Dream budget turning to nightmare for honest
tax payers.
The budget has levied tax upon cash withdrawals and has abolished
the benefits of Sec 88 or Sec 80L
DID THE “Dream Budget” exactly clicked the corporates and
MNCs, individual tax payers including the senior citezens and women, the
investors, the exporters and others??? The Budget 2005-2006 has
succeeded in pleasing no one imparting little direction to the economy.
Major decisions in the budget, like post-Assembly situation in Bihar, is
hung, yet to be taken.
TRANSACTION TAX
The inequity and lack of political will in dealing with the rich and
corrupt is highlighted by FM P. Chidambaram’s sole arresting policy
of the black money, making the innocent to suffer. Henceforth, all cash
transactions of Rs 10,000 or more in a day will be taxed at 0.1 per
cent, i.e. Rs 10. Smartly it has been dubbed as the banking cash
transaction tax which will also be extended to purchase of a bank draft
on a banker’s cheque or any other financial instrument on payment
of cash of more than Rs 10,000. Not only this, the encashment of a term
deposit with a scheduled bank alone the specified threshold will also
attract the tax. Quoting Abani Roy, the RSP’s leacer, he said in
Parliament, “he (Chidambaram) should have targeted cash withdrawals
of a higher denominations, say Rs 1 lakh. The tax on such small
withdrawals as Rs 10,000 will only cause irritation.” Accordingly
to bankers 35 – 40 per cent of transactions is above Rs 10,000 a
day. Chidambaram denied that it is a step to generate revenue but he
says it is a measure to keep a watch upon Black Money. According to him
the banks would be required to report to the government all deposits
that are exempt from the interest earned on tax deducted at source.
The fact always haunts; is this the right process to check black money
and at the cost of honest taxpayers? Why can’t the government reach
to the source of black money generation instead of taxing the salaried
class twice, once as TDS and other as transaction tax? The next time you
withdraw Rs 10,000 make sure it is Rs 9,999 only.
INCOME TAX
The please-all budget structured benefit to the salaried and middle
class, particularly those earning up to Rs 2 lakhs per annum. For
individuals there is no tax for earnings upto Rs 1 lakh.
Income Tax Slab
- Rs 1-1.5 lakh 10 percent
- Rs 1.5-2.5 lakh 20 percent
- Above Rs 2.5 lakh 30 percent
The level of 10 per cent surcharge
will apply to those whose taxable income is Rs 10 lakhs or more.
For women, the threshold level is Rs 1.25 but the rebate of Rs 5,000
has been wiped off. Senior citizen gains has been balanced to neutral
position by removing rebate of Rs 20,000 from tax and increased the tax
slab from Rs 1.5 – 2.5 lakh at a straight 20%. On the other hand
standard deductions, as well as Section 88 and 80L has been abolished.
The defined base by Chidambaram needs a redefinition for individuals
who will be coming under tax paying group. Only those citizens are
benefited who by default has escaped the direct tax. Otherwise the world
of tax is by arithmatic, remains the same as post budget 2005-06.
SERVICE TAX
The service sector accounts for about 52 per cent of the GDP. Budget
2005-06 has cast the service tax wide by extending it to 21 new areas.
The new series are:
- Costruction of residential complexes and apartments
- Exacavation and earth moving
- Transport of goods through pipeline
- Dredging in rivers and ports
- Club memberships
- Packaging and mailing services
Survey and map-making by private firms, clearing services, other
than those involved in farm sector, will also come within the service
tax net.
Renovation of building and civil structures, broadcasters providing DTH
transmissions, reconditioning and restoration of motor cars and man
power recruitment firms are under the tax net including videotape
production and sound recording fro remixes.
According to FM, 80 per cent of the service tax payers will gain from
exemption. Service providers whose gross turnover does not exceed Rs 4
lakh per year is exempted. The due date for service tax payment will be
the fifth of the following month or quarter as the case may be.
Lastly, the liability of payment of service tax on business auxiliary
services provided by the distributors of mutual funds will be on the
recipient of the services, namely, mutual funds.
As a whole in the tax system the finance minister has shown courage in
reducing the tax on matches made by big producers. The poorer are not
taxed, as we find astonishing fact that biris tax is untouched while the
tax on gutkhas and cigarettes has been raised, though it is well known
that the biri makers are the richest people in the country and are well
supported as a holy cottage industry. In the country over 80 per cent of
the tobacco is consumed in biris. The funniest part of it is that the FM
has turned into an oblivion about the health of the people. Well done.
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2005-06
