Chidambaram offers minor sops to income tax payers in budget 2013

Walking the tight rope ahead of next year's elections, Finance Minister P Chidambaram on Thursday offered minor sops to income tax payers but slapped a 10 per cent surcharge on 'super-rich' individuals and corporates, levied an inheritance tax and raised duties on mobile phones, cigarettes and luxury vehicles.

In his tax proposals in the Budget for 2013-14 to raise an additional Rs 18,000 crore (Rs 180 billion), he gave a benefit of Rs 2,000 to individual tax payers with taxable income of up to Rs 500,000 but made no change in either slabs or rates of personal income tax which will continue at 10, 20 and 30 per cent.

Aiming at higher growth rate for inclusive and sustainable development and revive manufacturing, Chidambaram hiked outlays for health, water and sanitation, SCs/STs and tribals and rural development.

Defence allocation has been increased to Rs 203,672 crore (Rs 2.03 trillion), including Rs 86,741 crore (Rs 867.41 billion) for capital expenditure.

First-time home buyers will get an additional deduction of interest of Rs 100,000 for home loans above Rs 25 lakh (Rs 2.5 million) and Rs 150,000 for home loans up to Rs 25 lakh. This will be over and above the current Rs 100,000 deduction allowed for self-occupation.

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Union Budget, as it unfolded on February 28

Complete coverage: Union Budget 2013-14

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Implementing the much-talked about super-rich tax, Chidambaram proposed to levy a 10 per cent surcharge on income of Rs 1 crore (Rs 10 million) and above and a 5 to 10 per cent surcharge on domestic corporates whose income exceeds Rs 10 crore (Rs 100 million) a year.

In the case of foreign companies, who pay a higher rate of corporate tax, the surcharge will go up from 2 to 5 per cent. On dividend distribution tax, he proposed to raise current surcharge from 5 to 10 per cent.

Presenting his eighth budget, the first after coming back to Finance Ministry last year, Chidambaram imposed an inheritance tax of 1 per cent on transfer of immovable property of over Rs 50 lakh (Rs 5 million).

Continuing the education cess for all taxpayers at 3 per cent, he promised that the new surcharges will be in force for just a year during 2013-14.

While the direct tax proposals will bring in Rs 13,300 crore (Rs 133 billion), those on indirect tax side will rake in Rs 4,700 crore. (Rs 47 billion)

Bringing in the super-rich tax, Chidambaram said, "I believe there is a little bit of the spirit of Mr Azim Premji (of Wipro) in every affluent tax payer. I am confident that when I ask the relatively prosperous to bear a little more burden for one year, just one year, they will do so cheerfully."

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Union Budget, as it unfolded on February 28

Complete coverage: Union Budget 2013-14

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The Minister did not resist the temptation of burdening smokers when he raised the excise duty by 18 per cent on cigarettes, cigars, cheroots and cigarillos.

Including two more services in the negative list of service taxes, he extended the levy to all air-conditioned restaurants and introduced a one-time voluntary compliance scheme for about 10 lakh service tax defaulters to rake in more money.

High-end luxury motor vehicles, motorcycles and yacht will attract 100 per cent import duty, up from 75 per cent while SUVs will attract a higher excise duty at 30 per cent, up by 3 per cent.

Passengers will be allowed to bring in duty free gold jewellery of up to Rs 50,000 in case of men and Rs 100,000 in case of women.

There is no change in the peak rate of basic customs duty on non-agriculture products and rates of excise duty and service tax of 12 per cent.

Chidambaram introduced a commodities transaction tax on non-agriculture commodities futures contracts at the same rate as equity futures that is 0.01 per cent of the price of the trade.

Union Budget, as it unfolded on February 28

Complete coverage: Union Budget 2013-14

Budget Impact Live!