Smita

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Budget Making Process
 Stage I
1. An Estimation of Expenditure is made by various Ministries.
2. An estimation of Plan expenditure is prepared by the Planning
commission.

 Stage II
1. An Assessment of Revenue receipts and Capital receipts is made
by the Revenue Secretary.

 Stage III
1. First estimates of Deficit are prepared.

 Stage IV
1. The Tax rates are revised or new taxes are proposed.
2. Expenditures are adjusted.

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How Budget is prepared?
 How the Indian Budget is prepared - Sify_com.ht

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Revenue Receipts and Revenue
Expenditure
 Tax Revenue  Non Plan Expenditure
1. Income Tax 1. Interest Payments
2. Corporate Tax 2. Defence payments
3. Wealth tax 3. Subsidies
4. Central Excise Duties 4. Pension
5. Custom duties 5. Postal Deficit
6. Service Tax and others. 6. Expenditure on Economic/
General and social
 services etc.
Non Tax Revenue
1. Interest Receipts
 Plan Expenditure
2. Dividend and profits of
PSUs’ and other
government bodies

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Current Tax Rates(2008-
09)
 current tax rates.htm

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 Revenue Receipts of Central
Government
(In Crores)
Head 1950-51 1980- 2001-022006-072008-09
81 Budget Budget

Tax 357 9,390 1,33,66 3,27,20 5,07,15

Revenu 0 0 0
e
Non 49 3,440 67,790 76,260 95,785
-Tax
Revenu
e
Total 406 12,830 2,01,45 4,03,46 6,02,93
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 Central government-Tax Revenue
(In Crores)
Head 1950-51 2001-02 2006-07 2008-09
Budget Budget
Income Tax 140 32,000 77,410 1,38,314

Corporate 40 36,610 1,33,010 2,26,361

Tax
Other Direct - 450 150 325
taxes

Excise 70 68,530 1,19,000 1,37,874

Duties
Custom 160 47,540 77,070 1,18,930 7
 Budget of Central Government
Revenue Account (In crores)
Head 1950-51 1980- 2001-02 2006-07 2008-09 2008-09
81 budget budget Actual

Revenue 406 12,830 2,01,450 4,03,460 6,02,935 5,62,173

receipts
Revenue 347 14,540 3,01,610 4,88,190 6,58,119 -
Expenditure

Surplus/ +59 -1,710 - -84,730 -55,184 -

Deficit 1,00,160

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Capital Receipts and
Expenditure
 Receipts  Non Plan Expenditure

1. Loans to States/ UT/

Foreign Governments
1. Recovery of Loans and PSU’s.
2. Disinvestment of 2. Defence capital
expenditure
PSUs’
3. Borrowings  Plan Expenditure

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 Capital Receipts/ Expenditure of
Central Government
1950- 1980- 2001-02 2006-07 2008-09 2008-09
51 81 budget Budget Actual
Capital 120 8,770 1,61,000 1,60,530 1,47,949 3,38,780
Receipts

Capital 182 9,630 60,840 75,800 92,765 -

Expenditur
e

Surplus / -62 - 860 + + 84,730 +55,184 -

Deficit 1,00,160

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Sources and Uses of
Funds (08-09)
 Source  Use
1. Corporation tax – 24% 1. Interest – 21%
2. Customs – 13% 2. Defence – 11%
3. Non tax Revenue – 10% 3. Other non plan expenditure – 10%
4. Non-Debt Capital Receipts – 2% 4. Subsidies – 8%
5. Income Tax -15% 5. Central plan -19%
6. Service & Other taxes – 7% 6. State & UT Plan assistance – 7%
7. Excise – 15% 7. Non plan assistance to states –
8. Borrowings & other Liabilities – 14% 5%
8. States’ share of taxes – 19%

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Actual
Receipts/Expenditures
 Receipts.htm
 Expenditure.htm
 Central Plan outlay by sectors.htm

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Deficit in Budget
 Revenue Deficit = Revenue Rec. – Revenue Exp.

 Capital Deficit = Capital Rec. – Capital exp.

 Budget Deficit = Total Exp. – Total Rec.

 Fiscal Deficit = Total Exp. –

(RR + Recovery of Loans + Disinvestment Funds)

 Primary Deficit = Fiscal Deficit – Interest

obligations of the government

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Details of Actual Budget
 Budgetat Glance.htm
 Budget2008-09_speech.pdf

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Budget 2008-09 – Revised
Estimates
Head 2008-09 (Budget) 2008-09 (Revised)
Revenue Receipts 6,02,935 5,62,173
Capital Receipts 1,47,949 3,38,780
Total Receipts 7,50,884 9,00,953
Non-plan Expenditure 5,07,498 6,17,996
Plan Expenditure 2,43,386 2,82,957
Total Expenditure 7,50,884 9,00,953
Fiscal Deficit 1,33,267 2,41,273
(2.5% of GDP) (6% of GDP)

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Deficit Financing
 The fiscal Deficit gap is filled by government
borrowings from the following-

1. Domestic Market
2. External Sector
3. Reserve bank of India

 Problems of deficit Financing-

1. Increase in the government debt.

2. Inflation
3. Increase in consumption.

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What is FRBM?
 Some targets to be achieved by
2009 now Postponed to 2011:

1. To bring down Fiscal Deficit to the level

of 3% of GDP
2. To completely eliminate Revenue
Deficit

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Highlights of Budget
2008-09
 60,000 Cr. Loan waiver for small and medium farmers having
holding size up to 2 hectare. Settlement (OTS) for other.
 Income tax slabs modified . No tax up to income of 1,50,000. For
Females same up to income of 1,80,000 and for senior citizen up to
income of 2,25,000.
 Corporate Tax rate unchanged. Surcharge and Cess continues.
 Short term capital gains tax up from 10% to 15%.
 No change in Securities Transaction Tax rate . STT currently paid is
allowed as a rebate against tax liability but from April 2008 STT paid
will be treated like any other deductible business expense against
business income.
 STT on options premium only, where the option is not exercised and
burden will be on the seller.
 Introduction of Commodities Transaction Tax on Options and Futures
trades.

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Budget Highlights
(Excise)
General CENVAT on all goods down from 16% to 14%.
 Excise lowered on small cars, two wheelers ,buses and their
chassis( 16% to 12%).
 Reduction in excise duty on all goods produced by the
Pharmaceutical sector from 16% to 8%.
 Reduced excise on paper, paper boards made from non-
conventional raw material(12% to 8%). Excise duty on writing,
printing and packaging paper reduced from 12 to 8%.
 Excise reduced from 16% to nil for wireless data cards,
Packaged coconut water, Tea and Coffee mixes, Puffed rice.
 No excise on Anti AIDS drug and bulk drug used to manufacture
it.

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Budget Highlights…
(Excise)
 Reduced excise on water purification devices,
Veneers, flush doors, sterile dressing pads,
breakfast cereals.
 Increase in excise on packaged software from 8%
to 12%.
 Higher excise on non filter cigarettes.
 Specific duty on unbranded Petrol and Diesel
instead of ad valorem tax.
 No excise on polyester filament yarn and 1%
excise on cellular handsets.

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Budget Highlights
(Custom D.)
Lower
 Project Imports from 7.5% to 5%.
 Steel Melting Scrap 5% to Nil.
 On certain specified life saving drugs, Bulk Drugs
used to manufacture above, duty down from10%
to 5%.
 Lower duty on Animal feed mixtures(30% to 20%).
 Lower duty on Bactofuges (7.5% to Nil)
 No Duty on specified parts of set top box and
certain raw materials used in IT/electronic industry.
 No duty on Helicopter simulators.
 Lower duty on crude and unrefined sulphur (5% to
2% 21
Budget Highlights ….
 No DDT on Parent company on dividend received from subsidiary
company and distributed by it.
 BTT done away with.
 Capital Gains Tax on corporate acquisitions in India.
 Service Tax exemption limit up from income of Rs.8 lakhs per annum
to Rs. 10 Lakhs per annum.
 Service tax on Stock and commodity exchanges, Moneychangers,
AMC providing ULIP, persons running game of chance etc.
 Reverse mortgage scheme encouraged.
 No FBT on crèche facilities, sponsorship of employee-sportsperson,
organizing sports events for employees, and guest house facility.
 Central Sales tax reduced from 4% TO 3%

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Budget Implementation
 Implementation Report.pdf

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Interim Budget 2009-10
Head 2009-10 (Interim Budget)
Revenue Receipts 6,09,551
Tax Revenue 4,97,596
Non Tax Revenue 1,11,955
Capital Receipts 3,43,680
Of Which Borrowings 3,32,835
Total Receipts 9,53,231
Revenue Expenditure 8,48,085
Capital Expenditure 1,05,146
Revenue Deficit 2,38,534
Fiscal Deficit 3,32,835
Primary Deficit 1,07,324

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Source and Use of Funds
(2009-10 ) - %
1. Corporation Tax – 22 1. Interest Payments – 20
2. Non Tax Revenue – 10 2. Subsidies – 9
3. Customs – 10 3. Defence – 13
4. Income Tax – 12 4. Non Plan Assistance to
5. Service Tax and Others – 6 States – 4
6. Excise – 10 5. Other Non Plan Expenditure –
14
7. Non Debt Capital Receipt – 1
6. Central Plan – 18
8. Borrowings - 29
7. State and UT Plan Assistance
–7
8. State’s Share of Tax - 15

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 Interim Budget Speech.pdf

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2009-10 – Budget
Highlights
1. Launch of two new schemes – Indira Gandhi National
Widow Pension Scheme and Indira Gandhi National
Disability Pension Scheme
2. National Rural Employment Guarantee Scheme –
Allocation of Rs. 30,100 cr
3. Sarva Shiksha Abhiyan – Rs. 13,100 cr
4. Mid Day Meal Scheme – Rs. 8000 cr
5. Integrated Child Development Scheme – Rs. 6,705 cr
6. Allocation under Jawaharlal Nehru National Urban
Renewal Mission - Rs. 11,842 cr.

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2009-10 – Budget
Highlights
7. Rajiv Gandhi Rural Drinking Water Mission – Rs. 7,400 cr
8. Total Rural Sanitation Programme – Rs. 1,200 cr
9. National Rural Health Mission – Rs. 12,070 cr
10. Bharat Nirman – Rs. 40,900 cr
11. Unique Identification Authority – Rs. 100 cr
12. RIDF – xv – Rs. 4000 cr
13. Interest subvention of 2% on pre-post shipment credit for
certain employment oriented export sectors – Rs. 500 cr
14. Allocation for Defence – Rs. 1,41,703 crore out of which Rs.
54,824 crore for the capital expenditure.

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Fiscal Stimulus Package
 December 7, 2008

1. CENVAT Rates reduced by 4% across the board

2. India Infrastructure Finance Co. authorised to raise
Rs. 10,000 crore
3. Additional Rs. 1,400 cr to clear Technology Up
gradation Fund backlog
4. PSU Bank Home Loan Package in two categories
– 0-5 lakh and 5-20 lakh
5. Import duty of Naptha completely lifted

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Fiscal Stimulus Package
 Fiscal Stimulus: 2 January, 2009

1. ECB Relaxation of Guidelines with removal of cost

cap on borrowings.
2. Liquidity Support to NBFC’s – 25,000 crore
3. Higher Credit Targets for PSU Banks – Rs. 56,000
crore
4. Accelerated Depreciation for purchase of
commercial vehicles
5. Re-capitalisation of PSU Banks – Rs. 20,000 crore

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Fresh Tax Cut Announcements:
February 24, 2009
1. Service tax reduced from 12% to 10%
2. Excise cut of 2% on goods that
attracted excise duty of 10% till now.
3. Imported Naptha for power sector fully
exempted from custom duty beyond 31st
March, 2009.
4. Duty on Bulk Cement reduced

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