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Income Tax exemption threshold may go up in interim budget

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Modi Jaitley

New Delhi, Jan 14 : With middle-class apathy on the rise, Finance Minister Arun Jaitley may double the income tax exemption threshold for the salaried from the present Rs 2.5 lakhs to Rs 5 lakhs while also reinstating tax-free status for medical expenses and transport allowance, providing some relief to the section already under strain since demonetisation.

Though propriety demands that not too many policy changes should be made in a vote on account budget, the BJP government is apprehensive of the possibility of a middle-class backlash in the impending general elections.

Hence the plan to streamline tax slabs, which in any case are in consonance with the coming Direct Tax Code, government sources told IANS.

The problem that may manifest itself is that the Union Budget will precede the unveiling of the Direct Tax Code Report on February 28. Tinkering with the tax rates before the release of the report will make it contentious.

The new Direct Tax Code will try to bring more assessees into the tax net, make the system more equitable for different classes of taxpayers, make businesses more competitive by lowering the corporate tax rate and phase out the remaining tax exemptions that lead to litigation. It will also redefine key concepts such as income and scope of taxation

At the moment, income up to Rs 2.5 lakh is exempt from personal income tax. Income between Rs 2.5-5 lakh attracts 5 per cent tax (see table), while that between Rs 5-10 lakh is levied with 20 per cent tax. Income above Rs 10 lakh is taxed at 30 per cent. Rs 5 lakh exemption is only applicable to individuals of over 80 years.

Also, tax free medical expenses up to Rs 15,000 and transport allowance up to Rs 19,200 per annum has been replaced with a Rs 20,000 standard deduction for those earning above Rs 5 lakh last year. This will benefit tax payers to the tune of Rs 12,500 annually which is not much but can be viewed as a sentiment buster.

A fatigued BJP dispensation realises that as the incumbent it will have to fight off varied challenges.

With acute farm distress, middle class backlash, massive spike in unemployment data and rising Dalit anger taking its toll on the BJP, it would like to unleash a slew of course correctives. The 10 percent quota for upper castes was part of this process to appease vote banks. But this was an executive decision adopted by parliament, tinkering with the tax structure similarly is a legislative decision.

Income Tax Slabs for Individual Tax Payers & HUF (Less Than 60 Years Old) for FY 2018-19 –

Income Tax Slabs Tax Rate

Income up to Rs 2,50,000* No tax

Income from Rs 2,50,000 – Rs 5,00,000 5%

Income from Rs 5,00,000 – 10,00,000 20%

Income more than Rs 10,00,000 30%

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Range-bound: Rupee caught between higher inflows, swelling reserves

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Mumbai, July 11 : The Indian rupee has been caught in a flux of higher FDI inflows and swelling foreign exchange reserves, thereby restricting its future movement around the Rs 75 per US dollar mark.

Analysts opined that the rupee is caught between higher foreign inflows and the Reserve Bank of India”s efforts to shore up reserves.

Even a lower import bill and stable exports do not seem enough for the rupee to break free from its current range.

“With the RBI continually increasing its forex reserves and investment in dollar via forward contracts, a floor seems to be place below Rs 75 levels on spot,” Anindya Banerjee, DVP, Currency and Rates, Kotak Securities, told IANS.

“The upside is also capped due to improving sentiments in the equity and bond markets. All in all, we are looking at a range of Rs 74.80 to Rs 75.80 over the next few weeks, with volatility remaining at a low.”

According to Sajal Gupta, Head, Forex and Rates, Edelweiss Securities: “The rupee appreciated swiftly to Rs 74.52 per dollar due to large FDI flows and rising equity markets and then weakened to Rs 75.20 on the back of the RBI”s efforts to mop up dollars to shore up reserves which stand at a record high of $513 billion dollars.”

“India is expected to see a Balance of Payment surplus of $60 billion this year due to lower crude price and falling imports. It is a big surprise that amid such strong FDI inflows, the rupee is still not strengthening as the RBI is mopping up all dollars to the reserves.”

Besides, he pointed out that imports have slowed down at a faster pace as domestic economy looks weaker compared with global markets.

Presently, India”s foreign exchange reserves increased by $6.416 billion during the week ended July 3.

The reserves grew to $513.254 billion from $506.838 billion reported for the week ended June 26.

Last month, official data showed India posted a marginal current account surplus in Q4FY20 on the back of a lower trade deficit, along with higher remittances, and an increase in investment flows.

The current account is the net difference between inflows and outflows of foreign currencies.

On the quarterly basis, the current account balance recorded a marginal surplus of $0.6 billion (0.1 per cent of GDP) in Q4 of 2019-20 as against a deficit of $4.6 billion (0.7 per cent of GDP) in Q4 of 2018-19 and $2.6 billion (0.4 per cent of GDP) in the preceding quarter of Q3 of FY20.

At present, India”s exports are steadily moving towards normalcy.

“Going ahead, we expect the caution surrounding the impact and duration of the novel coronavirus may keep all riskier assets on an edge, including the rupee. We see USD/INR trading between Rs 74.75-Rs 75.75,” said Rahul Gupta, Head of Research — Currency, Emkay Global Financial Services.

“Only heavy inflows may cap the upside in USD/INR spot. We recommend exporters to wait for better hedging levels as we expect the spot to appreciate; however, they can start hedging their receivables once USD/INR spot falls below Rs 75.”

(Rohit Vaid can be contacted at [email protected])

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Did Vikas Dubey reach Ujjain himself or was he brought there?

After Madhya Pradesh Home Minister Narottam Mishra announced his arrest, the Congress is raising questions.

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Vikas Dubey.

Ujjain/Bhopal, July 9 : After gangster Vikas Dubey, who had been on the run for the last seven days, was arrested in Madhya Pradesh’s Ujjain on Thursday morning, a controversy erupted over how he managed to reach the temple town. Questions have been raised whether he came on his own or was brought here, and also as to how he manage to cross many districts of Uttar Pradesh without being recognised.

Dubey, accused of killing eight police men in Bikaru village of Kanpur, was constantly changing his location for the past seven days. Though the Uttar Pradesh Police continued to raid various possible locations, he still reached Ujjain, dodging the police of several districts of UP and Madhya Pradesh.

Dubey, whose in-laws are also from Madhya Pradesh, has been coming to Ujjain every year. His mother Sarala Devi had admitted that he used to go to Ujjain every year to offer prayers at Mahakaal temple. It is being said that he reached Ujjain by road and also offered prayers at the temple on Thursday morning.

After Madhya Pradesh Home Minister Narottam Mishra announced his arrest, the Congress is raising questions.

Police sources said that Dubey came to Ujjain in a car from Uttar Pradesh and he also stopped at a residence of a person known to him in Nagjhiri area where he stayed for some time. He reached the temple for ”darshan” on Thursday morning. However, the security guards posted at the temple got suspicious and stopped him for questioning. He reportedly had a brief scuffle with the security guards who then informed the police post. Dubey was later arrested there.

But if Dubey did actually come to Ujjain by road, then he must have covered a distance of about 200 km in Madhya Pradesh seemingly without attracting police attention. Before entering Madhya Pradesh, he must have passed through several districts of Uttar Pradesh as well. Apprehension has been expressed that he reached Ujjain via Rajasthan”s Kota. The police is investigating this also.

Mishra said that Dubey came to Ujjain driving his own vehicle. “Two of his accomplices — Bittu and Suresh have also been arrested. The entire state police was on alert after the Kanpur incident. The surveillance was carried out and finally MP police succeeded in arresting him.”

However, questioning the government, Congress Rajya Sabha member and former Chief Minister Digvijaya Singh said: “It looks like a sponsored surrender to avoid an encounter by the Uttar Pradesh Police. My information is that this has been possible with the courtesy of a senior leader of Madhya Pradesh BJP.”

However, it was not immediately known whether Dubey reached Ujjain on Thursday morning itself or had come a day before.

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Xi Jinping: The Chinese Hitler leading PRC to disaster

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Chinese President Xi Jinping is unfairly using early recovery from pandemic for external encroachment and internal consolidation.Chinese aggression in all domains will be rebuffed globally, led by powers suffering the most.

Xi Jinping”s over ambition and lust for power has been emboldened by mute tolerance in CPC and PRC. His adventurism is leading China to disaster, unless the Chinese reins its leadership.Backdrop

History is full of examples whenever the ambition of any autocrat grew beyond global tolerance, he became responsible for collapse of his regime, resulting in disaster of the country and population, which emboldened him by mute tolerance. Today, despite facing unprecedented global anger for being the originator of novel coronavirus, the aggressiveness of Chinese leadership on multiple fronts to suppress internal and external dissent has pushed the world against itself. Xi Jinping”s unfair adventurism for incremental encroachment to all his ever increasing claim areas in continental and maritime domain, at a time when other countries are suffering from most dangerous pandemic of the century, with death toll rising every day, is amounting to inhuman aggression, junking all morals, international conventions, rules, treaties and forcing the world to reluctantly react against his regime.

Xi Jinping”s Overambition

Xi started his term by dream-selling to pull China out of poverty line by 2020. Internationally he projected himself as the crusader for world peace and climate change(despite junking the ruling of PCA and violating UNCLOS), with a resolve to push through Belt and Road Initiative (BRI) to fulfil Chinese dream of rejuvenation, after century of humiliation. As ”Chairman of Everything” he indirectly declared himself as the tallest leader on the planet, got himself re-elected for second term and did everything to make himself great, under the banner of ”Making China Great”. He assumed that the world will accept him as tallest autocratic leader, as Chinese people accepted him, without worthwhile checks and balances. His anti-corruption drive systematically eliminated the entire dissenting elements and all his possible competitors.

China: Boiling Pressure Cooker with no Safety Valve

Xi took over in 2012 as President with 7.9 per cent GDP growth and led China to economic downslide thereafter. With failing BRI, mishandling of COVID-19, there is no worthwhile achievement to his credit except that he managed to eliminate dissenting elements. His critiques in the CPC feel that his real achievements do not match his elevation to the status of MaoZedang, which has created some disgruntled elements/lobbies, who are still under check due to his comprehensive surveillance, because disagreeing with Xi ”The Core” is anti-national and leads to jail.

It is quite clear to Xi Jinping and CPC, that if he fails economically, and the educated people of China don”t get a decent life, they may not tolerate his autocracy, having no worthwhile grievance redressal mechanism and the democratic winds will start flowing from Hong Kong and Taiwan. The legal system stands hostage to party leadership justifies the boiling pot theory; hence the biggest threat to China comes from within. Some of his actions like laying restrictions on religious practices on Uyghurs” and their forced abortions in Xinjiang, use of force in implementing draconian National Security Law in Hongkong are too risky. The strict censorship of media and internet, electronic isolation, social engineering to bring societal changes are unpopular steps to minimize unrests.

Why over-ambitious Xi Opening Multiple Fronts?

The viability of ”Implosion theory” is feared to be a reality by a totalitarian regime; hence a dose of nationalism nurtured through external aggression, suits Xi Jinping”s hold on power, besides making best use of early recovery from COVID-19 in comparison to his competitors. China has unfairly used it as an opportunity to assert itself on multiple fronts, including India-China land borders to scrumptiously encroach some area not supposed to be held, as per the mutually agreed CBMs, where both sides were free to patrol. This is a sequel to the Chinese adventurism in Indo-Pacific at multiple places in South and East China sea with greater assertion against other claimants like Vietnam, Indonesia and Philippines. The rationale of China being over assertive at the time of pandemic comes from Sun Tzu”s thoughts of ”Strike adversary when it”s weak and preserve yourself when it is strong”. China is therefore speeding up its Incremental Encroachment Strategy in South China Sea as well as LAC.

The strategic calculations seem to be ambitious, as in authoritarian state, the sycophancy prevents leaders getting objective advices from subordinate strategists. When Hitler launched offensive in Russia in World War II, beyond its logistics limit for sustaining in winters, he overruled advices of subordinates and brought Germany to disaster.

In case of China, Xi emboldened by modernised arsenal and extensive exercises and propaganda is planning to take on some of the most experienced troops, despite not having a single pilot in the PLA with any operational experience. While its density of arsenal in South China Sea and Eastern Sea board looks impressive, but its vulnerability of long Sea lanes of Communications in Malacca strait and the Indian Ocean, coupled with blockading of its naval bases by hostile navies can draw out PLA out of its comfort zone, where it is no match to combined navies of hostile countries, including the US spending four to five times of China on defence over so many decades. The strong military posturing by navies from the US, Australia, Japan, and regional claimants of South China Sea enough for deterrence and accidental engagement, because an all-out war is recipe for mutually assured destruction (MAD), which even Beijing cannot afford given the fact that it faces potent nuclear and space power.

Contours of Undeclared Third World War

The forced occupation of landmass by China in terms of features in South China Sea claimed by others junking PCA ruling, has graduated to skirmishes. The dimensions of warfare to include economic war, cyber and information war, biological war by asymmetrical impact of COVID-19, resulting many more deaths than all world wars put together, large scale military posturing in Indo-Pacific and physical land grab offensive by China in Ladakh, using pandemic as a weapon.

The possible alliances also seem to be on the horizon seemingly China, Pakistan and North Korea taking on competitors of China and everyone else in the world not agreeing to Chinese narrative. The current global situation has every element of a World War, except that the dimension, instruments and modalities have changed from conventional war, and the war has not been ”Formally Declared”; hence it may well be called as ”Undeclared Third World War with Changed Instruments and dimensions”. The world has already entered in preparatory phase of it, without recognising it to be so.

Pattern of Global Reaction

In continental domain its land grab efforts in Ladakh have been rebutted by India, which honoured its 20 fallen soldiers with state honours, whereas the PLA chose to hide its fallen soldiers much more in number, creating another wave of anger amongst the PLA veterans. The mutual disengagement is being viewed with suspicion as PLA demonstrated its unprofessionalism to the world by using barbaric tools for attacking Indian soldiers, junking the CBMs and yet bought heavy casualties. India is certainly not going to take mini disengagement gestures for granted, unless PLA withdraws to pre-standoff positions; hence will be ready to respond with all options on the table.

In maritime front, the US has already demonstrated strong military posturing. The ASEAN, which was muted by China so far, by consolation of draft Code of Conduct and purse diplomacy, combined with coercion due to large power asymmetry, seems emboldened to talk about UNCLOS, demanding fair share of EEZ of affected countries. Taiwan, emboldened by national sentiments, leadership, the US support through Taiwan Relation Act and NDAA has started identifying itself as a nation, junking ”One country Two systems”, ready to defend itself should a situation arise, besides granting asylum to willing people from Hong Kong. Japan is looking for strengthening its defence capabilities. Some more adventurism by North Korea may see Japan going nuclear in future. Xi Jinping”s ambition has costed global loss of trust and some important markets for China. Russia and Iran have a forced marriage with China, due to sanctions from the West, but given the geo-strategic situation, playing neutral, along with sale of weaponry/oil may be the best option for them.

China may be able to implement the draconian National Security Act in Hong Kong, but global reaction is unavoidable. China has to bear the cost of demise of its financial hub, with many countries inclined for economic distancing, shifting FDI, banning concessions granted to Hong Kong, granting citizenship to those willing to exit, thus creating ideal conditions for urban insurgency in times to come, besides the rural insurgency of Xinjiang. Suddenly the voices in support of Uighurs and Tibetans and questions on ”One China Policy” have started becoming active, notwithstanding the threats of Chinese wolf warrior diplomats.

Future of China under over-ambitious Xi

Xi Jinping”s Chinese dream of ”Rejuvenation” and his aim of ”Prosperous Developed Society” with a ”War Winning Modern PLA” by 2050 was achievable, had he not harboured dictatorial over ambition to achieve these aims and dislodge the US as a superpower, making unfair use of pandemic. In fact, the first major conversion of features in South China Sea to military bases took place during the last US elections, with no big bang action from the US. This emboldened Xi to use pandemic unfairly to fulfil all his aims before time, without having capacity to protect its global shipping outside its eastern seaboard. With the kind of global anger he has generated against his regime, the lesson of diversification of global factory for the world, along with need of economic distancing from China has become evident. Xi has thus pushed his country on a path to disaster unless Chinese people wake up and shake up the CCP and rein their leadership to protect their dreams.

Takeaway for India

From the Indian perspective, this is the time when Beijing is under maximum external and internal pressure since last five decades. If Beijing continues with its high headedness, it will invite further pressure. This may well be the time to push through border settlement or demarcation of LAC as the political cost of resolving the border/LAC may be lesser than an active front with India. India should not settle down with token disengagement because unless the LAC is demarcated the standoffs will continue. For the time being India should not blink at the borders.

(Major General S. B. Asthana, SM, VSM Veteran is the Chief Instructor, United Service Institution of India. The views expressed here are his personal views.)

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