The proposals will give some direct tax relief to individuals, even as eating out, buying luxury cars, air travel, availing some professional services and investing in gold jewellery will become costlier.
Presenting his 7th budget in the Lok Sabha Friday, the finance minister said the exemption limit for personal income tax was being enhanced from Rs.1,80,000 to Rs.2,00,000, even as the limit for peak rate was being raised to Rs.10,00,000 from Rs.8,00,000.
"This will provide tax relief of Rs.2,000 to every tax payer," the finance minister said, adding: "My proposal on direct taxes will result in a revenue loss of Rs.4,500 crore."
He also announced new tax slabs under which incomes up to Rs.2,00,000 would be totally exempt, levy 10 percent for Rs.2,00,000 to Rs.5,00,000, then 20 percent for Rs.5,00,000 to Rs.10,00,000 and 30 percent for incomes above Rs.10,00,000.
For the corporate sector, he said, while the tax rates were remaining unchanged, he assured cheaper access to funds for expansion, even as he tinkered with the excise rates and customs duties for specific items.
He proposed to raise the service tax rate to 12 percent from the present 10 percent.
In the speech, which started exactly at 11 a.m. and lasted 110 minutes, Mukherjee listed a slew of proposals that ranged from social welfare schemes and incentivising industry to fiscal consolidation and sector-specific reforms.
Assuring further liberalisation of capital markets, he announced a new equity savings scheme to extend income tax deduction of 50 percent to those who invest up to Rs.50,000 in equities and whose annual income is less than Rs.10 lakh.
The finance minister started his speech with the cascading effect of the global slowdown on India, but yet assuring people that there were clear signs of a recovery which should see the country grow at 7.6 percent in 2012-12, against 6.9 percent this fiscal.
"The global crisis has affected us. India's gross domestic product (GDP) is expected to grow at 6.9 percent in 2011-12, after having grown at 8.4 percent in each of the two preceding years," the finance minister said.
"Though we have been able to limit the adverse impact of the slowdown in our economy, this year's performance has been disappointing. But it is also a fact that in any cross-country comparison, India still remains among the front-runners in economic growth."
At the same time, Mukherjee also said the Indian economy was at the cusp of a revival, as agriculture and services have continued to grow at a decent pace. It was industrial performance that was acting as a drag.
"While we do not have the aggregate figures for the last quarter of 2011-12, numerous indicators pertaining to this period suggest that the economy is now turning around. There are signs of recovery in coal, fertiliser, cement and electricity sectors."