Economy

A fine balancing act

Girish Vanvari Pranav Dholakia | Updated on January 20, 2018 Published on February 29, 2016

The budget ring-fences India amidst uncertainty



On the one hand the finance minister had to announce some impetus for the Make in India, Startup India, and Digital India initiatives, and on the other, in light of the global economic uncertainty, ensure that the Indian economy is ring-fenced from a possible downturn.

On the corporate taxation front, the base tax rate has been reduced from 30 per cent to 29 per cent; however, it is restricted to companies with a turnover of less than ₹5 crore. New manufacturing companies incorporated after March 1, 2016, will be entitled to a corporate tax rate of 25 per cent subject to their not claiming any profit-linked incentives. Further, there is clarity provided on the phase-out of the tax holidays.

The 200 per cent weighted deduction on account of research and development will be available up to 31 March, 2017, and subsequently 150 percent up to 31 March, 2020, and thereafter restricted to 100 percent of the expenditure.

The bill has proposed a big boost for business trusts such as the Real Estate Investment Trust and Infrastructure Investment Trust. Dividends received from the SPV of these business trusts shall not be subject to DDT. In his speech, the finance minister mentioned that the duration for computing long-term capital gains on sale of shares of an unlisted company has been reduced to two years from the existing three years.

A fresh attempt has been made to bring the undisclosed money into the tax net. An amnesty window is proposed to be provided for people to disclose their undisclosed assets. To promote the startup eco system, it is proposed to establish a fund for financing the startups.

The finance minister has also proposed to simplify and rationalise the tax system. An emphasis will be laid on using technology to track tax evaders.

Today, India can increase its share in the global economy. A robust and dynamic environment is needed. The proposed Finance Bill addresses this.

All in all, Budget 2016 is a prudent balancing act that meets diverse needs for growth, even as it keeps a watch on the global economic scenario.

Vanvari is the head of tax and Dholakia the director of KPMG in India. The views are personal

Published on February 29, 2016
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