The Hindu Business Line : Generous on personal taxation front

A $1.16-trillion economy growing at 8.7 per cent has aided strong growth in tax revenues. India’s fiscal position is comfortable with the fiscal deficit at 2.5 per cent and revenue deficit at 1.0 per cent for 2008-09.

The FM has been generous on the personal taxation front. Those earning Rs 5 lakh per annum are going to see tax savings of Rs 44,000 and this should help mitigate wage inflation for the industry in general and particularly the IT industry. This move is a welcome step for players in the IT industry.

The Budget was expected to revise the applicability of Fringe Benefits Tax (FBT) on ESOPs. No measures have been announced on this front. However, the marginal relief provided in the applicability of FBT is welcome.

Capital formation requires the existence of a deep market for corporate debt. The steps taken to put in place a corporate debt market are indeed welcome, including the proposal to exempt from TDS corporate debt instruments issued in demat form and listed on recognised stock exchanges.

The proposal to allow a parent company to set off dividend received from its subsidiary companies removes double taxation of dividends. This is a welcome move for the industry as it removes the anomaly of double taxation.

The IT industry had hoped for an extension of the tax holiday scheme for smaller players to be extended as the sharp rise in rupee has been particularly hurting the smaller players in the IT and BPO industry. The Finance Minister has disappointed the smaller players by not revisiting the sunset clause.

Overall, however, this Budget has rung in a positive sentiment for the country and will surely bolster India’s economic journey onward.

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