An Opportunity Well Grabbed

N R NARAYANA MURTHY,

CHAIRMAN & CHIEF MENTOR INFOSYS TECHNOLOGIES

The budget provided a unique opportunity to the finance minister. Positive macroeconomic indicators set the stage for a new impetus to the economy.

The FM did seize this and emphasised the urgency for reforms. I am impressed with the focus on the social sector, below-poverty-line category, housing, tax breaks on education and on the new national health insurance scheme.

The stress on infrastructure is also welcome. The initiative to provide government bridge-funding would make private sector participation in infrastructure viable.

Investment in airports, roads and ports will enhance productivity. Discontinuation of foreign aid and prepayment of foreign debts has sent strong signals on self-reliance.

Industry would benefit from the reduction in indirect taxes and capital gains tax. The IT industry has reasons to be happy as tax deductions under 10A/10B are being continued. Continuation of tax exemptions for M&A would allow consolidation of the industry.

Receipt of dividend has been made tax-free. But I would prefer tax exemption on dividend to be limited to Rs. 1 lakh per person, and benefits of 10A/10B to say Rs 20 crore per corporation to encourage smaller companies.

The reduction in administered interest rates and the enhancement of limits for FDl in the banking industry will make our financial sector robust. The continuing high fiscal deficit is a concern. Hopefully, the introduction of VAT, enhancement of taxes on the service sector and better tax administration, would increase revenue collection.

ASHWIN DANI,

Vice-chairman & MD, Asian Paints

Core focus to be beneficial

The government continued its focus on the infrastructure sector. The huge investment proposed for the sector through innovative funding mechanisms will stimulate growth in the coming years.

For the paints industry, the impetus given to housing will indirectly be beneficial. In particular, the continuation of the rebate on taxable income for housing loans will fuel growth for the construction sector.

The reduction of surcharge by 50 per cent on corporate tax will reduce the burden on high tax paying companies. Further, the lowering of peak customs duty from 30 per cent to 25 per cent will benefit the paints industry as considerable raw materials are imported. Overall, the budget has been good and will power growth for corporate India.

VENU SRINIVASAN,

CMD, TVS Motor Company

A challenge for investors

The Union Budget presented today makes the task of an individual investor extremely challenging. Dividend income from mutual funds was free of tax in the investors hands, subject to the mutual fund paying tax of 10% plus surcharge on the dividend payout.

While the interest rate cut of 0.5% was smaller than expected, several other major changes in the area of personal finance and investments are evident:

Dividend on equity and mutual funds, which was tax-exempt in the hands of the investor, will now attract tax at the applicable rate.

For investor in the higher tax brackets, this will have a substantial impact, though somewhat mitigated by the removal of the dividend distribution tax (Section 115 R).

The dividend payment option by the removal of the dividend distribution tax (Section 115 with Mutual Funds will no longer be the preferred route for investments and variants such as the dividend reinvestment plan will be more or less phased out.