Published on Thu, Feb 26,2015 | 20:33, Updated at Thu, Feb 26 at 20:33Source : Moneycontrol.com
By: Ameet Patel, practicing Chartered Accountant & Past President of Bombay Chartered Accountants' Society
The Budget 2015 promises to be like a much hyped Bollywood movie. The media, the ministers, the supporters of the tech savvy Prime Minister and the millions of voters who voted the BJP to power on the back of a much touted promise of "achche din" are all eagerly waiting for a blockbuster Budget from the Finance Minister Mr Arun Jaitley. Obviously, everyone has a different expectation from the Budget. It is neither possible nor feasible for any Finance Minister to satisfy everyone. In any case, no matter what the minister does, the opposition parties will always find the Budget to be "anti poor" or "lacklustre". In any case, considering the tremendous burden of high expectations that would weigh heavily in the mind of the Budget creators, I am sceptical about the final product living up to the expectations of a large section of the society. I hope I am proved wrong.
Since almost everyone has become an expert in the art and science of Budget drafting, I too thought of joining the party! Here are some of my expectations from the Budget 2015.
Personal Tax
1. The threshold limit for personal taxation should be increase to Rs. 3,00,000 for non senior citizens and Rs. 6,00,000 for senior citizens.
2. Limit for taxing gifts from non relatives under section 56 should be increased from Rs. 50,000 to Rs. 1,00,000.
3. The exemption limit for conveyance allowance for salaried people should be increase from the present Rs. 800 p.m. to Rs. 2,500 p.m.
4. The exemption limit for medical reimbursement for salaried people should be increased from the present Rs. 15,000 p.a. to Rs. 50,000 p.a.
5. Deduction for interest on housing loan should be increased from the present Rs. 1,50,000 to Rs. 2,50,000.
6. For salaried tax payers who do not claim any exemption in respect of any portion of their salary income, a standard deduction of upto Rs. 50,000 should be introduced.
7. Anyone having a PAN but not having income above taxable limit should be asked to file a simple declaration giving reason why he/she is not filing the return of income. Thereafter, such a person should not get any notice for non filing of the return unless there is a clear suspicion of concealment.
8. Surcharge and education cess should be abolished in case of individuals.
9. Form 26AS should be converted into a passbook style account and tax payers should be allowed to claim credit for any amount of TDS appearing in the said Form 26AS in any year instead of trying to match the income and the year. This will help reduce the massive problems that many tax payers face in terms of getting credit for the TDS. It will also help in reducing the prospects of having to claim refunds from the tax department. Also, if refunds get reduced, the government will have to pay lesser interest to the tax payers. Further, this would also do away with the thousands of applications for rectification that are filed every year and which add to the burden of the tax officers in the country. Thus, this would be a win win situation for the tax payers as well as the Government.
10. For senior citizens selling long term capital assets, a new exemption should be permitted upon investment of sale proceeds / capital gains in fixed income yielding assets (such as FDs, bonds, G-secs etc.) and there should not be any upper limit for this (unlike the limit of 50 lakhs in section 54EC).
Domestic Corporate Tax
1. MAT rates should be reduced to 15% and companies paying MAT should be exempted from sur-charge and education cess.
2. DDT rates should be reduced and the same should also be exempt from surcharge and education cess – if not for all companies then at least for SEZ units and SEZ developers.
3. Clear road map for roll out of GST should be unveiled.
4. The domestic transfer pricing regulations should be scrapped. They have only added to the compliance burden on domestic tax payers. We already have section 40A(2)(b) to take care of such transactions. If necessary, that section may be suitably amended to ensure that transactions between related parties are not entered into at unreasonable rates.
5. The prosecution provisions for defaults in TDS compliance should be abolished. The government must realise that tax deductors are doing a service to the government by collecting tax on its behalf. Such selfless service providers cannot be prosecuted for defaults.
6. The limit for expenses in cash should be increased from the present 20,000 to at least 1,00,000 and section 40A(3) should be amended suitably so that genuine expenses that are paid in cash for unavoidable reasons should not get disallowed.
7. Section 40(a) should be suitably amended to do away with the disallowance of expenses for shortfall in TDS. If at all the expense has to be disallowed, it should be disallowed only if there is complete failure to deduct any tax at source.
8. Many payments are now made over the internet or by credit cards etc. In such cases, it is very difficult to deduct tax at source. The TDS provisions may be suitably amended to provide that where payments are made electronically, the said payments should be exempted from TDS. In turn, the banks should be asked to submit an Annual Information Report to the tax department giving full details of all such transactions above a particular limit.
9. With a view to encourage restructuring of organisations and foster growth, special depreciation rates must be prescribed for goodwill generated in M&A deals.
Foreign Company Tax
1. The Act must be suitably amended to bring in clarity that a foreign company is not required to file a tax return in India if it does not have any income which is received / accrued in India or which is deemed to accrue or arise in India. there are also several instances of Foreign Portfolio Investors who have invested in Indian securities but who do not earn any income in India. Such FPIs also face this dilemma as to whether they are statutorily required to file the tax return in India or not.
2. MAT provisions should be unambiguously amended to state that they do not apply to foreign companies (including FPIs)
3. Scrap the GAAR on a permanent basis or reintroduce them after incorporating all the suggestions of the Shome Committee.
4. The compulsion of having to use a PAN based DSC and that too a token instead of a .pfx type DSC should be done away with. It is very cumbersome for foreign companies to apply for such DSCs in India. Also, the issue of safety and security of such tokens is a major issue. Therefore, for such companies, a DSC issued by a foreign DSC vendor should also be accepted.
Foreign Portfolio Investors
1. A separate tax return form should be introduced for foreign companies in which the details of Balance Sheet and Profit & Loss Account not to be asked for. This will do away with the notices that most such companies get from the CPC for non furnishing of the said details in ITR-6.
2. The sunset clause contained in section 194LD should be extended indefinitely from the present 31st May, 2015. This will give FPIs a sense of clarity and surety on the taxation of interest income.
3. For PAN applications by FPIs, instead of asking for proof of identity and address, the tax department should accept the FPI registration certificate issued by the DDP since the DDP would have already done extensive KYC before granting the registration certificate. This will save considerable time and efforts of the FPI in terms of getting documents appostiled.
4. The air on the India Mauritius tax treaty needs to be cleared on an urgent basis. This matter has been pending for a very long time. The lack of clarity is not in the interest of both countries as also not in the interest of the investor community. The LOB clause that the Mauritian government has suggested should be accepted immediately and in the event that GAAR is not scrapped/deferred, then a clear provision should be enacted to state that the GAAR will not over ride a tax treaty unilaterally.
General
1. The Sanman Patras that were once conferred on the top tax payers of each Range should be reintroduced. Such top tax payers should be given certain concessions (like exemption from scrutiny for a few years, an earmarked Relationship Manager type officer to help solve any problems that such a tax payer faces etc).
2. Section 14A and Rule 8D have become a major source of litigation in the country. There are hundreds of decisions from various tribunals and courts. All have only compounded the confusion and resulted in considerable harassment to several tax payers. The law should be amended and it should be made mandatory for the assessing officer to state in the assessment order the cogent reasons why he is rejecting the disallowance offered by the tax payer (which is the pre-condition for applying Rule 8D). Unless cogent reasons are given, an assessing officer should be prevented from applying Rule 8D.
3. TDS has become a major source of harassment for most deductees as well as deductors. Deductors find it extremely cumbersome to comply with the multiple sections and rules while deductees find it very difficult to get credit for the TDS. One way of easing the trouble for both categories without causing liquidity crunch for the government would be to allow deductees to pay advance tax every month and exempt them from TDS provisions. Such persons should provide an indemnity to the tax department that they would pay monthly advance tax and therefore payments made by others to them should be exempted from the TDS provisions. This will help thousands of tax payers without causing hardship to the government.
To conclude, my wish list can go on and on. But, for the time being, I end here but not before telling the Finance Minister that "yeh dil maange more".
