which primarily relate to application of the income, are being fulfilled and also to
enable the prescribed authority to withdraw the approval or notification of such entities
if they are found to have violated any such conditions.
179. Last year, I had withdrawn the tax-exemption allowed to
income earned by NABARD, National Housing Bank and SIDBI, since these institutions have
come of age and are working on commercial lines. For the same reasons, I propose to
withdraw this year the exemption allowed to income of the National Dairy Development
Board, Prasar Bharati and the Oil Industry Development Board.
180. Various amendments made over the years in the rules
relating to depreciation have given rise to a plethora of such rates for different types
of assets. The relevance and the need to continue with these rates, and whether they
should be scaled down to a maximum rate of 60%, should be a matter for open discussion.
The relevant details will be put up on the website of the Finance Ministry. After taking
into account the views expressed, a revised schedule of depreciation rates will be
notified.
181. Under the present system of taxation of dividends and
income from units, the company or the mutual fund pays a 10% tax, and the income is exempt
in the hands of the recipient. Such a system not only taxes income in the hands of a
person to whom it does not belong; it also militates against the pass-through status which
is the very essence of a mutual fund. There is also an inherent inequity in the present
system, which allows persons in the high-income groups to be taxed at much lower rates
than the rates applicable to them. These issues have been troubling me over the past four
years, and I am now convinced that the existing system must go. I, therefore, propose to
abolish the distribution tax of 10% on companies and mutual funds on the dividends or
income distributed by them. Such income will henceforth be taxed in the hands of the
recipients at the rates applicable to them, and will be subject to tax deduction at source
at the rate of 10%. In order to avoid a cascading effect, companies receiving such income
will be entitled to claim a deduction for the amount in turn distributed by them as
dividends. To continue the support given by me to equity oriented funds of the UTI and
other mutual funds, the income received during the financial year 2002-2003 by unit
holders of such funds will be taxed only at 10% as at present.
182. A tax rebate of 20% of the amount invested in certain
instruments specified in section 88 of the Income-tax Act is presently allowable to all
individuals and HUFs, as an incentive for retaining a part of their earnings in the form
of savings. Taxpayers in the higher tax brackets, however, do not require fiscal
incentives to save through the various designated instruments. I therefore propose to
allow the rebate at the existing rate of 20% only to persons having taxable income upto Rs
1,50,000. Persons having taxable income between Rs 1,50,000 and Rs 5 lakhs will henceforth
get a rebate of only 10% of the amount invested, and no rebate will be allowed where
taxable income exceeds Rs 5 lakhs. The special rebate of 30% for persons having taxable
salary income upto Rs 1 lakh will, however, continue. Further, while the existing limits
on the qualifying amounts of investment will remain, I propose to provide a clarification
in the law that the rebate will be allowed on investments made at any time during the
year, as long as the amount invested is less than the taxable income of the year.
183. Presently, tax exemption is available to certain categories
of employees receiving amounts upto Rs 5 lakhs as VRS compensation. I propose to extend
this exemption to employees of certain institutions of national or State-level importance
to be notified in this behalf.
184. I am also making some procedural changes which are included
in the Finance Bill.
185. A Scheme called "Sampark" is being launched by
the Income Tax Department, which will enable taxpayers to obtain information and forms
through the Internet. User-friendly software will be made available by the Department to
enable taxpayers to prepare their returns of income.
186. Effective use of information technology will depend
critically on strict compliance with the requirements relating to permanent account number
(PAN). I propose to make a specific provision in the Income-tax Act for imposing a penalty
of Rs 10,000 in all cases where a false PAN is quoted in documents relating to specified
transactions.
187. In 1998, I had prescribed certain high-value transactions
such as purchase or sale of motorcars and expenditure incurred in hotels and restaurants,
in which the permanent account number is to be compulsorily quoted. I propose to extend
this list of transactions provided in rule 114B of the Income-tax Rules to include
expenditure exceeding Rs 25,000 incurred in cash on foreign travel, purchase of bank
drafts exceeding Rs 50,000 in cash and making cash deposits exceeding Rs 50,000 in any
bank account. I further propose to introduce rules to provide that any transaction
specified in rule 114B which is incurred in cash must be reported within a certain period
to the Income-tax Department.
188. Sir, I have already stated that national security is an
overriding concern. Its cost has to be shared by all of us. I therefore propose to impose
a modest surcharge of 5% across-the-board on all categories of taxpayers, except
individuals and Hindu Undivided Families having total income upto Rs 60,000. The 2%
surcharge imposed last year in the wake of the Gujarat Earthquake is being abolished and
hence the net additional impact would be only 3%. I also propose to restrict the 100%
deduction of export profits allowed to certain units under sections 10A and 10B of the
Income-tax Act to a 90% deduction for the assessment year 2003-2004.
189. To sum up, Sir, my proposals made in this Budget on the
Direct Taxes will result in a revenue gain of Rs 6,000 crore, including the component of
surcharge of Rs 2,750 crore. I estimate that the direct tax revenue in 2002-2003 would be
Rs 91,585 crore.
190. Mr. Speaker, Sir, with these proposals I estimate total tax
revenue receipts for the Centre at Rs 1,72,965 crore and the fiscal deficit at Rs 1,35,524
crore or 5.3% of GDP.
191. Mr. Speaker Sir, this is a budget for consolidating,
widening and deepening the reform process. This is a budget devoted to development. This
is a budget to further promote partnership with the states for a better tomorrow for the
people of India.
192. Mr. Speaker, Sir, with these words, I commend the budget to
this august house.
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