The Budget should bring in changes to reduce hassles for tax payers

The Budget should bring in changes to reduce hassles for tax payers

The Government should also improve collections for the income tax department.

  • February 16, 2016  
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Subhash Lakhotia, Tax & Investment Consultant

Tax payers will be disappointed with the fact that there might not be any major increase in the basic income tax exemption limit in this year's Budget. Frankly speaking, the deductions for individual tax payers are also not likely to increase.

The Easwar Committee's suggestions will be of great help with regard to lower deduction of tax at source, which would result in non-piling of refund for tax payers. The National Pension System (NPS) has a bright future through the Exempt Exempt Exempt (EEE) concept.

Long-term capital gains upper cap may be raised to Rs 50 lakh only, while income tax exemptions on dividends may also be lowered to Rs 50 lakh. Tax rates on short-term capital gains may go up to 15 per cent of the total gains of up to Rs 50 lakh and, thereafter, the normal tax rates on such gains will be applicable. Taxation on salary income of different categories of employees, namely public and private sector, requires to be brought on a par, including deductions, allowances and taxation.

One of the most important points that might come up in the Budget is about introducing a presumptive tax system for professionals, including lawyers, doctors, chartered accountants, fashion designers and architects. It is expected that out of the gross receipt of professional income, 33 per cent will be taxed, especially when the person is not being able to maintain a detailed account book. I would also like to suggest that the limits for presumptive taxation for businessmen should be increased to a turnover of Rs 3 crore.

This would not cause any loss to the income tax department and, instead, will translate into higher tax collections. Clarifications on NPS should also be made clear so that there is no ambiguity to help tax payers claim the right amount of tax deductions. Currently, deduction for insurance premium paid is 10 per cent of the sum assured.

This should be increased to 20 per cent. It would be commendable if the government brings the tax rates for individual tax payers down to 10 per cent on an income of up to Rs 25 lakh and at 20 per cent on income in excess of it. All exemptions and deductions, if required, may be deleted.

As far as corporate tax payment is concerned, it would be better if the tax rates are revised to 20 per cent on incomes of up to Rs 1 crore and 25 per cent on income in excess of Rs 1 crore.

All types of tax exemptions, if any, should be scrapped. If these wishes do materialize in the upcoming Budget, surely the menace of black money, foreign black money, etc., will be things of the past and we will be able to carry out white money transactions with no hassles to tax payers. It would also result in better collections and less hassle for the Income Tax department. Now let us wait for the Finance Minister's verdict.

Written by Subhash Lakhotia, Tax & Investment Consultant