There was a hint of helplessness when the Finance Minister P. Chidambaram said that he neither had scope to increase the tax rates, nor reduce the tax-free limits. It was a tacit admission that, try as the government might, the incorrigible tax evaders refuse to be tamed and the government alas cannot do anything about it. The only anti-tax evasion measure one can discern in the entire budget is the 1 per cent TDS mandated on sale of immovable properties at Rs 50 lakh and above. This, coupled with his open admission that any increase in the tax-free limit, deserved though it is, would release wipe out thousands of taxpayers was a statement of despair and a preference for persisting with the targeting of the sitting ducks.

HALF-HEARTED MOVES

For those with a total income of not more than Rs 5 lakh, there will be a tax credit of up to Rs 2,000. This is not the same as hiking the tax-free limit to Rs 2,20,000 from the present Rs 2 lakh, because the proposed tax credit is not available if the cut-off limit of Rs 5 lakh is breached. Thus, a teacher who has a total income of exactly Rs 5 lakh would save Rs 2,000. Her tax works out to Rs 30,000 but she has to pay only Rs 28,000, thanks to this credit.

But her colleague drawing slightly more would have the mortification of paying a higher tax not only because she falls into the second slab of 20 per cent but also because of the denial of the tax credit to her.

If the middle class is looking for a major tax saving plank in this budget, it is available to a segment---the first home buyers. These persons can buy a house during the financial year 2013-14 by mortgaging the property and otherwise for self-occupation.

The interest payable on such loan would be eligible for set off against salary and other incomes up to a heightened ceiling of Rs 2.50 lakh as against the present Rs 1.50 lakh. As said earlier, this avenue is not available to those who already own a house and hence its appeal would be limited to wannabes at best. Of course, the Rajiv Gandhi Equity Savings Scheme (RGESS) launched with a lot of fanfare last year has been liberalised to a degree --- it will be available to those with income up to Rs 12 lakh from the hitherto Rs 10 lakh, and more importantly if would not be a one-time tax benefit but available for three consecutive years, subject to investments being made in the next two years as well, following the initial investments.

TAXING SUPER-RICH

Tax on the super-rich has turned out to be so much hot air. The cocooning of the capital market continues unabated. In the event, if you sell shares through the bourses after twelve months of acquiring them, you don’t have to pay any tax, apart from the soft securities transactions tax. The base rate of dividend distribution tax would stay at 15 per cent but the surcharge goes up from 5 per cent to 10 per cent, thus pushing up the DDT rate marginally from 15.75 per cent to 16.50 per cent.

The tribe of the super-rich, about whom we all agonised endlessly in the run-up to the budget has been identified at last ---- income of more than Rs 1 crore. They will have to pay a surcharge of 10 per cent, which effectively means the slab rates for them are 11 per cent, 22 per cent and 33 per cent, respectively, as against the normal rates of 10, 20 and 30. This is no big deal, given the fact that there are hardly 48,000 taxpayers with an income of more than Rs 20 lakh on the tax register.

Companies with total income of more than Rs 10 crore have been identified as the corporate version of the super-rich. They too will have to fork out a surcharge of 10 per cent. There is a qualitative difference between the two, though --- the corporate super-rich are sitting ducks, whereas the individual super-rich are hard to tax. They are land, forest and other assorted mafias to whom the long arm of the law particularly the tax department never reaches.

(The author is a New-Delhi based chartered accountant.)

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