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'Soak-Up-Rich Budgets Helps Build Case That Demonetisation Was A Wealth-Transfer Scheme Budgets are as much about politics as about economics and a good finance minister blends clever politics with sound economics. By that yardstick,  Arun Jaitley has pulled off a feat of sorts. He has presented a politically suave Budget, but without disturbing the markets or junking fiscal prudence. Jaitley has used the instrument of  Budget to send out a clear signal that the Centre does not see big industrialists, rich businessmen and the upper middle class — who loudly rooted for Narendra Modi in 2014 — as its constituency. The proposals make it clear that the Modi government's sights are set on the poor, the farmers, the middle class, the rural population and the  small/middle-level businessman/entrepreneur. In short, the voting classes who decide poll outcomes. Nothing illustrates this better than the proposal to slash income tax rate by half for those earning between Rs 2.5 lakh ...

Spurred by the adverse publicity over liquor baron Vijay Mallya and former cricket administrator Lalit Modi leaving the country to evade legal  proceedings, the government announced that it will bring a new law or amend the existing ones to confiscate the assets of such individuals. "In the recent past, there have been instances of big-time offenders, including economic offenders, fleeing the country to escape the reach of law... The government is considering introduction of legislative changes, or even a new law, to confiscate the assets of such persons located within the  country till they submit to the jurisdiction of the appropriate legal forum," finance minister Arun Jaitley said. When enacted, the move to confiscate assets could lead to the government attaching the assets of fugitives like Mallya, including shares controlled by him in companies like United Breweries Ltd and United Spirits Ltd.  However, it's not clear what happens if third party rights are already ...

In a move that will facilitate ease of business, domestic transfer pricing provisions will apply only if one of the parties to a deal is availing of tax benefits.  Traditionally, transfer pricing applied to international transactions entered into by a company in India with related parties, such as its foreign parent company or overseas group companies. Pricing of the transaction had to be at arm's length — which refers to a true unbiased value — to  ensure that India got its due share of tax. However, the Finance Act, 2012 expanded the ambit to cover domestic transactions (which included payment to directors) entered into by a company  with related parties if the aggregate of such transactions in a year was over Rs 5 crore.  The top-most challenge of India Inc was substantiating that directors' fees paid by it was at an arm's length. A director fee would depend on many factors, including size of the company, industry sector. Even Mukesh Ambani and Azim Premji were u...

With a tweak in definition, finance minister Arun Jaitley has made affordable housing more affordable. Henceforth, instead of built-up area, carpet area will be considered for low-cost housing. This will broadly increase house sizes by 30%. While a 30sqm (300sqft) cap will apply to municipal limits of the four metropolitan cities, for rest of the country, including in peripheral  areas of the metros, a limit of 60sqm (600sqft) will count. This should cheer people in Noida, Gurgaon and Ghaziabad in NCR-Delhi; Navi Mumbai, Basai, Thane and Kalyan around Mumbai; and Chandan Nagar and Howrah near Kolkata. Two-bedroom flats of 800sqft in most parts of the country will now come under affordable housing category as builders generally set aside 25% of built-up area to arrive at carpet area.  Credai president Getamber Anand said this would come as a shot in the arm for a struggling real estate sector. With FM giving an infrastructure  status to low-cost housing, firms will now be...

Parity between salaried and self employed MUMBAI: Early withdrawals from the National Pension System (NPS) will not attract tax, the Budget has clarified, and experts suggest using this route to increase the tax-free component of your retirement corpus.  An NPS subscriber can withdraw 25% of his contribution to the corpus for emergencies before retirement. For instance, let us assume  that your corpus now is Rs 2 lakh -- Rs 1 lakh contributed by you and the remaining by your employer. Instead of withdrawing the entire  amoun at retirement, you can withdraw Rs 25,000, or 25% of your contribution, earlier, without any tax incidence. The remaining Rs 1.75  lakh is withdrawn on retirement.  Since 40% of this Rs 1.75 lakh or Rs 70,000 is tax-free at retirement, the total tax-free amount goes up to Rs 95,000 (Rs 25,000 + Rs 70,000). Had the entire amount been withdrawn at retirement, the tax-free component would have been Rs 80,000.  Moreover, till now salaried ...

Finance Minister Arun Jaitley chairing the ninth GST Council Meeting, at Vigyan Bhawan in New Delhi on Monday. (PTI) The central government today formally accepted that it will not be able to meet the April 1 deadline for implementing the Goods and Services Tax (GST). The new deadline has been set for July 1, 2017. At the end of the ninth GST Council meeting, finance minister Arun Jaitley said: “The broad consensus among states is that July 1 seems more realistic”. But many states hinted that even the new deadline looks difficult to meet. “A lot of work is left, in fact, thirteen things need to be done before we even consider implementing GST. So I don’t want to comment want to on whether the July 1 deadline can be met,” said West Bengal finance minister, Amit Mitra. Jaitley said that Monday say consensus on tax on territorial waters and dual control, which deals with who taxes whom between the states and the centre. 90% of taxpayers with up to Rs 1.5 cr annual turnover will be assess...

Individuals will be asked to divulge source of large cash transactions post demonetisation   The government said it has identified 18 lakh individuals who will be required to divulge the source of large cash transactions that they  undertook in the weeks after demonetisation as part of the income-tax  department’s Operation Clean Money/ Swachh Dhan Abhiyan initiative.   An integral part of the government’s campaign against black money, the  account holders have been targeted through the use of data analytics  to sift through information for the period between November 9, when the  old Rs 500 and Rs 1,000 notes ceased to be legal tender, and December 30, when the window for their deposit in banks ended.   These 18 lakh persons have been identified by the tax department as their  transactions did not match their tax profile. Cases are being selected for verification on the basis of approved risk criteria, officia...

Jewellery sector will be most disappointed if no relief comes from Budget, especially after note ban Economic Survey for 2016-17 has indicated that implicit subsidy for gold is still too high and it mostly goes to the middle class. Market participants say that this indicates that government is looking to have higher tax revenues from gold. Survey notes that the calculations of implicit subsidies for the middle class, which forms top 40 per cent population, is estimated based  on expenditure distribution as per NSS data of 2011-12 LPG subsidy for this class has been estimated at Rs 28,219 crore for 15-16 and for gold it has been estimated at Rs. 10,800 crore which is  0.08 per cent of GDP. Surendra Mehta, secretary, Indian Bullion and Jewellers Association said that, "indications from the survey which says  that implicit subsidy on gold is still high is building a case for GST rate higher that 4 per cent". Going by survey indications, he doesn't think there will be reduct...

ANUPROY The Economic Survey 2016-17, released on Tuesday,yet again harpedonusing the Reserve Bank of India’s(RBI) equity to recapitalise  government banks. It argued after demonetisation, the “windfall” would boost the central bank’sfinances. Last year,when the Survey made this suggestion,then RBI governor Raghuram Rajan was critical of the proposal, arguing high equity  was needed for the stability of the central bank. After Prime Minister Narendra Modi announced the demonetisation of the old series Rs 500 and Rs 1,000 notes on November 8,people  had till December 30 to deposit the old  notes in banks. This led to the “windfall” of swelling deposits. This year, the Economic Survey has argued the central bank had more than adequate equity.Infact,it had the fourth largest equity  as a percent of central bank balance sheet in the world.From this,the RBI could easily return Rs 4 lakh crore to the government. “There is no particular reason why this extra capital sh...

N SUNDARESHA SUBRAMANIAN Opening with spiritual leader Ramakrishna Paramhansas" Takamati, matitaka ,"Bengali for money is mud,the Economic Survey 2016 17s  demonetisation chapter skipped difficult questions on note-ban implementation,while trying to figure out how best to milk the note  ban, described as money-vacuuming chopperor "helicopter hoovering” or the opposite of helicopter money, which involves distribution of printed money to the public. Advising against any impulse to penalise cash withdrawals in the short term,chief economic advisor Arvind Subramanian in the Survey  said, "The early elimination of withdrawal limits will help build confidence.By the same token, there should be no penalties on cash withdrawals, which would only encourage cash hoarding." Supply of currency should follow actual demand and not be dictated by official estimates of "desirable demand". In other words,"the Reserve Bank of India should re-establish internal co...

It adds, Bengaluru and Jaipur are collecting no more than 5 to 20% of the potential India’s urban local bodies, or municipalities, have a huge potential to raise resources through taxation such as property tax, the Economic Survey said. It said a low level of per capita expenditure of Urban Local Bodies (ULBs) against state per capita expenditure shows either states are not devolving adequate financial resources for these bodies or ULBs are not raising resources on their own. The Survey’s assessment of property tax collection potential of Bengaluru and Jaipur shows that currently both these cities are collecting no more than 5 to 20 per cent of the potential. The study on municipal finances conducted by the 14th Finance Commission indicated per capita revenue from property taxes was ~1,677 at most, with a low of just Rs 42. The Survey said with higher devolution of taxes to the states and grants to ULBs after the 14th Finance Commission, overall public funds available for urban rejuve...