The Budget proposal to tax the withdrawal from banks at 0.1% where the withdrawal exceeds Rs 10000 on a single day, is the most illogical and irrational provision of the Finance Bill 2005.

In my opinion, this provision is unconstitutional too. That one would be required to pay tax on withdrawal from one's own bank account defies all logics. If an assessee does not deposit money in bank, but retains it with him, there is no tax, since there is no withdrawal; however an assessee who withdraws money from bank when he needs money, irrespective of the purpose for which the money would be put to use, is put to tax!

The argument of the Finance Minister and the Prime Minister that this is a small amount to pay is not tenable, since it is not the question of the rate, but of the levy of tax itself is not justified by any stretch of imagination. The Government has failed to curb the free flow of money in the parallel economy, and this tax is an attempt to shift the burden on the legitimate transactions.

The proposal could be easily defeated by keeping multiple bank accounts and by withdrawing less than Rs 10,000 each day from all these accounts. And it is an open secret that the black money is not to be found in bank accounts, but lies elsewhere. This proposal, if passed, may not hold the test of jurisprudence, and may be quashed by the Apex Court.

The proposals to rationalize the personal taxation are welcome. Tax rates have been reduced to a considerable extent, and this is a great reason to cheer. However, the abolition of Standard Deduction, which was a special concession given to the salary-earners, in order to compensate for the non-deductible expenses, would mean that the level-playing will no longer be available to the salary earners. Moreover, the proposed attempt to put to tax fringe benefits in the hands of the employers is counter-productive, and would discourage such welfare expenditure by the employers.

Reduction of the rate of corporate taxation is a welcome step and is in tune with the recommendations of Kelkar Committee. The provision of set-off of Minimum Alternate Tax (MAT) under section 115JB will help the industry a great deal.

While the exemption of the small service providers from the Service Tax law is a great move, the levy of Service Tax on housing activity is unjustified.

Reduction in the rates of Excise Duty and Customs is in line with India's commitment to bring the duties down to a low level, in order to make Indian industry competitive. This should have a positive effect on the Government's efforts to keep inflation under control.

The Government has made a commendable progress in resolving the cross-border disputes with Pakistan, and the efforts have resulted in de-escalation of tension between the two nations, the Govt is committed to take more positive steps in this direction. In this situation the defense allocation of Rs. 83,000 Crores, up from the last year's allocation of Rs 77,000 seems a bit too extravagant.

The proposal to treat the trading in derivatives as income from business and not a speculative income is recognition of the fact that the stock market is an engine of growth for the economy.

On the whole, the budget is growth oriented, and should prove to be a major step in the direction of "Bharat Nirman", envisaged by the President APJ Abdul Kalam, and referred to in his speech by the Finance Minister.

You can reach him at: tsrawal@tsrawal.com