Budget may offer flat tax rate sans exemptions to individuals also
The government is considering a proposal to extend further incentives to salaried taxpayers in the upcoming budget. The Finance Ministry may allow individual taxpayers to pay a lower flat rate of tax if they forego all exemptions.
 
The new structure would be similar to tax rates proposed by Finance Minister Nirmala Sitharaman late last year where the base corporate tax rate was reduced to 22 per cent from 30 per cent for companies that agreed to forgo all exemptions and incentives. The tax was kept at even lower rate of 15 per cent for new manufacturing companies.
 
"After tax sops for corporates last year, the government is looking at ways to incentivise the individual taxpayers that form a major source of revenue for the Centre. While major changes in tax slabs could wait for some time, a scheme similar to the one implemented for the corporate sector is being examined for individuals too," said a source privy to discussions on the issue in the government.
 
At present while individual income upto Rs 2.5 lakh per annum is exempt from tax, a 5 per cent tax is levied for income between Rs 2.5 lakh and Rs 5 lakh. A higher 20 per cent slab is for income between Rs 5 lakh and 10 lakh while a 30 per tax rate is applicable for income above Rs 10 lakh. In addition, the government also levies a surcharge in slabs on super rich for income above Rs 50 lakh. 
 
The source said that though there is broad understanding on implementing a flat income tax rate for individuals, discussions is still going on its quantum and how it could fit a tax structure that has three to four different slabs.
 
Tax experts who did not want to be named on the issue told IANS that the government could look at a flat rate somewhere in between the 5 and 30 per cent income tax rates. The ideal would be around 15-18 per cent rate that would be lower than the peak rate of 30 per cent and the second rate of 20 per cent. Also, the new lower flat rate of tax may be applicable only for annual income of upto Rs 50 lakh.
 
Sources said that a higher flat rate is also being looked at for the super rich but discussions on this have remained inconclusive. 
 
At present, an individual can save upto Rs 1.5 lakh per annum under Section 80C of the Income Tax Act by making investments in insurance plans and few other specified instruments including buying a pension plan run under the NPS. An additional self contribution (up to Rs 50,000) under section 80CCD (1B) is available as NPS tax benefit. In addition, there are deductions for contributing towards paying premium for health insurance and for paying installment for homes bought on loans.
 
While the flat rate of tax may be attractive to a certain category of taxpayers that want a higher share of their monthly earnings in hand, experts say the move could also dissuade people from increasing their contributions towards savings. India's household savings has dropped to 17.2 per cent level in 2017-18 from 23.6 per cent in 2011-12. Data for FY 19 is not available. Higher domestic savings is crucial to mobilise funds for investments in the economy.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    ISHWAR SATWANI

    7 months ago

    Government must increase the Basic Exemption Limit from Rs. 2.50 lakhs to 5 Lakhs. Public will be more happy in this, rather than having lower tax rates .

    Middle class people who have to pay exorbitant fees to CA as they have to compulsory file the Income Tax Return if their Gross income is above Rs. 2.50 Lakh.

    No body is interested in lower tax rates . People are already fed up due to complicated , Ever Upgrading GST Law , & filling somany returns under GST Law .

    BR

    7 months ago

    Why must tax exemption be only for Salaried people. Many do not get salary as they have no jobs given to them by others. Many are married, lost their privacy, freedom &ability to earn independently because they are house wives. Some orphans, sick, decrepit, old people live on savings. Salaried people of PSUs &Govt get much money these days. There is no need to consider ONLY THEM AS IF THEY ALONE EXIST. Must people are unemployed or not in govt sector. They must get Income Tax exemption.

    Ramesh Poapt

    7 months ago

    expect the unexpected ! but not a shocker!
    govt can't afford negative surprise this time!

    Rajolu Ramam

    7 months ago

    I never read any thing about income tax and the budget. What the media and the press guess, never came true. It is a futile exercise. Never the things come true. In olden days some benefits were there for women and senior citizens. Slowly they were with drawn. Housing loan, Intrest on housing loan exemptions are not useful to the senior citizens.

    Govt rolls back changed eligibility for filing ITRs in Form 1
    Those owning a single house in joint names would continue to file their income tax returns (ITRs) in much simpler ITR-1 (Sahaj) and ITR-4 forms (Sugam) for assessment year 2020-21 with the government issuing a clarification in this regard.
     
    The clarification has come days after the government modified the eligibility for filing the returns in ITR-1 and ITR-2, stating that those owning a property jointly, spending Rs 2 lakh on foreign travel and paying electricity bill of Rs 1 lakh in a year would not be able to file returns in the simpler forms.
     
    They would have to file their returns with much more detailed information in other specified forms.
     
    Following the changes in the eligibility for filing returns in the two forms, concerns were raised over it with taxpayers claiming that it will cause huge hardship for them.
     
    "The matter has been examined and it has been decided to allow a person, who jointly owns a single house property, to file his/her return of income in ITR-1 or ITR-4 Form, as may be applicable, if he/she meets the other conditions," a Finance Ministry statement said.
     
    "It has also been decided to allow a person, who is required to file return due to fulfillment of one or more conditions specified in the seventh proviso to section 139(1) of the Act, to file his/her return in ITR-1 Form," it added.
     
    Tax practitioners welcomed the government move of going back to the previous position.
     
    "This is a welcome clarification allowing middle class taxpayers owning a single house property to file simpler ITR forms, 1 and 4, and not the detailed ITR forms even if they own house property in joint names," said Shailesh Kumar, Director, Nangia Andersen Consulting.
     
    It may be noted that taxpayers holding multiple house properties would have to file more detailed return forms.
     
    In the major changes notified earlier this month by the Income-Tax department, individual taxpayers were disallowed to file return either in ITR-1 or ITR 4 if he or she was a joint-owner in house property.
     
    In another change, those deposited more than Rs 1 crore in bank account or spent Rs 2 lakh on foreign travel or paid Rs 1 lakh on electricity bill in a financial year were also barred from using the easy-to-fill return forms.
     
    "By today's clarification, the government has maintained status quo. Now, the taxpayers can continue filing their returns in the same fashion in which they did last year," said Naveen Wadhwa, Deputy General Manager (DGM), Taxmann.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    GST authorities summon firms with 12 key docs for scrutiny, industry wary
    Central GST authorities have started summoning businesses with a set of 12 key documents pertaining to FY17-18, the GST roll-out year, for closer scrutiny suggesting an aggressive approach against suspected tax evasion.
     
    This has left the industry scared with many of them terming the move arbitrary. Many tax experts pointed out that several records called by the department are already with them and hence, such a demand is unreasonable.
     
    Industry sources said that records called by the central GST authorities include various GST returns (GSTRs), GST registration certificate, copies of annual report, Income Tax returns, reports of cost, tax and internal audits, cash ledger and work orders, among others.
     
    Bipin Sapra, partner at EY, said that GST audits are being ordered even where GSTR 9C has been submitted and the GST authorities have reconciliations of the financial data and tax paid.
     
    "The audit should be based on queries if any on the basis of returns already filed. The information sought is elaborate and is available with the authorities. Given that most big units have multi state registrations, it will be an epic task to get the audit done in all the states for each year. There needs to be a centralised audit of these records to avoid undue hardship and promote ease of doing business in India," Sapra told IANS.
     
    With pressure mounting on the field officers for higher GST collection, there has been more focus on curbing GST evasion and leakage. This week, the Revenue Department held a meeting with senior GST officials from both Centre and states and drew up a nine-point strategy to plug loopholes in the system.
     
    Archit Gupta, Founder and CEO, ClearTax, said that government has been taking an aggressive stand against taxpayers.
     
    "However, both government and the taxpayers should place increasing reliance on the systems data and use technology to improve compliance. Harassing taxpayers comes with limited benefits, but using technology for both compliance and audit is beneficial. The government will soon implement rules to make sure provisional ITC credit does not exceed 10 per cent.. this will leave taxpayers with no choice but to use technology for reconciling their data for ITC purposes," Gupta said.
     
    With many states opposing the idea of rate increase to augment GST revenue, the government has directed its focus on anti-evasion measures. From April this year, e-invoicing would be implemented for certain categories of businesses.
     
    Vivek Jalan, Partner, Tax Connect Advisory Services LLP said that the root cause of the notices is the directions given by the Commissionerate and CBIC to the field formations for going all-out on GST scrutiny.
     
    Further, such directions have given field officers the opportunity to take arbitrary actions.
     
    Jalan said that lower GST collection was not the only result of evasion but more of the lower GDP growth and the record-low consumption level.
     
    "The higher GST collection will not happen in this way (sending notices to taxpayers). There has to be higher GDP growth and consumption growth to mop up more revenue," the tax expert said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    Sudhir Mankodi

    7 months ago

    If the trading community has nothing to hide, why they should feel \"scared\" about the directive? It\'s a well known fact that those who are supposed to pay higher tax, they engage the services of the consultants (like the one who has been quoted in your report) to find loopholes to evade the tax. Afterall, govt. is expected to generate the revenue. If they seek clarifications what\'s wrong? Only the service class has to hear the brunt of dishonesty of the trading community by paying higher taxes?

    gcmbinty

    7 months ago

    Indian trading community under suspect. Indirectly, failure of the capitalist regime without without acceptable procedures of collecting taxes. GST rates are exorbitant and the open market theory of "Price Mark Up" and encouraging the retailers/vendors on the road to demand any price from the consumer has failed the RSS backed economics of the BJP.

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone