Requesting Finance Minister to provide Relief to the Middle Classes in Budget for FY 2022-23

 

Following are some suggestions for adoption in the forthcoming Budget for FY 2022-23.

 

1. Withdraw the Dividend tax of 10 % on Investors and reimpose it on Companies/MFs  

 

Senior citizens, who largely rely on dividend income for meeting their expenses find this 10 %  cut very substantial, made even more so, when Annual Inflation is 5 % +. 

 

If some of us are entitled to "not pay this 10% tax"  it involves filling 15G/15H forms for each Company/MF which is very cumbersome  AND/OR  making refund claims for which we invariably have to take help of CAs which involves a substantial cost.

 

Finally, Companies/MFs, by and large,  have been doing extremely well and are poised to do even better with your policies ; hence,  they will not find it difficult at all to bear this tax, which they were  anyway paying earlier and had no real objection to the same.

 

Also, when Companies pay this Dividend Tax,  they will be filing just  ONE TDS Return Return. However, when they are required to deduct it from Investor’s dividends they will have to issue well over 10 to 12 crore TDS Returns (Form 16) because of the number of investors per company and per Mutual Fund.  This is a substantial Administrative Burden that will also strain the IT backbone. 

 

2.   Increase Sec 80C Deposit Limit to 2.5 Lakhs  by increasing it by Rs. 1 Lakh only for PPF and at the same time pay 2 % LESS interest on this additional 1 lakh PPF Deposit to limit Govt costs.

 

This will help many people to reduce their tax bracket or even come out of Income Tax Payment bracket which will be a great relief.  At the same time, Govt costs are partially controlled by paying lower interest on the additional amount, as suggested.

  

 3.     Increase the  NO TAX LIMIT  from Current Rs. 5 Lakhs to Rs. 7.5 lakhs and from         Rs. 5 lakhs to Rs. 9.0 Lakhs for Citizens above 75 years of age  and SCRAP            THE OLD TAX REGIME for all.

     This will give a decent tax reduction to many in the Middle Class and big relief to           Senior Citizens including NOT having to File Returns, as already mandated by you        in your last budget,  for those above 75.

    Previously,  the NEW REGIME was of benefit to only those earning below Rs. 12          lakhs per Annum – now it will become attractive to also those that are earning close      to Rs. 20 lakhs per annum which will cover more than 80 % of Income tax payers. 

    At the same time the adoption of NEW TAX Regime by all  will substantially plug     leakages and reduce need for documentation in areas like House Rent and LTA Claims and bring substantial  “Return Processing” relief to the over-burdened         Income Tax Department.

  

4.     Scrap the Tax imposed on Long Term Capital Gains but increase the definition of Long Term from 1 year to 3 years

       The calculation of Capital Gains from sale of shares/Dividends is extremely                   cumbersome for the average citizen and he/she can always run  foul of the law             unless he takes help of  CAs,  which is again a big cost for him.  Also it requires           keeping track & safe storage of a large number of documents/records which is very strenuous.

 

This will be a  big relief for the average citizen and will be received with great deal of joy and enthusiasm by the entire citizenry.

 

This will also be a BIG RELIEF  to the IT Department from having to scrutinise each claim of Capital Gains Tax Liability reduction or exemption.

 

The objective of proposing an increase in the “Capital Gains qualifying period from 1 to 3 years”  is to ensure that there is far less volatility in the Capital markets from frequent and irresponsible short-term  selling/withdrawal.

 

The Revenue Loss, if significant,  may be made up by having a Capital gains Tax which is 2 percentage points higher than the individual’s or Corporate’s  applicable Income Tax Rate.  This will be a straightforward tax  that does not involve any documentation, calculation or  CA assistance.

  

5.   The  limit for Sec 54E  Deposits for claiming Capital Gains Tax Exemption be raised from present Rs. 50 lakhs to Rs. 2 Crores

 

The limit of Rs. 50 Lakhs was fixed over 20 years back.  Clearly the gains occurring these days are in Crores, especially for Old Property (land or building). Hence, it is only fair that this limit be revised to a more reasonable level.

 

If this is done it will encourage much greater transparency and disclosure of ‘actual transacted amounts”  fetching good Stamp Duty Revenue for the Government in all states.

 

Will encourage more accurate and higher disclosure which will translate to bigger  “Stamp Duty” revenues for the State Governments.

 

 

The above recommended measures will win you a lot of applause and enthuse the Middle Class who have been at the receiving end for the past 2 years.

 

It will greatly help to defuse the sombre mood and gloom that pervades the nation today in view of the re-emergence of the CORONA  spread,  as also the pain that the Middle Classes, in particular,  feel due to their loss of income and their well-being, being, relatively, ignored by the Govt, vis-à-vis  what has been done for other socio-economic groups. Such relief will greatly brighten their days.

 

 

Mumbai

11 January  2022