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  • Budget 2017: Much Ado About Nothing?

    Article by Jayant Pai in Bloomberg Quint, February 1, 2017

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    In recent times, post-budget emotions have resembled a hangover, necessitating an 'evening-after' pill. Blue-sky (a euphemism for 'unrealistic') expectations at the start of the Hon'ble Finance Minister's speech have inevitably tapered off into a sense of ennui.

    When it came to expectations, this year was as heady as one could have got, though hopes mingled with fears. Equity investors especially, were on tenterhooks after witnessing the 'good cop-bad cop' routine with respect to taxation of capital gains in the run-up to the Budget.

    At the end of this year's anodyne speech (despite the finance minister's laboured attempt at soaring oratory) with terms like 'digital', 'Mahatma Gandhi' and 'social equity' dutifully mentioned, a sense of deja vu coupled with a sense of relief, pervaded.

    While several seemingly 'path-breaking' proposals were laid out for farmers, youth, etc. prima facie this year's Union Budget was 'memorably forgettable' on the personal finance front.

    A Matter Of Optics

    However, despite being hard-pressed to ferret out notable measures, here is an attempt :

    The reduction in the income tax rate from 10 percent to 5 percent for those earning upto ₹ 5 lakh, is more optical than anything else. Sure, it does accord some tangible benefit for that swathe of assessees, but does little for the others. It is a 'Svengali-like' move, displaying more style than substance.

    In fact, some feel that the finance minister flattered to deceive, by specifically alluding to salaried tax-payers at the beginning of his direct tax proposals but not really offering them anything in the form of reintroduction of Standard Deduction, liberalising the definition of Leave Travel Allowance, etc.

    The change in the holding-period tenure of 'long-term' for real estate from three to two years could be counter-productive as it may encourage more churning. However, it is good to know that the choice of tax-saving options has increased (though further details were not given).

    Equity investors should be relieved at the status quo on long-term capital gains tax, coupled with no increase in the Securities Transaction Tax. The relief is visible in the spike in the BSE Sensex, as I write...

    Everyone should be relieved that there is no increase in the rate of service tax (though this was not really feared, considering the impending launch of GST) nor a re-introduction of wealth tax or estate duty.

    Change in base year from April 1, 1981 to April 1, 2001 will surely lead to a reduction in the capital gains tax liability for many assessees.

    The change in measurement of eligible 'affordable housing units' from built-up to carpet area is welcome.

    Raising of eligible threshold and reduced tax liability (from 8 percent to 6 percent) for receiving sales proceeds/income through digital means for businesses and professionals eligible for 'presumptive taxation'.

    Reduction in the threshold of permitted cash payments from ₹ 20,000 to ₹ 10,000 is a good move.

    Some Good Measures

    • SARFAESI related Receipts can now be traded on the Stock Exchanges.
    • 'Referral Bonus Scheme' and 'Cash Back Scheme for Merchants' for popularising the 'BHIM' App.
    • Moves to confiscate assets of loan-defaulting absconders.
    • Beginning of the end of the Foreign Investment Promotion Board (FIPB).
    • Minimal slippage on the Fiscal Deficit front.
    • Introduction of the concept of 'Electoral Bonds' for political party funding.
    • Foreign Portfolio Investors (FPIs) being spared the burden of double taxation on their investments in Indian companies.
    All-in-all, this was a Budget which did not play to the gallery. But perhaps, any Budget may have seemed pedestrian compared to the drama on various fronts, leading up to it.

    The original article could be seen here.

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