Union Budget 2011: New Income-Tax, excise duty, service tax proposals

The Finance Minister has increased the exemption limit for individuals to Rs1.80 lakh. However, the biggest surprise was proposals for senior citizens. The DTC, scheduled to be effective from April 2012, would be worth waiting for taxation issues to be made clear for individuals and corporates

After the bonanza announced by railway minister Mamata Banerjee, individual taxpayers were expecting similar goodies from the finance minister.

However, Pranab Mukherjee did not offer too much relief to individual taxpayers except raising income tax (I-T) exemption limit to Rs1.80 lakh from Rs1.60 lakh. There is no change in the tax exemption limit for women.

Mr Mukherjee said, "Last year, I provided relief to individual taxpayers by broadening the tax slabs. To take us closer to direct tax code (DTC) rates, I propose to enhance the exemption limit for the general category of individual taxpayers from Rs1,60,000 to Rs1,80,000 this year. This measure will provide a uniform tax relief of Rs2,000 to every taxpayer of this category."

The DTC is expected to effective from 1 April 2012.

The finance minister (himself a senior citizen), however, surprised individual senior citizens. He lowered the age limit for senior citizens to 60 years from 65 years and also increased the I-T exemption limit to Rs2.50 lakh from Rs2.40 lakh. For every senior citizen aged 80 years and above, the income-tax exemption limit has been raised to Rs5 lakh.

Girish Batra, chairman and managing director, NetAmbit, said," Hike in exemption limit will mean more disposable income in hands of consumers likely to be channelise into savings instruments and hence more demand for personal finance products. Given high interest scenario, the short term deposits, debt focused mutual funds, FMPs are most likely to benefits. Also high yield is another reasons why individual would put the money into saving instruments than spending. Further reduction in senior citizen age would provide fillip for retirement products demand including insurance, health insurance, savings schemes and retirement homes. Higher exemption limit is icing on the cake. Implications are similar for new category of very senior citizens created with people of 80 years of age."

However, Jyothi Prasad, investment banking, Asit C Mehta Investment Interrmediates Ltd, said, "Nothing exciting happened in the individual income tax (norms) in terms of any significant changes in slabs and no change in rates. This is likely to be a sentiment spoiler for the average middle class salaried person. Therefore this (the Budget) was not as populist as was expected."

The finance minister, presenting his sixth Budget, said that the government proposed to introduce the Constitution Amendment Bill in the current session to pave the way for the introduction of the long-awaited Goods and Services Tax (GST) regime. GST would subsume most of the Central and State taxes like excise and sales tax, making rules easier for the industry and other taxpayers.

He said under 'Mission Mode' projects, the government released funds to 31 projects received from States or Union Territories (UTs) for computerisation of commercial taxes, which will allow States to align with the rollout of the GST regime.

A new scheme with an outlay of Rs300 crore would also be launched to provide assistance to States to modernise their stamp and registration administration and roll out e-stamping in all the districts in the next three years, the FM said.

While widening the service tax net, Mr Mukherjee also brought all services provided by hospitals with 25 or more beds that have centralised air-conditioning. The levy is also extended to diagnostic tests of all kind.

"Extending service tax on medical checkups and diagnostic services would make medical services costlier. With the already existing skyrocketing prices of medical services, this would be a big drain on the pockets of senior citizens who avail these services on a regular basis and have very few sources of income," said Hiren Dhakan, associate fund manager, Bonanza Portfolio Ltd.

Here are the new tax proposals from the Union Budget 2011-12...

The finance minister said, "My proposals on direct taxes are estimated to result in a revenue loss of Rs11,500 crore for the year. Proposals relating to indirect taxes are estimated to result in a net revenue gain of Rs11,300 crore, leaving a net loss of Rs200 crore in the Budget."

DIRECT TAXES: Net loss from direct tax proposals are estimated at Rs11,500 crore for the year.

1. Personal Taxes:

  • Income-tax exemption limit raised to Rs1.80 lakh from Rs1.60 lakh for the general category
  • No changes in the I-T exemption limit for women (at present it is Rs1.90 lakh)
  • Tax exemption for senior citizens raised to Rs2.50 lakh from Rs2.40 lakh
  • Tax exemption eligibility for 'very senior' citizens aged 80 years and above raised to Rs5 lakh
  • Govt to introduce new, revised and simplified from 'Sugam' to reduce the compliance burden for small tax payers falling within presumptive taxation
  • The window for additional deduction of Rs20,000 for investment in long-term infrastructure bonds extended for one more year.

2. Corporate Taxes

  • Surcharge on domestic companies reduced to 5% from 7.5%
  • Minimum Alternate Tax (MAT) increased to 18.5% from 18%
  • MAT to be levied on developers as well as units operating in Special Economic Zones (SEZs)
  • Tax on dividends received by an Indian company from its foreign subsidiary reduced to 15%
  • Benefit of investment linked deduction extended to businesses engaged in the production of fertilisers.
  • Investment linked deduction to businesses developing affordable housing.
  • Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200%.
  • System of collection of information from foreign tax jurisdictions to be strengthened.

INDIRECT TAXES: Excise and customs duty proposals to result in net gain of Rs7,300 crore.

  • Standard rate of Central Excise duty maintained at 10%
  • No change in CENVAT rates
  • 130 items, mainly from the consumer goods category, brought into the Central Excise regime. Remaining 240 items to be brought into the tax net when general sales tax (GST) would be introduced. Nominal 1% central excise duty would be charged on these 130 items entering the tax net. No CENVAT credit for manufacturers of these items.
  • Basic food and fuel and precious stones, gold and silver jewellery, except branded ones, to be exempted.
  • Lower rate of Central Excise duty increased to 5% from 4%.
  • A levy of 10% on branded garments. Credit of tax paid on inputs, capital goods and input services would be available to manufacturers of these products. In addition, full SSI exemption is also extended to these products.
  • Peak rate of customs duty maintained at 10% in view of the global economic situation.
  • Basic customs duty on agricultural machinery reduced to 4.5% from 5%.
  • Basic Custom Duty reduced on micro-irrigation equipment from 7.5% to 5%.
  • De-oiled rice bran cake to be fully exempted from basic Custom Duty. Export Duty of 10% to be levied on its export.
  • Export duty on all types of iron ore unified at 20% ad valorem.
  • Basic customs duty on petcoke and gypsum (both used as critical raw material in cement industry) reduced to 2.5%.
  • Full exemption from basic Customs Duty and a concessional rate of Central Excise Duty extended to batteries imported by manufacturers of electrical vehicles.
  • Concessional Excise Duty of 10% to vehicles based on fuel cell technology.
  • The excise duty on LEDs reduced to 5% from 10% and special CVD (4% at present) fully exempted.
  • Customs duty on solar lanterns cut to 5% from 10%.
  • Crude Palm Stearin, used in the manufacture of laundry soap fully exempted from basic customs duty.
  • Full exemption from import duty that is available to spares and capital goods required for ship-repair units extended to imports by ship-owners too.
  • Reduction in basic customs duty on raw pistachio to 10% from 30%.
  • Reduction in basic customs duty on bamboo for agarbatti to 10% from 30%.
  • Reduction in basic customs duty on lactose for the manufacture of homeopathic medicines to 10% from 25%.
  • Reduction in central excise duty on sanitary napkins, baby and adult diapers to 1% from 10%.

SERVICE TAXES: Service tax proposals to result in net revenue gain of Rs4,000 crore.

  • Service tax widened to cover hotel accommodation charging above Rs1,000 a day, A/C restaurants serving liquor.
  • Tax on all services provided by hospitals with 25 or more beds with facility of central air-conditioning.
  • Service tax on air travel increased by Rs50 for domestic travel and Rs250 for international travel in economy class. On higher classes, it will be 10% flat.
  • Services provided by life insurance companies in the area of investment and some more legal services proposed to be brought under the tax net.
  • All individual and sole proprietor taxpayers with a turnover up to Rs60 lakh freed from the formalities of audit.
  • To encourage voluntary compliance, the penal provisions for Service Tax are being rationalised. Similar changes being carried out in Central Excise and Custom laws.





5 years ago

I would like to know the % of excise duty to be paid for the finished product of tablets


6 years ago

now excise duty in on how many turnover?


6 years ago

change of rate namkeen & sweets


6 years ago

Excise duty applicable on turnover of Rs 15000000


6 years ago

can i get the 130 items list

krishna kejriwal

6 years ago

there were no encouragement in education sector......


6 years ago

excellent and precis


6 years ago

Can individual apply for Service Tax Registration Number ?


6 years ago



6 years ago

When Service Tax Payment?
After Payment Received / at the time of invoice raised...


om prakash

In Reply to Rajesh 6 years ago

after payment recd then y make the service tax payment


6 years ago

can i get the list of 130 items ?

ks soodan

6 years ago

I think with the existing uncontrolled rate of inflation there could not be a better budget than this. It is a well balanced budget catering to every ones requirment without compromising with the growth and development of country.The golden aspect of the budget is consideration for directly handing over the aid/help to farmers or PBL. At present not more than 5% reach to them-aid disappear in the hands of middle men involved in the chain. I would call this budget simple ,straight forward and has direct or indirect bearing to whole nation.


6 years ago


Ramkishan Tiwari

6 years ago

I am also not happy with budget

harish sahni

6 years ago

can i get the list of 130 items ?

Union Budget 2011: It does not hold much promise for senior citizens

The finance minister reduced the qualifying age for senior citizens to 60 years; the I-T exemption limit has been raised to Rs2.50 lakh and a new category of ‘very senior’ citizens has been introduced—but experts and commentators feel that much more could have been done 

The provisions allocated for senior citizens in Budget 2011-2012 are being regarded as a dampener. Experts and senior citizen commentators view it as a cosmetic change, which wouldn't make much of a difference.

Finance minister Pranab Mukherjee announced the following measures for senior citizens: reduction of the qualifying age to 60 years from 65 years, enhancing exemption limit to Rs2.50 lakh from Rs2.40 lakh and creating a new category of 'very senior citizens', 80 years and above, who will be eligible for a higher exemption limit of Rs5 lakh.  

"I would say that we are not only back to where we started from, we have landed behind from square one," said Kaka Samant, GIC Pensioners Association. "It is a good move to bring the senior citizens' age limit to 60 years, but with this (raging) inflation, a marginal increase of Rs10,000 in exemption limit for senior citizens does not serve any purpose," he added.

Moneylife Foundation, in a Position Paper for senior citizens, had suggested that the age limit for senior citizens should be brought down to 60. Also, it was suggested that the exemption amount should be increased for senior citizens. The minister, though did not increase the exemption limit overall, created a 'very senior citizens' category, which will have the benefit of exemptions up to Rs5 lakh.

The recommendations were sent to the ministry along with a forwarding letter by
Dr SA Dave, former chairman of the Securities and Exchange Board of India (SEBI). After the minister's speech today, Dr Dave said, "Of course, reducing the age limit is a good move. But a slight relief in term of exemptions is not much. More could have been done, and more has to be done."

Professor Kanu Doshi, renowned chartered accountant, finance commentator and member of the board of directors of several companies, said, "The tax deduction at source for senior citizens could have been raised from Rs10,000 to Rs25,000. The changes made have been nominal. What we must see is that the elderly get the benefits from these reforms because often, financial institutions and companies are very uncooperative."

Lack of provisions on healthcare has come as a disappointment, because that is the most important concern for the elderly, especially with growing healthcare costs, said Prof Doshi. The Sastry Committee report, which talks of universal access to healthcare, is still sitting on the shelf. Mr Samant said that it is high time the recommendations are implemented, which would prove to be beneficial for the elderly.

Mr Samant also added, "While it is good to make provisions for families living below the poverty line, the bar should be raised to people who are above the poverty line. If the earning member falls ill and goes unattended, the family goes down below the poverty line. The government should stop such disasters from happening and make provisions accordingly."




6 years ago


Union Budget 2011: Export duty hike on iron ore may hurt Sesa Goa most

Finance minister has hiked duty on iron ore export to 20% in order to restrict export and conserve resources. The duty increase would hurt Sesa Goa, the largest private exporter of iron ore from the country

The finance minister today proposed to increase the export duty on all types of iron ore to a uniform 20%, a decision that will hurt iron ore exporters, particularly Sesa Goa.

Sesa Goa is the largest exporter of iron ore in the private sector and the company's stock price lost 7% (about Rs20) to Rs262.30 on the Bombay Stock Exchange today, while the benchmark Sensex closed up 0.69%.

Finance minister Pranab Mukherjee proposed to increase the export duty on "lumps" (one type of iron ore) from 15% to 20%, and the duty on "fines" from 5% to 20%, saying that iron ore is a natural resource that needs to be conserved. "Fines" constitute the bulk of exports from the country.

"The country's exporters of iron ore, those who mainly sell fines, will surely be affected by this increase in duty and Sesa Goa would be adversely hit as most of the company's business comes from the export of fines," Alok Kumar Nemani, analyst at Nomura Financial Advisory and Securities (India), told Moneylife.

Sesa Goa managing director PK Mukherjee declined to comment on the duty hike.

On the other hand, the finance minister has withdrawn the export duty on iron ore pellets, apparently to enhance exports after value-addition. Iron ore is the main ingredient for steel production.

Sajjan Jindal, vice chairman and managing director, JSW Steel, said, “The hike on export duty on iron ore fines and lumps to 20% advalorem is most welcome. I am sure that this will lead to greater value addition at home and encourage the domestic steel industry."

"This duty hike could also cause an increase in iron ore prices," Mr Nemani said.

India, the world's third largest iron ore producer, mined 218 million tonnes of iron ore in 2009-10 and exported nearly half of this. Sesa Goa is the country's largest producer and exporter of iron ore in the private sector. It exports almost 80% of its production, most of which is the "fines" quality of ore.

However, National Minerals Development Corporation (NMDC), another major iron ore producer, would not be affected much as the state-owned company exports only about 5%-10% of its production.

"With this increased export duty on fines, Sesa Goa's profitability would come down by 15%-18%," said an analyst from a Mumbai-based financial services company.

Steel minister Beni Prasad Verma was seeking a control on the export of iron ore, whereas major iron ore producing states like Orissa and Chhattisgarh were looking for a ban on exports.

The analyst said, "India has abundant reserves of iron ore, and export duty has been increased to preserve iron ore for the future."



radhakrishnan iyer

6 years ago

Its very foolish on part of the Finance Minister to impose a duty hike for Iron ore fines.No steel mill in India has the technology to convert Iron ore fines into steel.He has been wrongly advised by eminent people like Sajjan Jindal et at.

We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)