News: Budget may spell relief to commoner and India Inc

(PTI 25/02/2007) New Delhi - The common man, pushed to the point of exasperation by rising prices, and the corporate can expect some relief from Budget 2007-08 to be presented by Finance Minister P Chidambaram in the Lok Sabha on Wednesday.

The fourth budget of the UPA Government is likely to lay stress on agriculture and announce cut in customs duties on food products to contain inflation, which is hovering around 6.5 per cent.

Besides, the Budget is expected to focus on infrastructure development and may announce establishment of a special purpose vehicle to utilise part of the foreign exchange reserve to import capital goods.

On the personal taxation front, Chidambaram is likely to increase the limit of exemption for savings under section 80C of the Income Tax Act, 1961 from Rs1,00,000 to about Rs1,30,000-1,50,000.

The limit under section 80C was fixed by Chidambaram in 2005-06 after he removed the standard deduction which was available to salary earners.

The Finance Minister is also likely to extend tax exemption to three-year fixed deposits in banks within the overall limit of Rs1,30,000-1,50,000. The exemption is currently available to five-year fixed deposits.

The Budget is also likely to either abolish 10 per cent surcharge or cut corporate tax rates by three per cent to 27 per cent. Either way, corporates are expected to get a relief of three per cent from the Budget, sources said.

The effective rate of tax on corporate works out to be 33.66 per cent, comprising 30 per cent corporate tax, 10 per cent surcharge and two per cent education cess.