| ICAI welcomes the Union Budget presented by the Hon’ble Union Minister, which, at the outset, can be termed as a relief-oriented budget. The budget skillfully balances the need to step up the economic growth on the one side, check the inflation on the other side and also address the socio-economic needs of the nation. Consequently larger allocations have been given to several sectors like education and health to stimulate the growth of the economy and steps have been taken to address the problems faced by the farmers. The allocations and schemes for infrastructure developments in all the sectors have been appropriately enhanced. |
| The ICAI welcomes the proposal to make PAN an integral part for all the financial transactions in the securities market. This will bring transparency in the capital markets and ensure increased tax compliance. It is heartening to note that the Government is serious in improving the accountability and monitoring in regard to the spending of the budget allocations. This is an improvement on the outcome budget and the Institute fully supports the evolving of any system, which would properly account for the public expenditure. |
| DIRECT TAXES |
| The concessions given in respect of individual taxation would be welcomed. The ICAI has always been advocating that the maximum marginal rate should be applied on a much higher income limit as is the case in several advanced countries. Judged in this context the maximum marginal rate of 30% applicable to incomes above Rs.5 lakhs is a welcome rationalization. However, similar benefit has not been extended to the corporate sector, although rationalisation in the form of weighted deduction for scientific research has been given. In case the buoyancy in tax collection continues, one can expect rationalisation of the corporat tax in the next year. Further, extension of the benefit of amortisation of preliminary expenses to the companies in the service sector is welcome. Tax holiday for health care and tourism is good. |
| The changes made in the securities transactions tax whereby the same will be allowed as a business expenditure as against the existing scheme of allowing set off against the tax liability probably will increase the tax impact. Similar is the case in respect of short term capital gains where the rate has been hiked from 10% to 15%. |
| The concessions on the FBT front like removing creche facility, sponsorship for employees, guest house facility and organisation of sports events from its ambit would help in removing anomalies and promoting employee welfare. The Finance Minister has done the right thing by clarifying that reverse mortgage would not be considered as transfer for capital gains and that the monthly income received by the senior citizens would not be treated as income for charge of tax. |
| The Finance Minister has accepted the various recommendations made by the ICAI such as preponing the date of filing of income tax returns from 31st October to 30th September in respect of those tax payers who are required to get their accounts audited |
| The Finance Minister has also accepted the recommendation of the ICAI not to tax the dividend distribution in the hands of the holding companies in respect of dividends received from the subsidiary companies. |
| The introduction of commodity transactions tax is a logical step on the lines of security transactions tax and will help in bringing more transparency and tax compliance. |
| The ICAI had suggested various measures to strengthen the Annual Information Report and the Finance Minister has done the right thing by withdrawing the banking cash transactions tax since the Annual Information Report has been strengthened. |
| INDIRECT TAXES |
| On the indirect taxes front, the across the board reduction in CENVAT from 16% to 14% and reduction in specific consumer items will help in containing inflation and will also promote domestic industry. Further, several reductions relating to health sector are welcome. The Government has continued the earlier practice of bringing in a few more services under the tax net including specific capital market intermediaries, stock exchanges and software services. The increased threshold exemption of Rs.10 lakhs would certainly help the small service providers. The proposed rationalisation of the central sales tax from 3% to 2% is a consequence of the introduction of State-level VAT and is a step forward for implementing the goods and services tax. The extension of TUFF schemes with an increased outlay will definitely benefit the textile industry which need the attention and support of the Government. |
| The revenue deficit at 1.4% and fiscal deficit at 3.1% are below the budget estimates. The specific indication that the revenue deficit is understated to the extent of oil and fertilizer subsidy is indeed a measure of transparency. |
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