A new Government is in place and the aspirations for a policy statement through the Union Budget is soaring. Twitter and Facebook posts are also be used liberally to voice one's expectations while yours truly resorts to recording the expectations in this post.
The economy is creaking and the Iraqi crisis has not helped matters. However, Indians rise to their very best in times of crises, be it the Bangladesh influx or the sanctions imposed and more relevantly the mortgaging of gold and renting the airspace to US for its Gulf operations to fix the boat. This time could be no better. The pill for the economy is to ensure that the demand surges, supplies meet the demands, costs are cut to tame inflation while the revenue of the Government to meet its expenditure within the parameters of the deficit permissible is a recipe for innovation while the doomsdayers would cry from the sidelines that disaster awaits the nation. In this backdrop a wishlist is placed hereunder for consideration
The concept of deductions favour the rich as against a rebate. Take the example of a deduction of Rs 1 lakh u/s 80C of IT Act. The rich gets a relief of Rs 30,000 and it goes down to Rs 10,000/. Essentially, conversion of this into a rebate would mean that the rich are discouraged from saving and the incentive for investments could be placed at a higher rate resulting in the lower income groups also moving towards investment. Thus rebates being classified as savings with 10% rebate and investment with 30% rebate would provide the right impetus to the investment climate. Expenses in the nature of donations could be placed at 20% rebate thus ensuring progressive taxation.
The salaried classes constitute a huge taxpayer base while accounting for a marginal amount of taxes. The administration of the taxes are normally vexatious for this class. A standard deduction of Rs 50,000 would alleviate their hardship to a large extent. Similarly, in cases wherein the salary is realised by way of litigation, there is a need for allowing the litigation expenses as a deduction. The provision for a tax exemption under the head salary upto Rs 3.60 lakhs would also ensure that employers and employees do not collude to pass them as business income.
Many professionals are subjected to TDS but are credited with substantial amounts at the end of the year which results in they having to pay interest forcibly. An option for higher deduction of tax would enable these persons to save on the interest component while the exchequer would get the benefit of fund inflow in the month of April when inflows are lower.
The above measures would on one hand release substantial amounts into the market as disposable income. In order to ensure consumption is channelised towards domestic goods, it would be necessary to infuse indirect tax reforms. An excise duty cut whereby only the top 25 contributors to excise duty are levied excise would render the other goods cheaper in the market. These goods would also be able to promote quality and enhance production if the relief is tagged to the enhanced quality. The spin off of such a measure would be consolidation of such industrial units leading to competition in the international market too.
The compliant are punished and the defaulter is rewarded has been the resultant feeling of a number of schemes. In order to track defaulters of TDS and TCS, the IT Dept should make available an option on its portal for the deductee to mention the amount of TDS deducted which does not figure in his statement even after one month of the due date for filing the statement. A matching exercise could be carried out and the defaulter tracked in the shortest possible time. This would ensure that voluntary compliance is not penalised while the defaulter is tracked within time. The deductee would also not be penalised for no fault of his and the Dept would also save on grievances.
The need to boost the second and third tier cities is felt. The creation of corridors linking every district to the State capital by road and rail is to be ensured. Similarly, the need to set up infrastructure hubs which would trigger developmental processes in these towns needs to be envisaged. To cater to this need, the Infrastructure bonds may be thrown open without a ceiling to persons who have stashed money abroad. They could be asked to forego 70% of the sum as taxes and the balance 30% would go into these bonds carrying a taxable interest of 4% to meet the ends of equity as they had contributed to the current situation. Corporates with turnover exceeding 50 crores may be asked to contribute to the fund which would qualify for a 20% rebate in taxes. Besides this the artificial ceiling on investment in these bonds could be removed to enable investors to invest in these funds.
Education is a key area which needs focus. The cess collected from each State/ UT needs to be earmarked for development of education centres within such State/ UT. This would provide the impetus for the local authorities to also promote compliance in Central revenues. The identification of teachers and providing them the best of facilities is the need of the hour. 5% of the outlay needs to be for education. Similarly, the energy sector needs to be holistically reviewed. Plans to tap renewable energy should be extended to tidal and rainfall energy. Installation of solar panels on railway and bus tops to cater to the electrical needs within could result in saving of fuel.
The fuel costs need to be rationalised and made uniform. The first step in the direction would be to impose excise / customs duty on slab rate basis rather than percentage. This would make the hikes more palatable.
More in the next one as a debate emerges on these points. Expecting a storm in the teacup!