BUDGET 2010: RESULT ORIENTATION OF POLICIES AND PROVISIONS

[C.A. DEV KUMAR KOTHARI]

Summary:

It is high time that the honorable Finance Minister must bring in such   policies which are more result oriented and with lesser efforts more benefit to the public can be granted. The policies of penny wise and pound foolish must be discarded. Growth and result orientation should be the zeal of the budget 2010. With changes in overall economic conditions, and policies of GOI, many provisions need to be dropped or the scope need restricted. By following ABC (Always Better Control) analysis the matters can be made simple and result oriented without loosing check and balances.

Budget 2010:

In this write-up some suggestions are placed with a view to improve result orientation for the revenue and to concentrate on potentially higher tax payers instead of wasting time on administration of lower tax payer assessees.

Growth momentum needs continuity:

It is desirable that the growth should be maintained in near future as well as in long term. For that it is essential that the Government must adopt such policies, which can boost growth. For growth it is desirable that consumption as well investment both should improve. For better utilization of national resources also some efforts are required to be made. Some suggestions are as follows: -

For the benefit of public:

1. Consolidation of small villages - There are large number of small villages with abysmally low population not even exceeding 1000 people and such villages are scattered over a large land area. It becomes physically and financially difficult to provide good services like medical facilities, education facility, connectivity with roads, electricity and roads, transportation, security etc. Whatever facilities are available they cannot be fully utilized due to low population. The cost per capita also goes up. If such villages can be consolidated and suppose 30 such villages are consolidated and can be converted into a small township of about 40 - 50 thousand people, it will be much easier to provide qualitative essential services. For this purpose scheme like "AKIKARAN SE GRAMOTHAN", VILLAGE DEVELOPMENT BY CONSOLIDATION can be formulated.

2. Wealth of worship places must financially contribute to the society:

It is well known that we do not have a school, dispensary or play ground in many small villages but we definitely have many public temples or other worship places even in smallest villages. These worship places have considerable collection of cash money and other gifts. We also know that famous temples have huge surplus funds. These institutions enjoy tax exemptions. No doubt these institutions have significant role in our life, but it is also true that they are sitting on huge wealth and that wealth is remaining unproductive. Therefore, it must be made compulsory that such institutions shall mandatorily contribute to setup school, hospital, dispensary, play ground etc. in the nearby area as well as at other places when there is funds available. The wealth of temples, maszids, churches, gurudwaras, synagogues etc. must be used in productive manner and in service of living persons, animals and living plants.   

God does not take anything from us, but give us when we work. But we offer ghee, sugar, milk, fruits, vegetables, and other eatables daily to statutes of gods and goddesses. God can very well be pleased with a bath from pure water if offered with pure heart. Therefore, regulations can be made that in temples such wastages shall not be allowed and all food offered to god will be distributed to poor people- this will also make it reality that in every living person there is god and the food given to poor persons is accepted by god as food offered to god.

Growth oriented tax policies -

VAT, ST (GST)

Lower rate of tax, better compliance and finality of collection should be the basic approach. There is no purpose of first collect and then refund or allow credit.

Target of GST @ 16% is really unreasonable. Reasonable target is 9%. Therefore rates of taxes should be reduced to bring them down to 9% instead of raising them to 16% in due course.

To promote consumption small consumers and service users must be exempted from Service tax. For example, telephone bills with less than Rs.1000 per month may be exempted

Excise duties, should be reduced by at least 2% on most of items.

To provide incentive for growth by way of increased investment and production the economy can be improved. Now for good business raising capital is not a problem. What is needed is to provide incentive for better use of assets and investment.  For this purpose incentive can be extended by way of -

Extra shift allowance for working multiple shifts, this will help in increasing competitiveness by reducing cost due to better use of assets.

Additional depreciation for new investments in buildings @ 40% may also be allowed in respect of all type of buildings. For plant and machinery all type of plant and machinery, vehicles can be made eligible with a higher incentive of 40%.

Liberal depreciation allowance for let out house properties because let out property also suffer wear and tear. Furthermore, in view of changes in building styles and patterns in future life of buildings will fall.

In view of lower and further falling interest rates, high inflation it is necessary that we must save more for better post retirement life. Therefore, more benefits to induce saving is required. The savings made by people will again help in growth. For this purpose deduction under section 80C may be raised to Rs. three lakh and such deductions be simplified.

To provide investment in agricultural activities special incentive may be granted by way of higher depreciation, additional depreciation, lower rate of interest on bank loan to the persons who provide tractors, trailors, irrigation equipments, harvesting and processing equipments, etc. to farmers on rent, hire or job work basis.

Depreciation to salary earners:

Depreciation may be allowed to salary earners on durable assets purchased by them like vehicles, household appliances, computers, fitness equipments, entertainment equipments etc.

MAT may be abolished:

MAT u/s 115JB has lost relevance due to the following important reasons

a.       Tax is collected on distribution of dividend so the reason that dividend paying companies are not paying tax is doesnot exist.

b.      Most of incentives like accelerated depreciation, investment allowance, exemptions etc. have been withdrawn. In any case exemption is granted for a specific purpose, therefore levying tax by way of MAT dilute the purpose for which exemption is allowed.

c.       In competition it is necessary that companies must have sufficient funds after paying tax so that companies can pay dividend, maintain international goodwill, can have options to grow with strength to approach capital markets. 

Monetary limits - Some monetary relief in relation to certain transaction or certain requirement were fixed many years ago and it is desirable that those limits should be reviewed and revised. Some of such items are discussed below: -

a)                  Tax Audit Report - Limit for turnover from business may be revised from Rs. 40.00 Lakh to Rs. 2.00 Crore and for professionals from Rs. 10.00 Lakhs to Rs. 50.00 Lakhs.

b)                  Cash payments limit under section 40A (3) may be raised from Rs. 20,000/- to Rs. 50,000/-.

c)                  The department has to issue considerable refund orders against TDS many of which are petty refunds due to TDS at very low base. Even if one seeks certificate for no or lower TDS it involves lot of administrative work for the assessee and the A.O. This is of not much utility. This can be avoided by increasing basic exemption limit for TDS. Thus maximum amount up to which tax deduction is not required may be revised as follows -

i)                    TDS on interest on securities - limit may be revised to Rs. 25,000/- u/s 193.

ii)                   TDS on other interest on securities - limit may be revised to Rs. 25,000/- u/s 194A.

iii)                 Section 194C - Contractors payment. The contract value may be revised from Rs. 20,000/- to Rs. 50,000/- and annual payment to Rs.2,00,000/-.

iv)                 Section 194J - Payments to professionals and technicians - Limit may be revised to Rs. 50,000/-.

v)                  TDS on rent - limit  may be revised to Rs. 2,40,000/-

vi)                 Insurance commission u/s 194D to Rs.1,00,000/- because usually one person can be agent of only one insurance company. For other commission and brokerage u/s 194H the limit may be raised to  Rs.50000/-

(d) Provisions relating to taking loan and deposit and repayment thereof u/s 269SS and 269T -the limit may be revised to Rs.2.00 Lakh.

Deduction u/s 80C may be allowed as an expenditure:

Earlier tax rebate under section 88, 88B, and 88C, was allowed under various circumstances. In an article the author had suggested to convert rebates into deductions. Then S.80C was again reintroduced. However, now it has been made mandatory to file return if one want to claim deduction u/s 80C. This unnecessarily increases work load. The requirement to file return, when no tax is payable may be dispensed with by including deduction u/s 80C in category of a deduction while computing income instead of deduction from gross total income. Or requirement of filing return can be dispensed with when no tax is payable after considering deduction u/s 80C.

PAN and its use for surveillance:

Requirement to obtain PAN must continue so that a person who has PAN continue to be alert because he may receive notice to file return from the Department at any time. The notices may be issued at random, selective and rotational basis it will provide sufficient check. The following persons may be required to obtain PAN:

(a)  A Tractor, jeep and large irrigation equipment owner (including farmers).  

(b)  A person being owner of more than specified area of irrigated land or un-irrigated land. The area may be specified for different part of the country on the basis of yield and usual crops. Alternatively obtaining of PAN may be made necessary for farmers who have gross receipts from crop grown by him exceeding Rs. 2,00,000/- in a year.

( c) A person having  financial investments aggregating Rs. ten lakh or more in  fixed deposits, recurring & saving deposits in banks and post offices, bonds, debentures, savings certificates, shares and units of mutual funds loans  or deposits etc.  

PAN, declarations instead of return when no tax is payable:

Instead of mandatory return under proviso to section 139 it may be provided to obtain PAN for the specified persons. The PAN holders who do not want to file return of income due to income being below basic exemption limit may be required to file a declaration in this regard. The department may issue notice calling upon some of such declarant, on selective and rotational basis, to file return of income. This will provide a check and balance on the declarants.

Wealth Tax may be abolished:

There are few potential wealth tax payers and wealth tax collection is also not significant. However, since it is alive, the Assessing Officers have to spent considerably time to review the files of assessees and to find out whether the assessee has filed W.T. return, if not whether he is a potential W.T. payer. In that case he may issue notice calling upon the assessee to file W.T. return. But ultimately any commensurate revenue may not be raised by way of wealth tax.

In case WT is not abolished the limit of exemption should be raised to Rs. fifty lakh in view of considerable appreciation in value of gold, silver, and properties during last few years.

Appeal fees should be abolished:

Against wrong and illegal actions of government authorities public have to prefer appeals. It is a matter of record that in about 85% cases authorities are found wrong. Therefore, there is no justification of asking public to pay appeal fees while seeking redressal of grievances caused by government officers. Accordingly it is requested that appeal fees in all tax matters should be abolished.  

Capital receipts should not be deemed as income:

There are various provisions under which certain capital receipts are considered as income. These provisions may not test the legal scrutiny as to intra virse the Indian constitution. Because tax on income cannot be so widened as to tax capital. Such provisions should be omitted and instead of them provisions of considering income as taxable if it is proved that capital recript or exempted income shown is really taxable income must be taxed. Considering all people as tax evader under law is not proper.

Erring officers must be penalized:

Officers who do not follow judgments of High Courts and the Supreme Court must be penalized. It is very unfortunate that many officers (even some Tribunal Members) are not following binding judgments of the jurisdictional High Court and also of Supreme Court and the assesses are put to harassment. For this purpose effective law need to be framed. The law can be made so as to follow law as per prevailing judgment of higher authority, with freedom to rectify the same in case the prevailing order is reversed by further higher authority or court.