Tax slabs broadened, but aam-aadmi may not smile - Hindustan Times
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Tax slabs broadened, but aam-aadmi may not smile

Hindustan Times | ByM Lakshminarayanan
Feb 28, 2011 11:34 PM IST

The finance minister, Pranab Mukherjee presented his fifth budget (third in a series) in an upbeat mood on account of the swift and broad-based growth that the Indian economy has achieved in 2010-11. M Lakshminarayanan writes.

The finance minister, Pranab Mukherjee presented his fifth budget (third in a series) in an upbeat mood on account of the swift and broad-based growth that the Indian economy has achieved in 2010-11.

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As the government has outlined its direct taxes policy in the direct tax code (DTC), which was tabled in the Parliament in August 2010, the finance minister has limited his proposals to initiatives that required urgent attention. He has broadened the tax slabs for individual tax payers, fourth year in a row, which will add a marginal R2,000 in the hands of the aam-aadmi, clearly not enough to meet the inflationary pressure.

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Budget 2011 clearly signalled that direct tax code will be implemented from 1st April 2012 onwards. Although such confidence is not echoed in the case of GST implementation, he has proposed to introduce the Constitution Amendment Bill in this session of the Parliament, which will enable the roll out of GST eventually.

The reduction of the rate of tax on dividends received from overseas subsidiaries to 15% is a welcome relief and one would expect that this move would go a long way in encouraging corporates to bring in their earnings abroad into India.

On the other hand, the widening of the tax base for the minimum alternate tax (MAT) by bringing in special economic zones (SEZs) developers and the LLPs into the tax net from 1st April 2011 along with the increase in the rate to marginally above 20% is disappointing.

The thrust on the infrastructure growth as contained in various proposals will aid in achieving a double digit growth of the economy. The need for transparency and accountability in the governance much needed in the backdrop of recent scams and scandals cannot be over-emphasized.

Considering all the proposals laid out in its entirety, it can be safely said that the budget is growth-oriented.

(M Lakshminarayanan is National leader, tax & regulatory, Deloitte Haskins & Sells)

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