Budget Expectations - Rohit Mahajan, Saviance Technologies
Rohit Mahajan, Founder & MD , Saviance Technologies, shares his expectations from the Union Budget 2011 with CXOtoday.com.
So yet another budget and therefore yet another set of expectations. Obviously at an individuals’ level personal tax rates matter the most followed by the corporates who would keep an eye on the corporate tax rates & associated tax rebates or benefits for their respective sectors.
The budget should be looked upon with a much larger perspective in terms of expected GDP rate at around 8-9%. Governments’ focus would always be on regional balanced development, coupled with investment & expenditure in priority sectors like infrastructure, education, employment as well as reducing its own expenditure keeping the various rebates & subsidies in balance.
From an IT company’s perspective belonging to a SME segment, it would wish & expect the STPI benefits are extended by at least 3 years, to enable them to grow and be competitive in the global as well as local markets. IT sectors growth in India has been exponential in the past 2 decades and at present this sector can boast of all magnitude of companies from matured to start ups, each with different needs & aspirations.
Most of the start-ups and growing IT/ITES companies would wish encouragement for their on-shore and off-shore operations with simpler regulations & compliances. Similarly within the country itself, just like the proposed GST, such companies would want the FM to bring uniformity in the state controlled laws viz. Labour Laws which are different for each states. Complying with each State’s laws & regulations severely hamper the growth & reach of such smaller companies (across all sectors) & more importantly due to the incremental cost of such compliances, impacting their margins & in turn discourages them to venture in to such projects.
Due to growing economy in our country the compensation packages across almost all the industries, particularly in the IT/ITES or similar growth oriented sectors, have been increasing in the range of 20%-40% per annum over a period of 3 to 5 years, particularly relevant to the young population of our country. Therefore the spending pattern of such population & overall in our country has increased manifold due to the growing economy directly impacting through increased compensation packages. There is more cash available with the taxpaying individuals who normally spend or even over-spend on retail, entertainment, auto, etc. by passing essential savings.
However, over the past few years there has been very little proportionate increase in promoting the savings by the respective budgets. Till date an individual can invest only up to Rs 1 lac plus a few in designated infra funds to be locked for a longer period plus a housing interest of up to Rs 1.50 lacs. The budget should increase the tax savings (under 80C under various instruments viz. LIC, PF/PPF) limit up to at least Rs 3 lacs from the present out dated Rs 1 lacs limits. This will enable a potential tax savings of incremental Rs 0.67 lacs (assuming a 30% tax slab) however would pull in a potential incremental of Rs 1.33 lacs within the savings instruments.
Increasing the tax saving limits would serve a double purpose. Firstly it will promote tax savings in specified instruments like LIC, PF, specified bonds, housing repayments, etc. Secondly due to lesser disposable income in hand, at a macro-economic level, in the overall economy, it could help in easing out the inflationary concerns up to a considerable extent.
IT company (SME) wish list for the budget could include:
1. Extension of STPI benefits
2. Uniformity in various laws viz. labour laws across all the states in the country
3. Higher Tax Savings – up to Rs 3 lacs
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