What can a troubled FM in troubling times deliver? Very little. But within the constraints, P. Chidambaram has been able to shoot for what he could. He’s been brutally honest: “Even a moderate increase in the level of threshold exemption will mean that hundreds of thousands of taxpayers will go out of the tax net and the tax base will be severely eroded.” No revision of tax slabs, no new exemptions. And barring a mere feelgood credit for 18 million taxpayers—up to Rs 2,000 for incomes of Rs 5 lakh—no relief from rising prices, slow growth, high interest rates.
Beyond the inflation-infested real estate markets of the metros, though, there is respite. If you’re a first-time home buyer and borrow Rs 25 lakh, you will get an additional deduction of Rs 1 lakh above the existing deduction of Rs 1.5 lakh. But, a house with a carpet area of over 2,000 sq ft or priced over Rs 1 crore will cost more—that’s nearly every apartment in the metros.
There were no additions to the 80C list of exemptions. That’s good—the simpler the tax code, the easier it is for honest taxpayers to follow. That the know your customer (KYC) process in banks will suffice for insurance policies is a good step. Why it was not extended to all financial products escapes logic. Post-debate, I hope investors can look at a single KYC to mutual funds, stocks, futures and commodities. This would enable a smoother transition to financial products, instead of the default option of real estate and gold.
Robin Hood budgets have been presented over and again. Budget 2013-14 returns to that idea in a second dash to tax the rich. Of course, we hate the rich—till we get there, that is. So, let’s relish the voyeuristic pleasures to be had in watching them squirm. A person with a taxable income of Rs 1.2 crore will have to pay Rs 3,53,290 more in taxes due to a 10 per cent surcharge. That translates into a princely sum of less than Rs 30,000 per month—er, what are they whining about?
Here’s what. The real pinch to the 42,800-strong army of people making more than Rs 1 crore per annum will come from the spending side—from imported cars and yachts (customs duty raised to 100 per cent from 75 per cent) to SUVs (excise duty up by 3 per cent) and cigars (excise duties raised by 18 per cent), the (not so) merry man in whites has increased taxes on all these luxury products—and given us enough to feel good about. But if I were to pick the one thing I like about Chidambaram’s pre-election budget, it is this: a one per cent tax deducted at source (TDS) for all property transactions (minus the holy cow, agricultural land) worth Rs 50 lakh or more. The idea, it appears, is to improve the reporting of such transactions for paying capital gains. And even though the problem of undervaluation remains unaddressed, unclear and open to debate, this is a good first step towards hitting unaccounted-for transactions.
The author is a journalist and policy analyst; gchikermane AT gmail.com