July 5,2019 marks the first budget to be presented by current government after resounding victory in elections in May 2019.
I must congratulate Narendra Modi Sir and Arun Jaitley Sir for brilliantly managing fiscal deficit as well as inflation over past 5 years. Although in last budget not much tax relief was given to middle class by way of tax cuts.. However one has to understand that low inflation, low interest rates and Health schemes like Ayushman Bharat directly benefit middle class. Goods and Services tax has brought down prices of various daily need goods.
But in a country where direct benefit is more applauded than long term benefits Finance Minister Madam Nirmala Sitharaman must announce sops for middle class as an award for being honest tax payers.
My few suggestions as a common citizen for this budget are as under:
1 Raise LT Cap Gains exemption to Rs 20 L from 1 L
Long term capital gains at 10% post one year is not giving any stability to stock markets. Neither it has resulted in any revenues to government. After a long time, retail investors have come forward to invest in financial assets, but have not been encouraged with good returns. To add to woes, grandfathering creates more confusion
Stock markets returns will help increase consumption and revival of economy
2. Revival of Real Estate and Housing Finance Companies Rationalization of Sec 24 of the Act
Raise Interest exemption on self occupied home from Rs1. 5 L to Rs. 3.5 L
This shall encourage buyers to go for real estate and get the same financed. Currently Real estate companies with excess stocks and Housing Finance companies with liquidity crunch are both dragging the Economy downwards
3. Manage NBFC crises
Banks PSU, should start lending long term money to NBFCs and HFCs,
This will be the most critical measure to avert a crisis. Banks have practically stopped lending to small Housing Finance companies struggling with Asset Liability mismatch.. They are only lending to few large NBFCs
4 Improving Automobile Sector
Announce reward for scrapping cars more than 15 yrs to get Get rebate, as was announced in France a few years back, limit it to cars with engine cc upto 1.2 L.
Scrapping works as waiver of GST to be claimed back by owner, like cashback on cards, within 90 days, or with the annual ITR-V filing
This shall help boost car sales as well as decreasing pollution levels due to old cars in system
5. Relief for small and medium enterprises from MAT
Minimum Alternate tax was introduced to help small and medium enterprises for lesser tax and simplicity. However at 18.5% MAT currently it is more of disadvantage than any advantage to smaller companies when corporate tax on smaller companies is reduced to 25%
In current scenario if a corporate makes any capital gains on equity, it is subject to 18.5% tax whereas an individual pays 10% that too above 1 lac. I understand that corporate tax rates are different, however post tax of 10% on LTCG. mat provisions are disadvantage to smaller corporate
In current scenario when most entrepreneurs want to work as a corporate set up , MAT at 18.5% is clearly a discouraging step.
MAT provisions needs to be revisited again.
6. Setting limits on unfettered prosecution powers u/s 276B
Another issue is that even if a small or new company defaults on a small amount like 10,000 TDS by error, the principal office thereof, is subject to prosecution and harassment by tax authorities. One can charge some fine, but prosecution in such cases is really uncalled for. As of now, there are no fetters in terms of threshold limit on the powers of Tax Authorities when it comes to prosecution powers. Only way out in such case is that one can go for compounding which is a highly costly affair and that too one time opportunity available to a person. Any tax entity can commit small defaults, by error, however so much of backlash is demoralizing and uncalled for.
I suggest a limit of financial error( like non deposit of TDS ) be set to to help genuine tax payers and avoid Income tax officers harassing them . Just to illustrate mat be prosecution only if TDS default above 1 lac.
7 Infrastructure bonds
Although government has launched NPS scheme for additional 50,000 exemption from income, many are hesitant to go for same. Reasons like long term lock in and compulsory annuity purchase for 40% coupled with lower returns than a regular equity fund over long period, Infrastructure sector needs high liquidity and resources are limited.
I suggest Infrastructure bonds with 8% coupon rate with five year lock in period be kept an option to avail tax benefits over and above current exemptions. The same shall help the tax payer in getting extra exemption and also be a part of India Infrastructure story
8. Abolish tax on dividends received from Equity funds:
Dividends on equity funds are subject to tax deducted at source without giving the income tax payee to claim the same in his Income Tax returns. There are various middle class home makers and retired citizens who are not liable to pay any income tax due to low slab rate, but are subject to this tax. Dividends from mutual funds form a regular monthly income for them.
How fair is it to tax a person who is not liable to pay taxes? I request MOF to look into this urgently as many middle class families are unhappy on this provision.
9. Increase budget Allocation on Education
The government in past five years has given huge importance to education in past four budgers and need to be applauded for same. Artificial Intelligence is one area where requirement is exceeding the professional available. I request that separate institutions and cources be introduced in this area to take India ahead and help youth get more jobs
10. CSR and adoption of villages
Few companies in India are aware of social responsibly and many show CSR activities only on papers. Most of the companies show use CSR funds only on paper.
As our villages still lag behind modern medical services, education and general awareness I request corporate to adopt villages and update the progress at the end of every fiscal year with funds spent and progress made. This shall help in further growth of Rural Economy , which is the backbone of our country.
Corporate must look into education, insurance, medical needs of villages and work hand in hand with government to make the efforts of Mr. Modi reach these villages
11. Additional Tax incentives on usage of waste in construction of land filing activities
India as a highly developing economy needs to improve its waste management methodology and more & more innovative ways should be brought in for usage of waste produced in country. One of the possible ways could be to use such waste in various land filling activities in construction industry in building roads, highways, properties etc. This would help avoiding accumulation of heaps and stacks of waste over the land. So much of land area is wasted in containing such heaps and lot of damage happens when such heaps of waste get carried away to running roads in the event of rain.
I believe offering tax incentives for underground dumping of waste in land filling activities would help reduce the accumulation of waste over land.
12 Tax measures to promote air purification
It goes without any doubt that our country is developing by leaps and bounds by means of better infrastructure in terms of highly quality roads, highways; construction of hospitals, schools etc, establishment of more and more domestic industries; and all other facilities which offer a luxurious life. Unfortunately, all this is happening at the cost of quality of air which we breath in. There has been a time when people from rural areas moved to urban areas for all these better facilities and a good quality life. However, now the time has come where people from urban areas and metropolitan cities like Delhi NCR, Mumbai etc., are forced to move out to rural areas for heath issues due to hazardous air quality.
There is a high need of hour to strike a balance of healthy air quality with the good amenities. The corporates and other private sector should be welcomed with open hands to support government in such initiative and various deductions and tax exemptions should be offered for clean air initiatives.
India is growing. Being the fastest growing economy in the world and fifth largest, It has reflected that leadership with good intentions and citizens adopting the changes, We becoming number 4 is just a matter of time
Lets work toward more Stronger BHARAT