Finance Minister Pranab Mukherjee on Monday announced a slew of concessions, including a 1 per cent interest subsidy for lower and middle income housing loans, and exempted road repair and maintenance services from the ambit of service tax.
Replying to the debate on the Finance Bill 2009, which was passed with some amendments in the Lok Sabha, he also announced that the service tax on new services proposed in his Budget would come into effect from September 1.
Maintaining that lower and middle income housing deserves to be supported to stimulate this segment of house owners, Mukherjee said one per cent interest subsidy would be available to individuals for loans up to Rs 10 lakh (Rs 1 million) for houses that do not cost more than Rs 20 lakh (Rs 2 million).
He proposed to provide Rs 1,000 crore (Rs 10 billion) for this purpose. Giving yet another sop, the minister said that the eligible deductions for assessees with severe disability will be raised from Rs 75,000 to Rs 1 lakh for purposes of income tax.
The minister also extended the benefit of deductions in respect of interest paid on education loan for higher education to legal guardian of the student under Section 80E of the IT Act.
Similarly, he extended the sunset clause for tax holidays for industrial parks by another two years up to March 2011, in a bid to provide stimulus to infrastructure sector in the wake of economic slowdown.
Mukherjee said the interest subsidy on home loans will be routed through the scheduled commercial banks and housing companies registered with the National Housing Bank. It will be available for a period of one year.
He said he also proposed to provide further stimulus to the housing sector by allowing tax holiday in respect of profits derived from projects approved between April 1, 2007 and March 31, 2008, if they are completed on or before March 31, 2012.
The minister expected the developers to pass on the benefit of tax holiday to home buyers by appropriately reducing their prices.
"I am sure that both the expenditure and tax-foregone initiatives would provide relief to a large segment of prospective home owners and help revive the real estate sector," he said.
Yet another concession he extended was the tax holiday on profits in respect of business processing, preserving and packaging of meat and meat products and poultry, marine and dairy products.
Mukherjee, who had in his Budget speech announced seven-year holiday for payment of income tax on natural gas produced from oil and gas blocks awarded in the forthcoming licensing round, also extended the benefit to coal bed methane blocks.
Government has announced 70 oil and gas exploration blocks in the 8th round of New Exploration Licensing Policy (NELP) and along side areas for extraction of gas from below coal seams (CBM) have also been offered. The Finance Bill had restricted the tax benefit to just the oil and gas blocks and on Monday Mukherjee extended them to CBM too.
The benefit will be available prospectively from assessment year 2010-11 and subsequent assessment year.
On the Direct Taxes Code, which the Budget said would be released by August 20 for discussion, Mukherjee said suggestions made by members regarding simplification would find reflection in the preparation of the code.
The code, he added, would be placed in Parliament for discussion during the winter session.
Before appealing the House to pass the Bill, the Minister said economic recovery has begun and also expressed the confidence that the economy would be able to reach the high growth rate of 8-9 per cent by end of 2010.
He said creation of infrastructure, both physical and social, tax reforms and inclusive growth would be the theme of the policies and actions of the government.
"Reforms will be on our agenda, but reforms is a continuous process. It is not a mantra which is to be chanted occasionally", he said.
Noting there was no need to either press panic button or paint a rosy picture of the economy, the minister said, "We are not out of woods, situation is still difficult."
Efforts, he added, would have to be made to ensure four per cent agriculture sector growth by making available water, pesticides, fertilisers and credit at affordable cost to farmers.
The stimulus packages announced by the government are giving dividends, the Minister said, adding the output of cement and crude oil has improved and performance of manufacturing sector is encouraging.
Mukherjee also expressed the confidence that it would be possible to implement the Goods and Services Tax (GST) with effect from April 1, 2010. "On the board national issues, there are no discordant views (between the Centre and states)," he added.
Commenting on the remarks of former Finance Minister Jaswant Singh that income tax concessions were not enough to buy him a bottle of whiskey, Mukherjee in lighter vein quipped, "It is not advisable for him to have whiskey. As I had given up smoking, he should give up whiskey."
The minister said that in his Budget proposal he raised the income tax exemption limit by Rs 10,000 for general assessees and Rs 15,000 for senior citizens.
The minister further said that it was not possible to accept many of the demands of the industry at this juncture as the tax-GDP ratio has come down from 12.6 per cent to 11.5 per cent, mainly because of the steps taken to boost the economy.
On the issue of income tax refund and mounting interest payment on delayed refunds, Mukherjee said that the Central Processing Centre (CPC) being set up at Bengaluru would become operational in August.
Centralised processing of returns, which are filed online, he added, would help in facilitating payment of refunds and reducing outgo on delayed refunds.
