The ‘golden mean’ for this Budget

The ‘golden mean’ for this Budget: The key is to strike a balance between growth, fiscal consolidation and distributive justice


“In this context there is a need for a serious review of distributive
justice. It is articulated that if the general exemption for individual income
tax is raised from ₹2.5 lakh to ₹5.0 lakh the loss of revenue would be ₹15,000
crore which the government would not be willing to lose. Furthermore, it is
argued that such an increase in the general exemption limit would put 90 per
cent of the present income tax payers out of the tax net. It is further argued
that these tax payers pay only 10 per cent of the total income tax collected.
The flip side of this argument is that there would be very large reduction in
administrative costs.
Distributive justice calls for Aristotle’s Golden Mean. As a minimum,
the general income tax exemption limit could be raised from ₹2.5 lakh to ₹3.0
lakh, with a commensurate increase for senior citizens. Again, a part of the
savings in subsidy should be used to provide a large subsidy for pulses which
is an overriding priority. There have been demands for increasing the 80C
concession, which is ₹1.5 lakh now. As a minimum the National Pension Scheme
(NPS) should be given a separate ₹50,000 exemption in addition to the 80C
exemption. Further, the NPS should be moved from the Exempt- Exempt- Tax regime
to an Exempt- Exempt- Exempt regime. To sum up the weaker segments of society
should not be forgotten.”

 Please read full article using the link provided.
My response:
22, 2016
and tax
This refers to the
article “The ‘golden mean’ for this Budget” (Business Line, January 22). The
general exemption limit for individual income tax is one of the most discussed
subject among salaried class and senior citizens before every budget. The
revelation that an upward revision of the threshold from Rs2.5 lakh to Rs5.0
lakh will have an impact of just Rs15,000 crore on the income side of the
budget, by itself should be the guiding factor for FM to be magnanimous and
allow the doubling of the limit straight away in 2016-17.
The present practice of keeping the
exemption limit low and extending several deductions for savings and ‘perks’ force
salaried class and low income group of other taxpayers to incur expenses which
they would have otherwise avoided and save money in instruments which they
would have loved to skip. The deductions benefit mainly some service providers
and ‘investment advisors’/ tax consultants. To market financial instruments
which are now dependent on exemption provisions in Income tax act, GOI should
make them attractive and competitive by allowing professional management of
funds by LIC, National Savings Organisation, Department of Posts and fund
managers of schemes like NPS.
Pension and interest income earnt by
senior citizens who are not pensioners should be fully exempt from income tax.

M G Warrier, Mumbai


Popular posts from this blog



The King of Ragas: Sankarabharanam