101. Sir, I now present my tax proposals.
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
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
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
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
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
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
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
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
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
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
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 years budget.
After careful consideration of the Groups 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
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
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%
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
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
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
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
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
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.
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 years 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
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
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.
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.
also see : Budget
2002-2003 - Part 1