Chidambaram pointed out that no tax burden had been imposed in the Budget on any category of people, other than a “small burden” of a 10% surcharge on the relatively affluent 42,800 people with incomes of over Rs1 crore a year
In a warning to tax evaders, finance minister P Chidambaram said a huge amount of data has been mined to go after them and ruled out any amnesty scheme.
“No. In income-tax, there is no case for amnesty. Because now almost all returns are online except a small category which was exempt. We have a huge amount of data being mined. Therefore, there is no case for amnesty today,” he said on Sunday.
“Best case I can make out is to tell people, ‘please don’t hide your income’ Just admit your income and pay tax and be a proud citizen,” he said.
Chidambaram pointed out that no tax burden had been imposed in the Budget on any category of people, other than a “small burden” of a 10% surcharge on the relatively affluent 42,800 people with incomes of over Rs1 crore a year.
That number was deliberately used to ‘shock’ the nation that there are only 42,800 people who admit an income of over Rs1 crore, he said.
Voicing the hope that “other measures” proposed to be taken and the ‘shock’ of the number would persuade more people to declare their true income, Chidambaram said that, based on data mining, notices have been issued to 35,000 people, to be followed by more.
“We have the central process cell in Bangalore that processes all income-tax returns using the most advanced software. So, if the information we have from other sources is not matched with the information from I-T returns, that will be thrown up,” he said.
To a question, Chidambaram said there are no estimates on the amount of black income and the number who should be in the net but who are not. But, he said, in a country with 125 crore people, excluding 67% of the people under food security risk and elderly people and children, there would be 15 crore people with incomes in various segments.
“The top 10% should have large income... I think the number must be several times 42,800 who have high income,” he said, adding they may not be earning Rs1 crore but certainly Rs75 lakh or Rs50 lakh.
Just three days after it was presented by finance minister P Chidambaram, Anil Harish and Vimal Punmiya delivered their engaging analyses on the budget. Several important points, gone unnoticed by media thus far, were discussed in detail by the speakers. Particular attention was paid to amendments related to real estate. Read on to find out what impact this budget will have on your life
At the 155th seminar of Moneylife Foundation, Anil Harish, a lawyer who specialises in matters related to real estate, informed a packed audience at the Bombay Royal Yacht Club, in south Mumbai, that India is one of the most difficult places to do business in. “India used to the 120th most difficult country to do business in, out of 155, 20 years ago. Today, we are 132nd. Builders may be doing a lot illegally, but they are right to complain about how hard it is for them to get permits,” said Mr Harish, a partner at DM Harish & Co.
Mr Harish believes that the government has not done much to improve processes and reduce corruption in the system. Instead, he said that several amendments to the Income Tax Act this year are unclear and could easily be misinterpreted. He said, “The finance minister said he was encouraging micro and small industries, but proceeded to give an investment allowance of 15% to those entities that invest over Rs100 crore in the “manufacture of any article or thing” in the next two years. It appears that a particular company or firm desired this allowance and managed to persuade the government. What makes this provision unclear is that even builders can claim to have manufactured an article or thing in constructing a building. They could have excluded real estate, but they haven’t. So a builder could fight for this investment allowance. This is sure to result in much litigation.”
Another ambiguous provision relates to the additional deduction of Rs1 lakh on home loans sanctioned in the current year. Mr Harish said, “The finance minister said that this will promote home ownership in a significant way. But I don’t believe this will be the case. Mainly this is because the benefit is not so substantial. The loan must be sanctioned in FY13-14, the loan must be of less than Rs25 lakh, the flat value must be no more than Rs40 lakh. Remember that it says ‘value’. So the I-T department may not care about what you’ve paid for the flat. The department will go by the stamp duty valuation. There’s sure to be much controversy over this matter. Also, the finance minister said this is available to ‘first-home’ buyers, but this is nowhere written in the Bill. This again will lead to a controversy.”
One of the most draconian provisions announced, in Mr Harish’s opinion, was related to the amendment to Section 43CA. He said, “This will affect many people. This is because it requires both the seller and buyer to pay tax according to the Ready Reckoner value if the sale price is less than what the Ready Reckoner values at. This will surely cause problems. This is a very unfair law. We’re going back to the old days, it appears—when business was conducted either under the table or out of the country.”
Lastly, Mr Harish noted the areas the finance minister completely ignored. He said, “What did need attention was black money, corruption, scams, foreign accounts, exchange rate and employment opportunities. This was simply not addressed. But we must be thankful no estate duty was proposed.”
Vimal Punmiya, partner at Vimal Punmiya & Co, then proceeded to discuss matters not related to real estate. He began, though, by discussing his view of the Budget in general. “Nothing much has been done,” he said, “I was expecting the finance minister to propose a few taxes, but he didn’t. Mr Chidambaram usually does this. He will introduce several taxes. This time it was only one, the relatively minor commodities transaction tax. Largely, this is just an election budget. Either incentives were given or charges were announced. There was lots of talk about it, but not much has been given to either women or children.”
The need for reform has received much attention in the past few months. Mr Punmiya said, “Mr Chidambaram has announced a reform committee. I personally feel that this committee has the potential to do much good in the area of taxation. It can substantially reduce litigation.”
Mr Punmiya then informed the audience of the various benefits they are entitled to this year. He said, “You can claim a deduction of Rs2,000 if your salary is less than Rs5 lakh. Then, you can also now receive a deduction of 100% of the amount you donate to National Children’s Fund under Section 80G of the Income Tax Act. Usually, you get a deduction of just 50% of the amount you invest, as with the Prime Minister’s Office Fund.”
Like Mr Harish, even Mr Punmiya was glad that the estate duty wasn’t introduced. He said, “The finance minister had talked about bringing the estate duty back. This would have been devastating. At one point during the speech, I thought the estate duty was being brought back. But it wasn’t and for this I’m pleased. This would have taken us back to the 1980s.”
The seminar ended with an engaging Q&A session that lasted over half an hour.
If the last week’s lows hold, the Nifty will attempt to cross 5,740 and then 5,770
The market declined over 2% in the Budget week as corporates and foreign investors were largely disappointed with the proposals announced by the finance minister on Thursday. While he made a clarification on the tax residency certificate issue on Friday, some other proposals are seen as a setback to foreign investments. Concerns about the twin deficits—current account and fiscal—also dampened sentiments.
The BSE Sensex declined 398 points (2.06%) to settle at 18,919 and the Nifty closed the week at 5,720, a fall of 131 points (2.23%). The market indices are down for the fifth week in a row. However, if the last week’s lows hold, the Nifty will attempt to cross 5,740 and then 5,770.
The market managed to close with minor gains on Monday amid high volatility on support from the IT sector. The benchmarks tanked over 1.5% on Tuesday on global concerns, which led to a broad-based sell-off in the domestic market. Optimism emanating from the Economic Survey that the government would be able to rein in the current account deficit led the market in the positive on Wednesday.
The lacklustre Union Budget which proposed higher taxes on corporates and individuals saw the market paring its early gains and crashing by over 2% from the day’s high on Thursday. The finance minister’s clarification soothed foreign investors, which helped the market close in the green on Friday.
BSE Consumer Durables (up 4%) and BSE IT (up 2%) were the top sectoral gainers in the week. The key losers were BSE Realty (down 9%) and BSE PSU (down 5%).
TCS, Infosys (up 3% each), Bajaj Auto (up 2%) and Wipro (up 1%) were the main gainers on the Sensex while Hindalco Industries (down 8%), Tata Steel, Reliance Industries, HDFC Bank (down 6% each) and Coal India (down 5%) were the major losers on benchmark.
The Nifty was led by TCS, Jaiprakash Associates, Infosys (up 3% each), Bajaj Auto (up 2%) and Wipro (up 1%). The top losers were Siemens (down 10%), Reliance Infrastructure (down 9%), DLF, Hindalco Ind and Punjab National Bank (down 8% each).
The much talked about Railway Budget, presented two days ahead of the Union budget, turned out to be largely a non-event. While sparing passengers from another hike within a month, Pawan Kumar Bansal, however increased charges for super-fast trains, and fees for ticket cancellation and reservations.
The pre-Budget Economic Survey for 2012-13, tabled in Parliament on Wednesday, projected a turnaround in the economy in 2013-14, with growth expected to be in the range of 6.1% to 6.7%, higher than the advance estimates of 5% growth in the current financial year. The improved growth, however, would be subject to a normal monsoon, further moderation in inflation, which should induce further relaxation of the tight monetary stance, and a mild recovery of global growth.
Finance Minister P Chidambaram, presenting his eighth Budget, did not have too many options before him. Corporates were miffed as he raised the surcharge on corporate tax to 10% from 5% for domestic companies, whose taxable income exceeds Rs10 crore per year, and raised the surcharge on dividend distribution tax to 10% from 5%. He also levied a 10% surcharge on persons earning above Rs1 crore a year.
India’s economic growth in the October-December period of the current financial year declined to 4.5% —the decade’s lowest quarterly growth.
In international news, US president Barack Obama on Friday ordered the start of $85 billion in government spending cuts, heralding a potentially decade-long wave of belt-tightening that is likely to impede US economic growth this year. The cuts total $1.2 trillion over nine years. Of that, $85 billion comes out of the budget for the remaining seven months of this fiscal year, making for effective reductions of about 13% for defence programs and 9% for non-defence programs.