The Budget 2013 announcement of Investment allowance of 15% of investment for manufacturing
companies who invest total Rs.100 Cr or more in next 2 Financial Years(the period from 1-4-2013-14 to 31-3-2015) is most welcome.Accordingly, the Finance Bill,2013 proposes to insert new section 32AC titled "Investment in new plant or machinery" with effect from assessment year 2014-15
However, the Finance Minister has missed a crucial point. Absent consumer purchasing power and demand for products, no amount of tax sops can incentivise a company to invest in new plant and machinery.
Increase in IT exemption limit from Rs.2 Lakhs to Rs. 5 Lakhs would have reduced cost of collection of taxes, put money in people's hands, spurred investments by corporates and turned out cheaper and more effective than investment allowance. Increase in IT exemption limit would not only have achieved the objective behind investment allowance but would have achieved several other objectives in one stroke as detailed here http://taxanalyser.blogspot.in/2013/02/surprise-it-is-in-governments-interest.html
POLICIES WITH GOOD INTENT FAIL UNLESS THEY HAVE GOOD CONTENT ALSO
However, the Finance Minister has missed a crucial point. Absent consumer purchasing power and demand for products, no amount of tax sops can incentivise a company to invest in new plant and machinery.
Increase in IT exemption limit from Rs.2 Lakhs to Rs. 5 Lakhs would have reduced cost of collection of taxes, put money in people's hands, spurred investments by corporates and turned out cheaper and more effective than investment allowance. Increase in IT exemption limit would not only have achieved the objective behind investment allowance but would have achieved several other objectives in one stroke as detailed here http://taxanalyser.blogspot.in/2013/02/surprise-it-is-in-governments-interest.html
POLICIES WITH GOOD INTENT FAIL UNLESS THEY HAVE GOOD CONTENT ALSO
