Budget 2014: (Retro) taxing times

Updated: Jul 7 2014, 22:18pm hrs
Little did I know, after having discussed the Vodafone tax case at length in my ISB interview, that all the international professors coming down to teach us here - be it Economics or Finance, would continue to mention it as if the Vodafone case is now termed synonymous with the draconian tax laws and regulatory uncertainty in India!

So is Mr Jaitley, in his maiden budget, promising us a few of these tax reforms

Making the laws on indirect transfer only prospective (and not retrospective) from the date of introduction.

Providing further clarity on Treaty override to preferred investment jurisdictions like Mauritius (whose tax treaty is under renegotiation) and Singapore (whose tax treaty presently has a robust Limitation of Benefits clause), given that GAAR is set to kick in from 1 April 2015.

Getting fund managers to set up shop here by clarifying that they shall not be treated as Permanent Establishments and their Funds income will not be taxed in India. Wouldnt it in a way expand our tax base through the fund management fees earned here Not to forget the job opportunities for budding finance enthusiasts like me!

On the micro-economic front, how much merit does lie in making minor changes to the basic exemption limits in a country where only 3-4% of the population pays taxes Instead the super-rich tax should be introduced and for practicalitys sake, thresholds like a miniscule Rs 800 per month of tax-free transport allowance or Rs 15,000/ 25,000 of medical allowance and a minor Rs 100,000 as 80C deduction should undoubtedly be revised.

Thus, simplified tax laws by speedy implementation of DTC, GST, etc., better tax-administration and reduced protracted litigation (isnt it alarming to witness a majority of Transfer Pricing disputes of the world taking place in India given how little we contribute to the world trade!) is the need of the hour.

One could only hope for these wishful changes in the wake of BJPs much propagated ache din as the wait for Budget 2014 gets better by the day!

Radhika Tambe, Indian School of Business

NOTE: The views expressed are those of the author