I am presenting a detailed action taken report on last year's budget announcements. Some of the highlights are: deregulation of controls on agricultural commodities; progress towards decontrol of sugar; substantial reduction in the span of price control of drugs; decision to amend existing legislation governing revival and/or winding up of companies, along with abolition of SICA; substantial progress in privatisation; progress in the implementation of Expenditure Reforms Commission's recommendations and announcement of VRS for surplus government employees.

Agriculture and rural development

Deregulation

Having achieved great success with the Green Revolution and then the White Revolution, the country is now ready for its third revolution of agricultural diversification and food processing. This requires policy changes, a renewed thrust on agricultural research and extension, and a new climate that encourages much greater investment in both the public and private sectors. Freedom to the farmer, Kisan Ki Azaadi is the overarching goal of our policy.

Even though agriculture is a State subject, there are a number of Central Government policies that influence this sector. The Government has reviewed the operation of the Essential Commodities Act, 1955. Restrictive orders inhibiting storage, selling and movement of food and agricultural products are being removed. We can now look forward to a countrywide integrated market for agricultural products. I am proposing further decontrol and deregulation of agriculture along the following lines:

Agricultural credit

I am glad to report that the total credit flow to the agriculture sector through institutional channels is expected to reach the targeted level of Rs 64,000 crore this year. It is expected to increase to Rs 75,000 crore in 2002-2003. I propose the following steps to further improve the delivery of agricultural credit:

A special OTS scheme for small and marginal farmers will be announced by RBI to cover loans up to Rs 50,000.

Irrigation

I propose to increase the allocation for the Accelerated Irrigation Benefit Programme (AIBP) from Rs 2,000 crore this year to Rs 2,800 crore in 2002-03.

Agriculture extension and research

The accelerated diversification and modernisation of agriculture will require a new approach to research and extension services. I therefore propose to enhance the allocation for 2002-03 for agriculture research to Rs 775 crore from Rs 684 crore in the current year.

Linkages between research and extension will be strengthened to improve quality and effectiveness of research and extension systems.The Companies (Second Amendment) Bill 2001, already introduced in Parliament will enable the conversion of existing producer cooperative businesses into companies.

Agricultural exports

Promotion of agricultural exports is important for creating conditions for providing remunerative prices to farm produce. For this purpose Agri Export zones are being promoted in different States and 15 such zones have been approved so far. APEDA will catalyse development of infrastructure and flow of credit to the units in these Agri Export zones.

Rural development

Rural roads

The Pradhan Mantri Gram Sadak Yojana (PMGSY) initiated to provide connectivity through all weather roads to all our villages is making considerable headway. Depending on the accelerated implementation of these works I intend to find additional resources including those from multilateral sources in the course of the year.

Rural electrification

During my last budget speech I had announced a package of initiatives for electrification of 80,000 villages that have no access to electricity. Considering the fact that SEBs find it difficult to service debt, the Government proposes to introduce a new interest subsidy scheme called the Accelerated Rural Electrification Programme. An outlay of Rs 164 crore has been provided for this scheme in 2002-03.

Rural employment

The Sampoorna Grameen Rozgar Yojana (SGRY) announced by the Prime Minister in his Independence Day speech of 2001 was launched on September 25, 2001 by merging the ongoing Employment Assurance Scheme (EAS) and the Jawahar Gram Samridhi Yojana (JGSY). Since the launch of the scheme, release of 30.6 lakh tonnes of food grains to States has already been authorised, out of the 50 lakh tonnes allocated. This scheme will be continued next year.

Infrastructure

Provision of efficient and world class infrastructure is critical for our growth aspirations. A key issue that bears repetition is the imposition of appropriate user charges necessary to provide adequate returns on investment. Some success has been achieved in areas such as telecom, roads and ports where appropriate user charges exist. With the tariff rationalization and other bold measures introduced by my colleague, the Minister of Railways, we can expect the Railways to serve well the key transportation needs of the country in the years to come. Other areas such as power, urban infrastructure, other transportation and the like continue to experience great difficulty because of the lack of appropriate user charges.

Power

Restoration of financial viability in the power sector remains crucial. The average rate of return for all SEBs is about minus 40 per cent and their combined losses continue to increase. Hence, this is one of the foremost challenges not only in the power sector but also for the fiscal health of the state governments and the overall performance of the economy.

n. To redouble our effort in this direction APDP is being redesigned as the Accelerated Power Development and Reform Programme (APDRP), with an enhanced plan allocation of Rs 3,500 crore for 2002-03, up from Rs 1,500 crore this year. Access of the States to the fund will be on the basis of agreed reform programmes. Accordingly, the focus of reform has shifted from generation to transmission and distribution.

Roads

I am glad to inform the House that the Prime Minister's National Highway Development Programme (NHDP) launched three years ago is progressing well. It now promises to achieve a totally new scenario in the road sector. The Golden Quadrilateral will be completed substantially by December 2003, a year ahead of schedule. The North-South East-West corridors have a length of 7300 km, of which 716 km have already been four-laned. With the assistance of multilateral funding, other borrowings by the National Highway Authority of India (NHAI) with Government guarantee, and other innovative financing schemes, the funding for this phase will be fully tied up in 2002-03.

Ports

The present Port Trust structure does not allow Indian major ports to have the flexibility needed for efficient management and for raising institutional funding. It is therefore proposed to corporatise major ports in a phased manner. Private sector investments have been facilitated and 17 projects worth more than Rs 4,500 crore have already been approved and another 8 projects worth more than Rs 3,200 crore are under consideration. With corporatisation of the existing ports and new private sector ports coming up, the regulatory structure will be strengthened.

Civil aviation

The Government has already announced its decision to upgrade the international airports at Delhi, Mumbai, Chennai and Kolkata to the standards of world class airports by inducting private sector management and investment through long term leasing systems. Modalities for inviting offers have been finalised and the leasing process will be completed in 2002-03.

Private sector participation in greenfield airports will be encouraged through a package of concessions.The proposed new airports in Bangalore and Hyderabad will benefit from these concessions.

Urban development

The 2001 census shows that the urban population in India is now about 285 million, greater than the total population of the US. The number of cities with more than one million population has increased from 23 in 1991 to 35 in 2001. We are aware of the sad plight of most of our towns and cities. This needs to be changed if they have to act as engines of growth.

I propose to set up an Urban Reform Incentive Fund (URIF) with an initial allocation of Rs 500 crore to provide reform linked assistance to States. The Fund will seek to incentivise reforms in the following areas:

A City Challenge Fund (CCF) will also be set up as an incentive-based facility that will support cities to fund transitional costs of moving towards sustainable and creditworthy institutional systems of municipal management and service delivery.

Tourism

Tourism constitutes a priority area in view of its beneficial impact on growth of employment, generation of foreign exchange, and the promotion of greater national integration through domestic tourism. It is therefore proposed to implement a comprehensive tourism development package:

The Plan Outlay for tourism has accordingly been increased by 50 per cent to Rs 225 crore for 2002-03. I will have more to say on the fiscal measures relating to tourism in part B of my speech.

Financial sector and capital market

Debt market

Substantial progress has been made on the proposals made last year for the development of a transparent and active debt market in general and the government securities market in particular. Primary issuance of government securities is now being facilitated by an electronic Negotiated Dealing System (NDS) and efficiency of trading in government securities is being enhanced by the new Clearing Corporation of India Ltd (CCIL).

To help investors plan their investments better and to add transparency and stability in the market RBI will announce an issuance calendar for dated government securities. Having now received the concurrence of all state legislatures I also propose to introduce a new Government Securities Bill to replace the old Public Debt Act 1949 within this Parliament Session.

Capital market

In view of the various disturbances that have occurred in the capital market it is important to boost investor confidence and to strengthen market integrity. The following measures are being taken.

A package of measures for reforming the US-64 scheme and the Unit Trust of India (UTI) has been announced which seeks to balance investors' interest while ensuring systemic safety. The long overdue reform for making US-64 NAV based has been implemented. Further legislative changes in the UTI Act to put in place other needed reform measures will be proposed during the year.

Banking sector

Reforms in the banking sector will be continued to enhance the efficiency and competitiveness of the sector. The following measures have either been taken or are being taken:

Housing finance

The initiatives taken in the housing finance area in the last four years have shown positive results.

Total disbursement from housing finance institutions in 2000-01 was Rs 26,300 crore, a growth of about 28 per cent in the year. This amount financed the construction of about 28 lakh houses, much higher than the annual target of 20 lakh houses. To further strengthen housing finance the following measures are being taken:

I will have more to say on housing in Part B of my speech.

Capital account liberalisation

Capital account convertibility has been on our agenda for quite some time. In view of the many disturbances that have taken place in international capital markets in recent years I propose to continue with our policy of liberalisation with caution. Accordingly, I propose to take the following steps to further liberalise the capital account:

Structural reforms

Administered Price Mechanism (APM) for petroleum

As decided by the Government in November 1997 and reiterated by me last year, I am glad to announce the dismantling of the Administered Price Mechanism (APM) in the petroleum sector from April 1, 2002. As a result, the following measures are being taken:

Industrial restructuring

To deal with forces of competition, industrial and other companies require restructuring on a continuous basis. For this purpose it is essential to promote out of court mechanisms for timely and transparent corporate debt restructuring of viable entities, in addition to the use of legal avenues of financial restructuring. A mechanism for Corporate Debt Restructuring (CDR) has been set up under the guidelines issued by the Reserve Bank of India. I have decided to set up a small group consisting of bankers and others, under the chairmanship of Deputy Governor, Reserve Bank of India to suggest measures to make its operation more efficient.

Exports

The Government is committed to provide all assistance to accelerate export growth. A key new initiative is the establishment of Special Economic Zones (SEZs). I will announce a comprehensive package for SEZs in Part B of my speech.

To provide incentives to State Governments for export promotion through the creation of new export promotion industrial parks and associated facilities, I propose to increase the outlay for the scheme from Rs 97 crore this year to Rs 330 crore for 2002-2003. Overall outlay for the Department of Commerce for the year 2002-03 has been increased by 55 per cent to Rs 775 crore.

Fiscal consolidation

In every budget speech I have, at the risk of irritating repetition, expressed my deep concern at the poor fiscal situation of the Central and State Governments. Reflecting this concern I had introduced in Parliament the Fiscal Responsibility and Budget Management Bill in December 2000. The recommendations of the Parliamentary Standing Committee of Finance are receiving our attention and I propose to bring the Bill for consideration in this august House within the current session.

Small savings and interest rates

Last year I had announced the setting up of an Expert Committee headed by Deputy Governor, RBI to suggest rationalisation of administered interest rates. The Committee has given its report, which has been examined by the Government. Accordingly, I propose to take the following measures:

Pension reform

The present pension scheme for Government employees casts an open-ended financial burden on the Government. I had announced the appointment of a High Level Expert Group to develop a new pension scheme, based on defined contributions, for new recruits entering government service. The Expert Group has submitted its report to the Government. It has proposed a hybrid scheme that combines contributions from employees and the Union Government on matching basis, on the one hand, while committing to the employees a defined benefit as pension. The report is being considered by the Government and the new pension scheme for new recruits will be announced and implemented by June 1, 2002.

Privatisation

With the streamlined procedure for disinvestment and privatisation, I am happy to report that the Government has now completed strategic sales in 7 public sector companies and some hotel properties of the Hotel Corporation of India (HCI) and the India Tourism Development Corporation (ITDC).

The change in approach from the disinvestments of small lots of shares to strategic sales of blocks of shares to strategic investors has improved the price earning ratios obtained. We expect to complete the disinvestment in another 6 companies and the remaining hotels in HCI and ITDC this year.Disinvestment receipts for the present year are estimated at Rs 5,000 crore excluding the special dividend from VSNL of Rs 1,887crore.

Encouraged by these results, I am once again taking credit for a receipt of Rs 12,000 crore from disinvestment next year.

Defence

Modernisation and upgradation of our Defence preparedness is an area of highest national priority.

I have made a provision of Rs 65,000 crore for defence expenditure for next year.

Budget estimates for 2002-2003

In the budget estimates for 2002-2003, the total expenditure is estimated at Rs 4,10,309 crore, of which Rs 1,13,500 crore is for Plan and Rs 2,96,809 crore for non-Plan.

Plan expenditure

The budget support for Central, State and UT Plans has been placed at Rs 1,13,500 crore, an increase of Rs 18,400 crore over Budget estimates 2001-2002.

This amounts to an increase of 19.35 per cent over the last year, which is the highest increase in over a decade. Gross budgetary support for the Central Plan is being enhanced from Rs 60,276 crore in the revised estimates 2001-2002 to Rs 66,871 crore in 2002-2003. Central Plan assistance to States and Union Territories in 2002-2003 is also proposed to be increased to Rs 46,629 crore from Rs 38,878 crore in the revised estimates 2001-2002. While the increase in Central Plan outlay is about 11 per cent, the increase in central assistance to state plans is nearly 20 per cent.

Non-Plan expenditure

Non-plan expenditure in 2002-03 is estimated to be Rs 2,96,809 crore compared to Rs 2,65,282 crore in Revised estimates for 2001-02. The increase in non-plan expenditure is mainly in interest payments (Rs 10,133 crore), subsidies (Rs 9,278 crore), defence (Rs 8,000 crore) and grants to States (Rs 2,196 crore).

PART B

Sir, I now present my tax proposals.

I have formulated my tax proposals against the backdrop of the current economic slow-down. My tax proposals are intended to revive demand, promote investment, accelerate economic growth and enhance productivity. They are also aimed at widening the tax base, rationalisation and simplification of tax structures and encouraging voluntary compliance.

I present my indirect tax proposals first.

In 2000-2001, I had introduced the rate of 16 per cent as the rate of Central Value Added Tax (CENVAT) in the excise duty structure. Last year, I had reduced the three rates of special excise duty to a single rate of 16 per cent. This rationalisation in the duty structure has considerably reduced disputes and litigation and the cost of compliance to the assessees. Above all, it has put in place a system, which is stable, just and rational. We only need to refine it further.

I propose to abolish the 16 per cent special excise duty on a number of items. Henceforth, the special excise duty shall be confined to the following 8 items only:

I propose to do away with the concessional rate of 8 per cent excise duty applicable to LPG, kerosene, auto CNG and diesel engines up to 10 HP which will now attract the cenvat rate of 16 per cent.

Mr Speaker Sir, the rates of excise duty have now been considerably moderated. However, several exemptions still continue. In my last budget I had imposed excise duty at a moderate rate of 4 per cent on a few items. I propose to increase this rate from 4 per cent to the next slab of 8 per cent this year. Simultaneously, I propose to impose excise duty at 4 per cent on a few more items, which have remained exempted so far.

Cigars, cheroots and cigarillos of tobacco or tobacco substitutes which have been exempt so far shall attract 16% CENVAT.

In view of the abolition of Administered Price Mechanism on petroleum products and in order to provide for the subsidy on LPG and kerosene oil, I propose to make some changes in the duty structure of petroleum products. The rate of cess applicable to indigenous crude oil under the Oil Industry (Development) Act will be increased from Rs 900 per metric tonne to Rs 1,800 per metric tonne with effect from 1st March 2002. I propose to reduce the ad valorem rate of excise duty applicable to motor spirit from 90 per cent to 32 per cent. However, I propose to impose on it a surcharge of six rupees per litre. But the surcharge on ethanol doped motor spirit will be five rupees and twenty-five paise per litre.

I propose to maintain the excise duty rates on yarns. At present, cotton hank yarn is exempt from excise duty but is being widely misused. In order to ensure that the benefit accrues only to the handloom weavers I propose to bring hank yarn within the net of excise duty at 8 per cent, but at the same time, provide for appropriate subsidy on the price of hank yarn purchased by them. This will put an end to misuse and target the subsidy better. The Ministry of Textiles would announce the details of the subsidy scheme.

In order to enable the weavers to avail of CENVAT credit scheme, I propose to allow the weavers of grey fabrics to pay excise duty on an optional basis. I propose to extend a similar option to the knitting sector.

Handloom sector is not affected by my Budget proposals. Excise duty exemption on handloom fabrics continues. I now propose to grant exemption to handloom garments also from excise duty subject to certification by Handloom Export Promotion Council.

In order to enable the textile industry to modernise itself and acquire new technology, I propose to exempt excise duty on automatic shuttle-less looms. I also propose to exempt excise duty on specified processing machinery and specified silk reeling, weaving and twisting machinery. The customs duty on such machinery is also proposed to be reduced from 25 per cent to 10 per cent. I also propose to exempt specified jute machinery from excise duty. I hope this package will enable the textile industry to face global competition.

My proposals include special dispensation of excise duty structure for the petroleum refineries located in the North-East region. With effect from 1st March 2002, the petroleum products produced by all these refineries shall be charged to excise duty at half of the normal rates of excise duty otherwise applicable to petroleum products.

Inland air travel tax is exempted for air travel within the North-Eastern States. I propose to extend this exemption on air travel to and from North- East States.

Tea industry is currently facing a number of problems in the domestic as well as international markets for a variety of reasons. In order to promote the interest of tea growers, I propose to reduce the excise duty on tea from Rs 2 per kg to Re.1 per kg.

The excise duty exemption scheme for the small-scale sector is applicable to granite. In view of the fact that it is not available to marble, I propose to withdraw this exemption from granite also.

Mr Speaker, Sir, the justification of taxing more services does not require any elaboration. This year, I propose to extend the service tax to the following services:

Service tax is applicable to specific services provided by banks and non-banking financial companies. I propose to extend the service tax to corporate bodies that provide similar services.

The tax on these services shall come into force from a notified date.

Customs duties

Sir, I now present my proposals relating to customs duties.

The House may recall that, in my last budget, I had announced that I would move progressively to reduce the peak rate of customs duty to 20 per cent within three years. I had also said that the modalities for this would be worked out in time for the next budget. I had accordingly set up an Inter-Ministerial Working Group to recommend the modalities. The Group has suggested a road map for this starting with this year's budget. After careful consideration of the Group's report, I have decided that, by the year 2004-05, there would be only two basic rates of customs duties, namely, 10 per cent covering generally raw materials, intermediates and components and 20 per cent covering generally final products. In accordance with the road map, I propose to reduce the peak rate from 35 per cent to 30 per cent this year. I also propose to make some changes to take care of some current problems.

Our steel industry has been affected by slowdown in demand and has suffered large losses. In order to reduce its cost of production I propose to lower customs duty on a number of refractory raw materials by 10 per cent. These include natural graphite powder, silicon metal, sintered alumina, fused zirconia and boron carbide. I also propose to reduce the duty on graphite electrodes of above 24 inches diameter from 25 per cent to 15 per cent.

Ships imported for breaking are charged to customs duty at 5 per cent along with CVD and special additional duty. I propose to revise this by increasing the basic duty on ships for breaking from 5 per cent to 15 per cent and exempting them from CVD and special additional duty. This is to reduce the disparity between rolled products produced by the steel plants and cheaper products produced from ship breaking.

The steel industry is troubled by imports of seconds and defectives at cheaper prices. In order to address their concern I propose to increase the basic customs duty on seconds and defectives of steel to the bound rate of 40 per cent.

Non-ferrous metals are used for large number of applications by different segments of industry. I propose to reduce the customs duty on copper, zinc and lead from 35 per cent to 25 per cent and on aluminium and tin from 25 per cent to 15 per cent.

In order to encourage development of world-class infrastructure facilities, I propose to reduce the customs duty on specified equipment for ports and airports to 10 per cent.

In view of the difficulties being faced by the civil aviation sector, I propose to exempt duty on aeroplanes, helicopters, gliders, simulators of aeroplanes and their parts and raw materials.

The use of cellular phones is increasing by leaps and bounds but import through unauthorised channels is a matter of concern. I therefore, propose to exempt cellular phones and pagers from CVD. The basic customs duty is, however, being increased from 5 per cent to 10 per cent.

This year, I propose to increase the customs duty on tea and coffee to 100 per cent and on natural rubber, poppy seeds, pepper, cloves and cardamom to 70 per cent. I also propose to increase the duty on pulses from 5 per cent to 10 per cent.

I propose to reduce the customs duty on agricultural machinery and implements from 25 per cent to 15 per cent to encourage our farmers to acquire new and efficient technology.

As a measure of rationalisation and removal of anomaly I propose to reduce the customs duty on non-PDS kerosene from 35 per cent to 20 per cent and increase the customs duty on kerosene sold under the PDS scheme from 5 per cent to 10 per cent.

In order to promote interest in science, I propose to reduce the customs duty on planetarium equipments, parts and accessories to 15 per cent and also exempt them from CVD and special additional duty of customs. I propose to reduce the customs duty on cement and clinkers from 25 per cent to 20 per cent. This should help in keeping the domestic prices under control.

The customs duty on imported liquors is bound at 182 per cent for the current year under the WTO. Accordingly, I propose to reduce the customs duty on these items from 210 per cent to 182 per cent. I also propose to rationalize the rates of CVD applicable to liquors and wines to 75 per cent for value up to $25 per case and 50 per cent for others.

Passengers returning from abroad on transfer of residence are allowed certain items of personal use on payment of customs duty at a flat rate of 35 per cent. I propose to reduce this rate to 30 per cent and also add a few more items like lap top computers, portable photocopy machines, digital video disc players, video cassette disc players in the eligible list of items. The overall limit is also being raised from Rs 1.5 lakh to Rs 5 lakh.

I propose to impose nominal customs duty of 5 per cent on some of the items that are exempt at present. I also propose to impose special additional duty on certain other items that are currently subjected to 5 per cent customs duty.

My proposals on the excise side are estimated to result in a revenue gain of about Rs 6,700 crore in a year. On the customs side my proposals are estimated to result in a revenue loss of about Rs 2,200 crore. However, I anticipate buoyancy in indirect tax revenue and estimate that the total collection next year would be Rs 1,43,702 crore.

Direct taxes

Personal Income tax rates have been at 10 per cent, 20 per cent and 30 per cent and corporation tax at 35 per cent for several years. They are reasonable and therefore, I have left them unchanged in my last four budgets. I do not propose to change them this year also.

I have already mentioned the need to provide incentives for fresh investments in the industrial sector. To give impetus to such investment, I propose to allow additional depreciation at the rate of 15 per cent on new plant and machinery acquired on or after April 1, 2002 for setting up a new industrial unit, or for expanding the installed capacity of existing units by at least 25 per cent.

There is disparity between the rates of corporation tax applicable to foreign companies and domestic companies. This disparity arose in the past partly due to certain levies like surcharge being applicable to domestic companies but not to foreign companies. To correct this, I propose to reduce the rate applicable to foreign companies from 48 per cent to 40 per cent.

The small-scale industry sector has been making an important contribution to economic growth, and deserves continued support. In order to enable the Small Industries Development Bank of India (SIDBI) to augment its resources and provide cheaper credit to the small-scale sector, I propose to allow capital gains exemption under Section 54EC of the Income-tax Act to amounts invested in bonds issued by SIDBI.

Continuing the thrust given to the housing sector over the last four years, I propose to allow the deduction for interest payable on housing loans for self-occupied houses even where such houses are acquired or constructed after March 31, 2003, as long as the acquisition or construction is completed within three years from the end of the financial year in which the loan was taken. For giving a further impetus to investment in the housing sector, I propose to extend the capital gains exemption provided in section 54EC of the Income-Tax Act to bonds issued by the National Housing Bank.

The shipping industry in India is internationally competitive and is capable of further growth. In my Budget for 2000-2001, I had provided for a deduction of the entire profits of a shipping company if the amount deducted was kept in a reserve for purchase of new ships. However, the aggregate of the amounts that can be transferred to such reserve is limited to twice the amount of the paid up share capital of the company. I propose to extend it to cover share premium reserve and general reserve also. This reserve will not be considered while computing the book profits and shipping companies would thus be out of the purview of minimum alternate tax (MAT).

Presently, banks are allowed to deduct up to 5 per cent of their total income against provisions made by them for bad and doubtful debts. In order to strengthen the financial position of banks I propose to increase this allowance to 7.5 per cent of the total income. Further, in my budget for the year 1999-2000, I had granted an option to banks to deduct up to 5 per cent of their NPAs falling in the category of loss or doubtful assets as on the last day of the accounting year. I propose to enhance this optional deduction to 10 per cent, and also allow a similar option of deduction up to 10 per cent of loss or doubtful assets to public financial institutions.

With a view to encourage its growth, I propose to extend this benefit to companies providing telecom services and eligible for deduction under section 80-IA. I also propose to constitute an expert group to examine the extension of this benefit to other companies in the services sector, including the financial services sector.

In order to provide further fiscal relief to the tourism sector, I propose to take the following measures:

1) Expenditure tax on hotels will, henceforth, apply only to room charges, and will be payable only where such charges are Rs 3,000 or more per day, as against the existing threshold of Rs 2,000 per day.

2) The deduction available under section 80HHD of the Income-tax Act in respect of foreign exchange earnings of hotels or tour operators will be enhanced to bring it in line with the deduction available to exporters under section 80 HHC.

3) A deduction of 50 per cent of the profits earned by units setting up and operating large convention centres will be allowed for 5 years under section 80-IB.

Last year, for ensuring a degree of transparency in the affairs of charitable and religious trusts as well as certain other institutions claiming exemption under Section 10 (23C), I had introduced provisions requiring them to publish their accounts in a local newspaper, if their total receipts during a year exceeded Rs 1 crore. I have received a large number of representations pointing out the possibility of misuse of such information by anti-social elements. In view of these representations, I propose to delete this requirement.

Following the Gujarat earthquake last year, I had granted a 100 per cent tax deduction to donations made to certain approved charitable trusts and institutions that were to be applied before March 31, 2002 in relief work. As such relief work is still going on in many areas, I propose to extend the terminal date for utilisation of such donations from March 31, 2002 to March 31, 2003.

Last year, I had rationalised the rules for valuation of perquisites on the basis of their cost to the employer, except in respect of houses and cars where different criteria are adopted for simplicity. To relieve the burden on lower salaried employees, I propose to provide that no perquisites will be assessed for the assessment year 2002-2003 in the case of employees whose taxable salary, excluding perquisites, is up to Rs 1,00,000. For subsequent years, I propose to give an option to the employer to pay the tax on perquisites on behalf of the employees.

Under Section 89 of the Income-tax Act, a tax relief is provided in case of additional tax burden imposed in any one year due to receipt of arrears of salary. As a welfare measure, I propose to allow this relief also in cases where family pension is received in arrears.

In continuation with the taxpayer-friendly measures brought about by me in my earlier Budgets, I propose to abolish the provisions of Chapter XXC of the Income-Tax Act, which require a clearance to be obtained from the Appropriate Authority before registering a transfer of an immovable property.

Sir, some of the exemptions and deductions currently provided in the Income-Tax Act have become redundant and are not in harmony with the moderate tax regime that we have in India. The Advisory Group on Tax Policy and Tax Administration for the 10th Plan has recommended deletion of a number of such exemptions. I have carefully examined each recommendation of the group and have come to the conclusion that some of these exemptions are indeed unnecessary. I, therefore, propose to withdraw or discontinue the exemptions, which are not required any longer.

Under the present system of taxation of dividends and income from units, the company or the mutual fund pays a 10 per cent tax, and the income is exempt in the hands of the recipient. Such a system not only taxes income in the hands of a person to whom it does not belong; it also militates against the pass-through status which is the very essence of a mutual fund. There is also an inherent inequity in the present system, which allows persons in the high-income groups to be taxed at much lower rates than the rates applicable to them. These issues have been troubling me over the past four years, and I am now convinced that the existing system must go. I, therefore, propose to abolish the distribution tax of 10 per cent on companies and mutual funds on the dividends or income distributed by them. Such income will henceforth be taxed in the hands of the recipients at the rates applicable to them, and will be subject to tax deduction at source at the rate of 10 per cent. In order to avoid a cascading effect, companies receiving such income will be entitled to claim a deduction for the amount in turn distributed by them as dividends. To continue the support given by me to equity oriented funds of the UTI and other mutual funds, the income received during the financial year 2002-2003 by unit holders of such funds will be taxed only at 10 per cent as at present.

A tax rebate of 20 per cent of the amount invested in certain instruments specified in section 88 of the Income-tax Act is presently allowable to all individuals and HUFs, as an incentive for retaining a part of their earnings in the form of savings. Taxpayers in the higher tax brackets, however, do not require fiscal incentives to save through the various designated instruments. I therefore propose to allow the rebate at the existing rate of 20 per cent only to persons having taxable income up to Rs 1,50,000. Persons having taxable income between Rs 1,50,000 and Rs 5 lakhs will henceforth get a rebate of only 10 per cent of the amount invested, and no rebate will be allowed where taxable income exceeds Rs 5 lakhs. The special rebate of 30 per cent for persons having taxable salary income up to Rs 1 lakh will, however, continue. Further, while the existing limits on the qualifying amounts of investment will remain, I propose to provide a clarification in the law that the rebate will be allowed on investments made at any time during the year, as long as the amount invested is less than the taxable income of the year.

Presently, tax exemption is available to certain categories of employees receiving amounts up to Rs 5 lakhs as VRS compensation. I propose to extend this exemption to employees of certain institutions of national or State-level importance to be notified in this behalf.

I am also making some procedural changes which are included in the Finance Bill.

A Scheme called "Sampark" is being launched by the Income Tax Department, which will enable taxpayers to obtain information and forms through the Internet. User-friendly software will be made available by the Department to enable taxpayers to prepare their returns of income.

Effective use of information technology will depend critically on strict compliance with the requirements relating to permanent account number (PAN). I propose to make a specific provision in the Income-Tax Act for imposing a penalty of Rs 10,000 in all cases where a false PAN is quoted in documents relating to specified transactions.

Sir, I have already stated that national security is an overriding concern. Its cost has to be shared by all of us. I therefore propose to impose a modest surcharge of 5 per cent across-the-board on all categories of taxpayers, except individuals and Hindu Undivided Families having total income up to Rs 60,000. The 2 per cent surcharge imposed last year in the wake of the Gujarat Earthquake is being abolished and hence the net additional impact would be only 3 per cent. I also propose to restrict the 100 per cent deduction of export profits allowed to certain units under sections 10A and 10B of the Income-tax Act to a 90 per cent deduction for the assessment year 2003-2004.

To sum up, Sir, my proposals made in this Budget on the direct taxes will result in a revenue gain of Rs 6,000 crore, including the component of surcharge of Rs 2,750 crore. I estimate that the direct tax revenue in 2002-2003 would be Rs 91,585 crore. Mr Speaker, Sir, with these proposals I estimate total tax revenue receipts for the Centre at Rs 1,72,965 crore and the fiscal deficit at Rs 1,35,524 crore or 5.3 per cent of GDP. Mr Speaker Sir, this is a Budget for consolidating, widening and deepening the reform process. This is a Budget devoted to development. This is a Budget to further promote partnership with the states for a better tomorrow for the people of India. Mr Speaker, Sir, with these words, I commend the Budget to this august House.

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