Some Proposals/suggestions for consideration and
incorporation in the forthcoming Budget for FY 2021 - 2022
Some Administrative Steps
a)
Dispense with
the practice of asking the Tax Payer to fill in Assessment Year. Let the tax payer
only fill in the Financial year (which she understands very well) and
let the software translate this to the relevant Assessment Year (if so
required) for the internal working of the IT Department. Else, so many mistakes by thousands of
Taxpayers are made on this account, leading to their money getting blocked because it gets
credited to the wrong financial year and transferring this to the correct
financial year or getting it back is an extremely complicated, difficult and
long exercise. IT Dept already translates the Assessment Year to the
relevant Financial Year– it can,
easily, therefore, do the reverse.
b) Scrap the Rs. 10,000/- fine for entering a wrong PAN Number in any return. Entering a wrong PAN Number is not a criminal act - it is an act of carelessness, as innocent as the pressing of a wrong key and should not be penalised.
Develop an administrative and correction procedure whereby if a Tax Payer realises he has made a wrong PAN Number entry, he should be able to correct it ON-LINE within 6 weeks of his wrong entry without payment of any Fees/Fine. If he wishes to make a correction after 6 weeks have elapsed, he should be allowed to do so after payment of Processing Fee of Rs. 500/- for every such correction.
c) As you have done recently in case of MSME definition, i.e. the removal of distinction between Service and manufacturing sector, please do the same in case of GST Applicability.
Currently GST is mandatory for businesses having turnover of over Rs. 40 Lakhs whilst in case of Service Sector this limit is only "over Rs. 20 Lakhs". Kindly harmonize this by making the limit for Service Sector also Rs. 40 lakhs as it is for other businesses.
d) Consider making it mandatory to enter PAN Number of the person/entity from whom TDS has been deducted at the time of making the TDS deposit itself e.g. in Challan Number ITNS 281.
e) If this can be done in case of all TDS payment Challans, it will eliminate the need for filing separate TDS Returns, whose only practical purpose is to NAME & IDENTIFY the persons from whom TDS has been deducted and deposited.
This will mean a
huge, huge reduction of work, both for the Taxpayer / Tax Assesse as well as for the IT Department and will mean proportionate reduction in
disputes/queries/delays/penalties in respect of delayed Filing of TDS Returns.
f) Consider dropping the requirement for Tenants to secure a TAN and file TDS Returns when they are paying Rent to Landlords who are NRIs. This is a very cumbersome procedure and no individual tenant can do it on his own. As a result, he / she has to engage a Chartered Accountant for this purpose, which is not an insignificant cost.
Further, if the CA delays in filing the TDS returns, the penalty for the same has to be paid by the individual which again becomes an additional cost to the individual.
Finally, when
he gets out of such a house and moves into a non-NRI Landlord House or his own house, he has to ensure that he CANCELS his TAN, else he is continually chased by the IT
Department for “not having filed his TDS Return” !!!
For the Middle Class Tax-Paying Population
The position, after the
NEW Budget of FY 2020 – 21 is, as under :
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AGE |
AGE |
AGE > 80 |
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Below 60 |
60 < AGE <80 |
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Increase in Minimum Tax Free Level because of Budget increase of Tax Free Limit to Rs. 500000/- for
everybody |
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250000 |
200000 |
0 |
(as
people above 80, they were already
having Rs. 5 Lakh exemption) |
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Exemptions Lost |
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FD Interest |
50000 |
50000 |
50000 |
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Mediclaim |
20000 |
20000 |
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Sec 80C (assumed average claim of
Rs. 50K) |
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50000 |
50000 |
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Dividend Income from Shares &
Units (assumed for illustration) |
50000 |
200000 |
600000 |
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Other exemptions (HRA, Educ, LTA) [an assumed figure of Rs. 10K/mth) |
120000 |
NIL |
NIL |
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Total Exemptions Lost |
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290000 |
420000 |
650000 |
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Net decrease in Taxable
Income for different age groups |
-40000 |
-220000 |
-650000 |
Huge
increase in Taxable income for
people above 60 |
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Thus it may be seen that for the above ILLUSTRATIVE case, while people below 60 years have an INCREASE in their taxable income of approx. Rs. 40000/-, those above 60 years have an INCREASE in their taxable income of approx. Rs. 2,20,000/- whilst those above 80 have a huge INCREASE of Rs. 6,50,000/- in their taxable income (because they were already enjoying a Tax exemption level of Rs. 5 lakhs earlier and now have simply lost all the exemptions on Dividend Income and Sec 80C)
[Of courses, the above is illustrative and the figures will be different for each individual tax payer ; the above example has been chosen to only illustrate the basic point that more people are going to end up paying higher taxes under the NEW REGIME and hence are unlikely to switch over to it.]
Hence, to attract a switchover to the NEW TAX REGIME (which is highly desirable for its simplicity and the elimination of chances of false claim filing in cases like LTA, HRA etc.), it is proposed that a special incentive be given so that NO ONE ends up paying higher taxes than before.
For this only 2 changes are required to be made to give some relief to all Tax Payers :
a) Increase the Minimum Taxable Level from Rs. 5 Lakhs to Rs. 6 Lakhs &
b) Withdraw the dividend tax imposition on taxpayers and let Companies pay it as before.
Companies are already used to paying this tax and will not mind this at all, if they are compensated by removing the Long-term Capital Gains Tax (which is very complicated and therefore ideal for a lot of creative accounting and resultant Notices, Appeals, and legal disputes). The Government can protect its interest by defining long-term as 2 years instead of 1 year (the earlier provision) which will reduce the volatility factor of quick and sudden exits that the current 1 year limit encourages investors to do.
As the table below shows, this will give substantial relief to tax payers of all age groups, using the same illustrative figures as above.
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AGE |
AGE |
AGE > 80 |
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Below 60 |
60 < AGE <80 |
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Increase in Minm Tax Free Level (if Minimum Taxable level
increased to Rs. 600000 from Current level of Rs. 500000 |
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350000 |
300000 |
0 |
(as
people above 80 they were already having Rs. 5 Lakh exemption) |
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Exemptions Lost |
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FD Interest |
50000 |
50000 |
50000 |
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Mediclaim |
20000 |
20000 |
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Sec 80C (assumed average claim of
Rs. 50K) |
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50000 |
50000 |
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Dividend Income from Shares &
Units (assumed for illustration) |
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Other exemptions (HRA, Educ, LTA) [an assumed figure of Rs. 10K/mth) |
120000 |
NIL |
NIL |
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Total Exemptions Lost |
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240000 |
120000 |
50000 |
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Net decrease in Taxable Income for different age
groups |
110000 |
180000 |
50000 |
Reasonable
relief that will be welcomed by
ALL and, more important, attract huge numbers to the NEW “No Exemption” Tax regime. |
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Such a move will put extra money in the hands of EVERYBODY and will change the entire mood of the country, particularly the middle class who comprise, essentially, the small entrepreneurs, the professionals and the salaried tax-paying population who have so far been out of the radar in all alleviating measures announced as a result of the COVID crisis.
They not only need your attention & , molly-coddling but also need some tangible comfort, in these difficult times.
This move will simply fire up the stock market, more on sentiment than substance, but that is precisely what is required just now. The mood of the country needs to be changed, and you have it in your hands to do so.
This will also
greatly blunt the criticism that you are not thinking at all of the salaried,
professionals and middle classes.
The other major benefit this will secure for the Government and the country is that it will persuade a vast majority, if not the entire tax-paying class, to switch over to the NEW Regime of Exemption Free Taxation which will greatly simplify Income Tax Computation and Collection, reduce disputes as well as cheating to negligible levels and clean up the entire system.
Today a vast majority of both salaried and non-salaried taxpayers, particularly those above 60 or earning over Rs. 15 lakhs a year are opting for the OLD Regime which defeats the very purpose of introducing the NEW Regime of Taxation.
For the toiling Kisan
1. Increase the Kisan Samman Yojana from Rs. 6000/- to Rs. 7000/- for FY 2021 – 22, to Rs. 8000/- for FY 2022 – 23, and to Rs. 9000/- from FY 2023 – 24.
This will be widely and appreciatingly greeted by the entire agriculture and farming community and will be a resounding answer to those who are reaping cheap popularity by demanding astronomical and impractical sums in the name of the farmers.
2. Announce a SEED LOAN Scheme whereby
Govt. will give PHYSICAL Seeds to farmers for the Sowing
SEASON
(instead of giving money as Loan to buy Seeds) which saves him cost of procuring seeds and, at the same time, saves the Government from dispensing Cash.
This is to be returned in CASH (based on an agreed price at time of taking the SEEDS) by the farmer after he sells his harvest or it will be adjusted from his Kisan Samman Yojana due amount in 2 installments, after harvesting.
The only issue here will be the “Quality of Seeds” which can become a bone of contention, if the harvest turns out to be poor, no matter what the actual reason.
This can be offered as a voluntary scheme which the farmer can choose to ignore and make his own arrangements for SEED. This will protect the government form any charge of having forced the farmer into poor quality seeds, etc..
For the “24 x 7 On-Duty” policemen & Jawans of all other para-military forces
Announce a token one-time award of Rs. 5000/- to every Policeman up to the rank of Inspector for the huge risk and toil they have undergone during these CORONA Times - 60 % to be paid by Central Govt. and 40 % by the State Govt.
Similar award to all Non-Gazetted Officers and Constabulary of the following organisations, to be borne fully by the Central Government : CRPF, RPF, CISF and all other para-military forces.
I
do not have any data on the number of beneficiaries that will fall under such a
scheme but I do understand that because of huge numbers, the total amount may work to an impossibly
high and unsustainable figure.
In such a case, I have 2 suggestions for your consideration :
a) Instead of giving Cash give NSC (Natinal Saving Certificates) instead which will postpone the payment by 5 years or ask PSU Banks that have Mutual funds to give out equivalent Units of their best scheme with a lock-in period of 5 years and growth option and the government can pay the MFs the BASE Amount in 10 equal monthly installments over 5 years.
b) The other option is to make a notional, digital
deposit of R. 5000/- each in their name which they can redeem over a 3 year
period for availing any government service requiring payment of Fees/Charges
like
1. Passport Application/Renewal
2. Aadhaar Application / Update
3. PAN Card Application/ Update
4. Railway Ticket Booking
For MSMEs
1. Announce a 1 % Interest refund on Interest Costs incurred by them for Working Capital for the next 12 months. However, if, during that period, Banks announce an interest rate cut, this interest subsidy will be "equivalently" reduced.
By this step, you will help reduce the cost of borrowing and, at the same time, by tying it up with any reduction in interest rates by the lending Bank, you are also keeping Central Govt's commitment within a fixed amount.
This will substantially address the current complaint that you have made borrowing easier by removing the need for collateral/security but you have NOT reduced the costs of borrowing and, therefore, this step of the Government will actually prove to be a big debt trap for the MSMEs.
2. Please declare that IT Department has been
instructed to issue all approved Refunds latest by 31st March 2021 and that they will have to
announce every evening at 1800 hours (like the Health & Home Ministry’s
Press Conference)
2.1 the total
amount of refunds made on that day
2.2 the cumulative
amount of refunds made from 1 Jun 2020 till date
2.3 the balance
refund amounts that remain to be paid, as on date and
2.4 approx. by when it is expected to clear the entire balance amount.
3. Similarly, please announce that all PSUs have been asked to clear all over-dues of MSMEs latest by 31st March 2021 and then ensure that all subsequent dues are paid within due date. Here again, have the PSUs announce every day
3.1 how much of MSME dues have been cleared on that day
by all PSUS taken together,
3.2 how much has been cleared till date (i.e. Date of
announcement),
3.3 how much balance remains, and
3.4 Approx. by when it is expected to clear the entire balance amount.
Steps 2 & 3 suggested above will have a great morale-boosting effect on the industry. It will earn the Finance Ministry huge plaudits for its transparency and openness and will also put some healthy pressure on the Income Tax Department and PSUs to do this part of their work on a “mission-mode” by putting them into the full glare of public scrutiny.
This will also help to remove the tag of poor implementation, which is being frequently (and, unfairly) put on the Government.
4. Please put pressure on all Private Sector for clearing the dues of MSMEs, asking them to also ensure that they clear all MSME dues latest by 31st March 2021.
Ask the MSMEs that those who do not get their over-dues cleared on or before March 31st can complain to a Nodal Officer in MSME Ministry for appropriate action against the concerned company.
This will not only put the right amount of pressure on
the Private Sector but will win you a lot of support
and applause from the MSME sector, which desperately needs a lot of financial
and psychological support just now.
For the Stock Market and Corporate Sector
Please consider reverting to the earlier status of Companies paying the 10 % Dividend Tax but withdraw the LTCG Tax amendments introduced 3 budgets ago. This is what has angered and greatly upset the entire financial world (including foreign investors) and these 2 single steps will dramatically improve India's investment ratings
a) The withdrawal of 10 % Dividend Tax on Investors will be in consonance with avoiding double Taxation on Shareholders and Unit holders and will bring back the retail investor with a bang in to the market. It will also remove the distortion being caused to the “tax liability” of a vast majority of the Middle Class.
b) The
simultaneous withdrawal of Long – term Capital Gains Tax will be rousingly
welcomed by the financial community and will save a lot of IT Department
work in interpreting its hugely complicated methodology for assessing tax
liability. The one change you could possibly consider, to help reduce volatility in the market, is to increase
the period after which Capital gains are not taxed from 1 year to 2 years.
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