In the current world we speak of A-Bombs(atomic bombs),B-Bombs(biological bombs), & N-Bombs(nuclear bombs). But there is an altogether new bomb being thrown at the middle class, The L-Bomb ie Lagaan Bomb & the culprit for it our Honourable Finance Minister Mr. Yashwant Sinha.
I don't know where to hide my face after having given my expectations or should I say prophecies. Well, one thing is clear. I am not good at it. Not one thing on what I had written on my earlier review on the expectations has matched. Well that's not quite right. I can find solace by saying that I had told that Agriculture income would go untouched. Also the 2% Gujarat surcharge would be removed. Who on this earth, why earth? India, would have thought that the FM would introduce a higher security surcharge of 5%. The FM has just lived up to standard of not living upto our expectations.
Initially I thought that I will have two parts to this review , one on merits & the other on demerits. But the Honourable FM has not left any scope for me to write much on the first part. All in all this budget has disappointed both individuals & corporates.
The tax rates have not changed for individuals & Indian companies. But they end up paying more because of a higher surcharge. The Indian companies end up paying 31.5% instead of 30.6%. However the only positive aspect is for the foreign companies who will pay 8% less tax than earlier which has come down from 48% to 40%.
How the middle class families will be hit ?
The worst hit for this class of people is the Sec 88 Rebate. The rebate @20% will be allowed for people whose taxable income is not more than Rs.150000/-. However for people earning between Rs.150000/- to 500000/-,the rebate has been reduced to 10% from 20%. So he has to pay Rs.8000/- more tax because the maximum permissible limit for investment to availi this rebate was Rs.80000/-. So for comparing two assesses whose taxable incomes are Rs.150000/- & 150001/- respectively , the second ends up paying Rs.8000/- more tax just for having taxable income of Re.1/- in excess. Also assessee earning in excess of Rs.500000/- cannot avail of this rebate.
This class of people also earn their income from savings in Post Office, Provident Fund,National Savings Certificate etc. This also includes retired people where interest on such savings is their only source of income. Our dear FM has reduced the interest rates in these cases by 50 basis points ie 0.5%. The RBI tax free bonds interst rates have been reduced to 8% & a ceiling on investment has been put at Rs.200000/-.
The Corporate Dividend tax has been abolished which was @10% payable by the companies while paying dividend. This now will be taxed in the assesee's hands as income from other sources. This is a case of Double Taxation.
LPG has become dearer by Rs.40/-. Also kersosene by Rs.1.50/-. However, the FM has shown some udarta & reduced the prices of petrol & diesel by Re1/- & 0.5 respectively. But how does it help a person who does not have a vehicle. He does not get any benefit because the rates of taxis, rickshaws and other public transport will not come down.
He has introduced a service tax on Cable TV, Dry Cleaners, Beauty parlours etc. The Cable operators keep increasing their rates because of pay channels increasing their subscriptions. This is to add to the hit. Also, females will have to pay more to get their hair etc done up. Not that they are paying less now.
The cost of all postage articles have been increased.
To add to the agony our Honourable Railway Minister has also increased railway fares of second class.
The FM has not left out many areas uncovered.
The other significant change as per the FM is the bringing down of the cost of cell phones by abolishing CVD (Counter vailing duty) on them. As per him this will restrict people from buying cell phones from the grey market. Even after this the grey market will be preferred because this change is not enough to level the difference.
I have a bit of advice for the assesees. Most people just avail of the Sec 88 Rebate investing the maximum permisable amount & pay the rest as tax. There is one another section 80 CCC where one can save upto Rs.3000/- tax. This is for an approved Pension Fund upto a maximum of Rs.10000/-. I think LIC's Jeeven Suraksha is one such scheme. But then again one should have Rs.10000/- extra to invest or save.
Don't be surprised if one sees a roll back in a few of these by the FM in the next few months as he always does.specially on the 88 Rebate part..it will be back to the 20% mark. [As expected YS has rooled back the rebate u/s 88 if not 20% as I had said to 15% for the Rs.1.5 to 5 Lacs Income Group and in my earlier profecies review I had written that the max savings will be increased to Rs. 1 Lac which he has now ...yepppyy ] Sujay Marthi in his budget review has dissected the Budget very well. He has left very little for me to say. I just have a few words for our dear FM.
This is a mail forwarded to me & is very apt.
Tax his land, tax his wage,
Tax the bed in which he lays.
Tax his tractor, tax his mule,
Teach him taxes is the rule.
Tax his cow, tax his goat,
Tax his pants, tax his coat.
Tax his ties, tax his shirts,
Tax his work, tax his dirt.
Tax his chew, tax his smoke,
Teach him taxes are no joke.
Tax his car, tax his ass,
Tax the roads he must pass.
Tax his tobacco, tax his drink,
Tax him if he tries to think.
Tax his booze, tax his beers,
If he cries, tax his tears.
Tax his bills, tax his gas,
Tax his notes, tax his cash.
Tax him good and let him know
That after taxes, he has no dough.
If he hollers, tax him more,
Tax him until he's good and sore.
Tax his coffin, tax his grave,
Tax the sod in which he lays.
Put these words upon his tomb,
''Taxes drove me to my doom!''
And when he's gone, we won't relax,
We'll still be after inheritance TAX.
