At the first glance, the budget
this year may appear harmless to the middle class, but make no mistakes, it
will bite the common man in more than one way. Of course, if you read the fine
print! Let’s examine what some of the things he has given….
·
P. Chidambaram announced a tax credit of Rs
2,000 for persons with income up to Rs 5 lakh. He said, it will benefit 1.8
crore tax payers entailing a revenue sacrifice of Rs 3,600 crore.
·
Securities Transaction Tax on mutual fund
redemptions reduced from .25 percent to .001 percent. In the equity futures
segment, STT would be brought down to 0.01 per cent from 0.017 per cent. Little
relief for those who invest in Mutual Funds and shares
·
First home loan from a bank or housing finance
corporation upto Rs. 25 lakh entitled to additional deduction of interest upto
Rs. 1 Lac. Apart from the current deduction of 1 Lac 50 Thousand. Congrats to
those who are yet to buy their first home!
·
Income limit for the tax-saving Rajiv Gandhi
Equity Savings Scheme is raised to Rs. 12 Lacs from Rs. 10 Lacs. This benefit
is now extended for 3 years from the current provision of 1 year. Good news for
those who do not have a demat account or never traded in shares or bought
mutual funds through a demat account.
Now, lets’ examine what all he has taken away…
·
Buying a Nice House? Pay 1% more - Property
transactions skewered; TDS of one percent where transaction exceeds Rs.50 lakh.
Sorry, a nice home would now be little expensive!
·
Pay more to eat – As it will cost you 12%
more due to service tax on all air conditioned restaurants regardless of
whether or not they serve alcohol. Convince your family to have a good meal but
at a non – air conditioned restaurant!
·
Nice way to recover the so called revenue
sacrifice - Ten percent surcharge on income exceeding Rs.1 Crore (Rs.10
million/$180,000) a year; only 42,800 people have declared such income, very
surprising! However, Chidambaram did a good job by trying to recover a decent
portion of what he gave by way of Rs.2000 tax credit to 1.8 Crore tax payers.
·
Pay
more to watch - Finance
Minister has doubled the import duty on set-top boxes to 10 per cent making
them costlier. The four metros are now compulsorily digitised for cable
connections
·
Pay
more to talk - smart
phones or phones priced more than Rs.2,000 will now become pricier with the
sharp rise in excise duty to 6 per cent from 1 per cent
·
Pay
more to travel - Diesel will see a sustained rise in price if
global oil prices do not retreat as the allocation made for fuel subsidy is
also lower which means that the Centre is moving towards freeing prices of
petroleum products. Remember, your rail travel has already become costlier
courtesy the railway budget.
·
Pay more to cook – With freeing prices of
petroleum products, the cooking gas might prices are set to rise..
·
No real savings – Effective tax saving of
6.47% for those who earn upto 5 Lacs as the FM has allowed a tax credit of Rs.
2000, but this is not real courtesy the growing inflation. To make it more
effective, FM should have enhanced the Tax bracket instead of offering a paltry
Rs. 2000. Let’s compare the personal Tax scenarios of current and next FY –
Individual
|
Income Level 500,000
|
Income Level 5,000,000
|
Income level 11,000,000
|
Tax for FY 2012-13
|
30,900
|
1,369,000
|
3,223,900
|
Tax for FY 2013-14
|
28,900
|
1,369,000
|
3,546,290
|
Effective Tax savings
|
2,000
|
Nil
|
NA
|
Effective Tax savings
|
6.47%
|
0.0%
|
NA
|
Additional Tax burden
|
NA
|
Nil
|
322,390
|
Additional Tax burden
|
NA
|
0.0%
|
10%
|
Therefore, whatever Chidambaram’s
famous poet Thiruvalluvar says "Kalangathu Kanda Vinaikkan
Thulangkathu Thookkang Kadinthu Seyal" (which means,"What
clearly eye discerns as right, with steadfast will and mind unslumbering, that
should man fulfil.") For Aam Aadmi it is a budget with some pain and hardly any gain
This article was also published in "Chatterpiller", the newsletter of Carma Connect
https://carmaconnect.in/newsletters/2013/03/17/finger-food-9/
This article was also published in "Chatterpiller", the newsletter of Carma Connect
https://carmaconnect.in/newsletters/2013/03/17/finger-food-9/