Small saving schemes: Interest on small saving schemes has been dropped by 1 per cent. Interest on PPF has been dropped from 9 per cent to 8 per cent tax-free.

Rates on NSC-VIII, Post Office Time Deposits and Recurring Deposits and the Monthly Income Scheme, all covered under Section 80 L, have also been dropped from 9 per cent to 8 per cent.

Kisan Vikas Patra, will have its doubling period increased from seven years eight months to eight years seven months. The interest is fully taxable on accrual basis. Incidentally, NSS-92 was withdrawn in November 02.

Comments: Yes, Budget 2003 has given something to the senior citizens but it has taken away much more.

A large portion of the governmental outflow is on account of interest. Therefore it suits the government just fine to talk down interest rates. Users of money similarly are ecstatic.

They too will be borrowing at lower rates. It is only savers who are dismayed. They are told that inflation is low and the real rate of return is still quite healthy. The only problem is that the reality is different and the pressure on interest rates is northwards.

I wonder how the economy will react to this illogical reduction.

TDS on professional services: Individuals and HUFs were not required to deduct tax at source. FA02 introduced a new Section 44AB (a&b) making it obligatory to apply TDS for those individuals and HUFs whose sales, turnover or gross receipts of the business or profession exceed Rs 40 lakh (Rs 4 million) or Rs 10 lakh (Rs 1 million), respectively.

This provision applied from June 1, 2002. Now, with effect from June 1, 2003, Budget-03 proposes to exempt TDS requirement in case such payment is exclusively for personal purposes.

Comments: Such ifs and buts make the act complicated and discretionary.

The ITO may have his own ideas about what constitutes a personal purpose and what is not, giving rise to high amount of rent seeking which the Kelkar Task Force desired to avoid.

High premium insurance policies: Insurance polices with high premium and minimum risk cover are similar to deposits or bonds.

Therefore, Section 10(10D) is being substituted to provide that where premium paid in any of the years during the term of the policy, exceeds 20 per cent of the actual capital sum assured, the maturity value received by the policy holder will be fully taxable.

However, any sum received under such policy on the death of a person shall continue to be exempt.

Moreover, a new Section 88(2A) will be inserted to provide that the rebate in respect of premium or other payment made on an insurance policy, other than a contract for a deferred annuity, shall be available as is not in excess of 25 per cent of the actual sum assured.

Comments: This is as bad as the reduction on the interest rate of PPF; perhaps worse. In the case of PPF there was no contractual obligation and yet the account holder feels that this is palpable injustice.

LIC (and other insurers) has launched many such products which are similar in nature to deposits or bonds, mainly Bima Nivesh.

The policy holder has already entered into a contract with the LIC. Can the ITA override this contractual obligation in one fell swoop?

According to the doctrine of promissory estoppel, a Government should maintain the promises that it has given even if these are not contractual. The least that the finance minister can do is to make this applicable to policies issued after March 1, 2003.

LIC has also launched a product like Bima+ which is similar in nature to mutual fund schemes, with all the three options -- debt-based, balanced as well as equity-based.

Should IRDA have cleared these products in the first place? Well, I have also a grievance against IRDA.

New India Assurance Company cancelled their Janata Personal Accident Policies, issued with a fanfare, in 1995; Not all, but only those with a cover of over Rs 1 lakh.

It appears that there was some error in actuarial computation of the risk. Therefore, in July 2002 the policies were cancelled, 'in view of adverse claims experience.' The company also refunded pro rata the premia paid in advance.

And IRDA allowed this to happen in spite of the fact that its raison d'être is the protection of policy holders.

Interest on housing: Pre-budget it was feared that concessions on housing might be reduced. Thankfully, that hasn't happened and the Rs 150,000 interest deduction on purchase or construction of a house property stays put. The stipulation that the construction of the house should be finished within three years has been dropped.

Comments: I have a submission to make. No amount of tax exemptions, deductions and rebates can boost the housing sector.

The government must take a careful look at the Urban Land Ceiling Act, securitisation of mortgages, differing stamp duties in various states, and most importantly, the Rent Control Acts of various state governments. According to a recent McKinsey report such housing development alone can raise the country's GDP by almost a percentage point.

Isn't it plain common sense that private investment can be attracted only if the prospective investor has the comfort and assurance that his house would not be taken over from him by a tenant?

Someone has realistically observed, 'Fools build houses; wise men live in them.'

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