MARCH 17, 2012

Positive aspects of the BUDGET 2012-13

By G R Kumar, CA, Vizag

1. THE move to cap the populist subsidies to under 2%  of GDP during 2012-13 and eventually   over next 3 year, to be further brought down to 1.75 per cent of GDP; is laudable.

2. For 2012-13, Rs.30,000 crore is proposed to be raised through disinvestment; and at least 51 per cent ownership and management control to remain with Government. However, earlier proposals fell short of targets. 

3. The proposal to boost capital market by introducing “Rajiv Gandhi Equity Saving Scheme” to allow for income tax deduction of 50 per cent to new retail investors, who invest upto Rs.50,000 directly in equities and whose annual income is below Rs.10 lakh to be introduced. The scheme will have a lock-in period of 3 years.

4. Although brave statement has been made to introduce through consensus FDI in allow FDI in multi-brand retail upto 51% in multi-brand retail, the  prospects look bleak considering the state of numbers within the present UPA Government.

5. The central KYC depository proposed is a welcome move to avoid multiplicity of registration and data upkeep.

6. Power sector would receive a boost with the fuel linkage agreements being signed with power plants and ECB funding.

7. Infrastructure, Housing and Civil aviation sectors have also little to cheer with increased targets, relaxation of ECB funding etc.

DIRECT TAX PROPOSALS

8. The proposal to extend the sunset clause upto 31 Mar 2017 for In-house R&D expenditure – a move which would boost R&D and improve global competitiveness.

9. Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from Rs.60 lakhs to Rs.1 crore – a move which would help thousands of small businesses.

10. Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery. This too is welcome since this has a dual benefit – for the assessee as well as SME sector.

NEGATIVE ASPECTS OF BUDGET 2012-13

DIRECT TAX PROPOSALS

1. Contrary to general expectations, the Income Tax slabs have not been relaxed to the desired extent and reliefs are marginal. The increase in basic exemption limit  from Rs.1.80 lacs to Rs.2 lacs leaves much to be desired.

2. The proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions; will invite negative reaction from  trade – since MAT now puts them at par with companies.