« Top Headlines » Open DEMAT Account in 24 hrs  ITR Filing and Income Tax Audit Deadline Extended: 5 Critical Things Taxpayers Must Know  Filing Belated ITR for AY 2026-27? Know Which Losses You Can Carry Forward and Which You May Lose  CBDT Extends Tax Audit Report Deadline to October 21, ITR Filing Last Date to November 21 for AY 2026-27  CBDT Extends AY 2026-27 ITR Filing Deadline for Tax-Audit Cases: New Dates and Key Compliance Details  Foreign Assets Missing From Your ITR? Income Tax Department Opens One-Time Disclosure Window  Tax Audit Deadline September 30: Why AIS, TDS and GST Figures May Not Match Your ITR and What Taxpayers Should Do  Tax audit deadline September 30: Common mistakes taxpayers should avoid  Your ITR says ‘verified’, but the refund hasn’t arrived? 5 reasons why your money could be stuck  Missed the ITR Deadline but TDS Refund Is Due? Here’s How You Can Still Claim Your Money  ITAT Cuts ?4.85 Lakh Penalty After ?14.02 Lakh Interest Income Was Missed in ITR  ITR filed under old regime, tax calculated under new regime; Delhi ITAT gives taxpayer relief «  Professionals can’t claim Sec 32 tax benefit, says SC... Special audit for 20 oil block contracts... » Debts can dip on tax reforms November, 29th 2007 The deficit of the Indian budget is slowly getting diminished as tax collections are improving every year coupled with better management of finances.   While the fiscal deficit was at 4.1 per cent of the Gross Domestic Product (GDP) during 2005-06, according to estimates for 2007-08, it is bound to drop to 3.3 per cent.   Tax revenue that was at Rs 2,70,264 crore during 2005-06 is projected to jump to Rs 4,03,872 crore according to budget estimates for 2007-08. If the current trend is maintained, it may pave the way for a surplus within the next five years.   The deficit is largely being financed through the issue of government bonds of fixed tenure. The rates, which ruled at 13-14 per cent a few years ago, have dropped substantially to about 8 per cent now. Interest payments that were at 26.21 per cent of the total expenditure in 2005-06 is expected to drop to 23.36 per cent this current year.   But this does not mean that the government can continue to borrow just because the interest outgo is reducing. Typically, a surplus can be put to three alternative uses by the government - increase spending, reduce taxes, retire debt.   Though successive governments have promised rationalisation of the tax structure, there is a definite disinclination on the part of the government to bring down taxation levels.   Undoubtedly, reduction in the debt burden would provide the government with some definite relief.   Considering that the bonds are invariably refinanced, retirement of these debts from out of the surplus will mean lesser need to raise new debt. This will in turn simulate the economy and improve growth opportunities.   It is the third alternative that the government would do well to do some thinking on. The terms of the bonds that are now being issued do not provide for early redemption of the bonds.   As and when the budget shifts to the surplus mode, if terms do not permit for early redemption of the bonds, the government will be forced to pay interest on such bonds when it could very well redeem the bonds through the surplus, since the exit route is blocked.   P T Kuppuswamy (The author is the chairman and managing director of the Karur Vysya Bank)