Read Highlights of Union Budget of India for the
year 2006 -2007
Union Budget 2006-2007
AN OVERVIEW OF THE ECONOMY
- 2004-05: Growth rate 7.5% with manufacturing sector at 8.1%;
gross domestic saving increased to 29.1% of GDP and the rate of
gross capital formation, 30.1% of GDP
- 2005-06: GDP growth likely to be 8.1% with manufacturing sector
at 9.4% and agricultural growth at 2.3%; non-food credit growing by
- Fund allocation for eight flagship programmes to increase by
43.2% from Rs.34,927 crore in 2005-06 to 50,015 crore.
- North Eastern Region (NER): Allocation of Rs. 4,870 crore under
flagship programme in addition to 10% of the plan budget for each
ministry. Total allocation for NER comes to Rs. 12,041 crore.
- Sarva Siksha Abhiyan: 500,000 additional class rooms to be
constructed and 150,000 more teachers to be appointed. Rs. 8,746
crore to be transferred to the Prarambhik Siksha Kosh from revenues
through education cess.
- Mid-day Meal Scheme: 12 crore children now covered. Allocation to
be enhanced from Rs.3,010 crore to Rs.4,813 crore.
- Drinking Water and Sanitation: 56,270 habitations and 140,000
schools to be covered in the current year. Provision for Rajiv
Gandhi National Drinking Water Mission to be increased from Rs.
3,645crore to Rs. 4,680 crore and for Rural Sanitation Campaign from
Rs 630 crore to Rs 720 crore.
- National Rural Health Mission: Allocation increased from Rs 6,533
crore to 8217 crore.
- Integrated Child Development Services (ICDS): Total allocation
for ICDS increased from Rs.3315 crore to Rs. 4,087 crore.
- National Rural Employment Guarantee Scheme: Allocation of Rs
14,300 crore for rural employment in 2006-07 with Rs. 11,300 crore
under NREG Act and Rs.3000 under SGRY Act.
- Jawaharlal Nehru National Urban Renewal Mission: Estimated outlay
of Rs. 6,250 crore for 2006-07 with grant of Rs.4,595 crore.
Government to promote establishment of new towns, preferably focused
on a specific industry.
- National Social Assistance Programme: Old age pension to
destitutes above the age of 65 years to increase from Rs.75 per
month to Rs.200 per month.
- Against Rs.12,160 crore in the current year, Rs. 18,696 crore to
be provided in 2006-07 for the programme, increase of 54 per cent.
- The rates remain same on personal income tax and corporate income
tax. Further, no new taxes have been imposed.
- One-by-six scheme will stand abolished.
- There is a marginal revision in certain tax rates. Minimum
Alternative Tax (MAT) rate is increased to 10% from the present
7.5%; long-term capital gains arising out of securities is included
in calculating book profits; the credit period for MAT has been
increased to seven years.
- There is an increase of 25%, across the board, on all rates of
- Section 80IA of the Income Tax Act applies to infrastructure
facilities; the terminal date for developing an industrial park
extended to March 31, 2009 and for the power sector to March 31,
- Investments in fixed deposits in scheduled banks included in
section 80C provided the term is not less than 5 years; limit of Rs.
10,000 for the contribution of certain pension funds is removed from
80CCC subject to overall ceiling of Rs. 1,00,000.
- Open-ended and close-ended equity-oriented schemes to be treated
on par fro exemption from dividend distribution tax.
- Exemption under section 10(23G) removed.
- Primary Agricultural Credit Societies and Primary Cooperative
Agricultural and Rural Development Banks is still exempt from tax
under section 80P; all other cooperative banks are excluded.
- Benefit of section 54ED withdrawn w.e.f. April 1, 2006; scope of
section 54EC restricted to two institutions, viz., NHAI and REC; for
NABARD, SIDBI and NHB route of zero coupon bonds to raise low cost
funds already opened.
- Donations to wholly charitable institutions to be taxed at the
highest marginal rate; such donations to partly religious and partly
charitable institutions/trusts to be taxed only if the donation is
specifically for an educational or medical purpose.
- Banking Cash Transaction Tax (BCTT) to continue until the Annual
Information Returns (AIR) system can capture all significant
- Fringe Benefit Tax (FBT) introduces last year is proposed for the
- FBT on 'tour and travel' reduced to 5%. - For airline companies
and shipping industry, value benefit in the form of 'hospitality'
and 'use of hotel boarding and lodging facilities,' at 5% instead of
- Expenses on free samples of medicines and medical equipment
distributed to doctors excluded.
- Under section 115WB(1)(c) contribution by an employer to an
employee per year a threshold of Rs. 1,00,000 has been prescribed to
- Non-agricultural products peak rate reduced to 12.5% from 15%;
duty of alloy steel and primary and secondary non-ferrous metals
reduced to 7.5% from 10% (also includes duty for ferro alloys); on
steel melting scrap, the duty raised to 5%.
- Apart from few exceptions, the duty on mineral products reduced
- Duty on ores and concentrates reduced to 2% from 5%.
- On refractories and number of materials for manufacture of
refractories reduced to 7.5%.
- On basic inorganic chemicals reduced to 10% from 15%; on basic
cyclic and acyclic hydrocarbons and their derivatives to 5%; on
catalysts the duty to be reduced to 7.5% from 10%.
- Duty reduced to 5% from 10% on major bulk plastics such as PVC,
LDPE and PP; on naptha for plastics it is nil; on raw materials of
plastics like styrene, EDC and VCM, the duty is 2%.
- On 10 anti-AIDS and 14 anti-cancer drugs customs duty has been
reduced to 5%; on certain life saving drugs, kits and equipment it
is reduced to 5% from 15%; these drugs are exempted from excise duty
- On packaging machines, duty reduced to 5% from 15%.
- Concessional project rate of 10% is to be extended to pipeline
projects for the transportation of natural gas, crude petroleum and
- 4% CVD on all imports with few exceptions.
- On vanaspati, custom duty to be increased to 80%.
- Reduction of import duty on all man-made fibres and yarns, and
raw materials lik DMT, PTA and MEG to 10% from 15% and on paraxylene
- Reduction of excise duty on all man-made fibre yarn and filament
yarn to 8% from 16%.
- Duty on aerated drinks and small cars to be reduced to 16%.
- Customised software and software packages downloaded from the
internet, DVD Drives, Flash Drives and Combo Drives is to be fully
exempted from excise duty but 8% duty to be imposed on packaged
software sold over the counter.
- Duty on ready-to-eat packaged foods and instant food mixes such
as dosa and idli mixes to be reduced to 8% from 16% where as
condensed milk, ice cream, preparations of meat, fish and poultry,
pectins, pasta and yeast is fully exempted. · Extracts of
vegetable tanning such as quebracho and chestnut is exempted while
duty of footwear with retail price between Rs. 250 to Rs. 750 is
reduced to 8% from 16%.
- To all LPG stoves, concessional rate of 8% to be extended.
- Duty to be reduced to 8% from 16% on compact fluorescent lamps.
- Increase in excise duty on cigarettes by 5%.
- Service tax rate increased to 12% from 10%.
- New services to be included like ATM operations, maintenance and
management, share transfer agents, sale of space or time (other than
print media), sponsorship of events (other than sports events), ship
- Leasing and hire purchase to be treated as loan transactions.
- Proposal to set April 1, 2010 as the date for introducing Goods
and Service Tax (GST).
VAT and CST
- To moderate the price, LPG has been included in the list of
'declared goods' under the CST Act.
- Irrigation: Outlay for 2006-07 to be increased to Rs.7,121 crore,
with grant of Rs.2,350 crore. 20,000 water bodies with a command
area of 1.47 million identified in the first phase for repair,
renovation and restoration.
- Credit: Farm credit to increase to Rs.1,75,000 crore in 2006-07
with addition of 50 lakh farmers. Loan taken for kharif and rabi in
2005-06 will be reimbursed.
- With effect from Kharif 2006-07, farmers will receive short-term
credit at 7% with upper limit of Rs. 300,000 on the principal
- Sanctions under Rural Infrastructure Development Fund XII to
increase to Rs.10,000 crore.
- Agricultural Insurance: National Agricultural Insurance Scheme to
- Plantation Sector: A Special Purpose Tea Fund to be setup,
expected contribution of Rs.100 crore in 2006-07.
- Employment: Five industries, namely textiles, food processing,
petroleum, chemicals and petro-chemicals, leather and automobiles,
with employment opportunities identified in the manufacturing
- Textiles: Fund allocation for Technology Upgradation Fund (TUF)
enhanced to Rs. 535 crore from Rs. 435 crore; Rs. 189 crore
allocated for Scheme for Integrated Textiles Parks (SITP); Jute
Technology Mission to be launched; a National Jute Board to be
- Handlooms: 100 more clusters to be added to Cluster Development
at a cost of Rs. 50 crore; provisions for this sector to be
increased to Rs. 241 crore from Rs. 195 crore; a 'handloom' mark to
- Food Processing Industry: NABARD to create a refinancing window
with a corpus of Rs. 1,000 crore. National Institute of Food
Technology Entrepreneurship and Management to be set up.
- Small and Medium Enterprises: 180 items identified for
dereservation; corpus of Credit Guarantee Fund to be raised to Rs.
2,500 crore from Rs. 1,132 in five years; Credit Guarantee Trust for
Small Industries to be proposed to reduce guarantee fee from 2.5% to
1.5% for all loans; 10 schemes drawn up under five-year National
Manufacturing Competitiveness Programme.
- Tourism: development of 15 tourist destinations and circuits to
be undertaken; 50 villages with core competency in handicrafts and
other related work to be identified and developed; 4 new institutes
of hotel management to come up in Uttaranchal, Chhattisgarh, Haryana
and Jharkhand; plan allocation is increased to Rs. 830 crore from
Rs. 786 crore.
- Foreign Trade: Share in world exports to be doubled by 2008-09.
- Telecommunication: To reach 250 million connections. More than 50
million rural connections to be rolled out in three years.
- Power: Five ultra mega power projects of 4,000 MW each to be
awarded before December 31, 2006; Rs. 597 crore provided for
non-conventional energy resources; 10,000 villages in 2005-06 and
40,000 more to be electrified in 2006-07.
- Coal: Reserves of 20 billion tonnes to be de-blocked for power
- Petroleum: Under NELP VI, 55 blocks and area of 355,000 sq kms
offered. Rs. 22,000 crore expected in the refinery sector in next
- Road Transport: Budget support for NHDP enhanced from Rs. 9,320
crore to Rs. 9,945 crore in 2006-07; allocation of Rs. 550 crore for
North Eastern region; 1,000 kms of access-controlled Expressways to
be developed on Design, Build, Finance and Operate (DBFO) model.
- Maritime Development: Plan allocation for Department of Shipping
increased by 37% to Rs. 735 crore.
- Banking, Insurance and Pensions: Net capital support to banking
sector standing at Rs. 22,808 crore, to be restructured to
facilitate increased access of banks to additional resources for
lending to the productive sectors. Bill on insurance to be
introduced in 2006-07.
- Capital Market: Limit on FII investment in Government securities
to be increased to $2 billion from $1.75 billion and limit to FII
investment in corporate debt to be increased from $0.5 billion to
$1.5billion; ceiling on aggregate investment by mutual funds in
overseas instruments is to be raised to $2 billion from $1 billion
with removal of requirements of 10% reciprocal share holding.
BUDGET ESTIMATES FOR 2006-07
- Plan Expenditure: Estimated at Rs.172,728 crore, up by 20.4 per
- Non Plan Expenditure: Rs.391,263 crore, up by 5.5 per cent.
- Revenue Deficit: Estimated at Rs.84,727 crore, 2.1 per cent of
- Fiscal Deficit: Estimated at Rs.148,686 crore, 3.8 per cent of