India Today Group
Surfers' comments
The threshold limits on tax need to be increased and tax rates should be spread across more slabs so as not to hurt the salaried class. - Jayaraman

The I-T exemption for men should be Rs 1.8 lakh. Rs 1.5 lakh is peanuts. - Naveen Kumar
More »
Expert comments
Gaurav Taneja,
Partner & National Tax Director says the Finance Minister has stressed on buoyancy in tax collections and on attaining a Tax—GDP ratio of 12.5%.
Motilal Oswal, Chairman and Managing Director of Motilal Oswal Financial Services says the Finance Minister was uniquely positioned to present a landmark Budget.
Srinivasa Rao, Partner & India International Tax Leader, Ernst & Young is of the opinion that Union Budget has lived up to the populist trend.
Calculators
How this budget affects your
daily life:
Risk Calculator
Future Needs Calculator
Tax Calculator
SIP Calculator
Union Budget 2008-09  »   Story
Direct taxes - A balanced budget
Gaurav Taneja
  Print   Email   A  A  A
 

The economic backdrop to the Budget 2008 was mixed; though India has witnessed high growth rate in the recent past, coupled with burgeoning foreign exchange reserves and phenomenal increase in the direct tax collections, the fear of US slowdown, inflation, ever-strengthening rupee and high interest rates, are a matter of some concern. With buoyancy in tax collections, the industry expected a reduction in effective corporate tax rates (including surcharge and cess), Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT). This would have given further fillip to investment, which would help in sustaining the high growth rates. The Budget proposals have left a mixed feeling. The Finance Minister opened the Direct Tax Budget speech, stressing on the buoyancy in tax collections and on attaining a Tax—GDP ratio of 12.5 per cent in 2007-08 from 9.2 per cent in 2003-04.

Let’s look at some positives in the Budget: It has proposed a fiveyear tax holiday to hospitals situated in non-metros and hotels constructed in specified areas. With a view to encourage outsourcing of scientific research, the benefit of weighted deduction of 125 per cent has been extended to payments made to an approved research company.

DDT payouts between parent and subsidiary companies are now allowed to be set off in order to mitigate the cascading effect up to one level. Though, on the Fringe Benefit Tax (FBT) front there has not been much relief, the Budget has provided for rationalisation of these provisions to exclude payments made to sponsor a sportsman and for organising sports events.

A long-standing demand of service industry to extend the benefit of amortization of certain preliminary expenses has finally been accepted. The proposal for removal of Banking Cash Transaction Tax (BCTT) from April 1, 2009, would help reduce multiple taxes.

Now, something that could have been avoided: An increase in the short-term capital gains tax on shares from 10 per cent to 15 per cent on a justification to align it with the dividend rate is unlikely to be received well by industry and stock market.

Similar to the past practice, certain amendments have been made with retrospective effect (for example, addition of deferred tax and DDT in book profits for the purpose of MAT, clarification regarding written down value of assets for the purpose of computation of depreciation, penalty provisions etc., which annul the impact of certain judicial precedents.

This may have the effect of opening another series of litigation for settled matters.

The Finance Minister, taking cognizance that the growth in fiscal year 2008-09 would not be what was witnessed in the earlier years, has taken certain steps, including granting indirect tax incentives like reduction in excise duty to boost the industry sentiment, while holding on the reduction in the corporate tax rate.

On the whole, the Budget seems to be a balanced one.

(Gaurav Taneja is Partner & National Tax Director, Ernst & Young)

 

Source: India Today

Sector Analysis
AUTO
Negotiating a rough patch
Demand growth is expected to be buoyant driven by new vehicle launches, likely softening of interest rates and continued growth on the export front.
More »
Railway Budget
Lalu presents people's budget, slashes fares
The minister announced launch of several new trains and reduction in fares across all classes amid chaos by Opposition in Parliament.
More »
Features
A budget for Bharat
Buoyant tax revenues a lower fiscal deficit and an economy that's in top gear permit the FM to pump big money into agriculture and the social sector. Those efforts might help at the hustings, too.
More »
Economic Survey
'Expand telecom infrastructure, R&D'
"With rapid growth of telecom network, there is a need to further expand the infrastructure and research and development," the survey said.
More »
Surfers' comments
This is a very good budget, especially for agriculture and education. P Chidambaram is the best.
- By Saravanan P (plsharavanan@rediffmail.com)
If you can waive Rs 50,000 crore for farmers what about the tax on housing loan interest? That should also have been reduced.
- Chandra Shekar V (rilshekar@yahoo.co.in)
Please tax the street hawkers and give relief to the salaried persons.
- Rajaram (rajaramghurup@rediffmail.com)
This is the worst budget the finance minister has ever presented. The backbone of the country's economy is the transport but he completely missed it out.
- Jayakaanthan A (jayakaanthan@gmail.com)
The budget is sure to augment growth and will also lessen the volatility of the stock markets.
- Sidharth Paul (sidharth.paul@gmail.com)
Overall, the budget is satisfactory but the health sector should have been given greater importance.
- Ankit Chaudhary (chaudharyankit1987@gmail.com)
More »
Send your feedback
Name
E mail
Business Today's Budget edition
Editorial: Predictably populist budget
Special: Something for everyone...
Column: All for the common man
Exclusive interview with the FM
Maintaining the growth story
The Finance Minister defends Budget 2008 and the Rs 60,000 crore loan waiver doled out to farmers in an exclusive interview to Business Today's Sanjoy Narayan and R Sridharan.
VOX CEOs
"Total reduction of excise duties by 2% will give a welcome boost to the manufacturing sector. Also, the exemption of specified parts of set-top boxes from customs duties is commendable".
- Rakesh Bharti Mittal, Vice Chairman, Bharti Enterprises
More »
Advertisement
Beginner’s guide to budget
Union Budget is an estimate of the Government of India's revenue and expenditure for the end of a particular fiscal year, which usually runs from April 1 to March 31. Read on...
More »
Poll
Are you satisfied with Chidambaram's budget proposals for 2008-09?
Yes
No
Can't Say