The Government of India has announced and proposed its Union Budget for 2010 – 2011. The following have been announced.

Better income tax slabs which would benefit almost 60% of the tax payers. This can be elaborated as follows:

  • For those with income range between Rs.1.6 lakhs – Rs. 5 lakhs, the tax liability would be 10%.
  • For income varying between Rs. 5 lakhs – Rs. 8 lakhs, the tax liability would be 20%.
  • Income above Rs. 8 lakh will have a tax liability of 30%.

Keeping aside the above, the following key points should also be noted:

  • A proposed hike in the fuel prices has been a major amend. So, some of the benefits that come from the above tax savings would be catered to the fuel.
  • The higher inflation in food prices and related items would come from the above hike in fuel prices.
  • Fiscal deficit is proposed to be higher at around 5.5% for the coming year.
  • Enhanced deficit for current financial year is expected to be at 6.9% which is a huge disappointment.

Collectively, this stresses on the fact that benefits coming out of tax savings would be deviated towards paying more for the daily needs and utilities.

union-budget-2010

Higher fiscal deficit means that the Government income is less than its earnings. It meets this additional expense by printing surplus currency or by selling public assets. These public assets are basically made and supported by tax payers like us.

The budget certainly raises a hope as it has proposed to bring down the fiscal deficit in the next two years. But as has been seen in the past, the interim sees higher non-plan expenditure and that means increased fiscal deficit by the time the fiscal year comes to an end. So, we need to wait and watch to see what happens next!

There is no hike in service tax and which is welcoming for now. However, it remains to be seen if new occupations are being brought into the service tax bracket. But, until then, the public has to keep its fingers crossed.

Gems and jewel prices such as gold, silver and other precious stones are all set to rise. So, a warning to all those planning to get married or investing in a wedding must keep their pockets a bit more flexible!

It is agreed that the defence of the country is paramount and cannot be compromised on, still one fails to understand hike of another 4% in its expense on the country’s defence. This is especially when India continues to have a misfortune of having the majority of poor in the world and especially when they are dieing of hunger. Are we still afraid of others taking over our country despite being a nuclear power? At such a point, it is hard to understand the investment in nuclear resources if it is still not a good enough deterrent?

Excise duty is being increased for most of the manufacturing and capital goods segment. This is an effort towards fiscal discipline and management. But then, these minor benefits are taken away by pay commission reports that are recommended and implemented.

Almost Rs. 35,000 Crores have been raised by selling equity of public sector undertakings (supposedly owned by public) but none of this will be used for general benefit of public. It is likely that all will go into meeting the fiscal deficit.

You will pay more for your new television sets, air conditioners and cars. When will the Government understand that these items are no longer luxuries but utilities? It is tragic that these items get the same tax treatment as cigarettes and tobacco.

On the other hand, the extension of banking and interest facilities for real estate and housing sector is a step in the right direction. This would lead to stimulating many other related sectors like steel and cement in the economy. But it has to be ensured that these benefits are passed on to the general public by builders and developers through affordable housing.

It is not yet clear regarding the benefits of introducing new private banks. Rather than giving licenses to new banks, it is better to support existing banks in expanding their current networks. It has to be realized that the Indian financial market is still developing and major part of the population is still illiterate. They being subjected to aggressive private banking would mean that there will be more shocks and financial indiscipline. Many in public may end up losing money by trusting their savings to these new private banks.

In the end, let us hope that budgetary targets are met and no mid year surprises are thrown on the general public. They need to plan their budget too and it is possible only against a certain, stable Government budget.