Its that time of the year again when finance ministry babus will kick off the Budget-making exercise. The preparations, however, seem to be a little odd given that a large number of the tax changes announced in the Union Budget 2009-10 are yet to be notified.
While there isnt much of a delay in indirect tax proposals, which are usually notified soon after the Finance Bill for a year is passed, its mostly the direct tax changes that get delayed.
Take for example, the safe harbour rules or more importantly, the rules for taxation of perquisitesits been a good five months since these were announced in the Budget on July 6, but they are yet to be notified by the tax authorities. A related issue of refunding the fringe benefit tax paid by companies in the first tranche of advance taxes also remains unaddressed.
Similarly, guidelines for setting up the dispute resolution panels were late by over a month and a half from the original deadline of October 1. They were finally issued last week, although the members were appointed by the CBDT this Monday.
These are all pressing proposals as they will significantly alter the direct taxes regime for both companies and individuals, who need to plan their tax outgo accordingly. For instance, the whys and hows of perquisites taxation have got both corporate and individual taxpayers confused.
A similar situation arose last year as well. Then finance minister P Chidambaram had introduced a tax on commodities transactions, and everyone was left guessing when it would be notified. It was only in this years Budget that the tax was formally abolished.
Finance ministry officials have been promising that these notifications will be issued shortly. Its obvious that the preparation and consequent deliberations on the draft Direct Taxes Code have kept them all occupied.
Taxpayers need clarity and stability in tax treatment while making their investment decisions. This is one of the reasons why most tax changes are announced at the start of the financial year in the Budget. If notifications have to be delayed for months on end, tax changes may well be delinked from the Budget exercise.