Indira Gandhi became the first woman to deliver the budget of 1970-71. With that she also holds the distinction of being India's only lady Finance Minister. To summarize, budgetary deficits were pegged at Rs 225 crores, however revenues were reported to have increased to Rs 3867 crores from Rs 3587 crores.
Soon after delivering the budget on Feb 28, 1970, Gandhi was cited in various publications including The Indian Express of attempting a socialist balance.
Speaking about the economy, Mrs Gandhi indicated that the economic conditions of then India required a vigorous effort to stimulate growth. “During 1969-70, the first year of the Fourth Plan, there is every likely hood of achieving an over-all rate of growth of 5 to 5 and half per cent.”
This was as much a taxed-up budget as it seemed socialist in its approach. The hike in taxation offered the centre a handsome gain of Rs 170 crores. There was the aspect of concession for the low-salaried but wealth taxes, gift taxes, rise in direct and indirect taxation, increase in property taxes, import duties and hike in service-fee on postal and telegraph services made it obvious that the rich were not to be spared. Gandhi also used the budget to speak about rural schemes and policies. She elaborated that special schemes for farmers was to be taken up in 45 districts and mooted a proposal to offer a sum of Rs 25 crores for select rural work programmes in areas prone to famine. However, provisions for this plan were a part of the amount set aside for drought relief.
Direct taxation was tweaked by adding a surcharge at 10%, and revising slabs. Wealth tax rate was tweaked from 0.5-3% previously to 1-5%. Additional wealth tax on urban lands and buildings was increased. This was changed from a previous 1-4% to 5-7%. The budget speech also saw fresh definitions for property ownership.
Taxes on discretionary trusts were hiked and gift tax rates too were revised. The exemption limit of Rs 10,000 was lowered to Rs 5,000. The duty on TV sets too had been hiked with an imposition of 20% levy.
Mrs Gandhi said that 75% of the central tax revenues were derived from indirect taxation- customs and excise duties, and tweaked a few taxes in order to tighten the government's purse. In her budget speech, she said, "Wherever it has been necessary to touch items of common consumption, an attempt has been made to safeguard the consumption of the poorer sections of the community to the maximum extent possible."
For lower income assesses, the budget was a major cheer, in that the exemption limit at the lower end was revised from Rs 4,000 - 4,800 to Rs 5000. Mrs Gandhi during her budget speech said that such an exemption limit could allow tax administration officials to devote to larger cases where gains to exchequer could be correspondingly larger.
Minimum Deductions for salaried class too was revised. Previously the minimum deduction ranged from Rs 5 per month to Rs 250. The higher ceiling was for those who would commute to travel on a motor car. The minimum deduction of Rs 20 per month was made available to those who travelled to work on a bicycle or by public conveyance or by any other mode. The deduction of Rs 250 for the higher income groups was revised to Rs 200.
Mrs Gandhi explained, "The combined effect of the increases in direct taxation in a full year would be a gain to revenue of Rs. 36 crores." Duty on canvas, jute webbings, jute tarpaulin cloth were revised. Export duty on tea was abolished altogether but Excise duty on loose and packaged tea was raised. Import duties on a number of products were hiked. Examples include machinery, motor vehicle parts, pharmaceutical chemicals, non-electrical instruments plastic material, electrical resistance wires majorly.
The budget also touched upon cigarettes and whisky. The proposal sought a duty-hike on whisky, brandy, gin and wines. For cigarettes, Mrs Gandhi said, "The duty on cigarettes is being enhanced with the increase ranging from 3 per cent to 22 per cent ad valorem depending on the value slabs. The cheaper varieties of cigarettes will go up by only one or two paise per packet of 10 cigarettes. Assuming that the smoking community remains steadfast in its devotion, the additional revenue from this measure will be Rs.13.50 crores."
The duty on motor spirit, superior kerosene and furnace oil were revised. There was no duty on inferior Kerosene while Mrs Gandhi said that increase in price of superior kerosene would be a "modest" 3.5%.
Duty on free sugar was hiked from 23% to 37.5% ad valorem. This was made along with an observation that prices of sugar in free market had declined. Tariff rate on Khandsari Sugar was being increased from 12.5% to 17.5%. "The net additional revenue from sugar is estimated at about Rs.28.50 crores," added Gandhi.
The one major aspect of this budget was how the corporate sector got completely spared from the axe of tax.
There were bits of socialism in the budget, especially with the hike in wealth tax, property taxes, and the imposition on Whisky and Petrol. But prices of kerosene became costlier and so did essential items such as tea, and sugar.
From an investment perspective, the investor community appreciated that personal income ceiling was revised to Rs 5,000 and an exemption for taxable personal income had been raised. This and the opening up of investment benefits such as no tax on dividends on stock investments lead many to conclude that this was an investor friendly budget.
Not many economists and policy-makers were too enthused about this budget with a few commentators even claiming that the taxes were hiked by 93%.