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Govt tightens spending, sticks to borrowing target

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India plans to cut some government spending to help fund drought relief and a rural job scheme and ensure that market borrowing will be within the government's annual target, senior officials said on Tuesday.

A global economic slowdown and then the worst dry spell in nearly four decades have raised concern the government may overshoot its 10 trillion rupees ($206 billion) spending plan for 2009/10 (April/March), leading to higher borrowing.

But senior finance ministry officials said the government would stick to its record borrowing of 4.51 trillion rupees for the current fiscal year, and could even end up borrowing less if it cuts down on unproductive expenses. Late on Monday, the finance ministry said every government department will have to cut spending on costs such as domestic and foreign travel and office expenses by 10 per cent.

"I have suggested that at least 10 per cent of non-plan expenditure should be reduced. Of course, I have excluded security, defence and certain operational costs," Finance Minister Pranab Mukherjee told a news conference. But Mukherjee said the government should not reduce spending announced since December to pump-prime the economy.

Growth in Asia's third largest economy fell to 6.7 per cent in 2008/09, from 9 per cent or more seen in previous three years. Policy makers expect it to be above 6 per cent in 2009/10. Worries of a rising deficit have pushed up bond yields, and the comment helped yields ease to 7.36 per cent from at 0945 GMT, off an early high of 7.38 per cent, but above Monday's close of 7.29 per cent.

Government asks pilots, Jet mgt to sort out their problems

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The government today asked the management and pilots of Jet Airways to urgently sort out their problems.

Civil Aviation Secretary M Madhavan Nambiar, who met Jet Airways Chairman Naresh Goyal this morning, said he has requested both the parties to come to a resolution. Mr. Nambiar said he had held a series of meetings during the day to ensure an early end to the problem created by over 300 pilots going on mass medical leave in protest against the management's decision to sack two of their colleagues.

He said, the priority before the government is to reduce the passengers' inconvenience to the minimum, informing that 184 Jet flights have been cancelled since morning, affecting 13,000 passengers.

Income Tax Employees Strike on 9th September,2009

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Strike postponed by one month inform all comrades.

Examination issues settled, orders on mobile phones issued, Advance increment issue being clarified, Grade Pay issue will be resolved with in a month time, no outsourcing and agrement with JCA will be honoured,other issues are to be settled with in a month.

Detailed Circular to be issued in a day or two. Any absence due to non communication will not be treated as absence.
Source: Income Tax Employees Federation

Non-taxable Incomes in India - Ten ways to lower your tax bill

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The government is considering a proposal to raise the tax exemption limit on monthly transport allowance, a move that could enrich taxpayers by as much as Rs 9,000 a year, but at the same time put further pressure on its already-strained finances.

The proposal to increase the tax exemption limit for transport allowance to Rs 3,200 a month from Rs 800 follows a similar hike for government servants under the Sixth Pay Commission award. It is likely to find adoption in the private sector too, triggering greater spending across the economy and boosting the bottom lines of companies in a wide swath of sectors.

A decision on the proposal, following representations from some quarters in the government, is expected soon, a finance ministry official told ET, on condition of anonymity. The government, which is facing the worst economic growth prospects since 2003 due to credit crisis and drought, is leaving no stone unturned to boost consumer demand and revive economic growth to the record 9% seen before the 2008 crisis. It has cut taxes, raised spending on social and infrastructure projects and enabled lower interest rates for companies and individuals.

Private final consumption expenditure nearly halved to 27% of gross domestic product (GDP) in the last fiscal year from 53.8% a year earlier as consumers restricted spending fearing job losses amid slowing sales growth and reduced profits. The consumption fall was partly offset as government final consumption to GDP rose four-fold to 32.5% from 8%, according to Reserve Bank of India data.

The move is expected to lead to an yearly additional exemption of Rs 28,800, which would yield a tax saving of Rs 8,899 a year, including the cess, to those in the highest tax bracket. While this may boost demand, the government, which is already running a record deficit of 6.8% of GDP, could lose significant tax revenues and many assesses would also fall out of the tax net.

Collections of both direct and indirect taxes are under pressure following tax rate cuts and economic slowdown. Direct tax collections grew by a modest 4% in April-August period to Rs 87,888 crore. The Central Board of Direct Taxes, which has the power to formulate and change rules, is exploring the possibility of hiking the exemption through a notification.

Allowances such as transport are governed by the rule 2BB of the Section 10(14) of the Income Tax Act. The board is only required to place the new rule before Parliament whenever it has its next session.

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