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Sunday, 15 April 2012

UNION BUDGET 2012-13: NOT COMMON PEOPLE FRIENDLY

Posted on 01:53 by vikash gupta
UNION BUDGET 2012-13: NOT COMMON PEOPLE FRIENDLY


V.M. Khaleelur Rahman

The Union Budget for 2012-13 presented by the hon’ble finance minister Mr. Pranab Mukherjee on March 17, 2012 has burdened the people with the highest ever indirect taxes to the tune of Rs.45,940 crore by increasing and also widening the scope of service tax and excise & customs duties. The savings to the people in changes made in direct taxes is only Rs.4,500 crore. In other words the budget has given this amount and taken away Rs.41,440 crore.

Many consider this budget as the consequence of the weak UPA government facing multiple political problems and much talked about 2G scam and that no other government would have done better in the present situation as it needs revenue for its developmental projects. However the fact is that there is little for the common people in the budget. The 2% increase in the service tax is a big burden on them. The government should have found some other ways for revenue rather than taxing all including the less income groups.

The IT exemption limit for taxpayers raised from Rs.1,80,000 to Rs.2 lakh which means a saving of Rs.2000 is considered negligible and it is felt that it should have been at least Rs. 3 lakh in the present situation when prices of essential commodities have gone up considerably.

In the new income tax slab, the tax rates are as follows:

Income between Rs.200,001 to Rs.500,000 – 10%, between Rs.500,001 to Rs.10,00,000 – 20% and above Rs.10,00,001 – 30%

The 30% tax bracket now at Rs.10 lakh and tax exemption on interest up to Rs.10,000 on savings bank account are of course beneficial to the high income groups. Other benefits for taxpayers include a) The Rajiv Gandhi Equity Savings Scheme which seeks to encourage the flow of savings in financial institutions and improve the depth of capital market. It has a lock-in period of three years. It will allow for income tax deduction of 50% to new retail investors who invest up to Rs.50,000 directly in equities and whose income is less than Rs.10 lakh b) availability of tax benefit to senior citizens at 60 instead of 65 years and c) a deduction of Rs.5,000 for preventive check-up expenses allowed within health insurance benefit.

But as regards the Rajiv Gandhi scheme, some people question why investors should be lured to invest in highly risky equity investments with attractive tax concessions.

However the budget has taken away the benefit of additional deduction for infra bonds of Rs.20,000 and the IT officers are empowered to reopen assessments pertaining to foreign assets for up to 16 years instead of the present 6 years.

While consumers can be happy now that the limit for payment of service tax on apartment maintenance has been raised from Rs.3,000 to Rs.5,000 per month, silver jewellery exempted from excise duty, duty free baggage allowance at airports increased from Rs.10,000 to Rs.35,000 and excise duty on branded readymade garments reduced from 4.6% to 3.7%, enhancement in service tax from 10.3% to 12.36%, raise in excise duty on cars of 1500cc and above to 27%, increase in basic customs duty from 60% to 75% on imported SUVs worth over $40,000 (3000 cc or more for petrol, 2500cc or more for diesel) and 100% increase in customs duty on high purity gold in various forms are their losses in the present budget.

As far as investors are concerned, reduction of securities transaction tax on delivery based deals to 0.1% and more options for investing in tax free bonds (NHAI and Hudco) are their gains. Here again they have lost much as TDS has been made mandatory for sale of immovable property of over Rs.50 lakh in urban areas and Rs.20 lakh in rural areas, 1% tax collection at source by seller for any sale in cash valued over Rs.2 lakh of jewellery, bullion etc., TDS for interest from debentures if amount exceeds Rs.5,000 and no tax sops for only 10% instead of 20% for new insurance policies with annual premium over 10% of sum assured excluding loyalty bonus.

The advantages for businessmen are: withholding tax on interest on ECBs reduced from 20% to 5% for power, airlines, roads etc. for 3 years, a year’s extension for exemption under Section 80IA for power firms, also for lower tax on overseas dividend and small service provider exemption increased from Rs.10 lakh to 50 lakh and their disadvantages are: alternate minimum tax now on partnerships, sole proprietorships too, all foreign assets must be declared, penalty up to 90% on undisclosed income found during search and I.T. Act amended retrospectively to tax “offshore M&A deals” involving transfer of assets in India.

The finance minster has also announced that Credit Guarantee Fund is to be set up to reduce the risk of banks. It is reported that it may make the banks reduce the rate of interest on educational loans.

There is appreciation for the financial sector reform measures in the budget like permitting qualified foreign investors access to bonds market and steps to be taken to make IPOs easily available to retail investors in small towns. But there is little for hard working farmers and women. In short the present budget is pro higher income groups and not common people friendly.

(VMK in Indian Leather, April 2012)











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