Today is the day for the INDIA Budget to unveil. The not-so-encouraging election results for the central government, political compulsion to walk the thin line between coalition politics and the e conomic reform needs of the country, rising fiscal deficit and subsidies, stubborn inflation and the economic slowdown globally as well as in India, make it a very challenging time for the Central Government to walk the talk. Few of budget 2012 wishlist on the Direct Tax Proposals for industries of Gujarat, India follows:
Individual Tax Reforms
Considering the inflationary trends, coupled with sky rocketing rise in residential premises, there is a case for bringing in significant rationalization in Individual Tax. Measures such as increasing basic exemption limits to Rs3-4 lakh, reintroducing and providing a high standard deduction on salaries (say, up to Rs10 lakh), introducing educational expenses related deduction, removing or at least enhancing the limits on deduction vis-à-vis payments towards personal loan for residential purposes, among others shall bring in much required relief at an individual level and would also encourage wider compliance. Taxing rich farmers has been a political landmine, but on the economic front, the Government would one day be required to press this button. The trend of reducing tax incentives on social security investments also should be reversed.
Pharmaceutical Industry
It is undisputed that India is lagging behind in the R&D sector, compared to global benchmarks. Hence, it is imperative that a favourable policy framework is put in place to ensure that the Indian pharmaceutical companies are encouraged to become more research driven. Providing profit-linked tax holidays to units engaged in Research and Development and also to those who do Contract R&D for other entities will also help. Creating a R&D zone type concept could also be considered.
Real Estate & IT/ITeS Industry
Withdrawal of MAT for SEZ Developers and exemption from Dividend Distribution Tax (DDT) should be a positive step. Similarly for IT/ITeS, the sunset on Tax Holiday of STP units has been discouraging and levy of MAT on SEZ units have further diluted the Tax Holiday benefits. It is desirable that MAT is done away with for SEZ units. In any case, MAT rates should be reduced to around 10%. The IT & ITeS Industry is also plagued with various controversies, such as withholding on international lease line payments, software payments, etc. It is important that the intended tax position is codified under the Income-tax Act to provide clarity to taxpayers.
Infrastructure
Infrastructure projects have long gestation period and hence require fiscal stimulus, especially in the form of tax benefits. However, most of the tax holidays have been phased out in the last couple of years. There is a strong case of re-invigorating the tax holiday framework for the wider Infrastructure sector, alongwith removal / reduction in MAT. We all are keenly awaiting the Budget proposals. We hope that the Budget is progressive and brings a lot to cheer in these challenging times. (Author is a Director in KPMG and focuses on Gujarat Tax Practice) - Vishal Gada
No comments:
Post a Comment