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
