'He Delivered On His Promise Of Reducing The Tax Rates'
Rohinton Sidhwa, Member, FICCI's Taxation Committee and Partner- Tax, Deloitte Haskins & Sells LLP also spoke about the tax reforms and the data on demonetization as stated by FM, Arun Jaitely
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Sidhwa clearly stated, "The government should have utilised the data collected poste demonetisation to announce the tax slab reforms, only then he could go about long large scale tax reductions in each slab. I sympathise with him that the time was very less to actually look at the data, but I am sure once that data yields a dividend, over there he would have a lot more flexibility."
He added, "Certainly, from a corporate tax side, one of the things that we were hoping for was the abolition of MAT (Medium Alternate Tax), however it hasn't been touched upon. Jaitley said that it's not the right time to do, though I feel he could have started off with the reduction in the rate to begin with but instead he extended the credit period for another five years (so from 10-15 years). Now, that is one area where the companies which are not making income tax profits and are actually paying cash taxes, and this is something where all cash in one way or the other has to be refunded by the government or adjusted against future tax payments. I think the industry was actually looking forward to that going away."
He also added, "On corporate taxation the industry was also expecting and he actually delivered on was the reduction in withholding tax which is the interest which is paid to foreign loans. Now remember, the interest rates which are available to the corporates in India are traditionally much much higher than what is available in the international market. This particular section 194-LD actually allows borrowing and the interest is then subjected to a tax of only 5%, now extending this section which was also supposed to expire at the end of this year to the future, shows that there is something positive as after the banks were flushed with funds the rates have not come down as appreciably because the international market liabo is typically is in the range of around 1%. Actually, bringing availability of these funds to Indian companies is a positive step.
On the personal taxation front, Sidhwa said, "A positive is that ultimately he did deliver on his promise of reducing the tax rates, though he did it for a very small segment of the population and I kind of understand it that his hands are tied because as of now the buoyancy is not enough to cover our the large scale reduction on all tax-payers, so he has lite his bite to the higher slabs of incomes and he is hoping that a wider coverage of tax will eventually get the revenue that he needs to give a full scale reduction."
Sidhwa said, "I would probably give this budget -a 5 on a scale of 1-10, as all the steps like the income disclosure scheme, demonetization exercise, the funding of the public parties and GST, all of these will actually come into play next year. So, I feel next year it will be a really bumper budget."