×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Citizens want an empowering Budget from FM

Citizens want an empowering Budget from FM
Comment E-mail Print Share
First Published: Mon, Feb 11 2008. 11 23 PM IST

Updated: Mon, Feb 11 2008. 11 23 PM IST
As the countdown to the Union Budget 2008 begins, India, whether through corporates, individuals, policymakers or even the stock markets, voices its expectations and dilemmas on the coming event. We take a sneak peek.
The confidence of the Indian public is clearly reflected in figurative terms as the economy grew faster in 2006-07 than previous estimates and clocked 9.6% growth. According to the Central Statistical Organisation estimates, the economy is on course to grow by 8.6% in 2007- 08. The government, in its bid to sustain the high growth, is looking at policy adjustments to capture the mood of the nation. This is especially in view of recent global uncertainties and developments.
For the first time, direct tax collections have surpassed indirect tax collections which are in line with the developed economies across the globe. Recent government data on tax collections paint a happy picture of the economy and the tax collection machinery as far as direct taxes are concerned. During the first nine months of the current fiscal, personal income-tax collections rose by 50% and corporate tax revenues by 39.84% compared with the same period last year.
Such a phenomenal increase in the net tax collection could be attributed to strong economic growth, better tax administration and relatively improved compliance levels. Riding on robust economic growth and extremely positive business sentiment, the buoyant and largely bullish stock market, has also contributed significantly to the excellent growth in tax collections, with collection of securities transaction tax (STT) growing by a sharp 57.61% in the current fiscal.
To top it, increased investor interest in equities induced by strong economic fundamentals, robust flows from foreign institutional investors and an attractive short-term capital gains tax rate have also contributed to the increased tax collections.
People are investing like never before and the per capita income has increased manifold. The government must be keen to capitalize on this investment boom and strike a balance between inflation and growth.
With such positive signs on the tax compliance and collections front, the common man is definitely looking at return gifts from the finance minister. To find out more about what the people of India think, Mint recently ran a survey across a cross-section of individuals in various parts of the country on their expectations from Budget 2008.
HOMEMAKER
Indrani Dutta
New Delhi
• Have the introduction of the value-added tax (VAT) and the consequent increase in the prices affected your budget and saving potential?
Disagree. VAT is accepted and widely used in all developed countries and I see no harm in us paying VAT as it also cuts out a lot of business malpractices, such as avoiding sales tax by not issuing proper bills and receipts. As responsible citizens, we should allow the government to make legitimate income and only then we can subsidize essential commodities, such as petrol and diesel.
• Do you feel that there should be some stability in the price of petrol and diesel?
Agree. It should be subsidized from other government income.
• Do you think the government should look to curtail price rise in basic amenities and utility products? Please let us know what these basic products should be.
There should be a price band on products such as electricity, telephone, gas, rice, wheat, milk, sugar and mass transportation. Also there should be an independent agency such as the Securities and Exchange Board of India and the Telecommunications Regulatory Authority of India to monitor the pricing of essential products produced and marketed by multi-national companies.
• Do you think there should be more tax incentives on housing loans taken by women to encourage investments?
Certainly.
• One proposal you think should be introduced by the government in this year’s Budget?
Definite allocation of funds for building low-cost rooms and common toilets for the menial and migrant labour without whom the cities will not function. Give them human standard of living and medical support.
One thing which you think should be removed in this year’s Budget?
Service tax on rent. It is unfair to the landlord as well as the tenant. The landlord has put in hard-earned, tax-paid money to build the asset and the tenant is paying large amount to use the facility and, in addition, the landlord is also paying property and wealth tax. In effect it is double taxation.
What others said
• Like the finance minister, the obvious priorities of a homemaker are to reduce expenditure and increase savings. The introduction of the value-added tax (VAT) provides the homemaker the ease and comfort of purchasing standard goods at standard prices and at the same time ensuring that the government receives its rightful dues and business malpractices, such as improper bills/receipts are curbed.
• At the same time, homemakers said the government needs to ensure that essential commodities are subsidized. The government should consider introducing a price band for essential products such as wheat, milk, sugar, oils and utilities such as gas, electricity and telephone, the survey respondents said. The current shortage on liquid petroleum gas (LPG) is alarming and black marketeers are on the rampage, homemakers said. Petrol and diesel prices should be stabilized.
• Service tax on rent should be eliminated because it results in double taxation of the tenant and landlord.
• The government should focus on health care and improvement of living conditions of migrant labour working in cities through a special scheme, several homemakers, who responded to the questionnaire said. Tax sops can be given to companies introducing such schemes.
• Housing loans taken by women should qualify for higher tax benefits to encourage greater investment, homemakers said.
• The minimum exemption limit of taxable income for women should be raised from the current Rs1.45 lakh. The maximum limit for investments eligible for tax relief under section 80C should be higher for women, homemakers said.
SALARIED EMPLOYEE
Dipesh Narang
Mumbai
• Do you feel that the exempt exempt tax (EET) system [taxing the withdrawal from the Public Provident Fund (PPF)] should apply to investments made by you in the past when this scheme was not applicable?
Disagree.
• Do you feel that the minimum taxable income limit should be increased from Rs1.10 lakh , and if so, to how much? 1) Rs1.25 lakh 2) Rs1.50 lakh 3) Rs2.50 lakh 4) Any other amount
Rs1.50 lakh.
• Do you feel that surcharge should be removed? OR
Do you feel that the minimum limit for imposing surcharge on individuals should be increased from Rs10 lakh and to how much? 1) Rs 15 lakh 2) Rs25 lakh 3) Any other amount
Removed.
• Do you feel that the maximum limit of Rs1 lakh for the investments eligible for tax relief under section 80C should be increased to encourage more investment and if so, to how much? 1) Rs1.50 lakh 2) Rs2 lakh 3) Any other amount
At least Rs1.50 lakh.
• Do you feel that the limit on tax benefit for the repayment of housing loan should be increased from Rs1.50 lakh and if so, to how much?1) Rs1.75 lakh 2) Rs2 lakh 3) Any other amount
Rs2 lakh.
• Do you feel that the provision of standard deduction from salary should be reintroduced?
Disagree.
• Do you feel that the government should provide a better rate of return on PPF and fixed deposits?
Disagree.
• Do you feel that the requirement to file a hard copy of the income-tax return (filed without digital signatures) in spite of e-filing should be done away with?
Agree.
• Is there any requirement to reintroduce the benefit under section 80L (exemption for interest income)?
Agree.
• Should the annual information reporting questions be done away with for salaried taxpayers?
Disagree.
• One proposal you think should be introduced by the government in this year’s Budget?
30% tax on higher slab should be reduced.
• One thing which you think should be removed in this year’s Budget?
Tax on interest on fixed deposits .
What others said
• The survey revealed that for a salaried person, the challenge is to increase disposable income as perhaps, the section, a part of the class of people whose taxes being withheld at source, contributes most honestly to the government coffers. The salaried classes’ expectations from this and future budgets are to give the group the purchasing and investing power to sustain the spending boom.
• Going by the data on buoyancy in tax collections and salary increases, this is clearly possible. The first thought on this is to increase the threshold limit of minimum taxable income from the current Rs1.10 lakh to Rs3.50 lakh and remove the existing surcharge or increase the minimum limit for imposing surcharge, respondents said.
• The standard deduction should be reinstated. The 30% tax rate on the highest slab of income should be reduced, they said.
• The limit for investment eligible for tax relief under section 80C should be increased to Rs2.50 lakh from the current Rs1 lakh and tax benefit on interest paid on housing loan should be increased from Rs1.50 lakh to Rs2 lakh, most respondents said.
• Respondents said the annual information reporting requirements has added to the burden of administrative compliance and is not serving any useful purpose and can be done away with. In case of an e-filing, there should be no further requirement of hard copy filing.
• The tax exemption limit on rental income should be increased and the benefit of exemption on interest income under section 80L should be restored.
• The exemption limit for reimbursement of medical expenses by the employer should be enhanced from the current Rs15,000, salaried employees surveyed said.
STUDENT
Varun Giri
New Delhi
• Is there a requirement to reduce the interest rate on the education loan?
Agree.
• Do you feel that the tax benefits provided by the government for education loans are sufficient?
Disagree.
• Do you feel that the government is allocating sufficient funds and in the right way to provide better opportunities for higher education?
No (especially when its levying education and higher education surcharge). Although, I feel good that the government has enhanced fellowship for research scholars recently, there is still a substantial scope for improvement. There are not a lot of efforts made to stop brain drain.
• Do you feel that there should be a separate tax benefit on repayment of the principle amount on an education loan (in addition to the tax break on interest)?
Agree.
• Given the substantial amounts of loans taken, do you feel that the seven-year restriction on tax break is reasonable?
Disagree.
• One proposal you think should be introduced by the government in this year’s Budget?
Improving standards of regional universities and bringing them at par with Central universities, such as Delhi University. It will help students avail of cheaper and better education. This should be followed by creating enough job opportunities in those regions. Focus on primary education should be maintained.
One thing which you think should be removed in this year’s Budget?
If the policies are implemented in the way they are drafted and the true benefit reaches people on time, we have enough potential to be a superpower.
What others said
• As life almost nearly begins for a youngster, who still is in school, students hope to achieve an all-round development by pursuing higher education at the lowest possible cost.
• While the education cess has been introduced by the government, it is not clear as to how the government has allocated sufficient funds and better opportunities for higher education, students responding to the survey questionnaire said.
• The government should prioritize reduction of interest rates on education loans and provide tax benefits and breaks for such loans, the students surveyed said. The seven-year restriction of tax breaks on such loans needs to be revisited.
• Students said tax breaks should be considered for fee incurred on sports education.
• The maximum limit for investments eligible for tax relief under section 80C should be raised from the current limit of Rs1 lakh considering that annual school fees now range from Rs25,000 to 35,000 and investments also are being made on behalf of minors for their future needs.
• The challenges of primary education should be addressed by the government because the current skewed norms could lead to denial of education for many.
• The government also needs to focus on introduction of vocational courses and employment schemes for jobless youth, students said. As the voice of India poises to dominate the global scenario, the finance minister could certainly draw from this.
SENIOR CITIZEN
A Santhanam
Chennai
• Do you feel that the government should introduce a provision to provide a higher interest rate (similar to bank deposits) also on other government bonds /public provident fund etc?
Agree.
• Do you feel that the qualifying age for senior citizens should be reduced to 60 years?
Agree.
• Should the limit for deduction of medical insurance premiums be increased?
Agree.
• Do you feel that surcharge should be completely removed for senior citizens? OR Do you feel that the minimum limit for imposing surcharge on senior citizens should be increased from Rs10 lakh and by how much? 1) Rs 15 lakh 2) Rs 25 lakh 3) Any other amount
Agree (with the elimination of surcharge).
• Do you feel there should be a provision for standard deduction from the pension income?
Agree.
• Do you feel that the government is allocating sufficient funds for medical benefits for senior citizens?
Disagree.
• Do you feel that rental income from house property for one let-out house should be exempt?
Agree.
• What are the additional steps that should be taken by the government to increase social security for senior citizens?
Free medical attention in government/private hospitals and expenses should be covered by the government.
• One proposal you think should be introduced by the government in this year’s Budget?
Income-tax (standard deduction) for senior citizens should be increased to Rs2 lakh, that is, taxable income should be “NIL” up to Rs2 lakh.
• One thing which you think should be removed in this year’s Budget?
Service tax should be waived for senior citizens.
What others said
• In the sunset years of one’s life, senior citizens are looking for an assured income and liquidity, social security and good health care.
• The minimum exemption limit of taxable income should be raised from the current Rs1.95 lakh to Rs3 lakh for senior citizens, those senior citizens surveyed said.
• The maximum limit for investments eligible for tax relief under section 80C should be higher for senior citizens, they said.
• A recent welcome measure is the inclusion of the post office department’s senior citizens saving scheme under section 80C, most senior citizens who were surveyed seemed to agree.
• Rental income from one homestead property should be exempt from tax for senior citizens, they said.
• In the Union Budget 2007, the government had announced that a scheme for reverse mortgages on property owned by senior citizens would be introduced to provide greater liquidity to them. There should be greater clarity on tax and legal implications of the measure, senior citizens said.
• Medical insurance should be free for senior citizens as also an increase in the current limit for deduction of medical insurance premiums.
• A social security scheme should be specially introduced for senior citizens for free health care and medical attention, respondents said.
• The surcharge should be removed for senior citizens and a standard deduction be granted from pension income, they added.
• The government could consider introduction of higher interest rate on government bonds and public provident fund (PPF) for senior citizens.
EXPATRIATE
Jean-Marc Leclercq
New Delhi
• Do you think the 730-day rule for an expatriate to qualify as an ordinary resident (taxable on worldwide income) should be relaxed?
French citizens get only 12 months for working pass. We should get at least 36 months .
• Is the requirement to obtain a No Objection Certificate (NOC) at the time of departure from India just an administrative burden, especially as the law does not clarify whether this is required only at the time the expatriate leaves for good or for every travel?
Why is an NOC needed?
• What steps should the Indian Revenue Service take to expedite the issue of refunds?
I don’t know.
• Do you feel there is a requirement to introduce special and friendly procedure for issuance of refund in the name of the employer, if the tax is paid by the employer?
Taxation is too complex generally and should be modernized.
• Do you feel that the introduction of Fringe Benefit Tax on Employee Stock Option Plan is creating an issue of double taxation?
Taxation reform is required.
• Are you satisfied with the Permanent Account Number (PAN) allotment process? If not, do you feel that there should be an easy PAN allotment process for short-term assignees who do not have bank accounts or Foreigners Regional Registration Office (FRRO) registration in India?
I don’t know.
• Do you feel that the slab rate benefit for resident women should be available to non-resident women also?
Do you feel that the assessment and audit procedures are a harassment and require a lot of additional paperwork?
Do you feel that the information asked for by the tax office during the assessment process is in most cases not relevant and not easily available with you?
Do you feel that it is appropriate to share your home country bank details with the Indian Revenue Service during an audit, especially if you are not liable to tax on global income in the year in question?
I don’t know procedures in this country that are not giving you harassment. We never have a clear procedure systematic to follow up. Bank details, local or overseas, should be never shared. This is a part of privacy.
• One proposal you think should be introduced by the government in this year’s Budget?
To increase the social budget to support education and health conditions.
• One thing you think should be removed in this year’s Budget?
I don’t know.
What others said
• “India calling” is a welcome message for expatriates into India with its fast-changing and booming economy. Several expats said, India is the place “to be,” and who would disagree? However, the one thing that seems to haunt each one of these expatriates is a possible tryst with the Indian Revenue Service for some oddball pretext.
• Mr X comes to India for a job for three-four months. Now, the first step towards tax compliance for the expat is to obtain a Permanent Account Number (PAN). An expat needs to register with the Foreigners Regional Registration Office (FRRO) and/or get an Indian bank account statement to be accompanied with the PAN form. But to open an account you need a PAN. Mr X can give his overseas bank account statement, but that needs to be notarized, which is a time-consuming process. It is a Catch-22 situation for him and a process that should have been simple turns into a mini-ordeal.
• Mr X also is aware that the Indian I-T laws require him to obtain a “No Objection Certificate (NOC)” when he leaves the country, but he is not aware if this is required each time he leaves India or when he leaves the country permanently.
• Take Mr Y, who is working in India for the past three years. The tax laws for determining his residential status would make him taxable on worldwide income in India in the fiscal year following the year in which his stay in India exceeds 729 days (in the last seven years). The threshold needs to be increased and the two-three-year window widened because taxation of global income is associated collating a huge amount of paperwork, not to mention the increased possibility of an audit.
The next part in the series will run on 16 February and will be on “How the government spends”.
This story is based on interviews on a survey questionnaire framed by Ernst & Young Pvt. Ltd, which also provided the analysis. Teena Jain in New Delhi, Rachna Monga in Mumbai, Vidhya Sivaramakrishnan in Chennai and Deepti Chaudhury in Bangalore contributed to this story.
Comment E-mail Print Share
First Published: Mon, Feb 11 2008. 11 23 PM IST