Friday, Mar 01, 2002
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A dispirited, crushing budget
NEW DELHI, FEB. 28. With his fifth budget presentation today, the Union Finance Minister, Yashwant Sinha, set the stage for a repeat of his first attempt - a possible rollback of some provisions. The 2002-03 general budget that he presented to Parliament aims to mobilise a whopping Rs. 10,500 crores as additional tax revenue while simultaneously raising the prices of cooking gas (LPG) by Rs. 40 per cylinder, kerosene by 1.50 per litre, fertilizers by five per cent and sugar supplied through the PDS by 25 paise. The prices of petrol are down by Re. 1 per litre and diesel by 50 paise. Hikes in postal rates have also been announced.
While the poorer sections of society barely find a mention in the budget, the middle class - the driving force behind the industrial boom in recent years - has been further impoverished through a five per cent income tax surcharge on grounds of defence, even before any war has actually broken out. However, the two per cent Gujarat surcharge has been withdrawn. While the rates and slabs remain unchanged, some tax exemptions have been withdrawn and Section 88, which provides relief for investments made in insurance policies, provident fund and infrastructure bonds, has been modified. The benefit of 20 per cent tax rebate under this provision is now restricted to those with a taxable income of up to Rs. 1.5 lakhs a year while for those above 1.5 and up to 5 lakhs, the benefit has been halved to 10 per cent. Those with taxable incomes above Rs. 5 lakhs will get no benefit.
The interest rates on small savings has been lowered by half a per cent, applicable from tomorrow, and tax on dividend income has been brought back to the hands of the receiver at their individual levels of taxation. For 2002-03, however, specified equity schemes of UTI would continue to be taxed at 10 per cent.
Service tax has been extended to life insurance, inland cargo handling, storage and warehousing, event management, rail travel agents, health clubs and fitness centres, beauty parlours, fashion designers, cable operators and dry cleaning services. Service tax applicable on select banking services will come under the tax net if they are provided by corporate bodies.
A small relief has been extended to salaried employees whose perquisites were taxed in the last budget. Mr. Sinha has proposed that employers would be free to pay the tax on behalf of the employees without any add on. Also, a contributory pension scheme for new Government recruits is to come into operation later this year.
Even as he imposed higher burdens on the domestic constituents, Mr. Sinha brought down the corporate tax rate for foreign companies from 48 to 40 per cent, allowed foreign institutional investors (FIIs) to invest in companies without any sectoral limits that apply to foreign direct investment (except some specified sectors to be announced shortly) and lowered the import duty on foreign liquor. A liberal capital account convertibility provision has also been announced for non-resident Indians.
Through his taxation effort, Mr. Sinha hopes to garner an additional Rs. 6,000 crores through direct taxes, which includes 2,750 crores on account of the five per cent surcharge. On excise, he hopes to get an additional Rs. 6,700 crores, the bulk of which will be on account of duty and cess of petrol, which means that petrol prices could have been lowered further since a cess of Rs. 6 per litre has been imposed. On the customs side, because of the duty reduction and changes, the loss is estimated to be Rs. 2,200 crores, thus taking the additional total taxation to 10,500 crores, one of the highest mobilisations in recent years.
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