The Hindu Business Line : Rs 60,000-crore debt waiver for farmers; relief for income-tax payers

"If you are against the one-time writeoff of debts of the small and marginal farmers, then have the courage to stand up and be counted. You cannot duck the issue and I'm not ducking the issue." -- Finance Minister P. Chidambaram

Photo: Ritu Raj Konwar

Alok Mukherjee

New Delhi, Feb. 29

Two things stand out prominently in the Finance Minister, Mr P. Chidambaram's 2008-09 Budget - a substantial relief to farmers from indebtedness and a bonanza of sorts for the salaried class.

Both these sections are major beneficiaries of what is widely being termed as an "election" year Budget, but what is different this time is that the Finance Minister seems to have been able to hand out the relief without in any way breaking the back of the economy.

The macro-economic figures he reported and projected, in terms of fiscal and revenue deficits, show remarkable adherence to fiscal discipline.

The agriculture loan waiver scheme outlined by him in Parliament on Friday would cost Rs 60,000 crore, but there is no provision in the Budget for this, suggesting that the burden would fall on the banking sector for now. Asked about this at a press conference later, Mr Chidambaram said that "the Government will provideliquidity to the banking system over a three-year period and how we do it, leave it to my intelligence."

On income-tax concessions, his position was that these were revenue neutral and would not lead to any loss of revenue.

TAX THRESHOLD

There are substantial gains for individual taxpayers in this year's Budget. The Finance Minister has raised the threshold limit for tax to Rs 1,50,000 a year from the current level of Rs 1,10,000, which translates into a straight gain of Rs 4,000 per annum for all tax-payers.

He has gone ahead to alter the slabs as well, with the 10 per cent rate kicking in at the Rs 1,50,000 to Rs 3,00,000 slab, 20 per cent at Rs 3,00,000 to Rs 5,00,000 and a 30 per cent tax on income exceeding Rs 5,00,000 per year.

For an individual (male) with Rs 5,00,000 annual taxable income, the tax burden under the earlier regime would have been Rs 99,000 (without surcharge), which would go down to Rs 55,000 under the new slab system.

The gains would differ for women taxpayers where the threshold limit has been raised to Rs 1,80,000 from Rs 1,45,000 and for senior citizens from Rs 1,95,000 to Rs 2,25,000 per annum.

For senior citizens, another relief could be in the form of clarifications on the reverse mortgage scheme intended to benefit them in their old age. The scheme, where one could mortgage the house to the bank in lieu of a steady inflow or lump sum amount, has not taken off in the absence of clarifications on the likely tax implication.

Today, Mr Chidambaram made it clear that reverse mortgage would not amount to "transfer" and the stream of revenue received by the senior citizen would not be "income".

FOR THE CORPORATES

The corporate sector has not been a direct beneficiary this year - corporation tax rates and the surcharge remain unchanged and as the Finance Minister later explained to Business Line, there was no case for any reduction. But there are indirect benefits, in the form of across-the-board reduction in Cenvat (excise duty) rate from 16 to 14 per cent, which should spur demand and, with more money in the hands of the taxpayer, more sales hopefully.

Indian industry would also continue to enjoy the same level of protection against competitive imports with unchanged peak customs duty of 10 per cent. The auto sector has already raised a toast as excise on small cars and twoand three-wheelers and also buses and chassis has been lowered from 16 to 12 per cent and the pharma sector has given its thumbs up to the Budget as excise for all goods manufactured by this sector would see a cut from 16 to 8 per cent. The indirect tax giveaways are said to cost Rs 5,900 crore.

Also, corporate debt instruments stand exempt from tax deduction at source, there is clarification on dividend distribution tax between parent and subsidiary companies, and some changes in securities transaction tax have also been announced.

EXPORTERS DISAPPOINTED

There are disappointments from the Budget too. The exporters had given in a long list of demands to see them through the rough times of rupee appreciation, but their suggestions fell by the way side. Export-Oriented Units and Software Technology Parks were hoping for an announcement on extension of tax benefits which end in 2009, but it seems their agony of uncertainty would be prolonged.

In most other segments of the economy, if Mr Chidambaram has not given any benefits, he has not done anything adverse either and the corporate sector is taking solace from that.