New Delhi: Government may want to negate four years of policy paralysis with its last budget at the office. Finance Minister P. Chidambaram, who was ushered into the finance ministry to initiate the reform process, would like to strike a balance between populism and reformism. It is expected that the Union Budget would like to cut the fiscal deficit, which stands at a disturbing 5.8 per cent of the GDP. Government is expected to bring the deficit below the 5 per cent level to boost investment sentiments. To do that it is expected that it would withdraw subsidies from petroleum products. It may levy extra taxes from the corporate and the super-rich to bridge the gap. The government may take the following measures to shore up economic growth that is tottering at 5-6 per cent.
Indirect taxes rate may be kept same
The service tax and excise duty that was increased last year after many years of coalition propelled policy paralysis may be kept the same. Much to the dismay of the general public, the government may try to do away with or ease of provisions for exemptions and concessions.
Custom duty in crude oil import may be increased
The basic customs duty on crude may be hiked from 0 percent currently to 5 percent. This may increase the prices of petroleum in the country. This move would be beneficial for the economy; however, it may not amuse commoners.
Surcharge on rich people
The government may impose a 10 per cent surcharge on the super-rich , who account for 1 per cent of tax payers, but pay 63 per cent of total income taxes. This will likely translate into a 17 per cent year-on-year increase in total personal income tax collections.
The government is likely to impose a temporary 10 percent tax on annual dividend income exceeding Rs 15 lakh. Currently, shareholder dividend is not taxable.
Corporate tax: Surcharge rate may be lowered, minimum alternate tax (MAT) may be hiked.