The budget presented by our finance minister in the Parliament on Monday is technocratic and modern. He has struck a fine equilibrium between controlling inflation and fiscal balance on the one hand and promoting growth on the other.
I list below five proposals that I found to be significant.
1. Proposals in relation to corporate taxation
The current surcharge rate levied on domestic companies is proposed to be reduced to 5% from existing 7.5%. Further, the surcharge rate levied on foreign companies is proposed to be reduced to 2% from the existing 2.5%.
2. Infrastructure Debt Funds
In order to attract foreign investments in the infrastructure sector, our FM has proposed to set up dedicated debt funds. The income earned by such funds will enjoy tax exemption.
3. Foreign dividends proposed to be taxed at lower rates
Currently, dividends received by Indian companies from their foreign subsidiaries are taxed at 30% plus surcharge and cess. The proposed new section 115BBD provides relief by proposing to tax such dividends at 15% plus surcharge and cess. This support will help Indian companies to repatriate back dividends from their overseas ventures.
4. Measures to counter international transactions planning
The Budget proposes anti-avoidance measures to discourage transactions with jurisdictions that do not effectively exchange information with India through the introduction of a new Section 94A.
5. Special Economic Zones (SEZ) taxed
Under the existing provisions, the units/developers of SEZ are exempted from payment of MAT. It is proposed to withdraw this exemption with effect from April 1, 2012.
The implementation of GST is expected to slim down consumer goods prices for the aam aadmi. All in all, our FM’s proposals seem to have stuck the right chord with the masses and are a step in the right direction for the Great Indian Dream.
(Sailesh Haribhakti is the Chairman, BDO)