At the outset, we appreciate the efforts and initiatives taken by the Government on the economic front to handle the impact of Corona-19. Under this background, the Union Budget-2021 could be another sentiments boost.
Vidarbha Industries Association ( VIA ) would like to suggest the following for your consideration in the Union Budget 2021 – 22 to be soon presented by you as under:
- Review the definition of Agricultural Income:
The agricultural income is tax free as the Constitution of India does not allow the levy of income tax on such Income. The basic concept of keeping agricultural income out of the tax net was that India is an Agricultural based economy.
However, the provision has been used for tax avoidance &evasion and is not in accordance with the basic concept of taxation aimed at providing relief to the agriculturist.
We believe that the following measures could be considered to increase the revenue for the Government :
- Farming and Contract farming on aggregate land exceeding 50 Acres may be taken out of the definition of the term “Agricultural Income”.
- Tax under sec.115BBE :
During demonetization, section 115BBE was introduced so as to provide that certain income be subject to tax @ 60% plus 25% surcharge plus 4% Education & Health cess, resulting in an effective aggregate rate of 78%. Further, if the A.O. makes addition then penalty under section 271AAC may also be levied @ 10% of tax which makes the overall burden @ 84%. Special rate was introduced specially to take care of the situation prevailing at the time of demonetization. It needs urgent review.
It is requested that the Maximum Tax Rate be capped at 30% only.
- Upward revision of Personal Income Tax Slab:
The personal income tax exemption limit has not yet been changed since long though the alternate tax regime has been offered for personal taxation under section 115BAC by the Union Budget – 2019. In view of this, to kindly revisit the basic exemption limit as under:
a) Basic exemption limit be enhanced to Rs.5 Lakh for all categories of the taxpayers.
b) Income in the range of Rs.5 Lakh to Rs.10 Lakh may be made taxable @ 10%
c) Income in the rangeof Rs.10 Lakh to Rs.25 Lakh may be subject to tax @ 20%.
d) Income exceeding Rs.25 Lakh may be subject to tax @ 25%
Reduction in the maximum rate of taxation @ 25% would help in developing better tax compliant society and would encourage taxpayers to remain in the main stream.
- Minimum Alternate Tax:
The current rate of MAT of 18.5% is quite high and has impacted significantly cash flow of companies who otherwise have low taxable income or have incurred losses. The Government is attempting to phase out the exemptions and deductions available under the Act and so is the need to reduce the impact of MAT over the companies.
It is requested that the MAT rate be reduced to 10% from the present rate of around 18.50%.
- Allow deduction for corporate social responsibility expenditure:
Presently, no deduction is available under the Income Tax Act -1961 towards the expenses incurred on CSR activities as referred in Section 135 of the Companies Act, 2013.
It is requested looking at the noble gesture by the corporate, be encouraged further by allowing deduction while computing the business income of the assesses.
- Increase threshold limit under Section 80C of the Act:
There is no system of social security in the country. As a result, there is a need to promote the saving habit of the citizens. Tax benefit encourage & promote saving habits amongst citizens and thus investments. It may be noted that the limit of Rs.1.50 Lakh deduction u/s 80C has remained unchanged since long.
It is requested that the overall deduction limit may be enhanced to at least Rs.2,50,000/- from the existing limit of Rs.1,50,000/-.
- Redefining the meaning of “Relative” Under Section 56:
“Relative” is a cohesive term where if one person is a relative of second, the second person also considered as the relative of the first person. However, Section 56 defines the word “relative” from the angel of recipient only. As a result, one may be relative of other whereas other may not be the relative of first person.
The meaning of the “Relative” as given in section 56 needs to be reviewed. This can simply be done by adding the word “payer” in addition to the word “recipient” in section 56.
- Removal of taxation on Notional Basis:
Over a period of time, the department have been flooded with information and system to check and cross check the transactions. It calls for revisiting the notional taxation system which was introduced basically as a measure an anti abuse measure.
In view of this, VIA strongly appeal to kindly remove the taxation on “notional basis” as against taxation of actual income. It’s only the actual income received by an assessee which should be chargeable to tax.
- Notional Taxation u/s 50C, 43CA & 56(2)(x):
In continuation to our above suggestion, we would like to make following suggestions for your urgent consideration. It may be noted that the FMV of the industrial property for levy of stamp duty is significantly higher as compared to the actual rate prevailing. Section 50C, 43CA & 56(2)(x) provides for taxation of immoveable property transactions on notional basis where if the property is sold / purchased below its fair market value, the difference between actual sale consideration & stamp duty valuation is liable for income tax in the hands of buyers as well as seller.
There are various situations like sale of industrial property, distressed sale, sale of encroached property, sale of disputed property, sale of mortgaged assets by banks & various other factors which make it impossible to sale the property at FMV. Exclusions for such situation need to be provided in all above sections.
Further, reference to DVO option is presently is available only to the Assessing officer which can happen only after the transaction is completed i.e., the sale deed is executed. It is suggested that the option be given to the assessee to approach the AO for getting DVO report even before the transactions is executed. It could be subject to payment of prescribed fee to the DVO. This option is going to remove the contingency involved in the property transactions.
- Presumptive Income is case of professionals:
In case of Presumptive scheme of taxation for professionals under section 44ADA, considering Income @ 50% gross receipts is too excessive & looks unreasonable.
It is suggested that the rate be considered at 25% and the limit of Rs.50 Lakh may be enhanced to Rs.1 Cr.
- Monetary Limit for Tax Audit of Accounts:
Presently, corporate assesses are required to get the books of accounts audited if their turnover is exceeding Rs.1 Cr.
It is suggested that even the corporate assesses may be included in section 44AD net if total turnover or gross receipt in the previous year does not exceed Rs.2 Crore.
In short, if the corporate assesses opt for presumptive Income scheme, the tax audit may not be made compulsory if the gross turnover is up to Rs.2 Crore.
- Assessment in case of Income Tax Search cases u/s 153A:
By the Finance Act – 2018, the period covered by assessment u/s 153A has been extended from 6 years to 10 years in some search cases where income escapement is likely to exceed Rs.50 Lakh.
Considering the practical difficulties involved in maintaining the old records and compliance thereto, it is suggested that the period of assessment u/s 153A may be restricted to 5 Years in totality as against 6 years.
- Provisions regarding levy of penalty for concealment of income:
New Provisions under section 270A have been inserted w.e.f. A.Y. 2017-18 as replacement to the old system of levying penalty under section 271(1)(c) of the Act. The terms ‘under-reporting’ or ‘mis-reporting’ is likely to be a subject matter of litigation. Further, it is also not clear that at what stage the Assessing Officer should levy the penalty.
The penalty rate is 50% or 200% of the income. The penalty rate given u/s 270A need to be reviewed and may be linked with the tax amount and not with the income.
Further, it is suggested that a specific provision be incorporated so as to provide that the penalty be levied only after the case is decided in appeal against the assessee by ITAT and the issue has not been admitted by the High Court as substantial question of law. This will not only result in filing of appeal cases but will also ease the burden of the taxpayers from unwanted appeal filing.
- Recovery proceeding against directors u/s 179 of the Income-tax Act:
There are instances where section 179 is invoked by the Assessing Officer even prior to decision in appeal by CIT (A) or ITAT and without exploring full remedy for recovery of outstanding demand against the company.
It is requested that the mode of recovery envisaged in section 179 is exercised only if the demand has been finally settled and the Assessing Officer, after exercising all other options, is not able to recover the same from the company.
- Widening the scope of Joint Development Agreement (JDA) Taxation under Section 45(5A):
VIA appreciate the incorporation of section 45(5A) which has settled the controversy in the taxation of JDA. However, the benefit is available only to an Individual or HUF.
Considering the overall perspective and the background behind its introduction, it is suggested that it should be extended to all the categories of taxpayers as well.
- Revisiting the Interest Rate under section 234A, 234B and 234C and for refund u/s 244A:
In the recent time, there has been drastic change in the prevailing interest rate across all sectors of the economy. It requires downward revisions of interest rate by at least 3% on interest charged as well paid by the department.