Wish list Not Fulfilled but FM Makes the Right Moves in Budget
Of the savings and investments wish list I had from this Budget, nothing has been implemented. Yet I can’t help saying that this is a good Budget. Of course, there are some caveats, but I’ll discuss that later.
There are two changes in the area of savings and investments, both of limited relevance. One is a change in the rules for Long Term Capital Gains (LTCG), but not the one investors were scared of. Ever since the Prime Minister spoke against this zero tax back in late December, there was widespread expectation, despite the finance minister’s assurances that this tax would be brought in. That hasn’t happened. It would appear that the PM’s irritation has taken a backseat to Jaitley’s soothing words.
The other change is that the Rajiv Gandhi Equity Savings Scheme has been given a quiet burial. I doubt whether anyone will lament the thoroughly useless scheme that was a product of muddled thinking in Pranab Mukherjee’s finance ministry. I won’t bore you with the details because they are not relevant anymore. Suffice to say that both measures were buried in the annexure to the Budget speech.
The focus on tax breaks for the lowest end of the slabs as well as the smallest companies is characteristic of this government. This brings significant relief to the largest number of people and businesses at least cost to revenue, and that’s the way it should be. The most distinctive part of the Budget speech was the finance minister’s detailed, data-driven explanation of how India is largely a non-tax compliant country. He made the point convincingly. It’s shocking that at the top end, 1.48 lakh bank accounts saw an average of ₹ 3.3 crore of cash deposits each during demonetisation and yet there are a mere 1.7 lakh people in this country who file returns showing an income higher than ₹ 50 lakh. It’s clear that demonetisation has triggered a huge effort to expand the direct tax base.
If this is done with any kind of efficiency, then the country will enjoy the fruits of the demonetisation on a permanent basis. Much depends on whether this is done in the regular way that revenue officers work, or if there is some special effort at working in a clean and efficient way. For a government that has done so many things right, the lack of perceptible change in the set ways of income tax officers is an unforgivable blind spot. It’s possible that Jaitley is quietly chipping away at the corrupt and inefficient ways of tax collectors. However, some visible evidence of such an effort would have gone a long way to assure honest taxpayers that the bonanza of data and intelligence that demonetisation has provided won’t be frittered away in lining the pockets of the same people. The lack of tax compliance has come about because of an entrenched nexus between tax officials, chartered accountants and business owners.
The most distinctive part of the speech was the FM’s detailed, data-driven explanation of how India is largely a nontax compliant country