Created under intense pressure and high expectations to deliver, after winning the biggest mandate at the Lok Sabha elections, the much awaited full-fledged Budget 2015 has finally arrived. The expectation was an audacious blueprint for economic reforms and an equivalent focus on the common man, and may be to that extent some will be disappointed.
While the finance minister did not increase the individual tax slab rates, tax relief has been granted to middle-class tax payers in the form of enhancement of deduction for contribution to pension funds and health insurance schemes. One of the most progressive steps is the abolishion of wealth tax, which was a huge additional compliance burden that did not add much to the government’s kitty.
The finance minister has also proposed to replace the wealth tax regime with an additional surcharge of 2% on the super-rich (including domestic companies) with a taxable income of over `1 crore. According to the proposed new law on black money, concealment of income and evasion of tax in relation to foreign assets/non-filing of return disclosing foreign assets will be a prosecutable offence.
For businesses, ease of doing business, coupled with the stabilisation and rationalisation of tax structure, seem to be the primary objectives of the budget. With an aim to achieve a higher level of growth and investment, corporate tax rate has been proposed to be reduced from 30% to 25% over the next four years with corresponding phasing out of exemptions and deductions. However, there is no change in corporate tax rate for the next financial year. Further, what is being given away with one hand seems to be partly taken back by the increase in surcharge from 10% to 12% on a domestic company having taxable income over `1 crore and also on distribution of dividends and buyback of shares.
The much expected reduction in minimum alternate tax (MAT) or relief for special economic zones (SEZs) have not happened. One big relief for corporates would of course be the deferment of General Anti Avoidance Rules by 2 years.
Many positive and reassuring statements were made by the finance minister, and now we need to see how these are implemented.
Neeru Ahuja-Partner, Deloitte LLP