Ficci spells out wish list for Budget

Written by Neha Pal | Neha Pal | New Delhi | Updated: Feb 21 2012, 21:00pm hrs
In the context of the government suffering serious fiscal pressures, industry chamber Ficci expects Budget 2012-13 to initiate measures to ease the pressure. Ficci has proposed the following: Lower income-tax rate, reduction in MAT, encouragement of Indians to bring their overseas wealth back to India. The chamber also said a one-time amnesty scheme may be announced with regard to black money.

"Ficci expects the budget to be framed in the backdrop of on-going economic downturn, rapidly declining industrial growth and weak investment sentiments," said RV Kanoria, president, Ficci.

Ficci has suggested that the rate of minimum alternate tax (MAT) needs to be brought down to a reasonable level not exceeding 50% of the basic corporate tax rate.The existing rate of MAT is 18.5%, translating into almost 20% with surcharge and education cess has impacted significantly cash flow of companies with low or no taxable income. Also infrastructure companies, units in SEZs, SEZ developers and investment companies ought to be exempted from MAT.

The chamber has also encouraged consumption spending by leaving more money in the hands of the people the peak rate of 30% for individuals be made applicable over an income of R10 lakh which at present is R8 lakh.

Kanoria told FE, "Ficci believes that if our individuals are allowed to face lower tax rates at higher income level, it will incentivise people to come into the tax net, ensure higher ollection from greater compliance and encourage consumption and savings."

According to the chamber, interest earned by foreign lenders on overseas loans availed by Indian borrowers be tax exempt in all cases as was the position earlier under section 10(15)(f) or the taxation of interest payable on long term overseas debt particularly in the nature of bonds in the international markets be provided at 5% on the gross basis in all cases and not only restricted to the interest received from a notified International Debt Fund which was provided last year.

Kanoria said that this would help in making the foreign currency bond issuances commercially viable for Indian issuers more particularly those that need capital for long gestation projects. Moreover, it will also generate additional tax revenues for the government as the lower withholding tax will be applicable only for long dated (over 10 years) issuances, which in any case are not being accessed by Indian issuers presently due to high tax rates.

Ficci has asked for taxing foreign sourced dividend and capital gain income at a special rate not exceeding 10% on a continuous basis. Rajiv Kumar, secretary general, Ficci

told FE, "The government should encourage repatriation of Dividend Income, Capital Gains by overseas subsidiaries. While a large number of Indian corporate houses have been making huge investments abroad to tap the foreign markets, but owing to high tax rates in India, the profits from

such overseas business are not being repatriated back to India, said Ficci."