Dummy?s guide to the budget
Can’t keep focused through the entire budget speech? Number crunching numbs you? Had enough of reforms versus CMP and reforms versus CPM? And you simply want to know what’s in it for you? Here are ten points to look out for.
Personal tax: Does the FM follow the Kelkar route: cut exemptions on small savings (PPF, Kisan Vikas Patra, post office time deposits, etc), give relief, by way of raising the taxable limit (currently, tax starts from Rs 50,000-plus annual income) and reduce the number of slabs (currently three, attracting rates of 10 per cent, 20 per cent and 30 per cent)? Related questions. First, will he reform tax incentive on housing loans? Kelkar recommends an interest subsidy when you take a loan instead of tax relief on interest paid on the loan. Second, will small savings interest rates be aligned to market (read reduced)?
Corporate tax: Kelkar again. Will the FM cut exemptions and depreciation rates, and reduce corporate tax rate, currently at 35 per cent?
Service Tax: Services account for more than 50 per cent of GDP but contribute less than five per cent of tax revenue. Will the FM change this and if he does will he increase the service tax rate, currently 10 per cent, or bring more services under taxation, or opt for a combination? Currently, untaxed services include healthcare, education and, ironically perhaps, tax consultancy.
Cess: There’s one for education. That applies on everything. Will there be another one for public health spending, applicable only to vices, tobacco and alcohol? And a third one, for tsunami relief?
Cars and computers: Will the FM make them cheaper? If he does, will he reduce excise duties on passenger vehicles and import duties on four and two wheelers?
Lower import duties on plastics and metals will also help. The same formula for computers. Excise and import duties on PCs and components will have to come down.
Fuel price, fuel subsidies: High domestic taxes (customs and excise) add to high global oil prices and produce high domestic oil prices. Will the FM cut customs duty on oil (crude, LPG, kerosene, aviation fuel) as well as excise duty on kerosene and "balance" that with cuts in LPG and kerosene subsidy?
Hotels: Luxury hotel tax is 27 per cent now and in busy season, travelers often run up against room shortages. Will going to a hotel be a little less pricey and staying there in holiday season a little more easy? Luxury tax will have to come down and hoteliers need tax concessions to build more properties.
FMCG: The sector itself doesn't seem to be expecting any major tax change, except cigarette manufacturers, of course, who expect a hike in excise duty. So the budget may not affect most of the stuff on shop shelves.
Retail trade: But the shops themselves may change, if the FM announces in his budget a policy for allowing foreign investment in retail trade.
Banks and insurance: Will your not-so-friendly public sector bank (PSB) change? Pre-budget, big PSBs were given more autonomy. Will the budget allow more foreign portfolio investment (investment that buys shares) in PSBs. Will it announce a planned reduction in government stake in PSBs? On insurance too, the issue is whether foreign investment limits will be raised.
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