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: VAT RATES :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: due date for vat payment :: form 3cd :: cpt :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: empanelment :: VAT Audit
 
 
« Budget Extravaganza »
 Government should reinstate wealth tax in Budget 2017
 With demonetisation inducing tax compliance will PM Modi cut tax rates in Budget 2017?
 State plan budget utilisation in Odisha
 Maharashtra wants budget advanced to February
 Coastal economic zones may get 10-year tax exemption in next Budget
 Why advancing the Union Budget date may not make much difference
 Govt keen 2017-18 budget should not clash with polls: Arun Jaitley
 Finance Ministry seeks industry suggestions on taxation for Budget
 Budget should focus on fiscal firm up
 Finance ministry keen to present Budget on February 2 or earlier
 Poor railway performance may mar merged Budget

Don't bet much on direct tax reforms in this Budget
February, 15th 2010

As we wait for the 2010 Union Budget, experts are all agog about the fiscal numbers that will come out and whether the so-called stimulus will be withdrawn. However, the rest of us ordinary mortals who earn, save and invest, are a bit more worried about what impact the Budget will have on the taxes we will have to pay next year.

Every year, for crores of middle class Indians, the most hotly-anticipated part of the Budget is whether the various limits, slabs and exemptions will be raised or not. Thats the part that directly affects our bank accounts.

If the limits and the slabs are raised, we feel thankful towards the government of the day and if they arent, then we feel a little resentful. When the general elections are near, we feel theres a higher chance that we will get some scraps of lower tax liability and when the next elections are far away (as they are this year), we feel a little less hopeful.

I dont know about you but personally, I think that having fixed limits for income tax exemption and slabs is a sort of a fraud that the Government of India has pulled on the people from the very beginning. Theres a basic asymmetry in the way the whole deal is structured. The tax that you pay is set as a percentage of your income and thus goes up automatically as your income goes up.

However, the slabs and exemption limits are fixed as actual rupee amount and thus do not go up as inflation erodes the real value of the rupee. Think about it. If fixed amounts are the right way, then the tax code should have said something like you should pay X amount for income above Y amount. Instead, what we have is pay X percentage above Y amount.

Much of the income increase that a salary earner gets every year just compensates for inflation and to tax this is grossly unjust. The government runs various inflation and cost indices, including the cost-inflation index, which is used to adjust long-term capital gains tax to inflation. Theres no reason that slabs and exemptions of personal income tax cannot be adjusted upwards automatically every year in step with the cost inflation index.

However, realistically, what Im describing is a pipedream. Finance ministers get an annual chance to stand in the Parliament and dole out slab and exemption increases as largesse that they are grandly bestowing on the aam janta because of the milk of human kindness that is flowing in their hearts. They arent going to give up this grandstanding opportunity and replace it with a calculation that anyone can do.

In any case, the hope of direct tax reform that had risen with the release of the draft Direct Tax Code stands tempered. I dont know whether Im right but theres a clear sense that the opponents of the code - those whose power and livelihood would be most threatened by the simplification that it shall bring - now have the upper hand.

The Code is not actually dead but its certainly in hibernation and its far from certain whether it will emerge in anything resembling the form we have seen last year. So dont get your hopes too high. Direct tax reforms may still be as far as they always were.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Reengineering Software Re-engineering Software Reverse Engineering Software Reverse Development Software Change Modulation Software Conversion Software Re-creation Software Re-development

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