Union Budget 1998-99  

Key features of the Budget

Ministry of Finance, Govt. of India


Information Technology

Customs duties on electronic sector reduced considerably

New stock option scheme for Software companies linked to ADR/GDR issues.

Finance and Capital Markets

Measures to strengthen Financial System - experiment of Asset Reconstruction Companies to address the problem of non performing assets and target of 9% Capital Adequacy Ratio by March, 2000.

Legislative changes to enable derivatives to be treated as securities.

FII being permitted to invest in unlisted domestic security, at their risk.

Exemption from Capital Gains Tax to facilitate corporatisation of stock brokers extended by one year.

Insurance sector to be thrown open to private Indian companies

Statutory status to the Insurance Regulatory Authority

Non-Resident Indians

Limit for NRI secondary market investment in Indian companies increased from 1 to 5% and limit on aggregate NRI investment raised from 5% to 10%.

New India Millennium Scheme of UTI.

New Foreign Currency denominated "Resurgent India Bond" by State Bank of India.

Persons of Indian Origin holding foreign passports to get special PIO cards granting them visa - free regime and other privileges


Disinvestment/PSU Reform

Government to disinvest shares of IOC, GAIL, VSNL and CONCOR.

Indian Airlines to be restructured and Government holding to be pared down to 49% over 3 years,

Disinvestment of up to 74% in non-strategic public sector

New generous compensation package for workers when loss making, unrevivable PSUs are closed.

Direct Taxes

Stability in tax rates aimed - No change in rates of personal or corporate tax.

Income Tax exemption limit raised to Rs.50,000.

Standard deduction for salary upto Rs.1 lakh, raised to Rs.25,000. No standard deduction for salary above Rs.5 lakhs.


‘SARAL’, a one page return form for all non-corporate tax payers.

Loss from house property to be allowed adjustment against salary income at source.

Limits for compulsory maintenance of accounts raised.

Levy of Gift tax discontinued; gifts to be taxed in the hands of donees under I.T. Act.

Measures to reduce litigation and realise arrears

‘SAMADHAN’, a scheme for quick realisation of tax arrears and settlement of income/corporation tax disputes - pay 30% (or 35%) and patch up.

Direct appeals to High Courts.

Scope of Authority for Advance Rulings extended.

Other social welfare measures—

Special deduction for companies for generating additional employment.

100% deduction to approved activities for promoting women and child welfare, road safety and improvement of environment.

Relief measures for film industry.

Rationalisation measures

Specified business reorganisations to be exempt from capital gains tax; carry forward of loss and unabsorbed depreciation allowed.

Stock lending exempted from capital gains tax.

‘SAMMAN’ - a scheme to recognise and incentivise honest tax payers.

Indirect Taxes

Level playing field to the domestic industry by imposing 8% countervailing duty.

Several of the anomalies in the customs duty structure rectified.

Customs duties reduced in deserving cases without hurting domestic industry.

Tariff structure on petroleum products aligned consistent with dismantling of APM.

Baggage allowance from Rs.6000 to Rs.12000 per passenger.

Baggage allowance introduced at Rs.3000 for passengers coming from Nepal, Bhutan, Myanmar or China by air.

Excise duty rates considerably rationalised with a view to reduce the number of rates.

Base of taxation widened by imposing new levies.

Excise duty on cigarettes increased.

Service tax abolished on goods-transport by road, outdoor catering and Pandal contracts.

Twelve new services brought under the tax net.

‘Samadhan’ scheme to apply to Indirect Taxes too.

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