The Financial year 2006 – 2007, is nearing its end and many have started figuring out their taxes. Every time whenever our Finance Minister P Chidambaram gets into the Parliament with is suitcase on 28th February, there a lot of expectation from him to deliver. In the past, he has indeed. The Union Budget site gives all the information regarding previous budgets features, economic surveys. the Finance Minister’s speech shall be webcast on 28th Feb 07, on its site.
So what can we expect from him this year? Some thing that would keep the inflation levels low (Which touched a record level of 6.73%), something that would keep India, Inc happy, keep the left happy and most importantly keep the ‘Aam Aadmi’ happy as some states go in to election soon.
Here are some of my findings of what people expect from this years budget.
1. Senior Citizen’s Taxes
Senior citizens have long been rallying around the FM, to avail more tax benefits. In a recent report from IBNlive.com, Retired judge from the Karnataka High Court, Justice Michael Saldana, expects the same to happen. He advocates that senior citizens should be considered as a separate class of persons, which is permitted in the Constitution.
Justice Saldhana is hoping that the current budget will offer senior citizens special provisions like a higher interest rate on bank deposits, a greater deduction against premium contributions to medical insurance and eventually a hike in income tax exemption limit.
The report also quotes him saying,
Since the amount of tax that is collected from this category of persons is so very small – it is less than 1 per cent – it would be doing an immensely good turn to the very large volume of senior citizens in the country if the exemption limit itself were to be raised to Rs 3 lakh
2. India, Inc asks…
The Indian Industry has lots at stake, every budget. In a Business World report, The industry made their requests and wishlist before the FM, on 9th Jan 07 at the Pre Budget Durbar.
- Creation of a single Indian market through elimination of Central Sales Tax
- Enhancement of India ‘s competitiveness by reducing cost of transactions through application of an integrated goods and services tax (GST)
- Ramping up of investment in physical and social infrastructure through directed savings and investments; and
- Deepening of capital market through access to pension funds and increased access to foreign debt
FICCI says that the Central Sales Tax (CST) on goods moving across states as the main impediment in creation of the unified Indian market. CII and Assocham also agree on this.
CII, has been reported saying that a rise in physical and social infrastructure should be a priority in the next budget.
…The confederation wants the government to allocate at least 75 per cent of the additional revenue to be dedicated to infrastructure in the following proportions: 35 per cent each for education and physical infrastructure, 20 per cent on health, and 10 per cent on other developmental projects.
CII president R Seshasayee is quoted saying
I would hope to see significant emphasis on education and infrastructure. We need massive efforts in education to make our growth to make our growth happen, as we are facing a tremendous shortage of skills, low-end and high-end
CII argues that India is too conservative in borrowing from abroad and should increase its percentage of foreign debt to GDP to 25 per cent from the present 22 per cent.
Plus, other than this the Industry wants lesser taxes.
…To start with, it wants the 10 per cent surcharge on corporate tax to go. It wants the peak custom rate to be lowered from 12.5 percent to 10 per cent, and the peak excise rate to be lowered from 16 per cent to 14 per cent. It wants custom duty on items covered by India’s trade agreements with Thailand and Singapore to be still lower at 5 per cent. It also wants depreciation rate increased from 15 per cent to 25 per cent so that it can modernise quicker.
Another report on IBNlive.com, says that the FM, is likely to make packaged food cheaper by eliminating excise duties. The report also says that
…the ministry was also mulling to provide income tax deduction of 100 per cent for first 10 years for all types of new food processing units
Rediff.com reports that Budget 2007 may have changes in non resident taxation and make it better for foreign companies in setting up businesses here in India. Changes are likely to be in the Direct Taxes Code.
Among the changes is one that proposes to bring in an “anti-abuse, anti-avoidance” provision in the Double Taxation Avoidance Agreements between India and countries like Mauritius.
The report, quotes an Official source saying,
As a strategic measure, the government is considering introducing the provision as a part of the new direct tax code, rather than as a standalone provision in Finance Bill 2007
The report also says that, foreign companies are most likely to be allowed to claim 3% of their non-performing assets as deduction for tax purposes, and is also considering to make it mandatory that liaison offices and representative offices have a Permanent Account Number.
3. The Aam Aadmi
I’m not in the tax scanner, as I’m still a student.
As I’ve seen my Dad and some of my friends while they file their taxes, I have one suggestion – Please reduce the paper work. Some times it just gets irritating to know that you have to arrange a lot of papers for this. I don’t want to go much into this because I don’t know much about this. I have some knowledge, but I rather not put it here.
To conclude, I believe by this date the FM should have made the Budget ready. I expect that as in previous years, he delivers what India wants. I remember him saying on a television report last year that Big Bang Budgets are no more needed for India. Just an indication from the FM, that India is on the right track of economic growth.