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Updated: March 1, 2013 04:03 IST

Cautious approach

  • R. Anand
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R. Anand
R. Anand

“Status Quo” is sometimes the best form of “change”. It is said that a budget exercise before an election is similar to a tightrope walk — the ultimate balancing act. Tax proposals are always eagerly awaited since they affect a large segment of the population.

Keeping the same in mind, Budget 2013 seems to have a very cautious approach with respect to the income and expenditure policy of the Government.

On the personal taxation front, the government has adopted the twin approaches of providing relief/ rebates to the middle-class and increasing the tax on the super rich. Tinkering with tax rates and increasing the dosage of surcharge is something tolerant Indians have become used to over a period.

Coming down to the specific proposals, a marginal increase has been provided in the deduction available under Sec. 80C (relating to medical insurance premium) as well as a rebate for those earning income between Rs.2 lakh and Rs.5 lakh (rebate capped to Rs.2,000). On the other hand, increase in taxes on high-income brackets was expected in some form, and, hence, the surcharge on high-income earners is not a surprise.

The proposal of providing deduction on interest on loans borrowed for new home buyers (capped at Rs.1 lakh) is welcome, and is specifically targeted at the affordable-housing segment (Rs.25 lakh and below). However, the number of restrictions attached with this benefit (cap on the amount of loan, applicable only for first-time home owners and available only on acquisitions) may dilute the effect of the same. Also, the implementation related aspects will need to be evolved, for example, can Person A claim the deduction once in his individual capacity and also once again as a HUF? With respect to the corporate sector, granting of an investment allowance of 15 per cent on investment in specified new assets beyond Rs.100 crores appears to be an old wine in a new bottle, and is a targeted attempt to bolster investments.

R. Anand is Tax Partner, Ernst & Young

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