Budget 2006-07

A Good Budget
Dr. Tejinder Singh Rawal
Chartered Accountant
tsrawal@tsrawal.com


INTRODUCTION
The Budget was good because it was not bad. The speech of the Finance Minister was over abruptly, and he left the viewers wondering about what was in store for them. Since the Budget did not give any news, did not levy any new taxes, it was good news. There was a marked difference between this Budget and the last year’s budget in that last year the Finance Minister had introduced measures like FBT which had far reaching effect.

The Finance Minister P. Chidambaram decided to adopt a minimalist approach while proposing changes pertaining to Direct Taxes. Correctly so, because when the engines of the economy are running in full steam fiddling with Tax Provisions just for the sake of changes is certainly not the right approach. The Finance Minister followed the American adage, ‘ When it ain’t broke, why mend it?’ Even a cursory look at the report card of the economy proves that just maintaining the status quo in a momentum driven vibrant economy is enough to generate higher revenue. For example the economy grew at an impressive rate of 7.5%, with the manufacturing sector growing at whopping 8.1%. More importantly at current market prices, gross domestic saving increased to 29.1% of GDP and rate of gross capital formation was as high as 30.1% of GDP.
On reading the provisions pertaining to Direct Taxes one finds that most of the amendments proposed aim at including the structure of the law and removing anomalies and ambiguities rather than raising more revenue. The Finance Minister knows it well by now that since the economy is buoyant and vibrant, it makes no sense to fiddle with the structure which has been delivering impressive results. The Finance Minister did not even touch the provision of section 80C, on which he had spent a considerable amount of time in his previous budget speech, where he had tried to impress the need for introduction of an EET Tax regime in respect of investments.