The Indian government will have to come up with a very balanced budget. The country has had a very rough year both economically and politically.
The Indian government will have to come up with a very balanced budget. The country has had a very rough year both economically and politically.
The finance minister will be in a dilemma as to whether to come up with a populist budget or a structurally sound one. There are many policies that need to be put on the fast track.
There are economical issues like the mounting inflation and the widening fiscal deficit that also needs to be considered.
The industry was disappointed when Minimum Alternative Tax (MAT) was increased from 10% to 15%. This has hampered many companies profitability. Reduction in this tax figures tops the wish list of corporates.
An industry survey even suggests a complete abolishment of MAT, which is unlikely; however a reduction can be a possibility. If not for all companies it should at least be abolished for infrastructure companies.
Other major tax proposal is regarding the surcharge and cess. Surcharge on income tax was at 2.5% and was increased to 10%.
The recent bill in 2007 has exempted companies with taxable income less than Rs1 crore from surcharge. The industry expects that the surcharge should be lowered or even abolished on individual as well as companies and that the education cess should not be levied separately and included in direct tax collection.
Export Oriented Units (EOUs) operational from the year 2005-2006 can only claim tax benefits till year 2011 as against the full benefit of 10 years which is enjoyed by existing EOU's. This is a provision which needs to be extended for encouraging exports. Industry expects that this period should be extended by at least 5 years.
Derivative trading and hedging done by banks to develop the derivative markets in India should not be treated as speculative transaction like they are as of now.
There is a minor expectation that these transactions will be considered as a regular business activity and be treated for income tax purposes.
—Vaibhav Shah, MD, Monarch Projects
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