Budget 2019 - Some Proposals on Personal Income Tax

Last year’s Budget was a big disappointment for the Middle Classes and if the NDA Government wishes to win back its core constituency of middle class and the young, aspiring millennial,  it can partly achieve this through the Union Budget by the following measures :

1.     Raise Minimum Tax Slab from Rs. 2.5 Lakhs to Rs. 3.0 lakhs

This will benefit All Tax Payers as well as those on the threshold of paying taxes,  from Rs. 2500/- to Rs.15,000/- a year (5 %  to 30 % Tax Slab)

Assuming a median figure of Rs. 5,000/- (as tax payers are maximum in the lower tax slabs of 5 % & 10 % IT) this means a Revenue Loss of  Rs. 5000 X 6.84 Cr = Rs. 35,000/- Cr

2.   Raise Maximum Limit for Sec 80C benefits from Rs. 1.5 lakhs to Rs. 2.0 lakhs

This will benefit All Tax Payers as well as those on the threshold of paying taxes,  from Rs. 2500/- to Rs.15,000/- a year (5 %  to 30 % Tax Slab)

Assuming a median figure of Rs. 6,000/- and number of tax payers benefiting as 60 % of 6.84 Cr taxpayers (since all may not or may not be able to take this benefit) this means a Revenue Loss of  Rs. 6000 X 4.1 Cr = Rs. 24,000/- Cr

The above 2 measures will get a huge shout from the middle and higher income class citizens and give them a sense of compensation for the neglect they feel they have suffered in the past 2 years of Budget-making.

3.  Raise Sec 54 E Savings Limit for Capital Gains Amount from Rs. 50 lakhs to Rs. 1 Cr and simultaneously REDUCE Interest rate of REC Bonds & other eligible instruments to 4.25 % from current 5.25 %

This is only an inflation adjustment as the limit of Rs. 50 lakhs was fixed well over a decade ago.

Such a measure will benefit all those making capital gains.

It is difficult to estimate the likely impact on Revenue on absence of any data with the author ;  however,  however Government may not have a big revenue loss owing to proposed reduction in Interest rates.

This move will be welcomed by all real estate investors and may,  actually,  help increase the “white component”  of transaction even more,   which will have many  other cascading benefits.

4.  For Salaried employees Scrap all Tax-free allowances like HRA, LTA, Fuel & Drive Allowance and Education Allowance and,  in lieu of the same, compensate them by raising the STANDARD DEDUCTION to 25 % of GROSS Annual Salary  subject to a minimum of Rs. 40,000/- and a maximum of Rs. 1,75,000/-50 lakhs.

This will be a major Tax Simplification Reform as it will do away with a multitude of tax exemptions that often get misused, particularly HRA & LTA, and the raising of the Standard deduction is largely a “compensatory adjustment”  and not a beneficial one.

It is estimated that there will be no significant revenue impact of this measure ; however, based on actual impact found, the figures can be suitably revised in the 2020 Budget.  This fact should be announced in the 2019 Budget itself.

5. Introduce a unique tax support to those undergoing Professional courses like Engineering Medicine, Law to begin with

The proposal is - 50 % of the  fees (Academic Fees only) paid for such courses (not the Fees billed but the actual Fees paid net of any scholarship, grant or financial support) will be tax deductible in 5 equal instalments in the FIRST five years of the person’s income, post-acquisition of the qualification.

This will benefit all those going in for higher education and address the needs of the student / young professional community in the budget,  directly,  for the first time.  The gradual introduction also allows government to calibrate the extent of support based on actual revenue loss discovered.

It is difficult to estimate the likely impact on Revenue on absence of any data with the author

Such a provision will draw enthusiastic support from students who are aspiring for higher education but are not well off and have to beg & borrow to be able to pay for the same.

6.  Drop the requirement for the Tax Payer to fill in Assessment Year in any and all Tax Forms – let him/her just enter Financial Year

Financial year is so much easier and clearer for the average individual tax payer to understand - ; let the software translate that into the appropriate Assessment Year for Tax department’s internal processing purpose.  In fact,  currently when you want to pay TDS or Advance Tax,  you are asked to enter Assessment Year and the software displays a “flashing notice” saying “Please Note - this Assessment Year means this Financial Year”.  Hence it is clear that the software is capable of translating AY to FY ; it can as well translate a  FY entry to the corresponding  AY figure.

 

This will be a huge relief to individual taxpayers who often make mistakes while entering this information while paying TDS,  Advance Tax and Self-Assessment Tax  and as  a result,  their tax payment gets credited to the wrong year – recovery of which is a long, complicated and  irritating procedure.

This measure has no revenue impact.  It is part of the ongoing effort  for making the Tax Department user-friendly and reducing errors in tax filing.

           

7.  Increase the time for correcting  “erroneous PAN entry  in Tax Payment Challans”  to 60 days from current 10 days or so  and make the process simpler and do away with any penalty for such erroneous entries.

This will be a huge relief to individual taxpayers who often make mistakes while entering this information,  either a typographical error or simply due to hurry or carelessness.  Very often,  such mistakes are discovered much later during internal audit or some kind of reconciliation activity etc. ; hence the suggestion to increase the time limit for correction. 

This measure has no revenue impact.  It is part of the ongoing effort  for making the Tax Department user-friendly and reducing errors in tax filing.

8.     Simplify Rules for  TDS for payment of rent beyond Rs. 50,000/- to NRI Landlords so that TDS  Payments can be made as in the  case of landlords who are Resident Individuals  and do away with requirement for obtaining TAN Registration &  filing of  TDS Returns which is very cumbersome & also expensive as it requires professional help from a CA.

This will be a huge relief to tenants who are simply not geared to follow so many rules and requirements for getting TAN Registration and filing TDS Returns.  It will also save them the cost of CA Fees.

This measure has no revenue impact.  It is part of the ongoing effort  for making the Tax Department user-friendly and reducing errors in tax filing.

Mumbai

30  December,  2018

Attributes of an Ideal Shop Floor Manager

• Must know his Job

1. His specific responsibilities
2. Who are his customers and what are their needs and priorities
3. Who are his suppliers (Purchase, Stores, Shops prior to his in the manufacturing sequence) and what are their limitations and what support / clarifications they need form him so that they can serve him better
4. His work targets – both quantity and time
5. Parameters of evaluating performance and information collection and reporting necessary for doing so

• Must know his Resources

1. His plant and machinery and their state of fitness for operation
2. Availability (physical and operational) of auxiliary equipment, tools, jigs, fixtures, dies, spares etc.
3. Input Materials used and required by him – their availability, scarcity and caution to be exercised in their handling and use

• Must know his people (his most important resource)

1. Names, sections where working, in which shift
2. Age, experience and qualification,
3. Strengths (Skills and special competencies)
4. Shortcomings (limitations) both in terms of skills as well as attitude/behavior
5. Hence, areas where he/she needs training, guidance, counselling
6. Potential for growth

• Must be aware of, and strictly adhere to, all safety, environment and statutory regulations and practices. Should take special care of following :

1. Use of PPE (Helmets, Safety Shoes, Masks, Goggles, Slings etc.)  by all employees in his work section
2. Proper execution of all safety and precaution measures while operating machines in his shop
3. Proper earthing of all electrical machines/equipment in his shop and regular check of the same as per recommended practice
4. Full and free access to Fire Extinguishers and Electrical Switchboards in his department
5. Regular training and Mock Fire Drills ensuring that sufficient (ideally, all) employees know how to use the Fire Extinguishers and other such equipment
6. Aisles, Staircases and Emergency Exits always kept fully free for speedy movement and prevention of accidents
7. Attend to any leakage (air, water, gas, steam, oil, coolant) to prevent accident and pollution

• Must keep himself abreast of  changes and developments in his sphere of working and all related areas

1. Technological
2. Regulatory / Statutory
3. Competitive
4. Environmental / Safety / Societal

• Must constantly benchmark himself  against best performance parameters,  internationally,  and strive to attain and surpass them

Mumbai

7 August 2005

4 Indian Companies have it in them to give a huge boost to India's Economy ---

….  if only they will.

These are SBI, HDFC,  LIC Housing Finance and HUDCO.

All these 4 organisation should announce, simultaneously,   a full 1 % cut  from their current levels  in their lending rates for

1.      .    Home Loans
2.           Home repair/refurbishing/furnishing Loans 

for all loans from that date and all outstanding  “Floating Interest Rate Home Loans” prior to that date  and  a 0.5 % cut for all outstanding  “Fixed Interest Rate Home Loans” on that date.

These special rates should be made available for a limited period of say, 6 to 9 months only.  Reason for proposing this limited period is explained below.

Just imagine the explosive impact  this would have on the entire construction/housing sector and the whole economy.  

People’s pent-up demand for homes would now come up to the brim and lead to a huge secondary kick to the economy by way of demand for steel, cement, furniture and furnishings, lights and fittings, kitchen equipment., tiles and ceramics,  in addition,  of course, to  the huge employment demand it would generate in the construction sector which is the biggest employer of unorganized rural labour that migrates form one construction sector to another.

How are Banks/Lenders supposed to make up for this proposed 1 % interest cut – 0.5 % by internal efficiencies (through cutting waste & cost by speedier processing and simplification of processes) and the rest 0.5 % will be more than made up by the surge in business volumes.

To really get this going,  the following must also be done :

Processing charges must be made NIL or reduced to 50% of their current Level for the period of this “reduced interest rate offering”

Pressure (only pressure, no compulsion) should be put on all major Builders to also offer a Flat, across the board cut of 5 % in their rates prevailing as on date.  This will provide a double boost to the entire effort.

The reason for restricting this reduced rate offer to a limited period is to ensure that the economy gets a kick start by people rushing to take advantage of this offer. If this reduction is made open-ended or permanent there will be no “time pressure”  for people to invest and the momentum needed to put the economy into a higher trajectory will not be achieved.

I am hoping that the “powers-that- be”  in these 4 organisations will examine this proposal  and take the next step.  Ball in their Court now.

It’s not just the facts and logic that matters, Mr. Arun Jaitley .....

... you have to take the ‘mood’ and perception into account also.

You and Mr Adhia have explained with impeccable logic why nothing or nothing more needs to be done for the salaried class. So I will not debate that. However, my point simply is that expectations were different, and for more. As a consequence, there is deep disappointment, which is slowly building up into resentment, which will definitely affect votes in 2019 and the 3 upcoming State elections before that.

Do you want to be remembered for having won the admiration of financial analysts for financial prudence, particularly the foreign ones, and forever condemned for making NDA lose the polls?

Please do not dismiss this as some naive alarmist feedback – this is what the bureaucrats will tell you, primarily because election results do not affect them one bit – they will always remain in the corridors of power, no matter which party wins or loses.

If you walk the streets yourself, you will gauge the deep “let-down”  feeling of the salaried class who are your most disciplined tax-payers.

So what is my suggestion – one very simple step.

Just increase Sec 80C limit by Rs. 50,000/- to Rs. 2 lakhs.

Of course, this will have a financial cost (albeit not too huge) but the resulting relief and joy it will bring to your “committed constituency” will change the entire perception about the budget and dramatically drown out the voices of the “congenital prophets of doom” who pretend to see not even one good point in the budget because it electorally suits them to paint a dark picture.

This simple move will finesse all these biased opposition voices and give a much needed boost to the morale of the people, of the NDA and, I believe, so also of the stock market.

Do consider this option – low cost but very high returns!

Letter to the PM of India - Suggestion No 04

Shri Narendra Modi

Prime Minister

Government of India

152, South Block,  Raisina Hill

New Delhi  110001                                           January  02,  2018

Dear Sir

                                      Suggestion No  04

This is further to my last communication of  October  10, 2017.  Herewith,  my fourth suggestion to you.

                            

a) Please advise the Ministry of Sports that, in future, whenever any sportsperson is being awarded for outstanding performance or for winning medals/accolades at international/national events,  the award should only be given partly in cash/kind and largely by way of Investments Instruments so that he/she has some meaningful savings for later on in life.

b)   Today when the Central and Sports Governments vie with each other to give Cash Awards to say Olympic or Commonwealth Games medal winner,  these young persons land up with anything between Rs. 50 lakhs to Rs. 5 crores in cash at a very young age,  usually around the twenties.

As can be easily understood,  most of such cash awards get quickly used up in conspicuous consumption by way of purchase of fancy items like car, appliances, air travel and fancy (& wasteful) parties.

Further,  when sometimes these sportspersons are gifted expensive cars,  they end up spending from their pocket to maintain & run the car or they have to simply abandon it.

c)   As against the above , my suggestion is that part of the Award Money (or Budget) should be give out by way of Investments.  Let me explain this with an illustration :

d)   Suppose it has been decided that for an Olympic Gold Medal winner,  an amount of Rs. 20 lakhs will be given as Cash Award,  then it should actually be given out as under :

1)   30 %  of Award Amount  as  Cash Award of Rs. 6 lakhs

2)   25 % of Award Amount  in LIC’s Single Premium Endowment Policy or JEEVAN Utkarsh Plan be Investing Single Premium of Rs. 5 lakhs

3)   25 % of Award Amount  as NSC or KVP Certificates of Rs. 5 Lakhs

4)   20 % of Award Amount  as provision for Premium payment for next 10 years for Health Insurance with PSU Insurance Company for Self for Rs. 5 lakhs coverage (Annual Premium likely to be Rs. 40 K), amounting to Rs. 4 Lakhs over 10 years

RATIONALE for the above recommendation

a)   The fact all the award money is not being given in cash will ensure that all of it cannot be spent in a short time.

b)   The Sportsperson will have some compulsory savings from his award money which will stand him/her in  good stead when from goes down or h/she is no longer earning as much as when they were in peak form.

c)   It inculcates a savings and insurance habit amongst sportspersons.

d)   It also eases cash flow for the Governments. 

Needless to add that the above is a suggested structure, by way of illustration, and it can be appropriately fine-tuned to ensure that the sportsperson gets the best “mileage” out of such a structure.

However, to avoid any backlash of public opinion or hardship to the awardee,  dedicated and efficient implementation is to be ensured to see that all the components of the award are disbursed simultaneously and the awardee does not have to do any running about,  whether for documentation/procedures/formalities nor does he/she have to remind anyone in the Government/Ministry about getting a particular “component” of the award disbursed.

Kind regards.

(Hemendra K. Varma)

Encl :  a/a

cc :    Shri Nripendra Mishra,  Principal Secretary to PM

          Shri Pradeep Kumar Sinha,  Cabinet Secretary

Col. Rajyavardhan Singh Rathore, Minister of State (IC) of Youth Affairs and Sports