'The Budget is clearly anti-middle class'

K Ganesh

As far as taxation for salaried employees is concerned, the surcharge has increased from 2 per cent to 5 per cent. Also Sec bb benefits have been curtailed if you are in the higher income bracket of more than Rs 500,000 .You will need to pay more tax.

Taxation on dividend is a negative move. Dividend was taxed earlier at company level or at mutual fund level at 10 per cent and then it was distributed to investor. At the, investor level it was tax free. But now, this will be taxed at the investor/individual level as per his tax bracket.

On perks, the income tax implication is the same as last year. I do not see any new impact on perks. The Budget has no specific impact on the call center business. But reduction in deduction 100 per cent to 90 per cent of sec 10 A 10 B benefits will affect all companies in call center & IT that enjoy tax holiday.

It will be extremely difficult to hire if the employee has to be paid three years salary on firing. This will give raise to more unemployement as companies just cannot afford to hire as before & will find ways to automate or eliminate or even outsource to other countries the work. This will mean instead of India being the destination for outsourced work it will start sending work outside.

To give greater impetus to the IT industry, the proposed Sec 10A, 10B amendment has to be removed. IT stocks are down perhaps due to this reason more than anything else. After September 11, software exports & ITES sector are affected. We need some concessions rather than such retrogade steps.

The IT sector will hopeully rejuvanate in two or three quarters.

The Budget is clearly anti-middle class. I am not able to see otherwise. In the current scenario, the best investment options available to the middle class would depend a lot on your risk/return profile. But with inflation rates being low , debt schemes & bonds offer good return better than what is available in most developed countries.

With changes in Section 88, it means you will not be able to invest in tax saving options like earlier. This means you will need to pay the tax first & invest only what is available post tax, whereas earlier you could have invested the entire amount in tax saving instruments.

K Ganesh is CEO, CustomerAsset.

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