1. IMPLEMENTING THE NCMP MANDATE · Focus on agriculture: output of food grains expected to be 209.3 million tonnes, 5 million tonnes more than the previous year. · Promoting employment: National Rural Employment Guarantee Scheme launched; in the current year, Rs.11,700 crore to be spent to create rural employment. · Enhancing investment: investment rate increased from 25.3 per cent in 2002-03 to 30.1 per cent in 2004-05. · Augmenting infrastructure: 5,083 MW of capacity to be added to power generation in 2005-06, during the Tenth Plan period the total addition estimated at 34,000 MW; until December, 2005, under Rajiv Gandhi Grameen Vidyutikaran Yojana, contracts placed for projects spanning 95 districts and covering 41,461 un-electrified and 9,379 electrified villages; Golden Quadrilateral (GQ) and the North-South, East-West Corridors- progressing at the rate of 4.48 kms per day; 96per cent of the GQ to be completed by June, 2006 and the Corridors byend 2008.

2. BHARAT NIRMAN · In the first year of implementation, 2005-06: Rs.944.18 crore released so far as grant under AIBP, target of 600,000 hectares of irrigationpotential expected to be created this year; against target of 56,270 habitations, 47,546 habitations covered until January, 2006 under Accelerated Rural Water Supply Project; 5,337 habitations connected under rural roads programme by September, 2005, and Rs.3,749 crore released so far; 870,000 rural houses constructed, sum of Rs.2,260 crore released till January, 2006; Rs.1,100 crore released for rural electrification, target of covering 10,366 villages expected to be achieved;17,182 villages provided with a telephone till December, 2005.· Against Rs.12,160 crore in the current year, Rs.18,696 crore to beprovided in 2006-07 for the programme, increase of 54 per cent.

FLAGSHIP PROGRAMMES · Allocation for eight flagship programmes to increase by 43.2 per cent from Rs.34,927 crore in 2005-06 to Rs.50,015 crore. ·

North Eastern Region (NER): In addition 10 per cent of the Plan Budget of each Ministry/Department to be allocated for schemes and programmes in the North Eastern Region (NER); for the flagship programmes allocation of Rs.4,870 crore in 2006-07; total allocation for NER is Rs.12,041 crore. ·

Sarva Siksha Abhiyan: 93 per cent of children in age group 6-14 years are in school, number of children not in school has come down to about one crore; outlay to increase from Rs.7,156 crore to Rs.10,041 crore in 2006-07; 500,000 additional class rooms to be constructed and 150,000 more teachers to be appointed; Rs.8,746 crore to be transferred to the Prarambhik Siksha Kosh from revenues through education cess. ·

Mid-day Meal Scheme: 12 crore children now covered; allocation to be enhanced from Rs.3,010 crore to Rs.4,813 crore. ·

Drinking Water and Sanitation: 56,270 habitations and 140,000 schools to be covered in the current year; non-recurring assistance of Rs.213 crore to be provided in 2006-07 for setting up district-level water testing laboratories and field- level water testing kits; provision for Rajiv Gandhi National Drinking Water Mission to be increased from Rs.3,645 crore to Rs.4,680 crore and for Rural Sanitation Campaign from Rs.630 crore to Rs.720 crore.

3.· National Rural Health

Mission

: more than 200,000 Associated Social Health Activists (ASHA) to be fully functional and over 1,000 block level community health centres to provide round the clock services; allocation increased from Rs.6,553 to Rs.8,207 crore. ·

Integrated Child Development Services: additional 188,168 centres created; Centre assisting the States to the extent of 50 per cent of the actual expenditure incurred for supplementary nutrition or 50 per cent of the cost norms, whichever is less - cost estimated at Rs.1,500 crore and this assistance to increase to Rs.1,700 crore; total allocation for ICDS increased from Rs.3,315 crore to Rs.4,087 crore. ·

National Rural Employment Guarantee Scheme: allocation of Rs.14,300 crore for rural employment in 2006-07 with Rs.11,300 croreunder NREG Act and Rs.3000 crore under SGRY, more funds to beprovided according to need.·

Jawaharlal Nehru National Urban Renewal

Mission

: estimated outlay of Rs.6,250 crore for 2006-07 with grant of Rs.4,595 crore;Government to promote establishment of new towns, preferablyfocussed on a specific ind ustry, for example Information Technology,or a specific theme, for example education or health.·

National Social Assistance Programme: old age pension to destitutesabove the age of 65 years to increase from Rs.75 per month to Rs.200per month; Rs.1,430 crore provided for 2006-07; State Governmentsurged to make an equal contribution; a system to be established, withintwo years, for pension to be credited directly to the account of thebeneficiary in a post office or a bank.·

Women and Children: gender sensitivities of the budgetary allocationshighlighted through an enlarged statement on gender budgeting toinclude schemes where 100 per cent of the allocation is for the benefitof women as well as schemes where at least 30 per cent of theallocation is targeted towards women; statement covers 24 demands forgrants in 18 Ministries/Departments and five Union Territories andschemes with an outlay of Rs.28,737 crore; 32 Ministries andDepartments have set up Gender Budgeting Cells.·

Scheduled Castes and Scheduled Tribes: a statement on schemes forwelfare and development of SCs and STs included in Budget;allocations for schemes benefiting only SCs and STs enhanced by 14.5per cent to Rs.2,902 crore and for schemes with at least 20 per centallocation for SCs and STs enhanced by 13.9 per cent to Rs.9,690crore; equity contribution to the National SC Finance and DevelopmentCorporation increased to Rs.37 crore and to the National SafaiKaramchari Finance and Development Corporation to Rs.80 crore.

4.· Minorities: corpus of Maulana Azad Educational Foundation to bedoubled to Rs.200 crore; Rs.16.47 crore to be contributed to strengthenequity base of National Minorities Development and FinanceCorporation; Corporation to intensify efforts to reach to artisans andweavers in urban and peri- urban centres especially in districts withconcentration of minorities; programme to focus on skill enhancement,credit and techno-managerial support; allocation to National Councilfor Promotion of Urdu Language increased from Rs.10 crore to Rs.13crore; Government to finance 20,000 merit-cum-means basedscholarships to encourage students to pursue higher studies.·

Kasturba Gandhi Balika Vidyalaya Scheme: 1,000 new residentialschools for girls from SC, ST, OBC and minority communities to beopened in 2006-07; Rs.128 crore provided and an additional sum ofRs.172 crore to be provided during the year; as a further incentive tothe girl child who passes the VIII Standard Examination and enrols in asecondary school, a sum of Rs.3,000 to be deposited in her name, to bewithdrawn by her on reaching 18 years of age.

INVESTMENT · Government to provide equity support of Rs.16,901 crore and loans ofRs.2,789 crore to Central PSEs (including Railways); infusion ofRs.1,180 crore in cash and non-cash sacrifices of Rs.2566 crore in lasttwo years to restructure ten PSEs, including Indian TelephoneIndustries Limited and Heavy Engineering Corporation Limited; todevelop India as a hub for gems and jewellery, an expert body to beconstituted.

AGRICULTURE·

Irrigation: Outlay of Rs.4,500 crore under AIBP in 2005-06, grantcomponent of Rs.1,680 crore; States expected to spend Rs.2,520 crorefrom their resources; outlay for 2006-07 increased to Rs.7,121 crore,with grant of Rs.2,350 crore; Command Area Development Programmeto be revamped to allow participatory irrigation management throughwater users’ associations; 20,000 water bodies with a command area of1.47 million hectares identified in the first phase for repair, renovationand restoration; estimated cost Rs.4,481 crore.·

Credit: Farm credit increased to Rs.125,309 crore in 2004-05; expectedto cross target of Rs.141,500 crore for 2005-06; to increase toRs.175,000 crore in 2006-07 with addition of 50 lakh farmers; banksasked to open a separate window for self- help groups or joint liabilitygroups of tenant farmers; a one time relief to be granted to farmers whohave availed of crop loan from scheduled commercial banks, RRBs andPACS for Kharif and Rabi 2005-06, and amount equal to two

5 percentage points of the borrower’s interest liability on the principalamount up to Rs.100,000, to be credited to his/her bank account beforeMarch 31, 2006; Rs.1,700 crore provided for this purpose.· With effect from Kharif 2006-07 farmers to receive short-term credit at7 per cent, with an upper limit of Rs.300,000 on the principal amount;subvention for this to be given to NABARD. · Sanctions under Rural Infrastructure Development Fund (RIDF XI) atRs.7,301 crore as on January 31, 2006; corpus for RIDF XII to increaseto Rs.10,000 crore; specified projects under PPP model to be allowedto access RIDF funds; separate window for rural roads with a corpus ofRs.4,000 crore during 2006-07.·

Agricultural Insurance: National Agricultural Insurance Scheme tocontinu.·

Plantation Sector: A Special Purpose Tea Fund to be setup, expectedcontribution of Rs.100 crore in 2006-07.·

Micro Finance: 801,000 SHGs credit-linked in two years with creditof Rs.4,863 crore disbursed to these SHGs; another 385,000 SHGs tobe credit- linked in 2006-07; NABARD to open a line of credit forfinancing farm production and investment activities through SHGs;Committee to be appointed on Financial Inclusion.·

Horticulture and Fisheries: terminal markets to be setup on PPPmodel-Rs.150 crore earmarked for this in 2006-07 under NationalHorticulture Mission; Central Institute of Horticulture to be establishedin Nagaland; National Fisheries Development Board to be constituted.

MANUFACTURING·

Employment: five industries with employment opportunities identifiedin manufacturing sector, these include textiles, food processing,petroleum, chemicals and petro-chemicals, leather and automobiles; inservices, tourism and software can offer large number of jobs.·

Textiles: allocation for Technology Upgradation Fund (TUF) enhancedfrom Rs.435 crore to Rs.535 crore; Rs.189 crore to be provided forScheme for Integrated Textiles Parks (SITP), Jute Technology Missionto be launched; a National Jute Board to be established.·

Handlooms: Cluster Development approach to continue with 100clusters to be added at a cost of Rs.50 crore in 2006-07; yarn depots tobe established; a ‘handloom’ mark to be launched; scheme to beintroduced to provide interest subsidy on term loans; provision for thehandloom sector to be increased from Rs.195 crore to Rs.241 crore.

6· Food Processing Industry: food processing to be a priority sector forbank credit; NABARD to create a refinancing window with a corpus ofRs.1,000 crore, especially for agro-processing infrastructure and marketdevelopment; National Institute of Food Technology Entrepreneurshipand Management to be setup; Paddy Processing Research Centre,Thanjavur to be developed into a national- level institute.·

Petroleum, Chemicals and Petro-chemicals: a Task Force setup tofacilitate development of large PC&P Investment Regions; three suchInvestment Regions expected to be developed in 2006-07.·

Information Technology: existing vehicle of viability gap funding andIndia Infrastructure Finance Company Limited to provide equity and/orviability gap funding to new ventures; window to be open for threeyears.·

Small and Medium Enterprises: 180 items identified fordereservation; to give impetus to lending by SIDBI, SMEs to berecognised in the services sector and small scale enterprises in servicessector to be treated on par with small scale enterprises in manufacturingsector; corpus of Credit Guarantee Fund to be raised from Rs.1,132crore to Rs.2,500 crore in five years; Credit Guarantee Trust for SmallIndustries to be advised to reduce guarantee fee from 2.5 per cent to 1.5per cent for all loans; insurance cover to be extended to 30,000borrowers; ten schemes drawn up under a five-year NationalManufacturing Competitiveness Programme, including promotion ofICT, mini tool rooms, design clinics and marketing support for SMEs;implementation to be in the PPP model. ·

Cluster Development: Empowered Group of Ministers to be constituted to lay down policy and oversee implementation.

SERVICES SECTOR ·

Tourism: development of 15 tourist destinations and circuits to be taken up; 50 villages with core competency in handicrafts, handlooms and culture, close to existing destinations and circuits, to be identified and developed; 4 new institutes of hotel management to be established in Chhattisgarh, Haryana, Jharkhand and Uttaranchal; Plan allocation increased from Rs.786 crore to Rs.830 crore. ·

Foreign Trade: share in world exports to be doubled by 2008-09.

INFRASTRUCTURE·

Telecommunication: to reach 250 million connections by December,2007, provision of Rs.1,500 crore for Universal Services ObligationFund in 2006-07; more than 50 million rural connections to be rolledout in three years.

7· Power: five ultra mega power projects of 4,000 MW each to beawarded before December 31, 2006; to create an enabling andempowered framework to carry out reforms an Empowered Committeeof Chief Ministers and Power Ministers to be setup; Tenth Plan targetof 3,075 MW of installed capacity for non-conventional energy sourcesexceeded by December 31, 2005 with installation of 3,650 MWcapacity; Rs.597 crore provided for non-conventional energy resources; Rajiv Gandhi Grameen Vidyutikaran Yojana: 10,000 village s in 2005-06 and 40,000 more villages in 2006-07 to be electrified.·

Coal: reserves of 20 billion tonnes to be de-blocked for power projects;definition of captive consumption to be amended to allow mining byproducers with firm supply contracts with steel, cement and powercompanies; capacity of Central Mines Planning and DevelopmentInstitute Limited to drill in order to prove reserves to be expanded.·

Petroleum: under NELP VI., 55 blocks and area of 355,000 sq kmsoffered; investment of Rs.22,000 crore expected in the refinery sector,in the next few years.·

Road Transport: Budget support for NHDP enhanced from Rs.9,320crore to Rs.9,945 crore in 2006-07; special accelerated roaddevelopment programme for the North Eastern region at an estimatedcost of Rs.4,618 crore approved with allocation of Rs.550 crore in2006-07; 1,000 kms of access-controlled Expressways to be developedon the Design, Build, Finance and Operate (DBFO) model.·

Maritime Development: National Maritime Development Programme(NMDP) approved; work is in progress in 101 projects covering, inlandwaterways, shipping and ports including deepening of channels inKandla, JNPT and Paradip ; plan allocation for Department of Shippingincreased by 37 per cent to Rs.735 crore; study to identify a suitablelocation for a new deep draft port in West Bengal to be carried out ;National Institute of Port Management, Chennai, renamed as NationalMaritime Academy, to be upgraded into a Central University withregional campuses at Mumbai, Kolkata and Visakhapatnam. · India Infrastructure Finance Company Limited incorporated; inprincipleapproval granted for to three road projects in Gujarat.

FINANCIAL SECTOR·

Banking, Insurance and Pensions: net capital support to bankingsector standing at Rs.22,808 crore, to be restructured to facilitateincreased access of banks to additional resources for lending to theproductive sectors; Bill on insurance to be introduced in 2006-07.

8· Capital Market: limit on FII investment in Government securities to beincreased from $ 1.75 billion to $ 2 billion and the limit on FIIinvestment in corporate debt from $ 0.5 billion to $ 1.5 billion; ceilingon aggregate investment by mutual funds in overseas instruments to beraised from $ 1 billion to $ 2 billion with removal of requirement of 10per cent reciprocal share holding; limited number of qualified Indianmutual funds to be allowed to invest, cumulatively up to $ 1 billion, inoverseas exchange traded funds; an investor protection fund to be setupunder the aegis of SEBI; RBI's anonymous electronic order matchingtrading module (NDS-OM) on its Negotiated Dealing System to beextended to qualified mutual funds, provident funds and pension funds;steps to be taken to create a single, unified exchange-traded market forcorporate bonds.

OTHER PROPOSALS·

Research and Development: National Agricultural Innovation Projectfor research at frontiers of agricultural science to be launched in July,2006; National S&T Entrepreneurship Board has setup Technologybusiness Incubators, enabling concessions to be provided to incubateeentrepreneurs.·

Institutions of Excellence: Universities of Calcutta, Mumbai andMadras to get a grant of Rs.50 crore each to mark the beginning of their150th year celebrations, with another Rs.50 crore each to be given atthe conclusion of the year; Punjab Agricultural University, Ludhiana.to get grant of Rs.100 crore; status of an autonomous National Instituteto be accorded to Rajiv Gandhi Centre for Biotechnology,Tiruvananthapuram, Kerala.·

Skills Development: Rs.97 crore allocated for upgradation of ITIs;Skills Development Initiative (SDI) taken up through a PPP schemewith initial provision of Rs.10 crore.·

Backward Regions Grant Fund: Rs.1,156 disbursed so far in currentyear, Rs.5,000 crore allocated in 2006-07.·

Jammu and

Kashmir

: State Plan for 2006-07 fixed at Rs.2,300 crore;additionally Rs.848 crore provided for the J&K Reconstruction Plan,including Rs.230 crore for the Baglihar Project; special central Planassistance of Rs.1,300 crore provided for reforms in the power sector.·

Defence Expenditure: increased to Rs.89,000 crore includingRs.37,458 crore for capital expenditure.

9· e-Governance: National e-Governance Plan to be approved shortly; 25projects, in mission mode, to be launched in 2006-07.·

Celebrating History and Heritage: Rs.10 crore allocated forcelebration of 150th anniversary of the First War of IndianIndependence; National Gandhi Museum, Rajghat and the KasturbaGandhi National Memorial Fund, Indore to be given Rs.5 crore each;Rs.5 crore for safeguarding of old art forms and oral traditions.

FISCAL CONSOLIDATION·

Twelfth Finance Commission: Rs.94,402 crore to be released asStates’ share in gross tax revenues in current year compared toRs.78,595 crore in 2004-05; grants- in-aid to States are Rs.25,134 crorein RE 2005-06 against Rs.12,081 crore in 2004-05.·

Subsidies: consensus sought on the issue of subsidies.·

Gross Budgetary Support and Gross Fiscal Deficit: Centre's gross tax-GDP ratio: 9.2 per cent in 2003-04, 9.8 per cent in 2004-05, 10.5 percent in 2005-06 (RE), 11.2 per cent in 2006-07 (BE); Gross FiscalDeficit less than Gross Budgetary Support for Plan in 2004-05; revenuedeficit for in 2005-06 to be 2.6 per cent and fiscal deficit 4.1 per cent.

BUDGET ESTIMATES FOR 2006-07·

Plan Expenditure: estimated at Rs.172,728 crore, up by 20.4 per cent;

Non-Plan Expenditure: Rs.391,263 crore, up by 5.5 per cent.·

Revenue Deficit and Fiscal Deficit: revenue deficit estimated atRs.84,727 crore, 2.1 per cent of the GDP; fiscal deficit estimated atRs.148,686 crore, 3.8 per cent of the GDP.

TAX PROPOSALS

Indirect Taxes: Customs · peak rate for non-agricultural products reduced from 15 per cent to 12.5per cent; duty on alloy steel and primary and secondary non-ferrousmetals reduced from 10 per cent to 7.5 per cent; this will also be the rateof duty for ferro alloys; on steel melting scrap raised to 5 per cent andbrought on part on par with primary steel; · duty on mineral products reduced to 5 per cent, with a few exceptions. · duty on ores and concentrates reduced from 5 per cent to 2 per cent.

10 · duty on refractories and on a number of materials for manufacture ofrefractories reduced to 7.5 per cent. · duty to be reduced on basic inorganic chemicals from 15 per cent to 10per cent; on basic cyclic and acyclic hydrocarbons and their derivativesto 5 per cent; on catalysts from 10 per cent to 7.5 per cent. · duty to be reduced on major bulk plastics like PVC, LDPE and PP from10 per cent to 5 per cent; on naptha for plastics to nil; on styrene, EDCand VCM which are raw materials for plastics to 2 per cent. · reduction of customs duty on 10 anti-AIDS and 14 anti-cancer drugs to 5per cent; on certain life saving drugs, kits and equipment from 15 percent to 5 per cent ; these drugs also exempt from excise duty and CVD. · duty on packaging machines to be reduced from 15 per cent to 5 per cent. · concessional project rate of 10 per cent to be extended to pipelineprojects for transportation of natural gas, crude petroleum and petroleumproducts. · CVD of 4 per cent to be imposed on all imports with a few exceptions ;full credit to be allowed to manufacturers of excisable goods. · Customs duty on vanaspati to be increased to 80 per cent. · rates on clearances by EOUs to the Domestic Tariff Area (DTA) adjustedat 50 per cent of basic customs duty plus excise duty on like goods. · reduction of: excise duty on all man-made fibre yarn and filament yarnfrom 16 per cent to 8 per cent; import duty on all man-made fibres andyarns from 15 per cent to 10 per cent ; import duty on raw materials suchas DMT, PTA and MEG from 15 per cent to 10 per cent ; import duty onparaxylene to 2 per cent. Excise · with the intention to converge all rates at the CENVAT rate at 16 percent; duty on aerated drinks and small cars to be reduced to 16 per cent. · 8 per cent duty to be imposed on packaged software sold over thecounter; customised software and software packages downloaded fromthe internet to be exempt; DVD Drives, Flash Drives and Combo Drivesto be fully exempt from excise duty. · condensed milk, ice cream, preparations of meat, fish and poultry,pectins, pasta and yeast to be fully exempt; duty on ready-to-eatpackaged foods and instant food mixes, like dosa and idli mixes, to bereduced from 16 per cent to 8 per cent.

11 · vegetable tanning extracts, namely, quebracho and chestnut to be exemptfrom duty; duty on footwear with a retail sale price between Rs.250 andRs.750 to be reduced from 16 per cent to 8 per cent. · concessional rate of 8 per cent to be extended to all LPG stoves. · duty on compact fluorescent lamps to be reduced from 16 per cent to 8per cent. · glassware to attract duty of 16 per cent on par with ceramicware andplasticware. · excise duty on specified printing, writing and packing paper to bereduced from 16 per cent to 12 per cent. · cess under the Oil Industries Development Act to be increased fromRs.1,800 per metric tonne to Rs.2,500 per MT. · re-imposition of excise duty at 12 per cent on computers to enabledomestic manufacturers to take CENVAT credit as well as to facecompetition from imports; price not to be impacted as duty to be eligiblefor full input tax credit, · duty of 16 per cent to be levied on set top boxes with reduction incustoms duty from 15 per cent to nil. · increase in excise duty on cigarettes by about 5 per cent. · excise and customs tariff exemptions that are end-use based or haveoutlived their utility or need certification or give rise to disputes beingrescinded; exemption for the SSI sector will remain. Service tax · new services to be covered including ATM operations, maintenance andmanagement; registrars, share transfer agents and bankers to an issue;sale of space or time, other than in the print media, for advertisements;sponsorship of events, other than sports events, by companies;international air travel excluding economy class passengers; containerservices on rail, excluding the railway freight charges; business supportservices; auctioneering; recovery agents; ship management services;travel on cruise ships; and public relations management services. · coverage of certain services now subject to service tax to be expanded. · leasing and hire purchase to be treated on par with loan transactions,interest and instalment of principal amount to be abated in calculatingvalue of the service.

12 · proposal to set April 1, 2010 as the date for introducing national levelGoods and Service Tax (GST); service tax rate increased from 10 percent to 12 per cent as another step towards converge between service taxrate and the CENVAT rate; net impact likely to be very small in view ofcredit available for service tax or excise duty payable.

Direct Taxes · no change in rates of personal income tax or corporate income tax;no new taxes are being imposed. · one-by-six scheme will stand abolished. · marginal revision in certain tax rates in the quest for equity-Minimum Alternate Tax (MAT) rate increased from 7.5 per cent ofbook profits to 10 per cent which is only one-third of the normalrate; long-term capital gains arising out of securities included incalculating book profits; period to take credit for MAT increasedfrom five years to seven years. · increase of 25 per cent, across the board, on all rates of STT. · Section 80IA of the Income Tax Act applies to infrastructurefacilitie; terminal date for developing an industrial park extendedfrom March 31, 2006 to March 31, 2009; for the power sector, thedate extended to March 31, 2010. · investments in fixed deposits in scheduled banks for a term of notless than five years included in section 80C of the Income tax Act;limit of Rs.10,000 in respect of contribution to certain pension fundsremoved in section 80CCC subject to overall ceiling of Rs.100,000. · definition of open-ended equity-oriented schemes of mutual funds inthe Income tax Act aligned with the definition adopted by SEBI;open-ended equity-oriented schemes and close-ended equityorientedschemes to be treated on par for exemption from dividenddistribution tax. · exemption under section 10(23G) removed. · Primary Agricultural Credit Societies and Primary CooperativeAgricultural and Rural Development Banks to continue to be exemptfrom tax under section 80P of the Income Tax Act; all othercooperative banks excluded from the scope of that section. · scope of section 54EC restricted to two institutions, viz., NHAI andREC; for NABARD, SIDBI and NHB, which are banks, route ofzero coupon bonds to raise low cost funds already opened; if needed,

13appropriate support to be provided to these institutions to enablethem to access resources to fulfil their mandate effectively; benefitof section 54ED withdrawn with effect from April 1, 2006. · anonymous or pseudonymous donations to wholly charitableinstitutions to be taxed at the highest marginal rate; such donationsto partly religious and partly charitable institutions/trusts to be taxedonly if the donation is specifically for an educational or medicalpurpose; such donations to wholly religious institutions and religioustrusts not to be covered by the new provision. · constituency allowances of Members of State Legislatures to betreated at par with constituency allowance received by Members ofParliament. · Permanent Account Number (PAN) is the critical element incapturing incomes and expenditures; scrutiny of Annual InformationReturns (AIR) on high- value transactions reveals that 60 per cent ofthe transactions are without quoting PAN; hence proposal to takepower to- issue PAN suo motu in certain cases and to direct personsto apply for PAN in certain cases; in due course, more transactionsto be notified for which quoting of PAN to be mandatory, a fewmore transactions to be prescribed to be reported in AIRs. · Banking Cash Transaction Tax (BCTT) to continue for some moretime until the AIR system is able to capture all significant financialtransactions. · Fringe Benefit Tax (FBT) introduced last year as a revenue raisingmeasure; justified on the principles of horizontal equity and verticalequity; on review, following changes being proposedoValue the benefit in the form of ‘tour and travel’ at 5 per centinstead of 20 per cent;o Value benefit in the form of ‘hospitality’ and ‘use of hotelboarding and lodging facilities’, in case of airline companiesand shipping industry, at 5 per cent instead of 20 per cent;o Exclude expenses on free samples of medicines and ofmedical equipment distributed to doctors;o Exclude expenses incurred on brand ambassador andcelebrity endorsement; ando Prescribe a threshold of Rs.100,000 under section115WB(1)(c) so that only a contribution by an employer toan approved superannuation fund in excess of Rs.100,000per year per employee to attract FBT. Under section 80Cthere is already exemption up to Rs.100,000 for contributionby an employee to an approved superannuation fund.

14· Modernizing Tax Administration: The Departments of Income Taxand Customs and Central Excise to undergo Business ProcessReengineering (BPR); nationwide networks to connect 745 incometax offices in 510 cities and 550 customs and central excise officesin 245 cities, creating national databases; national data centres, datawarehousing facilities and disaster recovery sites being set up ;jurisdiction-free filing of returns, online tracking of status ofaccounts and refunds of income tax to be possible ; introduction of arisk management system and Electronic Data Interchange (EDI) inthe Customs Department to reduce dwell time for cargo; E-paymentsof customs and excise duties to be possible; both Departments tohave fully computerised networks by end 2006. · a statement on revenue foregone, (tax expenditure statement ),captur ing the departures from the normal tax regime introduced.

VAT and CST: · in order to moderate the price, LPG (domestic) included in the list of ‘declared goods’ under the CST Act.