by Harish Gupta, National Editor, Lokmat Group
FM Throws Please-All Tax Budget Googly
Cuts Taxes, Withdraws DDT
But Takes Away 70 Exemptions
Sensex down 1000 points
Harish Gupta
New Delhi, Feb 1
Finance Minister Nirmala Sitharaman Budget echoed what the industry was telling Prime Minister Narendra Modi for months - put more money into the hands of the people by reducing tax. She has done exactly the same by reducing personal tax and in the process took a hit of Rs 40,000 crores. Tax payers can pay less taxes under the new system, save more money and spend as they wish. The slabs have been reduced considerably for those earning up to Rs 15 lakhs a year.
But there was a catch ! The FM introduced a “Dual Personal Income Tax” system whereby the tax-payer will lose benefits of 70 out of 120 exemptions that were available to them. The tax payers can opt for any of the two systems. If you want old system of taxes you take advantage of all 120 exemptions. If you want new system, pay less and lose 70 exemption.
This is a googley and no one is sure who will opt for whom. After introducing the “Dual Tax system” for the Corporate sector where it can opt for old 22% tax slab or new 15% slab, the same comes for personal tax too. Obviously, the government wants people to spend money instead of saving and prop up the economy. The slow-down is largely because people are not spending the money.
Another big boost given to companies was withdrawal of Dividend Distribution Tax (DDT). This is surely music to the ears to the companies and foreign investors too. However, the individual tax payers will have to pay dividend tax irrespective of any slab he may be. This is another googly.
However, the government took a series of steps in the Budget to end tax terrorism including creating an institution of a new taxpayer charter, amending the Companies Act to bring criminal liability in certain areas to end, bring faceless appeals etc.
True to the commitment made by PM Modi, the Budget also gives a boost to Make in India and Assemble in India by enhancing customs duty on variety of items and reducing excise duties.
What has baffled everybody is that the please Industry Budget has taken the Sensex crashing by 1000 points today. But Nirmala Sitharaman was confident when she said today, “Wait until Monday, why rush to a conclusion... the full implications will be understood by then.”
Interestingly, PM Modi did not launch any big ticket scheme. Rather, the government slashed allocation for major schemes in the Budget for next fiscal.
Ends
