Budget ’09: Dear FM, could you please be our Santa?

The common man and woman have many expectations from the finance minister every time the budget comes up and hence we dutifully put forth our expectations and hope Mr. Finance Minister acts like a good Santa and makes us happy.

An open letter from WE the people of India, to the Honorable Finance Minister on the eve of Budget 2009.

Its budget time once again, and all the leading dailies are flush with industry leaders and business pundits rolling out list after list of what they expect the finance minister to deliver when he presents the latest budget of the Union of India.

But what about the actual people who stood in all those long queues to vote for him? (Some even against him!). Sounds clichéd but, the common man and woman have many expectations from the finance minister every time the budget comes up and hence we dutifully put forth our expectations and hope Mr. Finance Minister acts like a good Santa and makes us happy.

Honorable Finance Minister, on the first week July we request you to:

From the Self-employed & Small Businesses

• 1. Reduce Corporate Income Tax Rate. This has not been altered from the effective rate of 33% for so long.

  2. Service Tax Rate reduction. Having started at 5%, service tax had reached 12.36% and is now at 10.3%. Why not increase the services under cover and reduce the rate back to 5%?

  3. Give more support for innovative entrepreneurial ventures in the form of reduced interest rate from banks and tax holidays. The benefit should not just be in the lines of support to software industry but for other innovative areas too.

  4. Double the limit for self assessment for Income Tax. The present Rs.40 L is too low with the inflated price of goods. Rs.1 crore will be a reasonable limit at today’s prices. This saves time, money and strain for businesses and the self-employed.

  5. Expedite the Common Goods & Service Tax (GST) regime implementation. This will help business from filing many forms and saves time. Also the mechanism will add many more tax payers to the system.

  6. Extend limit of support to MSMEs (Micro, Small and Medium Scale Enterprises) for Credit Guarantee and make the process more accessible. Support for quality certifications, patent registration and bank guarantee for exports need to be extended in limits.

  7. Liberalise archaic labour laws please. We are sure you too would be bored with them!

From the Salaried Class.

1. We wish for higher and more reasonable slabs for our income tax. Think of starting the slab from Rs.3L (Rs.25,000/- per month) income. And let’s forget the Rs.10 L highest slab – it is too less at today’s income levels. Why not make it Rs. 50 L? Suggested slabs – 3L to 7.5 L – 10%, 7.5 L to 25 L – 20%, 25 L to 50 L – 30%, above Rs. 50 L – additional surcharge 10% on 30%.

2. Can you look at removing/rationalizing the fringe benefit tax. Today even the telephone bills, sales promotion, travel and hotel expenses come under FBT. Highly unreasonable and pinching on our pocket.

3. Clarity on LTA (The Supreme Court decision that companies do not have to verify bills has left us in a limbo on how and when and how much to claim as LTA)

4. HRA claim limits to be increased from 40% of basic (50% in Metros). With the rents having gone high and mostly stayed high, the HRA limits are not enough to cover actual rent paid. This leads to lesser claim for tax free income under HRA.

5. Have an additional slab for income tax reduction for investment in Infrastructure. Only this time let it be in mutual funds and not low yield bonds.

6. Rs. 1 L exemption under Sec 80C is actually useless. Most salaried class employees’ contribution to EPF is over Rs.60K per year. We are all serving home loans and pay hefty tuition fees for children. These items themselves will be much over Rs.1 L . So where is the incentive to invest in ELSS (Equity Linked Saving Schemes) or ULIPs (Unit Linked Savings Plans). Actually this can be increased to Rs. 5 L to encourage more equity participation from retail (we the people!) investors.

From the Home ministers of Indian Families – The Housewife

1. New Pension Plan – Give tax benefits – Change from EET (exempt, exempt, tax) to EEE (exempt, exempt, exempt). Being EET the plan only gives tax deferment – i.e. instead of today, I pay tax later. Other pension related plans like the EPF or the PPF are of the EEE nature. Also the New Pension Plan requires clarity in the quantum of pension annuities.

2. Reduce duties on white goods. At 8% on most of the goods and 4% on the rest, there is definitely scope to support the buyer by reducing the rates. We are still waiting for the new fridge, washing machine, microwave and….!

3. Reforms/ control related to children’s school education. When there is regulation and control on fees charged by engineering colleges, why is there none on schools? Some schools today charge more than engineering colleges.

4. Support for Electric Two Wheeler industry. The recent models have been found to be trendy, convenient, cost effective to run and safe at the same time. A project to provide (micro level) carbon credits may be created at the Government level. The electric vehicle industry is in a nascent stage is now dependent on housewives and the teenagers as users. Support from the government at this crucial time will help this industry to develop solutions for the general public in the form of larger vehicles and for other demanding users. This industry will help the nation and the world as a whole to be less dependent on carbon based fuels.

5. With a low cost and working broad band connection, many entertainment (games, video and movie on demand) and income sources (home based medical transcription, translation, and similar BPO activities; stock market investing, financial research & analysis; internet based market research, content research, etc.) open up for a housewife. Will the budget support this industry?

From the Students

1. Educational Loan norms changed / modified. Now it is so lenient, that many students do not pay up properly. Being a politically sensitive segment (like agriculture), collection activity is not streamlined. Though the lending terms are very supportive (start paying after getting a job or 6 months after graduation whichever is earlier). Many students have not adhered to the schedule. This turns away banks from lending, which in turn hurts the genuine students.

2. Start more Science & Technology Entrepreneur Parks & Incubation Centers to kindle and maintain the entrepreneurial bug. Using STEPs students then create more jobs instead of seeking one. These parks support business at the ideation stage with infrastructure and mentorship (expert guides). This will help graduating students to test and fine tune their products / business ideas with guidance and support. This reduced the risk of failure and stimulates more students to follow their dreams to create a business empire of their own.

From the golden oldies – retired/senior citizens.

1. Apart from senior citizens (Rs. 1.8 L slab for no income tax), why not have a separate slab for pensioners without any other income. Even people who have taken VRS (at an earlier age) but without a job or other sources of income should be in this slab. The slab for senior citizens and pensioners can start from the Rs.7.5 L slab suggested earlier. (Relief to many current pensioners and a good vote bank too).

2. Forms for getting TDS exemption to be simplified. Any simple photo ID card should actually be able to eliminate the need for any of the forms.

3. There is a discrepancy between the age for the senior citizen between the IT department (65 years) and other Government departments (60 years). If official retirement age is 60, people become pensioners when they turn 60, but that they should continue to pay high taxes till they turn 65 is an anomaly, if not unjust. If the Railways can give concessions from the age of 60, why not the Income Tax department tax us lesser from age 60?

Dear Sir, we sincerely hope that you consider our wishes and take the appropriate action during your speech on the first week of July 2009. As citizens of this nation we wish to be part of the growth story and the above wishes would be great morale boosters in this endeavour.

Signed – the common man and woman of India!