Dream budget or dreams shattered??

CS LLB Pulkit Gupta (https://www.facebook.com/pages/Life-and-Promises/553962034682487)   (16631 Points)

28 February 2013  



“Government lasts as long as the under-taxed can defend themselves against the over-taxed”


· Every year Aam Aadmi i.e. salaried class looks towards FM to provide some relief to their pockets. A minimum increase in Slab Rate from current Basic Exemption of Rs. 2 Lac to 3 or 3.5 Lac can bring a smile and provide boost to their purchasing power.

· People expect FM to take proper measures to reduce Fiscal Deficit.

· 80C deductions are what common man look upon to reduce his Tax Burden. 1 Lac limit seems to be from ages and needs to be revised. A higher limit say 2-2.5 Lac w’d encourage more savings.

· An increase in Petroleum subsidy to decrease fuel prices.

· Layout roadmap for implementation of GST.

· Remove STT on equity investments.

· Reduction of Excise Duty from existing 12% to 10% on small cars

· Promote investment in Mutual Funds, Bonds and Shares by providing tax-benefits to first time investor in the market.

·  Reduction in Health-care cost by allowing higher deduction U/s 80 D

·  Include Foreign Travel in Leave Travel Allowance which can be claimed twice in 4 years.

·  A separate section for payment of principal amount on house loan which currently is included in 80C. Normally this 1 Lac limit gets exhausted in PPF, LIP and Tuition Fees itself and one hardly gets any benefit of payment of principal amount.

· Raising Children Education and Transport allowance which were fixed more than a decade ago.

· Reduce S.Tax rate from 12% to 10%

· Special consideration should be given to Women and Senior Citizens.

· Lowering of Corporate Tax, abolition of MAT and boost banking sector by issuing more licence.

·  Increase TDS limit on FD which currently stands at Rs 10000

·   Allow deductions on provisions for NPA and removal of TDS for NBFC deposits.

BUDGET - 2013

·Women Related Issues-   Highlight of the Union Budget was Set-up of Nirbhaya Fund and Women’s Bank. The FM announced setting up the ‘Nirbhaya Fund’ of Rs 1ooo Crore for safety and empowerment of women. But on the other hand it disappointed this section with no changes in the slab-rates for them.

·Costlier V/s Cheaper- Increase in excise duty on SUVs from 27% to 30%. Similarly hike in import duty on imported luxury goods such as high-end motor vehicles (from 75% to 100%), motor cycles (from 60% to 75%) and on yachts and similar vessels (from 10% to 25%). Costlier- Cigarettes, mobile handsets priced above Rs.2000, sports utility vehicles, marbles for flooring, dining at air-conditioned restaurants. Cheaper- Leather Products, Branded apparel, Precious Stones

·Set-Top Boxes- On one hand our Govt. is promoting digitization and on the other hand they have increased the import duty on set-top boxes from 4% to 10%.

·Duty Free limit for Gold- Rose to Rs. 50000 in case of male passenger and Rs 100000 in case of female passenger.

.Banking Sector- All Regional rural banks and co-operative banks to be e-linked by this year end. Rs. 14000 crore capital infusion in public sector banks in 2013-14.

·Insurance Sector- Insurance Companies can open officers in Tier- II cities without prior permission from IRDA. Union Budget 2013-14 has raised the eligibility cap on Life-insurance premiums to 15% for policyholders with disabilities or specified ailments.

·General Economy- Fiscal Deficit of 2012-13 contained at 5.2% and target for 2013-14 is 4.8%. FM expects it to bring it down to 3% at 2016-17. The country's economic growth, as per official estimates, decelerated to 5 percent and 6.2 percent in the past two years, from 8.6 percent and 9.1 percent in the two years preceding them.
Chidambaram said the Indian economy was today constrained by three factors: high fiscal deficit, slow growth and high inflation. "My greater worry is current account deficit," he said, alluding to the high oil import bill the country has been burdened with.
"India will need $75 billion to finance the current account deficit," he said, adding that this could only be done by attracting foreign direct investment in large amounts.

·Middle Class- Tax Credit of Rs. 2000 for with income of less than Rs. 5 Lac. One can claim an additional tax break of Rs. 1 Lac on interest payment of housing loan in addition to Rs.1.5 Lac lakh permitted currently. Inflation indexed bonds are on the cards.

·Encouragement for investors- The income threshold from existing limit of Rs. 10 Lac has been raised to Rs. 12 Lac to invest in Rajiv Gandhi Equity Saving Scheme. This will encourage new investors. STT on Mutual Fund and ETF at found counters is slashed to 0.001% from 0.25%.

·Burden on super rich- People with a taxable income of Rs. 1 Crore and more will have to pay a surcharge of 10% on income over Rs. 1 Crore for a period of one year.

·Taxation- No revision in current slab rates. Increase in surcharge to 10% on domestic companies with annual income of more than 100 million rupees. Time to introduce Commodities Transaction Tax.  Propose to impose a withholding tax of 20% on profit distribution to shareholders. TDS of 1% where property transactions exceeds Rs. 50 Lac. 100% Tax deduction for contribution to National Children’s Fund. Educational Cess to continue at 3%. DTC is still WIP.

·Indirect Tax- No Change in the standard rate of Customs and Excise Duty. It provided relief to readymade garment industry. In case of Cotton, zero excise duty at fiber stage also. Handmade carpets totally exempted from Excise Duty. Exempts imported ships and vessels from the duty.

·Market Response- Markets gave thumbs-down to Finance Minister P Chidambaram's Budget 2013-14, with BSE benchmark Sens*x nose-diving 291 points to close below 19,000 level as FII tax issues and new surcharge on domestic corporate left investors disappointed           

·Response from opposition parties- It doesn’t appear to be an election budget but a confused one.

· My Synopsis- Well according to me Mr. FM has taken an easy way out. He has chosen a safer way by taxing super-rich and by avoiding middle class. But he hasn’t introduced any remarkable tax-reforms too. It is definitely not a game changer. There is no relaxation for real-estate sector. Similarly there is lots of difference between proposal and implementation. Middle class is getting the benefit of Rs. 167 only and rich are paying for Government faults.


Pulkit Gupta