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| Edited By: Manju AB |Source: DNA |Updated: Feb 05, 2018, 05:15 AM IST
Finance minister Arun Jaitley made big announcements but the allocations for various schemes seem to be minuscule, says corporate lawyer Anil Harish. In an interview with Manju AB, Harish says companies have to file returns failing which the directors lose their directorship from all the companies where they have a presence. Even if the company is in losses and there is no revenue loss to the exchequer, the directors can be prosecuted.
It does have a short-term impact. But there is no reason to give exemption to one kind of asset class. It is a fair move.
This seems to be strangely implemented. Section 2(24) and section 28 now will state that the fair market value will be treated as income and taxed. Take for instance a builder who decides to occupy office space in the building he developed and there is no sale. He will be liable to be taxed on the fair market value of his property. A jeweller who decides to take a portion of jewellery home will also be liable to a tax even if it is for his own use. Same is the case for a car dealer. This is really strange. Profit should be taxed and not the fair market value. When there is no sale to the third party but merely a conversion for one's own use, the income should be quantified but the tax should be deferred as is the position under section 45(2) where the tax liability comes only when there is a sale.
Lots of announcements but very little allocations. In para 9 of the Budget speech, for instance, FM Arun Jaitley has mentioned that persons belonging to the poor and middle class will be provided great relief on interest rates on housing schemes. This refers to the PMAY (Pradhan Mantri Awas Yojana) and the affordable housing but there is no provision in the Budget for this. In para 42 of the speech, it is also said that the government will set up a dedicated fund in the National Housing Bank (NHB). This will be funded from the priority sector shortfalls that banks may make in the financial year. This is interesting. When banks fail to meet targets for agricultural lending, they need to deposit the amount they failed to lend to the NHB. This is interesting because when do you know there is a shortfall? Only towards the end of the financial year. So it will not form part of the budgetary allocation. The NHB Act is also being amended to transfer RBI's stake in the National Housing Bank to the government. RBI is an independent organisation so government probably wants to influence the policies of the National Housing Bank by this move.
There is a reference to the smart cities mission statement which says that it aims to build 100 smart cities. The FM says we have selected 99 cities. But somehow they have not selected the last 100th city. These cities have started implementing various schemes. Out of the Rs 2 lakh crore allocated, only projects worth Rs 2,350 crore have been completed. So it is only 1% of the smart city projects that have been completed. And there is about Rs 20,852 crore worth of work which is under progress in the smart city mission, which is another 10% of the allocated amount.
Rates of tax have been slightly changed this year. For individuals and firms, the rate of tax has gone up due to the health and education cess, which is at 4%. This is higher than the 2% and 1% that we already have.
Even if a company has no taxable income, it will be required to file a return. If it does not, the directors will be prosecuted even if there is no loss of revenue to the government.
Oh, the fallout was immense. If you happened to be a director in one of those companies and the company was in losses and it was lying defunct, then you would lose your directorship from other companies as well. For example, one person was a managing director of a company with a turnover of Rs 500 core. Even he lost his directorship because he was the director at one of the shell companies which had not filed its annual returns.
Yes, but it does have an anomaly. The base year for calculation of the annual turnover of a company is FY17. The turnover of the company should be Rs 250 crore or less in that financial year. Why should it be pegged to a single year?
There cannot be a big bang every year. Our income tax rates have been in the range of 30% to 36% for the last 20 years. We cannot expect it to be lower. We are not in the old days of tax when the rates were in the 80% and 90% bracket. But the government tendency to make amendments to the Income-tax Act still remains. Just like the FM said that MPs' salaries should be inflation-linked and reviewed once in five years, so the basic exemption should also be reviewed every five years. That will be more simple and expectations will not be high.
There are 55 clauses to amend the I-T Act this year. Earlier, it was 70-80, sometimes even 100. So this year it was less. But what is the need to change it so many times? We want more stability in the tax laws.
For example, in London, the density of population per square kilometre is 6,000, in Shanghai it is 8,000 and Mumbai 28,000. Only Kolkata and Dhaka (in Bangladesh) are more than us so this is one record we should let go of if we aim for quality of life. We are practically the world champions. Our population needs to be spread out all over the country so the quality of life improves. In para 99, he (the FM) talks about bullet train project for which they are setting up an institute in Vadodara (in Gujarat) to train the manpower to run this rail. While he talks about the bullet train and infrastructure, let's see what he says in para 67... 'Cleaning up of the Ganga is of national importance. And it is our firm commitment'. Actually, some of you will remember that when Rajiv Gandhi became the PM in 1984, one of his first priorities was cleaning up the Ganga. So that was 34 years ago and it is still a mission.
