Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: ACCOUNTING STANDARD :: form 3cd :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: due date for vat payment :: list of goods taxed at 4% :: TDS :: VAT RATES :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: articles on VAT and GST in India :: VAT Audit :: ACCOUNTING STANDARDS
News Headlines »
 8 benefits you must know about this tax-saving mutual fund
 10 most important income-tax changes which will apply from April 1
 Delhi: 54 CAs, company secretaries on radar in I-T crackdown against black money
 10 Income Tax Rules That Will Change From April. See Details Herea
 Looking for last-minute tax planning with Section 80C investments? Here's help
 Aadhaar mandatory for filing income tax return
 Will Aadhaar linkage solve India's income tax woes?
 GST roll out from July 1 will make goods cheaper: Jaitley
 Aadhaar To Be Mandatory For Filing Income Tax Return, PAN Application
 7 best tax-saving solutions which can help you save money
  No proposal to replace Income Tax with Banking Cash Transaction Tax

I-T sops for infrastructure investment?
October, 17th 2007
It certainly is an excellent idea

Raising funds for infrastructure development is an important issue on which the government needs to deliver. The required sums are large as projected by various bodies. The latest projection is from the Planning Commission, which quantifies the required investment over the next five years at $492 billion, 70% of which is expected to come from the public sector. The finance ministry should push for any ideas that will help raise these resources. In this context, an increase in the tax-free investment limit with the increase being invested in infrastructure bonds is certainly an excellent idea.

If these bonds are structured in an attractive manner, the response from investors is likely to be encouraging as there are currently relatively few vehicles for investment. The recent increase in savings has mostly been channelled into insurance products, bank deposits and mutual funds.

Vinayak Chatterjee
Feedback Ventures
While the returns have been good over the past few years, the retail investor is wary of increased exposure to equities. On the other hand, deposit rates offered by banks are coming down. In such an environment, the retail investor would be prepared to put money into a long-term instrument with fixed returns that are at a slight premium to what banks are able to offer.

Any objection to this proposal will, of course, point to the fact that it is deficit enhancing as compared to, say, an increase in taxes. However, at a time when tax compliance is improving, it will be a mistake to try and push for higher taxes. Stability in the income tax regime has been an important ingredient in nurturing better tax compliance. Instead of raising taxes, the finance ministry should seek savings in some unproductive areas to accommodate higher spending on infrastructure.

Infrastructure spending by the public sector also has the benefit of crowding in investments from the private sector. The private sector will have more confidence in contributing its 30% if it perceives the government as a serious partner in infrastructure development. If, on the other hand, the government fails to raise adequate resources, the business as usual scenario is likely to continue and infrastructure bottlenecks will be the order of the day.

It'll hurt the credibility of the tax regime

The government is deliberating on enhancing the income tax exemption limit for individuals by Rs 50,000, if the additional investment is made in power (infrastructure) bonds. This is a welcome step for mobilising resources to bridge the $40 billion resource gap in infrastructure during the Eleventh Plan period.

While the proposal will serve the dual purpose of providing relief to taxpayers and mobilising funds for the infrastructure sector, it is useful to look into the nitty-gritty of such a proposal.

The creditability of the tax regime, which is of fundamental importance for the effectiveness of tax incentives, is affected by such short-term measures. One recalls that a similar scheme was in vogue until 2004-05. Under the scheme, individual taxpayers were given tax exemption for investments up to Rs 1 lakh pa and the maximum investment in infrastructure bonds had a limit of Rs 30,000. Revisiting the scheme so soon does cast aspersions on the creditability of the tax regime and will be seen as a temporary measure. Also, the tax-expenditure estimates should take into account the effective cost of such a scheme for the government.

Mahesh C Purohit
Director, FPEPR
From the point of view of the taxpayers, it is important to remember such a step is regressive; the rich benefit more. It may be worthwhile to introduce a progressive scheme of exemption wherein 50% tax exemption is given for invested funds in the top bracket, 75% in the middle and 100% in the lower income group. It is important to ensure that such a scheme is non-discriminatory for both the private players (as against public sector) as well as the small players (as against big players) in the infrastructure sector.

Finally, the suggestions made by the FM in his budget speech of 2007-08, regarding the use of the balance of the National Small Savings Fund due to reduced obligation of the states and also the use of a small part of the foreign exchange reserves (without the risk of monetary expansion), especially to meet the cost of foreign exchange components of such projects, are extremely important.

Let us hope the sub-committee headed by Montek Singh Ahluwalia will pay heed to these observations before fine-tuning the proposal.
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
SEO Company Search Engine Optimization Company US SEO Local SEO Company Website SEO Company Alabama SEO Company Alaska SEO Company Arizona SEO Company Arkansas SEO Company California SEO Company Colorado SEO Company Connecticut SEO Company Delawa

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions