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Tax Slab Is Good For Small Tax Payers

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Rajesh Srinivasan, Leader GES, Deloitte India

Personal Tax: Budget belies the expectations of individuals who are hoping to get additional deduction on qualified investments under Section 80C and also on interest on loans taken for self-occupied property. With the implementation of the Direct Taxes Code (DTC) being deferred, the Finance Minister as expected, has tried to bring in some of the provisions in the DTC in the current budget. 

Significant among this is the calibration of tax slabs in line with the proposed slabs under the DTC. Though this would provide relief of up to Rs 22,000 for individual tax payers having income of Rs 10 lakhs and above, the common man may get only marginal relief of Rs 2,000 out of the increase in threshold limit. 

This is contrary to expectations that the threshold limit may be pegged at Rs 3 lakhs as recommended by the Parliamentary Standing Committee that reviewed the DTC proposals.  

The fact that interest income on savings bank account up to Rs 10,000 would be exempt from tax comes as a welcome sign for small tax payers. The benefits on the direct tax front may to an extent be neutralized by the indirect tax proposals, with the increase in excise duty and service tax rates from 10 per cent to 12 per cent.

Homi Mistry, Partner, Deloitte Haskins and Sells

The raising of the exemption limit from Rs 1.8 lakh to Rs 2 lakh and the extension of the 20 per cent tax rate which is currently applicable for incomes between Rs 5 lakh  to Rs 8 lakh to Rs 10 lakh is a welcome step. The deduction available up to Rs 50,000 on investments made in the Rajiv Gandhi Equity Saving Scheme for individuals having an annual income up to Rs 10 lakh is a step in the right direction and should give a boost to the capital markets. Senior citizens will no longer be liable to pay advance tax if they do not have business income. The reduction in the STT rate from 0.125 per cent to 0.1 per cent will give a boost to the capital market.
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Sanjay Chamria, Vice Chairman & Managing Director, Magma Fincorp Limited

Finance Minister Sh Pranab Mukherjee presented his budget in the parliament today. Although the budget was without any substantial reforms, Government's commitment to go ahead on the path of fiscal consolidation is a step in the right direction. There were no definitive steps to control the ballooning subsidy bill, however, the FM has targeted to keep central subsidies under 2% of GDP in 2012-13, which if achieved, would be commendable.

In the budget, the Finance Minister has continued  with his focus on Agriculture through higher target of Rs 5.75 lac crores for agriculture credit, continuation of interest subvention scheme, increased outlays for Department of Agriculture and cooperation as well as for Rashtriya Krishi Vikas Yojana. The announcement of 5 missions for agriculture development in the 12th Five Year Plan will boost rural economy and will help increase opportunities for AFCs to be part of this growth.

The focus on infrastructure with a targeted investment of Rs 50 lac crores under the 12th plan is a positive. The FM has provided further boost to low cost affordable housing with measures like opening up of external commercial borrowings , setting up a credit guarantee trust fund  for housing loans, continuation of interest  subvention scheme of 1 per cent, enhancement of limit of indirect finance under priority sector from Rs 5 lac to Rs 10 lac and exemption of construction services for residential dwelling and low cost mass housing from service tax net. This will help boost the sector as well as related sectors like cement, steel and financial services.

The increase in service tax and standard excise duty rates from 10 per cent to 12 per cent were expected. These would however, further impact the industry which is already under pressure from high interest rates. Although lower fiscal deficit target of 5.1% is positive, we would like to see further steps to improve liquidity and reduce interest rates for private sector including AFCs.

The budget is a negative for automobile sector with increase in excise duty on large cars having a potential impact on demand. On the other hand, the tax on diesel cars, which was widely expected, has not come through which is a positive.

There is no change in corporate tax. However, some relief in personal income tax will benefit the common man.

The FM has also focused on reforms in capital markets with 20% reduction in STT, allowing Qualified Foreign Investors to access corporate bond market, simplifying IPO process and helping expand equity market coverage to retail individuals through Rajiv Gandhi Equity Savings Scheme. 

While overall the budget has moved in the direction of reducing fiscal deficit, more credible steps on reduction in subsidies to help reduce inflation, lower interest rates and increase the growth in the economy would be our expectations from the government going forward.