'The good work done by the earlier two
finance ministers seems to have been continued'
A N Shanbag
The good work done by our earlier two
finance ministers seems to have been continued by
Yashwant Sinha. We are absolutely sure that the process of
liberalisation will be taken a step ahead
in the right direction, benefitting the
country in general.
As for the one-by-six theory of tax assessment, this is basically for residents of 35 specified cities in India, and therefore no NRI comes under this requirement. However, it is always advisable for an NRI to have a
Permanent Account Number, and also file returns so
that when and if he eventually returns to India, he doesn't have any problems
with the department.
Those who pay their taxes regularly ought to be completely
indifferent to the scheme. The tax net has been cast wider only to apprehend the tax evaders.
As for the standard deduction, it is available
for all employees. It is one third of the
salary or Rs 20,000, whichever is
lower.
The finance minister has increased the standard deduction ceiling to
Rs 25,000 for employees with a salary
of less than Rs 1,00,000.
Section 80 GG has been reintroduced, benefitting those
assessees who pay rent over 10 per cent of
their income. Loss from house property
can be set off against salary income
now.
What Sinha has given with one hand he has taken
away with the other. Thus, employees with
a salary over Rs 500,000 will not be
eligible for any standard deduction
henceforth. Salaries in the range between Rs 100,000 and Rs 500,000
continue to get the same standard deduction as before.
Before this Budget, an NRI
could have invested in any company
up to 1 per cent of its equity capital, and an NRI group up to 5 per cent.
Now, these limits are purposed to be increased to 5 per cent and
10 per cent respectively.
Currently, there are quite a few schemes of mutual funds
open for subscription to NRIs, some of
them are debt-based and some of them are equity-based, some others are
balanced.
The NRI community had expressed its concern over the
exchange rate risk that an NRI investor faces when he invests in
India.
Responding to this concern, the Unit Trust of India and State Bank of India have announced the launch of foreign currency denominated bonds
which mitigate exchange rate risk.
Opening of an account is by the simple
process of filling the relevant offer
document.
Whether the widening of the tax base will net more fish, even of the
exotic variety, depends on its implementation. In
practice, because of the lack of an
effective administrative mechanism
and widespread corruption, many
potential tax payers manage to escape.
Let us wait and watch
The salaried person always has this standing complaint, about having to pay taxes while businessmen and professionals get away. The
salaried employee gets many more tax
privileges than a businessman or
professional. The main complaint
stems from the fact that a salaried
employee cannot become dishonest
even if he wants to.
It is true that the tax collected from salaried persons is not
much to boast about, but it would be
unfair to others to leave them out of
the net.
As for the Voluntary Disclosure of Income Scheme, it is like sanctioning dishonesty. It is, and ought to be, a one-time exercise.
If the finance minister starts coming out with VDIS
schemes every year, taxation will
become redundant.
What we have today is a 'new-clear'
Budget. I hope its promises are kept.
I also hope that the finance minister's avowed
intention to streamline and simplify
the systems and procedures becomes a
reality. This has been the dream of
every finance minister in the past, but no one has
yet succeeded. I hope for the best.
A N Shanbag, the wellknown taxation expert, spoke on the Rediff Budget Chat.
Budget '98
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