Budget Hopes

budget and salaried

Venkatachalam-photo2After the general elections the euphoria and optimism about making India an economic powerhouse is evident. Expectations of both the salaried class and corporate houses are high. The finance minister does have a tough job.

A salaried person expects, exemption limits for various allowances, basic exemption and reimbursements be revisited and linked to inflation. A separate deduction of INR 50,ooo for investment in housing and insurance products. Restoration of deduction under section 80CCF - Investments in long term infrastructure bonds. These measures will also help mobilise long term funds.

Corporate India currently pays tax at 30 percent; this rate needs to be rationalised to 25 percent. The UK and China have lower headline rates. The Minimum Alternate Tax (MAT) rate at 18.5 percent today, compared to 7.5 percent when MAT was introduced needs to be revisited. Exemption from Dividend Distribution Tax (DDT) and MAT should reenergize the SEZ scheme. Royalties and fees for technical services need to be taxed at 10 percent instead of 25 percent to encourage import of latest technology.

The investment allowance deduction under section 32AC needs to be extended for at least five years. The dispute resolution mechanism and authority for advance ruling need to be suitably staffed to achieve efficiencies and provide clarity.

Lastly, India needs an improved business environment which could be achieved by, providing suitable clarifications on tax disputes, giving a go by to retrospective amendments and deferment of General Anti Avoidance Rules (GAAR) by 2 years.

By K. Venkatachalam, Partner - Tax and Regulatory Services, PwC India