- Personal income tax exemption limit may be raised to 125,000 rupees ($3,125) a year, from 110,000 rupees. Taxable income of up to 150,000 rupees may continue to attract 10 percent income tax. The 10 percent surcharge on income tax may be halved or scrapped.
- The corporate tax rate, which stands at 33.99 percent including surcharge and cess, may be lowered by cutting or abolishing the 10 percent surcharge.
- The agriculture ministry may propose a additional charge of 1 percent on direct taxes and 2 percent on indirect taxes to partly fund a debt relief package for farmers.
- Service tax rate is likely to be unchanged at 12 percent.
- The Goods and Services Tax (GST) rate and structure is likely to be announced. The Central Sales Tax (CST) rate may be cut by 1 percentage point to 2 percent and is expected to be completely withdrawn by 2010-2011 once the GST is implemented.
- Value-added tax for LPG and other declared goods, edible oils, bread, ready-made garments and intermediate goods may be raised to 5 percent from 4 percent to offset revenue losses the states incur due to the lower CST.
- The dividend distribution tax rate may be cut to 12.5 percent from 15 percent.
- Interest on external commercial borrowings may be taxed, making foreign debt more expensive.
- Interest or dividends earned on infrastructure bonds issued by commercial banks may be exempted from tax
Will foreign equity investment go up?
This is something that was promised to the life insurance players and has been discussed in every budget and we hope the Government is able to take a decision on the same at the earliest.
The growth of the Indian insurance sector is critical from the aspect of a social security measure. Fresh Foreign Direct Investment (FDI) is required to fuel this and to ensure that customers in India get access to world-class products, which the foreign partners bring into India. The increase in FDI will give the Indian insurance industry the necessary capital infusion required for its development and expansion.
We should also bear in mind the beneficial impact that the entry of foreign players to the insurance sector has had on both direct and indirect employment in India. This together with the huge CSR initiatives launched by most companies has had a direct positive impact on Indias economy. Increased FDI limits will accelerate these trends.
We are hoping that all political parties will look at the FDI limit in an overall perspective and encourage the growth of the insurance industry in the country. In insurance the proposal is to raise FDI to only 49%, so the majority control still remains with the Indian partners.
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