Budget 1998-99, presented to Parliament on Monday, also unveiled schemes for wooing non-resident Indians in addition to giving special PIO (Persons of Indian Origin) cards to them to garner foreign exchange.

The minister spared the corporate sector from the levy of any fresh taxes and scattered small reliefs on personal income tax while settling for a high fiscal deficit of 5.6 per cent of GDP. Efforts have been made to widen the tax net and encourage a culture of voluntary tax compliance through three new schemes "Saral", "Samman" and "Samadhan".

On the other side, the price of petrol has been increased by Re 1 per litre to finance road infrastructure and of urea by Rs 1 per kg for correcting the distortion in fertiliser consumption. The rates of postal stationary too have beenrevised to partly bridge the deficit. The availability of Modvat credit has been restricted to 5 per cent of the duty paid.

As far as indirect taxes are concerned, the minister has proposed an additional non-modvatable levy of 8 per cent on imports. Certain items, however, have been exempted from this levy. Among the notable tax proposals, customs duties have been hiked for the iron and steel items. The indirect tax proposals, taken together, would yield an additional Rs 3,304 crore from customs and Rs 5,009 crore from excise.

The Swadeshi touch was all-pervasive in the budget which promised to open the insurance sector only for Indian private companies. While proposing to double the inflow of foreign capital into the country by speeding up foreign investment clearances, two special schemes -- India Millennium Scheme and Resurgent India Bond -- have been specifically announced for NRIs.

On the domestic front, apart from the SSI sector, the emphasis has been laid on developing the farm sector and theproposals included setting up of Kisan Credit Cards for farmers and enhancing the corpus of the Rural Infrastructure Development Fund to Rs 3,000 crore. To help SSI sector finances, the minister proposed to delink Sidbi from the IDBI, enhance the working capital finance limit for SSIs to Rs 4 crore and ask the RBI to strengthen financing schemes for the sector.

In a bid to meet the aspirations of almost all sections of the society and the corporate world, the finance minister settled for a high fiscal deficit of Rs 91,025 crore amounting to 5.6 per cent of the GDP, which however, is lower than the 6.1 per cent recorded in the previous year. Total expenditure for the year has been pegged at Rs 2,67,927 crore. Revenue deficit will be around Rs 48,068 crore, about 3 per cent of the GDP as compared to 3.1 per cent in the revised estimates for the last fiscal. On the receipt side, the target for disinvestment has been retained at Rs 5,000 crore and Rs 91,025 crore is proposed to be raised by way of marketborrowings.

In the case of personal income tax, the level of tax exemption has been raised to Rs 50,000 from Rs 40,000 and the ceiling of standard deduction to Rs 25,000 from Rs 20,000 for incomes up to Rs 1 lakh. However, those having an income of more than Rs 5 lakh will not be entitled for standard deduction. In a bid to widen the tax base, the minister has expanded the list of four criteria for compulsory filing of tax returns under the Income Tax Act to include possession of credit cards and membership of expensive clubs. Henceforth, anyone fulfiling one of the six criteria (including four mentioned in P. Chidambaram's budget) will have to file returns. The scheme too is been extended to 23 more cities from the current 12.

Simultaneously, it would be obligatory for individuals to quote their PAN or GIR number in respect of certain identified high-value transactions like purchases of cars, property and opening fixed deposit accounts.

Among the new schemes being introduced to rationalise the taxstructure are "Saral" (one page income tax return form for all non-corporate taxpayers), "Samadhan" (to reduce litigation) and "Samman" (to honour taxpayers). The minister also proposes to abolish Gift Tax. Gifts will henceforth be taxed under the Income Tax Act.

The other proposals include extending 100 per cent tax holiday to industries in backward areas till 2000. The extension of tax holiday for power sector would be up to 2003 and also to new refineries set up after October 1, 1998. The tax holiday benefit will also be extended to radio paging and services provided by satellite owners for telecommunications.

The minister proposed to provide depreciation at the rate of 25 per cent to intangible assets and amortisation of preliminary expenses. However, any money paid by way of extortion will not qualify for deduction as a business expense.

Although the direct tax proposals would result in a loss of Rs 950 crore, the minister hoped to garner about Rs 48,855 crore, higher than what was projected inthe interim budget, through improved collection of arrears and rigorous enforcement of tax laws.

In the case of customs duty, the additional non-modvatable levy of 8 per cent shall not apply to crude oil, newsprint, the capital goods sector under special tariff regime or goods which are subjected to additional duties of excise in lieu of sales tax gold and silver imported by passengers or other nominated agencies and life saving drugs that are free from customs duties.

By levying additional tax of Rs 1 per litre of petrol, the minister hoped to garner Rs 790 crore in a year. The amount shall be used for development of roads and will entirely go towards augmenting the corpus of the national Highways Authority of India.

The duty is proposed to be increased on gold import from Rs 220 per 10 gm to Rs 250. The baggage allowance is proposed to be increased to Rs 12,000 from Rs 6,000 currently.

Also the duty on patrol goods is being restructured and calibrated to augment dismantling of the administered pricemechanism.

The minister also proposed to rationalise the excise duty structure to ensure convergence towards a mean rate of 18 per cent. However, in the process it is proposed to restrict the availability of modvat credit by 5 per cent of the duty paid in the case of inputs used in the manufacture of excisable goods. No restriction will be placed on the modvat in respect of capital goods.

The service tax too has been restructured to include more services like consultancy services, architects, real estate agents and cost accountants. However, transportation of goods by roads, outdoor caterers and pandal contractors are being taken out of the purview of this tax.

As far as postal stationery is concerned, the rate of competition postcard is being increased to Rs 3, inland letter to Rs 1.50 and letter to Rs 3 for every 10 gm or part thereof and parcels from Rs 8 to Rs 10 for every 20 gm or part thereof.

As far as the non-fiscal aspects of the budget are concerned, the minister promised a hassle-freeprocedure for clearing FDI proposals. The decision of foreign proposals exceeding Rs 100 crore will be taken within 90 days, the minister assured. With regard to capital market reforms, minister Sinha said that FIIs would be allowed to invest in unlisted domestic debt securities and an institutional mechanism would be created to protect the interests of small investors. Also the investment limit for NRIs and OCBs in a company has been enhanced to 5 per cent from one per cent earlier.

He also unveiled the agenda for financial sector reforms which include enhancing capital adequacy norms for banks to 9 per cent and setting up of asset reconstruction companies for weaker banks.

Key Features
Personal taxation
No changes in tax rates or slabs. Tax-free limit raised from Rs 40,000 to Rs 50,000. Exemptions for medical bills reimbursements up from Rs 10,000 to Rs 15,000.

Standard deduction

Deduction for incomes up to Rs 1 lakh raised to Rs 25,000. No standard deduction for incomesabove Rs 5 lakh per annum.

Corporate taxation No changes in tax rates or slabs.

Tax holiday for energy sector

Tax holiday for certain key sectors, including power and oil, extended to 2003 from 2000

Widening tax base Criteria for compulsory filing of returns widened to six measures from four; credit-card holders and `posh club members' are new entrants.

Simplifying procedures

Simple 1-page Saral income tax return forms to be introduced Bid to wipe out black money

PAN/GIR numbers to be quoted in all high-value transactions involving property, vehicles, share purchases, and for opening bank and FD accounts.

Gift tax

Gift tax abolished. All gifts to be taxed as income under Income-Tax Act.

Customs dutySpecial additional 8 per cent non-modvattable levy on imports.

Import levy on steel goods

Customs duty on cold-rolled steel increased from 25 per cent to 30 per cent

Hardware measures

Import duty on several computer components cut

Petrollevies up

Additional petrol tax of Re 1 a litre imposed. Measure expected to yield Rs 790 crore

Gold importers to pay more

Duty on yellow metal up by Rs 30 a gram.

Crude cuts?

Duty on crude cut to 22 per cent from 27 per cent; excise levy on petrol up to 35 per cent from 20 per cent

Smokers to pay more

Excise duty on cigarettes up by 6% to-11 per cent

MRP-based excise levy

Net to be extended to home appliances, paan masala and razor blades

Service-tax measures

Service tax on transporters scrapped, but chartered accountants, credit-rating agencies, architects and company secretaries will have to pay a service fee

Postal tariff recast

Inland price up to Rs 1.50 from Re 1; competition post cards to cost Rs 3. Measures to rake in Rs 180 crore this year. In a full financial year,the measures will yield more.

Insurance opened up

Insurance sector thrown open for domestic private players. IRA to be given statutory status.

WooingNRIs

State Bank to issue foreign currency-denominated "Resurgent India Bonds"

Decks cleared for IA takeoff

Centre to bring down stake in Indian Airlines to 49 per cent over three years. Govt to cut stake in non-strategic PSUs to 26 per cent

Divestment bonanza

Centre to go ahead with divestment plan in IOC, Gail, VSNL, Concor

Exit policy for PSU labour

Safety net to be put in place for workers when unviable state-run companies are shut down

Futures are here

Futures trading allowed in edible oils, oil cakes and oilseeds

Capital adequacy for banks

Banks will have to hike their capital adequacy ratio to 9 per cent by 2000

Breaking the umbilical cord

Sidbi to be delinked from parent IDBIFinancial sector reforms

Debt-recovery tribunals to strengthened in bid to pare state-run banks' bad loans

Delicensing

Coal, lignite and petro products delicensed

Booster for foreign private investments

All FDI proposals to becleared within 90 days

Infotech sops

Infotech firms allowed to issue ADR/GDR-linked stock options to retain staff

Excise relief

SSI exemption limit for excise raised to Rs 50 lakh

Small-scale sector sops

SSIs working capital ceiling hiked to Rs 4 crore

Restoring subsidy balance

Urea fertiliser price hiked by Re 1 a kg to restore N-P-K balance.

Housing needs

Urban Land Ceiling Regulation Act to be repealed; Hudco capital base to be stepped up by Rs 110 crore

Core sector

Plan outlay for energy sector up 35 per cent to Rs 61,146 crore

Highway to better roads

National Highways Authority to get Rs 500 crore for new road projectsLeeway for fund managers

PFs can invest 10 per cent of their fresh contributions in private infrastructure investments

Draconian Fera goes

Fema to replace Fera; bill to be introduced in budget session of parliament

Capital markets get a leg-up

Stock-index futures to be treated as securities.