Keeping the ball rolling for building a bright and stable new India, the main focus of finance minister’s speech was on ‘putting the nation first’ based on the principles of “reform, perform and transform”. In her comprehensive speech, the finance minister elaborated on the government’s vision to make India a $5 trillion economy, over the next five years by giving an impetus to investments, infrastructure, housing for all, education, start-ups and Make in India.
Acknowledging taxpayer’s contribution towards nation building, the finance minister outlined various tax proposals to incentivise investments, ease compliances for taxpayers, improve tax administration and at the same time increase tax revenues. With a view to achieve the objective of ‘Housing for All by 2022’, an additional deduction of upto Rs 1.5 lakhs for interest paid on loans for purchase of an affordable house valued upto Rs 45 lakhs has been proposed, resulting in a benefit of Rs 7 lakhs over the loan period of 15 years. This is expected to encourage investment in housing and give a boost to the real estate sector.
Recognising the need for securing an individual’s retirement and leave more cash in the hands of the National Pension System (NPS) subscribers; the exemption limit has been increased from current 40% to 60% on final withdrawal from NPS accumulation. To incentivise NPS subscribers more, it is proposed to increase the limit of deduction from 10% to 14% towards pension contribution by Central Government employer on account of employee.
Additionally, the government also decided to extend the pension benefit to retail traders & small shopkeepers, whose annual turnover is less than Rs 1.5 crore via introducing a new scheme Pradhan Mantri Karam Yogi Maandhan.
The administrative processes in this scheme has been kept easy for the subscribers as the enrolment will be completed with Aadhaar and bank account of the individual, along with other requisite documents on self-declaration basis. It is expected that this will cover three crores individuals with an aim to secure their post retirement life.
With an objective to promote use of electric vehicles affordable to consumers, it is proposed to provide an additional tax deduction of Rs 1.5 lakhs, on the interest paid on loans taken to purchase electric vehicles.
Taking a pragmatic step in tax scrutiny; the Budget proposes to have faceless tax assessments. Currently, the existing system of assessments involves personal interaction between the taxpayer and the department official, which at times leads to certain undesirable practices. This step will surely avoid such adverse practices and will bring transparency in the assessment process.
An important measure introduced in this Budget is the inter-operability of PAN and Aadhhar. Individuals, who do not have PAN, will now be able to quote their Aadhaar number in any document, where PAN was required providing relief to the common man who were asked to mention their PAN and Aadhaar at various places.
On the flip side, in order to collect more taxes and to increase contribution to tax by individuals falling in highest income bracket, surcharge on individuals with taxable income from Rs 2 crore to 5 crore and Rs 5 crore and above has been enhanced to 25 per cent and 37 per cent respectively. This would result in an effective tax rates for such taxpayers increasing by 3% and 7% respectively.
In order to expand the scope of digital payments and to promote cash less economy, levy of TDS of 2% on cash withdrawal exceeding Rs 1 crore a year from a bank account has been introduced. However, this may lead to cash blockage for certain category of taxpayers. Measure to widen the tax base and collect more taxes include the introduction of a new provision for deduction of tax at source on payment exceeding Rs 50 lakh in a year made to contractors and professionals by individuals. Provisions related to deduction of tax at source on transfer of immovable property provides for levy of TDS, at the rate of 1 per cent on the amount of consideration paid or credited. There was an ambiguity on the term ‘consideration for immovable property’ for this purpose. It has been clarified that the term ‘consideration for immovable property’ includes all charges which are in the nature amenities and are incidental to transfer of the immovable property like club membership fee, car parking fee, electricity and water facility fees, maintenance fee etc.
The scope of applicability of filing tax return has been extended to include certain category of individual tax payers, who have deposited more than Rs 1 one crore in current account during the year, incurred expenditure of more than Rs 2 lakh for travel to foreign country for self or others or paid electricity bill exceeding Rs 1 lakhs in a year. Such taxpayers will be required to file their tax return even if the annual income is below taxable limit.
In conclusion, there is no doubt the government has endeavored to take many steps to stimulate the collection of taxes for development of nation.
However, the expectations of the middle class salaried individuals could have been further considered by mea-sures such as reducing the tax rates, or increasing the standard deduction, increasing the limit of ded-uction on specified investments, etc.
The Budget was silent on the new tax code and it is hoped that the new code would bring more cheer to taxpayers.
— The author is the director of Grant Thornton India LLP (With inputs from CA Rajat Trivedi)
