Union Budget: A positive one in tough times

BANGALORE, INDIA: The Finance Minister has done a fine balancing act of fulfilling the aspirations of the country in terms of increased investment in infrastructure and education while at the same time focusing on keeping the fiscal deficit in check.

The Finance Minister started by setting a goal of 9 per cent for GDP growth and creation of 12 million jobs in the economy in the next few years.

With the fiscal deficit at 6.8 per cent he does not have much headroom to reduce taxes. Within that, he has left corporate taxes untouched. He has increased the exemption limits on personal income taxes and removed the surcharge on personal income taxes.

Fringe benefit tax was abolished which would reduce the administrative overheads in companies as well as reduce tax outflows.

For the IT industry, extension of sunset clause in section 10A/10B by one more year is a move in the right direction even though it will benefit very few companies.

The industry was expecting an increase in the tax holiday period from 10 years to 15 years. There was a clear case for doing that extension at least for smaller companies which are reeling under the pressure of global economic downturn.

Simplification in service tax rules relating to refund and setting up of a dispute redressal mechanism to handle transfer pricing issues on international taxes are welcome initiatives.

Individual tax payers will see immediate increases in their take-home salaries since the exemption limits have been increased and surcharge on personal income tax of 10 per cent has been removed. This will put money in the hands of individuals in these trying times.

The Government has committed Rs 120 crore on the UID project. National Employment Exchanges are to be automated through Public Private Partnership (PPP). The Government is setting up a Central Processing Center in Bangalore for processing electronic income tax returns. These initiatives will stimulate the domestic IT industry.

The Government is increasing the spending on higher education – IITs and NIITs. Spending on education is being increased. This will ensure that talent is available to fuel the growth of the industry in the future.

Overall investment in infrastructure is being increased; this will help IT industry also.

Fiscal deficit is estimated to increase to 6.8 per cent. This is a cause of concern. The government should come out with steps to reduce this deficit over time. Overall, this is a positive budget given the global economic slowdown.