Search the Internet          Tips  Sites: Finance, Investment

Savings scheme for entire salaried class in the offing: Sinha

Finance Minister Yashwant Sinha on Wednesday defended lifting of exemptions and 0.5 per cent cut in small savings rate in the Budget, and said the government was considering a savings scheme which would benefit the salaried class in, both, the public and private sectors.

"We are considering a savings scheme for the entire salaried class in the government and the private sector," Sinha said at the Assocham Post-Budget Session in New Delhi.

The move can be seen as part of pension reforms, which was spelt out by Sinha in the Budget. The roadmap for the pension sector would be formally announced by June this year.

Presently, the pension cover is provided to government employees only.

But the Insurance Regulatory and Development Authority and insurance industry had demanded reforms in the pension sector, especially in the unorganised and services sector to boost long-term savings.

The industry has demanded a three-pillar pension structure - the first pillar for covering the government and the PSU employees, the second pillar for private employers and employees and the third pillar would be a voluntary scheme for everyone.

The industry had also demanded that tax concession on Rs 10,000 under Section 88 CCC of Income Tax Act be enhanced to Rs 20,000 per annum.

Sinha declined to divulge details of the 'saving scheme' that government was firming up.

He, however, defended his Budget measures, saying, "While removing tax concessions, we have been careful on small wage earners."

The finance minister categorically ruled out any climb down on his direct and indirect proposals, saying that he has presented the Budget with 'courage and conviction'.

Pleading that the Budget be given a chance, Sinha said he will stick to his convictions.

Dispelling the criticism that Budget was hard on the middle class, Sinha asked the industry and the common man to stop looking at the Budget narrowly as to how it affected him but to take a larger view as to how it will benefit the country.

Sinha said he was being criticised on the one hand by some as to why he did not reduce interest rates by 100 basis points and on the other as to why he lowered interest rates by 50 basis points.

"Should the economy of a country be run for a class of people who depend solely on interest income?" he asked.

Talking about the decision to hike LPG and kerosene prices in the Budget, the finance minister said he was encouraged by editorials in the pink dailies that said: "Sinha hold! Don't give up."

The editorials were referring to the pressure from Opposition and allies to bring back the subsidies taken away in the Budget.

"I am convinced that everybody wants the government to govern firmly with the only qualification that you do it for others but don't touch me. This 'unfortunate attitude' and the demand for tax breaks was hardly conducive to raising the falling tax to GDP ratio," he added.

Sinha, however, regretted that the same papers were criticising him for levying the 10 per cent dividend tax in the hands of recipients while abolishing it on for corporates as it amounts to double taxation.

Sinha said it was important to decide as to how far the logic of double taxation has to be taken. Besides, he had reduced the dividend tax from 20 per cent to 10 per cent in his last Budget.

He said the Budget this year cannot be seen in isolation but in the light of the previous four budgets he has presented.

Saying that dividend tax was a legacy of the past, Sinha observed, "If you are a high net worth individual and you give a hefty salary to your driver, would you say that the driver should not be taxed because you have paid a tax on your income."

The finance minister said he had imposed last year a tax on income from exports. Income from any source is an income and needs to be taxed, he added.

Referring to the criticism that removal of rebates on income above Rs 500,000 was a big blow to the middle class, Sinha said: "My arithmetic shows that people in this category are only 3,65,000 and have an income of Rs 40,000 per month." The middle class is of about 200 to 250 million.

Additional inputs: UNI

ALSO READ:
Tax payers between the devil and the deep sea
Small savers to feel the pinch
The Rediff Budget Special
Money

Tell us what you think of this report