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 Mr. Kanu H. Doshi is a B.Com., (Bombay University) and a fellow member of the Institute of Chartered Accountants of India. After qualifying as a Chartered Accountant, Mr. Doshi was associated with Mr. S.V. Ghatalia, eminent Chartered Accountant, for a few years. He is now a Partner of Kanu Doshi Associates, Chartered Accountants, Mumbai.
Mr. Doshi, having specialised in the field of Taxation, is at present Tax Consultant to UTI and several other Mutual Funds and companies on Taxation, Company Law and Financial matters. He is also the Dean – Finance, at Welingkar Institute of Management Development & Research, Mumbai where he teaches Corporate Tax Planning and Financial Management for the Master’s Degree in Business Management. Mr. Doshi has made presentations at a number of seminars and conferences on Taxation, Investments and allied subjects arranged by several professional organisations including Association of Mutual Funds in India, the Institute of Chartered Accountants of India and UTI Institute of Capital Markets, among others.
Pfn: What is your initial reaction to the Union Budget? On a scale of 1 to 10, with 10 being the highest, how would you rate the budget?
Mr. Doshi : On a scale of 10 marks, I would give only 5 marks to this Budget.
Pfn: Please discuss the tax provisions pertaining to individuals that have been proposed in the budget?
Mr. Doshi : Tax provisions affecting individuals are as under:
- Rates of Taxes: Unchanged
- Basic rates for Individuals, HUF & all other Entities (Other than Firm & Co.)
| Income upto Rs. 50,000 |
NIL |
| Between Rs.50,001 to Rs.60,000 |
10% |
| Between Rs.60,001 to Rs.1,50,000 |
20% |
| Over Rs. 150,000 |
30% |
- Basic rate of tax for Firms and Companies also unchanged.
First Rupee of Income to be taxed @35%
- But Surcharge of 5% on Income modified.
(a) Surcharge on Individual, HUF, AOP,BOI upto taxable income of Rs. 850,000 NIL
(b) If Taxable Income exceeds Rs. 850,000 10%
(c) Aggregate incidence of tax on category (b) above (30 *10)33%
(d) Surcharge on Firms & Companies 2.5%
(e) Aggregate on (d) above (35 * 2.5) 35.875%
(f) Surcharge on Artificial Juridical Person 10%
- Incidence of Income Tax on Income of Individual/HUF:
| Income (Rs.) |
Present (Rs.) |
Proposed (Rs.) |
| 500,000 |
130,200 |
124,000 |
| 850,000 |
240,450 |
240,450 |
| 10,000,000 |
287,700 |
301,400 |
| 100,000,000 |
3,122,700 |
3,271,400 |
- Standard Deduction for Salaries
| Salary (Rs.) |
Present (Rs.) |
Proposed (Rs.) |
| Upto Rs. 150,000 |
Lower of 33% or 30,000 |
Lower of 40% or 30,000 |
| Over Rs. 150,000 but less than Rs. 300,000 |
25,000 |
30,000 |
| Over Rs. 300,000 but less than Rs. 500,000 |
20,000 |
30,000 |
| Salary over Rs. 500,000 |
Nil |
20,000 |
- Tax Rebate under section 88 (PPF, LIC, etc) continued at Rs. 70,000 + 30,000. (Rs. 1,00,000) to Individuals and HUF @ 15%.
- But with Gross Total Income below Rs. 5,00,000.
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Payments for Tuition Fees paid for two children @ Rs. 12,000 per child. Maximum Rs. 24,000 per year to the parent. Amounts actually paid to university, college, school or other educational institution for FULL TIME courses within India. Part time Courses and Coaching Classes are therefore not eligible.
- Within Rs. 70,000 limit only. It should have been additional amount.
- Dividends & Mutual Funds Income EXEMPT once again u/s 10(34) & 10(35) w.e.f assessment year 2004-05, accounting year 1.4.2003 to 31.3.2004
- Sections 115-O & 115 R also reactivated from the same date.
- Companies and Mutual Funds to pay additional tax @ 12.5% of amount distributed.
- No tax on income distribution by (US 64) and by Open ended Equity Oriented Funds for one year till 31.3.2004.
- No tax on Capital gains on US 64 units.Deduction u/s 80L now not necessary for dividends and mutual funds income.
- Larger space now in Section 80L for Bank FD Interests and Bonds Interest.
- Total eligible amount of deduction u/s 80L Rs. 12,000 + Rs. 3,000 for Government Securities
- TDS also now not necessary for these two items.
- Tax Reliefs For Senior Citizens: 65 years or more during the previous year
- Tax Rebate u/s 88B raised from Rs. 15,000 to Rs. 20,000. No tax on income of Rs. 1,53,000
- If Salary or Pension then No tax on income of Rs. 1,83,000 (because of Rs. 30,000 – Standard Deduction).
- Can seek No TDS on filing a declaration with payer of income.
- Can subscribe to Annuity Policy of LIC to get Rs. 2,500 p.m
Pfn: What in your opinion will be the net impact of these measures?
Mr. Doshi : Net impact of these measures in financial terms would be perhaps not much in as much as pluses are canceling out all the minuses. But the amount of instability this tinkering with small changes in Surcharge, Standard deduction for salaries, capital gains on equity shares etc., will lead to unproductive work and harassment
Pfn: Do you think the Finance Minister could have addressed these tax related issues in a more attractive, yet more effective, manner?
Mr. Doshi : From a person of the high caliber as Mr. Jashwant Singh much more innovative, radical and extra ordinary approach was expected and therefore all the tinkering he has carried out has come as a big let down.
A man who began with a very bold and imaginative utterances and actions by appointing Kelkar Committee, this Budget has come as an anticlimax. There are several provisions in which he has superseded Supreme Court decisions [as in section 36(1)(iii) on interest on money borrowed; excluding building from the definition of Plant, changes in TDS provisions] without a whisper in the Budget Speech all indicate his total delegation to the bureaucrats.
Pfn: From the tax perspective, which are the investment avenues that seem attractive to you now?
Mr. Doshi : From investment perspective Mutual Funds and Equity Shares emerge as the favourites largely because of total tax exemption in respect of income from them and lower interest rates on all Debt instruments. Equity and Mutual Funds units could easily yield 10% tax free returns.
Pfn: What would be your advise to tax payers who are looking at optimizing their tax outgo?
Mr. Doshi : For tax planning, tax payers should plan to earn Salary Income from concerns they control to enjoy the Standard Deduction of Rs. 20,000; should borrow money for a house and claim interest deduction of Rs. 1,50,000 to reduce their tax liability. Investors should also plan their Bank Fixed Deposits within the family members in a manner to enjoy full deduction of Rs. 12,000 under section 80L.
Pfn: Any other issue you would like to discuss.
Mr. Doshi : A very big disappointment of this Budget is the way the Finance Minister has granted exemption in respect of long term capital gain on listed equity shares. Why is the eligibility restricted to purchases only after 1st March 2003? Why not to the existing holdings? Again why the restrictions to purchase BEFORE 1st March 2004? What about purchases after 1st March 2004? Why are they not eligible? And above all, what is the significance of these two dates after 1 March 203 and before 1 March 2004? What turns on this? Why these complications where the tax payer has to keep elaborate record of purchases and separate treatment of other listed shares?
I conclude by wondering if this is at all, Mr. Jaswant Singh’s Budget or is it some subordinate junior officer’s amateur exercise?
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