Gap Analysis Of Union Budget 2011

A gap analysis of expectation versus the actual budget announcements:
• Expectation:Banking licenses were being looked at with a glare of expectation to be thrown some light upon.
Budget 2011:The budget only announced that the banking bill is being taken up for discussion. However no concrete date for its discussion or conclusion was announced, thus the finalization is under question. Such an announcement, if brought would have had a positive effect in businesses and markets as a whole, since it would have started an era of closer competition and higher compliance and regulatory effectiveness.
• Expectation:Separate exemption for life insurance of up to Rs.50, 000 was being sought. In addition to this, increased exemption in health insurance exemption from Rs.15, 000 to Rs.50, 000 was being looked at.

Budget 2011: Services provided by life insurance companies in the area of investment are also proposed to be brought into tax net on the same lines as ULIPs. Expansion of the scope of legal services to include services provided by business entities to individuals as well as representational and arbitration services by individuals to business entities has been proposed.

• Expectation: Dilution of tax slabs were expected to be raised to Rs.2 lakh for general category, Rs.2.5 lakh for women and Rs.3 lakh for senior citizens.The exemption limit for various allowances set in 1997 at Rs.800 for transport, Rs.100 for school fees and Rs.300 for hostel was expected to increase to Rs.4000 for transport, Rs.500 for fees and Rs.2000 for hostel, reimbursement of medical expenses was expected to increase to Rs. 50000 from the current Rs. 15000. Apart from this, raising the Rs.1 lakh limit for 80C to Rs.2 lac was expected.Medical treatment of disabled dependents which is currently Rs.50000 was expected to be raised to Rs.75000 under 80DD. Also, Abolition of 3% education cess was expected.
• Budget 2011:Income tax slabs have been changed once again this year.
• For general category the limit has been raised from the current Rs.1,60,000 to Rs1,80,000.
• For women, the limit remains as current.
• For senior citizens category, there have been two major changes that have been brought up. Firstly, the current age to qualify as senior citizens has been reduced from 65 years to 60 years and secondly, the limit has been raised from 2, 40,000 to Rs 2,50,000
• Apart from this, an new category has been announced for senior citizens above 80 years and the limit of exemption has been kept at Rs. 5,00,000
• Old age pension to persons of over the age of 80 will be raised from Rs 200 to Rs 500.
No announcements were made in terms of 80C, 80 DD or education cess.
• Expectation:Deduction up to Rs 20,000 for investing in infrastructure bonds was being expected to be raised to Rs.30000.
Budget 2011: The exemption remained unchanged. Although three additional companies, i.e. Warehousing Corporation, NHAI, IRFC and HUDCO have been allowed to issue bonds. Supply of such bonds will be more as a result which would result in highly competitive and transparent pricing and deepening of the bond market in India. As a result of more trading, development of trading platform to a larger extent would be extensive
• Expectations:Housing loan exemption limit for self-occupied property which is currently Rs.1.5 lakh was expected to be raised to Rs.3 lakh.
Budget 2011: No changes were made on this front as well.
• Expectation:Raise in excise duty on two-wheelers and cars was expected to be brought.
Budget 2011: Prices of cars, hybrid cars, raw steel and mobile phones have fallen. On the other hand, health check-ups, AC hospitals, AC restaurants and branded clothes are to become expensive. Additionally, there will be change in excise duty. The standard rate of central exercise duty will be maintained at 10%. A 1% central excise duty on 130 items entering the tax net. Basic food and fuel and precious stones, gold and silver jewellery will be exempted and there will be no change in CENVAT rates.Service tax on air travel has been increased by Rs 50 for domestic travel and Rs 250 for international travel in economy class. On higher classes, it will be 10% flat.
• Expectation: Sops for affordable housing under `Housing For All` were expected. Last year, housing loans under INR 10 lakh were given an interest rate cut of 1%. Similar measures were expected to come along.It was expected that housing sector growth would on priority to be provided Interest rates relief through Banks (a small percentage) given the speculation & outstretched prices which had dented sector sentiments the last fiscal. A regulatory body e.g. Real Estate Regulatory Authority was expected to be brought upand regulate the real estate sector in wake of recent corporate governance issues.Simplification in transaction costs (which currently include stamp duty) and giving developers a set-off or credit on the taxes paid on construction material and services was expected which would decrease overall construction costs, a respite to investors of real estate. Also, creation of a nation-wide, unified taxation system, which currently differs between states, was expected. Beside Special Residential Zones (SRZs) was expected be taken off the drawing board and finally implemented, and developers who focus on ultra-low-cost housing, either through SRZs or otherwise, expected more sops.In addition to this the service taxes charged on additional services given by the builder were expected to be done away with.
Budget 2011: The limit under priority sector lending has been raised from Rs.20 lakh to Rs.25 lakh. This would be a welcome move as it would boost the demand for low cost housing. The construction sector and the other allied sectors would grow as an effect.
• Expectation:Presently, short-term capital gain in MF debt schemes are being taxed at individual tax slabs and these were expected to be altered. Also budget was expected to announce significant measures such as allowing banks to provide guarantees for bonds issued by companies, to deepen the corporate bond market. Bank guarantees help improve the risk profile of a company and enable it to access the market. At cheaper rates.
Budget 2011: no announcements were made on this front too.