Leading to higher InflationThe budget 2010 is really good for some people like farmers and middle class people. Mr. Pranab has increased the income tax slabs instead of increasing the minimum exemption limit as it was Rs.1,60,000 in the last year. The amount of Rs.1,60,000 would have been increased to at least Rs.2,50,000 as the income level of common man is increased. Two things I wish to say here, 1) Extending the waiving of farmers loan seems eyeing on election, but the negative impact leads to higher inflation as the availability of cash liquidity will be widened. 2) Inflation for the month February crossed already 8%, if further petrol price and excise duty is increased, then rest of the dependent commodities price will also increase. Of course it is inevitable to increase the petrol price as the oil companies are incurring loss on this front, but he would have generated the other revenue sources to compensate this corner. Once the inflation starts increasing the RBI intervenes to control the inflation by increasing the bank rates, so it impacts the whole economy adversely. Ultimately the budget 2010 is burden on poor people who are already suffering the price heat.
Prof. Shrinivas R. Patil
Professor of Finance
KLES’s IMSR
Hubli (Karnataka)
Email id: shriji.patil@gmail.com
Cell No: 9900409419
We are currently in a strange position where the Indian economy is doing well but the global economy is yet to complete its recovery. The fiscal stimulus package cannot continue for long and there is a compelling need to bring down fiscal deficit. Having settled down well in the 2nd innings, the Dr. Manmohan Singh Government has a big opportunity on hand to set in motion some path breaking initiatives which can be effectively implemented in next 4 years. The growth in the next decade has to be driven primarily by expanding the digital economy and efficient tax administration. Just as Government expenditure on physical infrastructure has helped economies grow, this time around, the growth will be driven only by investment in digital infrastructure. This growth can be achieved by effective Public Private Partnership. There is lot of private entrepreneurship in the country and the Government only needs to create the right kind of business climate for encouraging young entrepreneurs with simple business laws and processes apart from providing a low cost accessible IT infrastructure. Late in the day for consideration in the budget, but am leaving these thoughts for deliberations for the next budget and any policy making formulation 1.Tax benefits for players in internet space. Absence of stamp duty was one of the reasons for dematerialized shares becoming very successful. For e-commerce to grow, a similar proposition of tax exemption or lower rates of tax could be offered for a defined time frame to encourage more online transactions. The internet economy could be demarcated similar to a SEZ and given the Government support through tax concessions. E-commerce has the potential for exponential and faster growth in volume of transactions and consequently GDP/Per capita income. Eliminating all the costs of physical infrastructure, the benefit of lower costs could be transferred directly to the consumer. In the long run online transactions will lead to transparent, easy and more effective tax collection for the Government. 2. Broadband to home – treat as essential utility similar to power sector. Encourage ISPs with accelerated depreciation/ tax holiday benefits to invest in fiber to home. In the years to come high speed broadband access at home will be critical for economic growth. 3. Administration reforms – effective tax administration friendly to small businessmen and professionals. Just as there is a LTPU for large corporates, a separate tax administration set up who can understand the issues of small businesses and support the growth is the need of the hour. For instance it is unfair to expect start up businesses to incur overheads in understanding complex tax laws and complying with them. There is a visible change in culture of people to spend more and save less. Also as a developing nation we require significant long term sources of funds to finance infrastructure projects. Encourage greater saving with Government (PPF/NSC/ 15 year bonds) where Government could borrow at say half of its current borrowing rates. The individuals will save, social security is ensured and Government could borrow at significantly low cost for long term.
"The govt must raise basic exemption limit to Rs 3 Lakhs for salaried individuals from proposed Rs 160000. Then make it 10% between 3 Lakhs and 5 lakhs, 20% between 5 Lakhs & 10 Lakhs. Charge 30% for more than 10 lakhs – income tax on the annual income. From the coming slab from the govt poor man wiil be the looser and higher income group will escape from paying income tax to the govt, that is not fare and it will affect adversely the indian economy and increase the gap between haves have nots.." When the US and UK are imposing more tax on higher income group individuals, here in india, our 'respected leaders' helping higher income groups to lead our nation further to poverty as the income to the govt from higher income group may reduce due to this proposed slab.
1. Formerly a deduction was allowed under section 80L for ‘Bank Interest’. This may be restored by giving deduction upto Rs.10,000/- for interest received from Banks form Savings Bank Account. At present the interest earned in such Savings Bank account is to be included in taxable income as ‘Income from other sources’, however low the amount may be, which is cumbersome. 2. Now at the time of assessment the credit for TDS is denied if the same does not appear in Form No. 26AS (consolidated statement wherein all the TDS of the particular assessee appears) though Certificate for TDS is available with the assessee. If the person who has deducted tax does not pay the TDS in time or file the TDS return properly the tax deducted will not be found in the Form No. 26AS. For the fault of the ‘Deductor’ the ‘Deductee’ is penalized. It is like the preamble of Income Tax System which says “Robbing Peter to pay Paul”; here Peter is penalized for the fault of Paul. So a procedure is to be evolved to overcome this anomaly. 3. As at present the entire Dividend is exempt at the hands of the recipient without any limit and the limited company pays DDT(Dividend Distribution Tax) @ 10% at the time of distribution of dividend. The assessee who earns Rs. 100 as well as an assessee who earns Rs. 1,00,000 are taxed at the same rate i.e. @ 10%, which is paid by the company. One who earns more has to pay more tax and who earns less has to be either exempted from payment of tax or has to pay less tax. In order to overcome this type of disparity a deduction may be allowed under section 80L upto Rs. 10,000/- and if the Dividend is more than this exemption limit of Rs. 10,000/-, the same may be added with Total Income as Income from other sources and the DDT may be allowed as rebate form the tax payable so that the income will be taxed at appropriate tax slabs.4. The limits for section 269SS&T relating acceptance and repayment of loans and for section 40A(3) relating payment for any expenditure are to increased to Rs. 50,000/- from the present limit of Rs. 20,000/-, which overdue for a long time. The latest modes of payments such as direct payment by cash into the recipient’s bank account, (which is a boon to the businessmen due to ‘anywhere banking’), transfer through internet banking and RTGS (Real Time Gross settlement) are to be exempted. These sections may be amended so as to take cognizance of direct cash payments to the parties concerned only for initiating penalty proceedings.
