The tax slab for men and women both has been merged. The basic threshold limit increased from Rs. 1.8 lakh to Rs. 2 lakh for 10% rate and from Rs. 8 lakh to Rs. 10 Lakh for 30% rate. The investor shall get marginal savings from such changes. The savings can be in the range of Rs. 1,030 to Rs.22,660.
Rajiv Gandhi Equity Saving Scheme has been proposed. This is primarily done to boost equity investment. Due to its lack of outreach the purpose of this investment seems to be defeated. Individuals with income above Rs. 10 Lakh should have also been included. Interest from savings account upto an amount of Rs. 10,000 is exempted from tax. Individual with highest tax bracket will be better off as the effective yield shall be good as compared against FD.
Service tax has been increased to 12% – effectively 12.36% is a cause for concern. It will not only affect the consumers but also the industry shall be affected. Prices of essential as well as other services shall rise which is already reeling under inflationary pressure. The ambit of service tax has been widened and redefined. Rise in service tax shall have severe impact on multiple sectors.
Doubling of custom duty for gold shall have a severe impact on the prices of gold. India is the largest importer of gold and such a move shall lead to smuggling of gold and thriving of unorganized sectors for gold with illegal importing. The demand of gold will be hampered too and the buyers may shift from gold coins to silver coins. The price rise shall be passed on to the consumers.
The Budget has failed to bring big-bang reforms. The budget has been undirected even though the focus was development of Infrastructure. Several woes were not addressed like depreciation of rupee which was almost 12.4% against dollar on month-to month basis. The budget in fact has failed the consumer expectation and has focused on more domestic driven economy. It has focused on reducing Import, increasing savings and investment. The focus has been to reduce fiscal deficit and generate more revenue at the cost of the consumers.
This is a guest post by Mr. Mitesh Agarwal, BBA & MBA (Finance). Currently working as Financial Analyst with a leading firm in Mumbai.