In his seventh national budget presented in the Lok Sabha Friday, Mukherjee raised the income tax exemption limit for individuals to Rs.2,00,000 from Rs.1,80,000 and revised the tax slabs to bring relief to some 35 million people in the country.

But by bringing virtually all services under the tax net and by hiking the rate from 10 percent to 12 percent -- as also by raising the standard excise rate to 12 percent from 10 percent -- he also ensured you pay more indirect taxes than before.

This is why the net impact of his proposals is such that while direct tax measures will result in a net revenue loss of Rs.4,500 crore ($900 million), the indirect tax changes will fetch a net revenue gain of Rs.45,940 crore ($9.1 billion) -- over 10 times more.

You may have to pay more for dining out, gold jewellery, luxury cars and smoking, even as you get relief while watching a movie in cinema halls, investing in equities, going for a preventive health check or paying for your child's education.

On income tax front, the finance minister proposed new tax slabs in which income up to Rs.2,00,000 will be totally exempt, levy 10 percent on Rs.2,00,000 to Rs.5,00,000, then 20 percent on Rs.5,00,000 to Rs.10,00,000 and 30 percent on income above Rs.10,00,000.

"This will provide tax relief of Rs.2,000 to every tax payer," the finance minister said, adding: "My proposal on direct taxes will result in a revenue loss of Rs.4,500 crore."

Overall, in the Rs.14,90,925 crore ($300 billion) budget, the fiscal deficit -- which is the total projected expenditure less tax and non-tax revenue, as also loan recoveries -- is pegged at 5.1 percent of GDP, which is lower than 5.9 percent for the current fiscal.

He said with the economy getting back on rails, it was time for some tough measures -- a statement endorsed by Prime Minister Manmohan Singh who said it was necessary to "bite the bullet", especially on issues such as subsidies.

"When the time comes for taking tough decisions, we hope we will be able to take all our allies on board," the prime minister said, giving his reactions to the budget when asked specifically as to how he hoped to carry the coalition partners along.

Even Mukherjee said it was more important to address the challenges than earn brownie points. "Whether or not today's announcements make tomorrow's headlines matters little, as long as they help in shaping the headlines that describe India a decade from now.

For the corporate sector, the finance minister, said, while the tax rates will remain unchanged, he assured cheaper access to funds for expansion, even as he tinkered with the excise rates and customs duties for specific items.

Mukherjee said he also proposed to tax every service, but for 17 items specified in what he termed as a negative list, and enhanced the rate of such levy to 12 percent from 10 percent.

This is projected to fetch Rs.1,24,000 crore ($24.8 billion) against revised estimate of Rs.95,000 crore ($19 billion) for 2011-12 .

Assuring further liberalisation of capital markets, he announced a new equity savings scheme to extend income tax deduction of 50 percent to those who invest up to Rs.50,000 in equities and whose annual income is less than Rs.10 lakh.

Mukherjee spelt out some far-reaching reforms in the budget, notably on the subsidy front, which he promised to cut to 2 percent of India's gross domestic product (GDP).

"Such a step is needed to improve the quality of public spending," he said, adding the effort now will be to directly transfer subsidies on fertiliser, food and fuels to to the intended beneficiaries.

He hoped for an early implementation of the direct tax code and a pan-India goods and services tax to unify federal and state taxes, even as he promised incentives to attract capital for infrastructure development.

He also said the government will make an all-out effort to curb outflow of black money and bring back such ill-gotten funds stashed away in tax havens abroad.

Mukherjee began his speech touching on the cascading ill-effects of the global slowdown on the Indian economy, but assured people there were clear signs of recovery that should see the country grow at 7.6 percent in 2012-12, against 6.9 percent this fiscal.

"The global crisis has affected us. India's gross domestic product (GDP) is expected to grow at 6.9 percent in 2011-12, after having grown at 8.4 percent in each of the two preceding years," he said.

"Though we have been able to limit the adverse impact of the slowdown in our economy, this year's performance has been disappointing. But it is also a fact that in any cross-country comparison, India still remains among the front-runners in economic growth."

At the same time, Mukherjee also said the Indian economy was at the "cusp of a revival", as agriculture and services have continued to grow at a decent pace. It was industrial performance that was acting as a drag.

"While we do not have the aggregate figures for the last quarter of 2011-12, numerous indicators pertaining to this period suggest that the economy is now turning around. There are signs of recovery in coal, fertiliser, cement and electricity sectors."

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