The Modi 2.0 government's maiden Budget Friday hiked petrol and diesel prices, raised import duty on dozens of items and increased tax on the super-rich as it sought to spur growth through higher spending and sops for startups, housing and corporates.
Presenting the Budget for 2019-20, Finance Minister Nirmala Sitharaman announced further opening up of aviation, insurance and media sectors to foreign investment while throwing a lifeline to the struggling shadow banks (NBFCs) to boost investment and lending in the economy.
She made no changes to the income tax slabs but hiked surcharge on the super-rich. Those with a taxable income of Rs 2 to 5 crore will now pay 39 per cent tax while those with more than Rs 5 crore income would pay 42.47 per cent.
"Those in the highest income brackets need to contribute more to the nation's development," she said.
Also, 2 per cent TDS on cash withdrawals exceeding Rs 1 crore and mandatory filing of returns by certain category of individuals was brought in with a view to tighten compliance.
With sluggish growth in tax revenues, she announced plans to sell stakes in PSUs and sought more dividend from the RBI and public sector banks and companies in order to boost revenue and bring down the deficit.
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For the same, excise duty and cess on petrol and diesel were hiked by Rs 2 per litre each and import duty on dozens of items ranging from gold to automobile parts and tobacco products was increased.
The customs duty on gold has been increased to 12.5 per cent from 10 per cent.
To spur consumption, she lowered corporate tax on companies with revenue of up to Rs 400 crore to 25 per cent from 30 per cent. Currently, the lower rate is applicable only to companies with revenue up to Rs 250 crore.
Sitharaman said the reduced tax rate would cover 99.3 per cent of corporates in the country.
The Budget also sought to boost 'Make in India' by way of reducing duties on certain inputs and raw materials and creating a level playing field by increasing duties on certain goods. Emphasis has also been placed on promoting electrical mobility by reducing customs duty on parts used to manufacture electric vehicles.
While customs duty on some parts used in EV manufacturing has been brought down to nil, the GST rate on electric vehicles will be lowered to 5 per cent from 12 per cent.
To boost the use of electric vehicles, an additional income tax deduction of Rs 1.5 lakh on interest paid on loans taken to purchase EVs has been proposed.
"The Indian economy will grow to become a USD 3 trillion economy in the current year (from USD 2.7 trillion last year). It is now the sixth largest in the world," she said, adding the target is to take it to USD 5 trillion in coming years. "This budget is setting out a vision, a target, for every sector of our society."