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Karnataka to abolish agriculture income tax
March, 18th 2016

The rate of growth of Karnataka’s economy has slowed down from 7.8 per cent during 2014-15 to 6.2 per cent during 2015-16.

Reading out the State budget for 2016-17 in the State Legislative Assembly on Friday, Chief Minister Siddaramaiah, attributed this slowdown solely to decline in growth rate of the agriculture sector.

In a major relief to planters, the budget proposed to abolish agriculture income tax and it would benefit coffee, tea and rubber and other plantation crop growers.

The agriculture sector is estimated to decline by 4.7 per cent during this year, mainly due to drought in 137 taluks during kharif and 62 taluks during the rabi crop seasons.

Presenting his 11th budget overall, and the fourth after he assumed office, the Chief Minister said decline in farm growth mainly attributable to fall in foodgrains production from 126 lakh tonnes during 2014-15 to 110 lakh tonnes in 2015-16 due to drought.

He said the service sector is growing at 9.1 per cent while the industrial sector is expected to register a growth of 4.5 percent during the current year.

The total budget size of 2016-17 is pegged at Rs. 1,63,419 crore, of which the plan size is fixed at Rs. 85375 crore, an increase of 17.6 per cent over the plan size of Rs. 72,597 crore during the last year.

Of the 1,63,419 crore, the estimated revenue receipts is pegged at Rs. 1,30,758 crore and capital receipts at Rs. 31,198 crore including borrowings of Rs. 31,036 crore. The fiscal deficit is expected to be Rs. 25,657 crore, which at 2.12 per cent of GSDP, complies with the Karnataka Fiscal responsibility Act.


For redressal of grievances of farmers of the state and converge schemes of agriculture department and other departments, the Chief Minister proposed to set up a Karnataka State Agriculture and Farmers Welfare Committee headed by Chief Minister. Agriculture department and other departments related to welfare of farmers would be brought under the committee.

To give more focus to farmers and effective techniques adopted by them, special agricultural zones would be identified in parts of the State on the lines of SEZs formed for industries.

The budget proposed to develop 100 villages in four districts across four revenue divisions as Model agricultural villages under the “Suvarna Krishi Grama Programme”.

Tax reliefs

The budget exempted from the tax handmade paper and hand-made paper boards, including hand-made paper products manufactured and sold by dealer recognised by the Khadi and Village Industries Board as an eco-friendly measure.

It reduced VAT on office files made of paper and paper boards from the present rate of 14.5 per cent to 5.5 per cent.

It cut VAT from the present rate of 14.5 per cent to 5.5 per cent on articles of nickel, titanmum falling under heading HSN 7505, 7506, and 8108 to encourage aerospace industry.

Other goods that set to become cheaper are: rubber sheet, set top boxes for viewing TV content, multi-media speakers, LED bulbs. Taxes on all these goods reduced from 14.5 per cent to 5.5 per cent.

Mr. Siddaramaiah would seek a Vote on Account for the first four months of the financial year, ending July 31. This has been the norm in Karnataka.

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