Personal Tax Down & Fiscal Deficits Up in Indian Union Budget 2009-2010
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New Delhi, India, 7 July 2009. India’s 2009-10 budget was announced yesterday which gives increases in personal tax exemption limits. It also enacts a wide rage of stimulus measures spanning a variety of industries. This is despite a growing fiscal deficit.
The new 2009-10 budget was formed with as the government seeks to revive its GDP output to its 9 percent average over the past three fiscal years from its dismal 6.7 percent in 2008-09. [br]
New Delhi, India, 7 July 2009. India’s 2009-10 budget was announced yesterday which gives increases in personal tax exemption limits. It also enacts a wide rage of stimulus measures spanning a variety of industries. This is despite a growing fiscal deficit.
The new 2009-10 budget was formed with as the government seeks to revive its GDP output to its 9 percent average over the past three fiscal years from its dismal 6.7 percent in 2008-09. [br]
Three main stimulus measures were proposed. These are personal tax relief for individuals, increased spending on public projects, and the RBI’s monetary easing and liquidity-enhancing actions.
Tax concessions in the past resulted in the fiscal deficit increasing from 2.7 percent in 2007-08 to 6.2 percent of GDP in 2008-09. It is unclear whether or not this will increase this year, with further fiscal accommodation.
Most of the spending on public projects relates to infrastructure, such as highways, railways, drainage, energy, agriculture, and more. It includes financing schemes for incremental lending.
Measures have been taken to encourage export-led growth via the Export Credit and Guarantee Corporation (ECGC) which will cover industries that have been hit hardest, into March 2010.
Micro-lending and small business lending and financing will be encouraged through an Rs.4,000 crore fund which will stimulate liquidity to rural and small industry. Many of these producers rely on exports for survival.[br]
A package to aid the printed media industry will begin to non-governmental advertisers. It will waive the standard agency commissions if these ad buyers can prove loss of revenue. This will be in effect from 30 June 2009 to 31 December 2009.
Personal tax changes will mean that tax exemption limits are higher. This is good news, especially for those that earn more than Rs10 lakh per year, as their 10 percent surcharge will disappear. No changes were made to corporate tax rates.
For senior citizens, the income tax exemption limit has been increased by Rs15,000, and by Rs10,000 for everybody else. Also, wealth tax exemption limits have doubled from Rs15 lakh to Rs20 lakh.
There are increased deductions for medical treatment and maintenance for dependents with severe disabilities, rising from Rs75,000 to Rs1 lakh.
There will no longer be a tax on fringe benefits employees receive, which employers previously had to pay.
Simply filing taxes will be easier, as well, with the process becoming simplified. In addition, quicker refunds can be expected.
Efforts to increase educational spending have also been made, with yearly deductions on interest from higher education loans being expanded.
Dwayne Ramakrishnan, EconomyWatch.com
