SOME REASONABLE EXPECTATION FROM BUDGET 2014-15 FOR GENERAL PUBLIC

[CA DEV KUMAR KOTHARI]

High expectations:

The general public of India has very high expectations from the new government headed by Shri Narendra Modi with Shri Arun Jaitley as Finance Minister. With constraints all high expectations may not be full filled, because even a small relief to an individual tax payer can culminate into big cost to the government.

High inflation in last many years has eroded real income of many from general public because remuneration has not kept pace with inflation, real earnings on investments have eroded due to reduced purchasing power of money earned as interest and also of capital saved. Therefore, a big jump in tax free slabs or low rate slabs is need of hour. However, it may not be possible to fulfill such expectations immediately.

Reduction of prices of commodities, general inflationary pressure will have to be combined effort to balance  revenue by tax for government and real earnings and  real savings for general public. 

Earlier articles:

In some recent articles author has suggested for better productivity and  efficiency in various government departments by improving task targets, reduction of idle time, un-necessary and un-productive work etc. This can lead into big savings in government departments.

Better quality of government spending with reasonable check and controls while spending public money can be another source of savings of public money.

Once government working and spending improves, it will be a major source of internal generation by way of savings without any sacrifice of necessary expenditure.

Cost per unit of production or per unit of service or per unit of government obligation can be reduced by better productivity and  efficiency  of men, machines, and materials available to government.

Reasonable expectation for general public:

High expectations can be met only with major improvement in productivity, efficiency and quality leading to reduction of per unit cost. Some costs can be reduced quickly by check on idleness, better productivity and efficiency—this can be targeted within this fiscal year.

However, major reduction in costs is a medium to long term plan- in some areas results can be achieved within 1-2 years whereas in some areas it may take 3-5 years.

There need to be balance in tax exemptions, tax rates, and incentives for savings which are required to improve capital base on public and the government.

Therefore considering that government can achieve some short term goals in cost reduction, the following expectations can be considered reasonable for general public who are assessed as individuals, HUF, AOP and BOI and also partnership firms:

Nature	Reasonably expected amount Rs.	Remarks
Basic exemption for individuals, AOP, BOI and partnership firms.	Rs.3,50,000/-	This will just help tide over impact of  inflation.
Deduction for investments u/s 80C, for individuals below age of 50 years . (LIP, PPF, EPF, GF, Pension Fund, NSC, School fees, government  securities, mediclaim insurance etc.)	Rs.1,50,000/-	This will improve capital base by improved savings.
Deduction for investments u/s 80C, for individuals above age of 50 years for better retirement plan. (LIP,PPF, EPF, GF, Pension Fund, NSC, School fees, government  securities, mediclaim insurance etc.)	Rs.2,50,000/-	“do”
Deduction for capital spend for housing loan repayment, stamp duty, registration expenses etc.	Rs.2,00,000/-	“do”
Exemption  or deduction from certain earnings: Bank interest on all type of deposits with banks, housing companies, government securities, small saving instruments, rental income from all type of  let out house properties, rental income from vacant land.	Maximum Rs.1,00,000/-	“do” Rate of earnings from such investments is very low, therefore, tax exemption will improve a bit yield on such investments made by general public.
Standard deduction against salary income.	25% of salary subject to maximum Rs.1,50,000/-	Salaried persons are also engaged in a vocation and need to spend for such vocation.
Depreciation on furniture and fixtures, equipments, vehicles owned and used by individuals earning salary income.	Furniture , house hold and office appliances @15% Vehicles @ 25% [Maximum Rs. one lakh in any year].	Depreciation will be allowed on WDV (cost – depreciation actually allowed).
Depreciation allowance on construction cost of houses used for residence and offices for own use and also in case of let out properties.	@10% of construction cost.	Depreciation will be allowed on WDV of cost of construction and no depreciation on cost of land or share in land will be allowed.
Rationalization and reduction of rate of TDS / TCS so that un-necessarily higher tax is not deducted / collected which leads into higher refunds.
Enquiry, investigation, survey, scrutiny etc. during assessments or otherwise should not be a handy tool of harassment by tax officers. This is expected from all tax authorities of Central Government.
Reasonable amounts be prescribed for cash  payments of expenses, cash receipt of loans, repayment of loans in cash, etc. in view of high inflation which we had in recent past  but old low  limits  are still continuing  in many of relevant provisions.

Indirect taxes:

Certain essential commodities and services need to be exempted for general public/ small consumers and users. Rate of indirect taxes need to be reduced by 3-4%. The reduced rates of tax can improve demand for such things and on higher volume government may not loose big revenue over a long period of time.

COST ACCOUNTANTS ROLE:

Cost accountants role should not be limited to statutory compliances ( which are considered as forced requirements) for  maintaining cost records and rendering cost audits. The team of cost accountants can help in improvement in productivity of all sort of resources and efficiency.  

COST ACCOUNTANTS can help in undertaking studies for improvement of working and spending so as to make government more productive with better cost and quality controls in utilization of men, machines, infrastructure and materials. These need to be aggressively dealt in all government departments and government undertakings.

Reduction in government spending for total volume of any product or service rendered by government can enable government to reduce public costs of all types and thus can help government in considerable reduction of taxes.