Savings accounts may escape withdrawal tax

Chidambaram hints at finetuning fringe benefit tax.

Finance Minister P Chidambaram today hinted at changes in the cash withdrawal tax and exempting savings bank accounts from its purview.

"I am sensitive to the concerns expressed by members (of Parliament). No tax has been imposed. It has only been proposed. Someone referred to the savings account. You will get good news when we discuss the Finance Bill," Chidambaram told the Lok Sabha at the end of a 16- hour discussion on the Budget for 2005-06. The minister had proposed a 0.1 per cent tax on cash withdrawals of Rs 10,000 and above.

He said the Prime Minister had asked him the reason for the huge uproar in the House when he had proposed it during the Budget presentation. "I told the Prime Minister, Sir, I was applying yours and mine austere standards when I had made the proposal."

In a reference to other tax proposals, including the fringe benefit tax, he said: "I have not dealt with any aspect of the Finance Bill. That does not mean I am not sensitive to the concerns expressed by you. I will deal with this in greater details when we take up the Bill."

After the minister's speech, the Lok Sabha passed the vote-on-account of Rs 1,69,269 crore for government expenditure for the first two months of 2005-06.

Stating that the focus of his Budget was on growth, investment and stability, he said if growth dipped, there would not be any money to implement programmes.

"The primary emphasis would be on growth but it should be stable and sustainable," he said adding that if this was achieved, there would be more equity at the end of the government's five-year tenure.

He also said a balance had to be struck between taxes and borrowings, taxes and services, lending rates and borrowing rates, Plan and non-Plan expenditure, and capital and revenue expenditure.

Observing that non-food credit had grown, he said investment had picked sharply up after two-and-a-half years of "investment drought".

He said the key to agriculture development was the flow of credit, which was stepped up to Rs 1,05,000 crore in 2004-05 and that, the government was confident of exceeding this target to touch the Rs 1,08,000 crore mark by March-end. The government has set a target of Rs 1,40,000 crore for the next year.

Stating that his tax proposals would leave more money in a housewife's purse, Chidambaram said those who had money should spend 60 per cent of it and save 40 per cent since consumption drove production and growth.

Referring to inflation being at 8.7 per cent in August 2004, he said the government would control it and keep it below 5 per cent.

Chidambaram said the Prime Minister had written to all ministers for converting outlays for the current year into outcomes. He said a detailed statement of physical outcomes of various ministries would be presented to Parliament during this session.

Replying to the criticism that the Bharat Nirman goals were unachievable, he said the government proposed to implement it as a business plan and if states joined the efforts, the goals could be achieved.

On the National Highway Development Project, he claimed that on an average, 7.73 km were being built since the government assumed office compared with the average of 1.86 km during the National Democratic Alliance rule.

He denied the small-scale industry was dying and said that the government would bring a Small and Medium Scale Enterprises Development Bill during the current session of Parliament.

The finance minister spelt out seven areas where cooperation of states would be required. While pitching for better governance, he said central funds should be utilised for programmes they were allocated for, and not diverted.

He also called upon states to implement value-added tax and amend the Agriculture Produce Marketing Committee Act besides implementing the recommendations of the Vaidyanathan committee on cooperative banks.

The finance minister also asked states to monitor the lending rates of cooperative banks so that they are brought down at least to the level of public sector banks. He said self-help groups should be strengthened while adding that the government was planning to set up a regulator for micro-finance.

---

FMSpeak

FRINGE BENEFIT TAX
I am sensitive to the concerns expressed by MPs

INVESTMENTS
If growth is stable, there will be far more equity at the end of the government's tenure

TAXATION
The Budget will leave more money in housewives' purses

INFLATION
We will control it below the 5 per cent level

STATES
Implement VAT, revamp co-op banks and agri marketing set up