Budget Overview Corner

CR Team | Thursday, 10 July 2014, 07:28 IST

Recently, the budget for the next fiscal year was announced by the government of India. While it encompassed something or the other for every individual of the country, we bring to you an overview of few industry leaders on their though and expectations from the current budget.

Below is an overview on the expectations of Manasije Mishra, CEO, Max Bupa Health Insurance.

The Union Budget is expected to focus on health to provide fresh impetus to healthcare reforms with a focus on health assurance, preventive healthcare, innovative solutions and research & development. To overcome the current industry challenges like consumer low awareness and under low penetration, my expectations from the budget are:

·         Focus on Universal Health Coverage – It is every Indian’s need to have access to an all-inclusive and quality healthcare system. UHC should be the comprehensive framework for the country’s public health planning. Innovations across all touch points will be harbinger of growth and will help us accomplish our mission of getting to universal health insurance coverage in India.

·           Thrust on Public Private Partnership (PPP) Model – We need to go beyond the RSBY module and reach out to a wider population to provide quality healthcare at a faster pace. Allocation of resources for PPP (public private partnership) to increase health insurance penetration and improve the overall healthcare scenario will be a positive move for the sector. We need a unified and universal system that is funded through a progressive taxation system.

·         Overall Push to Health Insurance – There is an impending need to make health insurance mandatory for every citizen. Owing to increased medical inflation and rise in healthcare costs, priority needs to be given to this sector. The nation should be provided with a strong, feasible and lasting healthcare financing framework to reach out to each and every citizen of India

·         Increasing the FDI limit - Insurance is a capital intensive segment. The government’s proposal of FDI hike from 26 percent to 49 percent is a welcome move. This move is expected to provide a fillip to the growth of this sector as it will have a direct positive impact on inflow of foreign investment, improve the economic sentiment and currency valuation. All this will ultimately result into better quality of healthcare and penetration of the healthcare industry. FDI hike will create a conducive environment for healthy competition and increased capital infusion.

·         Providing Fiscal Incentives – For consumers, exemption of service tax from Health Insurance premium and increasing the tax exemption slab for premium paid  will be a stimulus to the industry’s growth. The demand for Tax Exemption will give a boost to the insurance sector and increase the penetration by encouraging people to invest in health insurance.






Below is an overview on the expectations of Veerasundar Veluswamy, EVP & Chief Financial Officer, CSS Corp.

The new government, which has profound insights about the Indian economy, has the courage to take economy to a remarkable potential. The government should plan this year union budget in the right direction, which should make a positive impact.

According to me, the new government needs to focus on the following for the current fiscal:

Minimum Alternate Tax (MAT)

The rate for Minimum Alternative Tax (MAT) has steadily increased over the years (7.5 percent to 18.5 percent including surcharge & cess).  We are expecting removal of MAT for SEZ’s, 10A entities. As promised the entities should have tax exemption or the MAT rates should be reduced to 10 percent to minimize burden on corporate sector investments which are made based on assurance by Government

Advance rulings:

I wish the domestic transactions should also be brought under the scope of Advance ruling, just as the overseas transactions to provide better clarity regarding the applicability of taxes, thereby the process become more robust and time bound

Settlement of tax disputes:

Under the present structure it takes about 12-15 years to resolve a tax dispute of corporate sectors. The new government should set up an option to ease the process, mainly for negotiation and tax settlements.

This process would free up considerable bandwidth from the tax enforcement machinery & overstretched judicial system. I am sure this can save considerable resources spent by Corporate in defending their tax litigations

Streamlining of tax rates:

My budget wish list includes the reframing the tax rates.  Currently the domestic companies are levied a tax rate of 34 percent and foreign companies close to 43 percent. Government must take steps to align India's direct tax rates in line with those in ASEAN in the next five years making India internationally competitive. 

Clarity on CSR cost deduction

As per the new Companies Act 2013 the companies have to spend 2 percent of average net profits under corporate social responsibility (CSR). Though it is mentioned as mandatory, there is no specific provision under the Income Tax Act, 1961 which allows for deduction for CSR expenditure. Allowance of deduction through a specific provision will provide certainty regarding tax treatment.


Substitution of Dividend Distribution Tax (DDT) with Withholding Tax for foreign investors

In the current situation, DDT is not eligible for tax credit in the home countries of the foreign investors. If the dividend distribution tax paid is converted into withholding tax, it would help the foreign investors to claim the tax credit in their home country for the taxes paid on dividends in India without any loss of revenue to the Indian tax authorities.

Transfer Pricing – Notify Safe harbor provisions

The provisions have been introduced in the Act with retrospective effect from April 1, 2009, empowering the CBDT to notify safe harbor rules for determination of arms length price.  Although introduction of safe harbor rules is a welcome step, which brings certainty and reduces tax litigation, CBDT should revisit the transfer pricing adjustments as no rules have been prescribed by the CBDT so far.

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