Need Tally
for Clients?

Contact Us! Here

  Tally Auditor

License (Renewal)
  Tally Gold

License Renewal

  Tally Silver

License Renewal
  Tally Silver

New Licence
  Tally Gold

New Licence
 
Open DEMAT Account with in 24 Hrs and start investing now!
« Top Headlines »
Open DEMAT Account in 24 hrs
 8 reasons why old tax regime is still attractive for many taxpayers in this income tax bracket
 March 31 deadline is getting near. How to save income tax with tax loss harvesting?
 45-day MSME payment rule: Impact and details of Section 43B(h) explained
 Small savings schemes that offer tax benefits of up to Rs 1.5 lakh under section 80C
 RE-OPENING OF CORRECTION WINDOW FOR MAY 2024 CA EXAMINATIONS
 Powerful Upgrades, Tally 12+1 months renewal Plan and Connected Services for your growing Business - March 2024
 How innovative solutions can help fix the Sec 43B conundrum for MSMEs
 Income Tax dept asks many individuals to explain high value transactions of FY20-21 as Updated ITR deadline nears
 Release Notes for TallyPrime and TallyPrime Edit Log Release 4.1 | What s New!
 Deadline to file updated ITR FY20-21 ends on March 31: Details on additional tax
 4 tax-planning mistakes to avoid this season

Debts can dip on tax reforms
November, 29th 2007
The deficit of the Indian budget is slowly getting diminished as tax collections are improving every year coupled with better management of finances.
 
While the fiscal deficit was at 4.1 per cent of the Gross Domestic Product (GDP) during 2005-06, according to estimates for 2007-08, it is bound to drop to 3.3 per cent.
 
Tax revenue that was at Rs 2,70,264 crore during 2005-06 is projected to jump to Rs 4,03,872 crore according to budget estimates for 2007-08. If the current trend is maintained, it may pave the way for a surplus within the next five years.
 
The deficit is largely being financed through the issue of government bonds of fixed tenure. The rates, which ruled at 13-14 per cent a few years ago, have dropped substantially to about 8 per cent now. Interest payments that were at 26.21 per cent of the total expenditure in 2005-06 is expected to drop to 23.36 per cent this current year.
 
But this does not mean that the government can continue to borrow just because the interest outgo is reducing. Typically, a surplus can be put to three alternative uses by the government - increase spending, reduce taxes, retire debt.
 
Though successive governments have promised rationalisation of the tax structure, there is a definite disinclination on the part of the government to bring down taxation levels.
 
Undoubtedly, reduction in the debt burden would provide the government with some definite relief.
 
Considering that the bonds are invariably refinanced, retirement of these debts from out of the surplus will mean lesser need to raise new debt. This will in turn simulate the economy and improve growth opportunities.
 
It is the third alternative that the government would do well to do some thinking on. The terms of the bonds that are now being issued do not provide for early redemption of the bonds.
 
As and when the budget shifts to the surplus mode, if terms do not permit for early redemption of the bonds, the government will be forced to pay interest on such bonds when it could very well redeem the bonds through the surplus, since the exit route is blocked.
 
P T Kuppuswamy
(The author is the chairman and managing director of the Karur Vysya Bank)
Home | About Us | Terms and Conditions | Contact Us
Copyright 2024 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting