INDIA BUDGET 2013 :PC NETS BIG FISH

Not so long ago, India appeared to be cruising towards superpowerdom. Then bad weather struck, at home and abroad. With elections looming on the horizon, Chidambaram faces a twin challenge: Keep Congress hopes afloat while steering the economy out of choppy waters. He's soaked the rich, made a splash for women, and sought to shore up investments

Shankar Raghuraman | TIMES NEWS NETWORK 

    Budgets presented in the run-up to elections, whether in the preor post-reforms era, have tended to showcase how much the government is doing for the common man. What's changed post-reforms is that the 'pro-poor rhetoric' has not been accompanied by a 'soak-the-rich' posture. Finance minister P Chidambaram on Thursday bucked that trend. 
    While announcing a tax rebate of up to Rs 2,000 for those with incomes of not more than Rs 5 lakh, the FM imposed a 10% surcharge on income tax for crorepatis, who officially number a mere 42,800, and for domestic and foreign firms with taxable income above Rs 10 crore, which would leave out only small enterprises. 
    In a similar vein, he has hiked customs duty on all mobile phone handsets costing more than Rs 2,000. And has increased excise duty on SUVs—which the fine print of the Budget suggests have been defined in a manner that includes several sedans too. The duty on imported high-end automobiles and yachts has been upped too. Those buying homes and flats with a carpet area of 2,000 square feet or more, or a value of Rs 1 crore or more, will now effectively pay service tax on 30% of the value of the property, while cheaper ones will continue to pay 25% of the value. As Chidambaram himself put it in his speech, "When I need to raise resources, who can I go to except those who are relatively well placed in society?" 
    The 'pro-poor, anti-rich' stance apart, the FM was at pains to show how much the government cares for women and their empowerment. Among the many proposals directed at women was a Nirbhaya Fund for their security and empowerment, and India's first women's bank. 
    For the taxpayer, there will be an additional Rs 1 lakh available for deductions on home loan interest payments, though again only for relatively modestly-priced homes and first-time owners. There were promises too of inflation-linked savings instruments, though the details are to be worked out by the RBI. 
    For corporates, there is an incentive to invest, with 15% of spending of over Rs 100 crore on new plant and machinery in the next two years qualifying for a deduction. For the markets, there was some relief in the form of lower rates of tax on securities transactions and easier procedures for foreign portfolio investors. Against this was a fresh levy, equivalent to the tax on securities transactions, on non-agricultural commodity futures. 
AUR FOR AURAT 
One of the recurring themes of this Budget was women. TOI has long campaigned for a better economic deal for women; this is a good beginning. The FM also announced the setting up of a 1,000cr "Nirbhaya Fund" for the "dignity and safety of women". In the days following the brutal rape of a 23-year-old girl (who later died) in Delhi, TOI named her Nirbhaya (Fearless One). Other women-centric measures include: 
    First women's bank to be set up in public sector with capital of 1,000cr. Will lend to businesses that are run by women, employ women, and support women's SHGs, livelihoods 
    200cr to end "gender discrimination"; to help "vulnerable groups" like single women & widows ARE YOU SINKING OR SWIMMING? TOI HELPS YOU NAVIGATE 
    The biggest gainers from the new income tax proposals are those whose income is between Rs 2.2 lakh and Rs 5 lakh per annum. Everyone in this category saves exactly Rs 2,060 in their tax bill (including the 3% education cess). The only exception are those aged above 80, who are already tax-exempt till Rs 5 lakh and those aged between 60 and 80 who are exempt till Rs 2.5 lakh.Those with incomes between Rs 2 lakh and Rs 2.2 lakh will not have to pay any tax for next year, but how much they save depends on what their income is. A person with an income of just above Rs 2 lakh, for instance, will save almost nothing, while someone who earns Rs 2.1 lakh saves only Rs 1,030. Between Rs 5 lakh and Rs 1 crore, you neither gain nor lose in tax liability. Beyond Rs 1 crore, the extra tax bill mounts rapidly. At Rs 1.5 crore, the additional burden is Rs 4,45,990, at Rs 2 crore it is Rs 6,00,490 and at Rs 5 crore it becomes Rs 15,27,490. 
This is because the 10% surcharge applies to your entire tax bill and not just the portion over Rs 1 crore. 
    While you gain nothing from the Rs 2,000 tax rebate if your income is above Rs 5 lakh, you can still avail of the enhanced benefit on home loan interest payments. So far, interest payments up to Rs 1.5 lakh were deductible from your taxable income. The FM has now said that another Rs 1 lakh of interest payments will be allowed as a tax deduction provided your home loan does not exceed Rs 25 lakh, the value of the property is not more than Rs 40 lakh and it is your first home. If you meet these criteria, you can now 
save Rs 10,300 or Rs 20,600 or Rs 30,900 from your tax bill depending on whether you are in the 10%, 20% or 30% tax bracket. 
    While the formal IT exemption limit remains at Rs 2 lakh, you can avoid tax even with much higher incomes under certain circumstances. If you can use the exemptions for PF contributions, insurance premia etc up to Rs 1 lakh under Sec 80C, the home loan interest deduction under Sec 24 up to Rs 2.5 lakh, the exemption on savings bank account interest up to Rs 10,000 and the Mediclaim premia exemption up to Rs 20,000, you could theoretically have an income of Rs 6 lakh and be tax-free. Of course, whether all 
this is practically possible at such income levels is debatable. 
    As a consumer, your next mobile handset will become costlier as customs duty has been raised from 1% to 6% for all handsets costing more than Rs 2,000. If you are a smoker, the FM's decided you must pay more for your sin. So the excise duty on cigarettes has been hiked by about 18%. Similar hikes will apply to cigars, cheroots and cigarillos. 
SUV prices set to soar, even some sedans will cost more 
    With customs duty up from 75% to 100%, importing a Lamborghini could set you back by Rs 60 lakh, and a Land Cruiser by Rs 15 lakh. Excise duty on SUVs is also up, so even M&M's Scorpio and Toyota's Innova will cost Rs 15,000 to Rs 55,000 more. Worse, the definition of SUVs also covers Honda Civic, Toyota Altis and Maruti SX4, whose prices are set to rise by Rs 16,500 to Rs 40,000 | P 7 Tax changes to yield an extra 13k crore in direct taxes A nother change was to stipulate that where a foreign investor's equity holdings in a firm are over 10%, it would be treated as FDI, while below that threshold it would be FII investment. 
    The net effect of the tax changes is estimated to yield an extra Rs 13,300 crore in direct taxes and Rs 4,700 crore in indirect taxes. The total additional resource mobilisation of Rs 18,000 crore pales in comparison to the Rs 41,440 crore Pranab Mukherjee had proposed to raise last year. Despite the relatively modest tax mopup, the FM has managed to present a budget that apparently hikes outlays on key areas like education, health and the social sector by significant amounts—and yet contains the fiscal deficit at 4.8% of GDP. 
    There is a bit of smoke and mirrors in that image, though. Chidambaram constantly referred to how big the jumps in outlays were relative to the revised estimates for 2012-13, but chose not to dwell on the fact that when compared with the budget estimates for the same year, the increases were most often modest. 
    He is also clearly banking on being able to cut subsidies by a significant amount–next year's estimates for combined food, fertiliser and petro product subsidies is almost Rs 27,000 crore less than the revised estimates for 2012-13. Is that a sign that the government really means it when it says that fuel prices will be periodically revised? We'll have to wait and see. To be fair to the FM, he is, like Pi in Ang Lee's multi Oscar-winning film, faced with the onerous task of surviving a destructive storm and taking both the economy and his party-–not necessarily in that order—to shore. A little bit of fantasizing and optimism in such a situation is perhaps anecessary condition for survival. We can only hope it will be sufficient too.