Budget Blues

Ya! I know Budget week is long over, but it is better late than never. Dunno why, but a subject that has always appealed to me is Finance. Sometimes, I also wonder how I landed in Engineering instead of pursuing some CA or some Journalism course. I am addicted to them. But, having landed in a place as busy as DA-IICT, I just dabble on them here.
Back to business. If one has to list two highlights of the budget that have caught the eye of the storm, they would be:
1. Withdrawal Tax.
2. Fringe Benefit Tax.

Since one has heard and read a lot on the former, let me choose the latter. Rather, the rationale behind my decision is that I would be paying the Withdrawal Tax very soon, but Fringe Benefits, nope, not so soon. Before I comment, lemme tell you Fringe benefit tax (FBT) is a tax on benefits that employees receive as a result of their employment, including those benefits provided through someone other than an employer.

To quote the FM himself, The benefits that are usually enjoyed collectively by the employees and cannot be attributed to individual employees shall be taxed in the hands of the employer; transport services for workers and staff and canteen services in office or factory to be outside the tax net; the tax to be called Fringe Benefits Tax; rate to be 30 per cent on an "appropriately defined base".

This means employers giving perks other than conveyance and canteen will have to shell out a new tax to the tune of 30%. The reason for levying this tax according to P.Chidambaram, Finance Minister, India, is neither the employer nor the employee pays any tax on these benefits, which are of considerable material value.

At present, where the benefits are fully attributable to the employee they are taxed in the hands of the employee, that position will continue. In addition, the Minister has proposed that where the benefits are usually enjoyed collectively by the employees and cannot be attributed to individual employees, they shall be taxed in the hands of the employer. However, transport services for workers and staff and canteen services in an office or factory will be outside the tax net.

All these sums up to business giants in India shelling out bundles of money to the National Treasury. This means all those executives who happily wandered the world in Executive Class for meetings and conferences(I did that just a fortnight ago too ) will now have to settle for the Economic Class.

This, according to me, is a sensible decision on the part of the finmin. Tax all the benefits that provide luxuries and take care of common needs.

Coming to the budget as a whole, I feel even I would rate the budget at the same rank it averages in many forums... 7-8. This is a very superior ranking by any terms. The only thing that this budget did not speak of was Disinvestment, strictly according to me.

Actually, Chidambaram-Manmohan Singh combo raised the expectations of huge reforms. But, it was not too much to be seen in the budget. I guess the reason for this must have been the trade-off between need for political stability and a visionary budget. The Finance Minister cleverly avoided terms like disinvestment in the budget, thus appeasing the Left and also taxed the private spending sector through fringe benefit tax. He also lent a helping hand to the savings of the rising Middle Class of India by rising the Income Tax slab.

And for all those looking for reforms in privatisation and disinvestment, don't lose heart , he has announced a sale of share in large PSUs like ONGC a couple of days after budget. He announced the reason to raise funds for National Investment Fund (if I am not wrong) that would aim at fulfilling the promises of UPA in the Common Minimum Programme.

This is the perfect balance anyone could have struck and whatelse, the markets have responded wonderfully with the sensex zooming near to 7000 mark (6892.82 at the time of this post). All in all, a perfect budget for a great financial year from a visionary ministry.