15 Suggestions to Rationalize/Reform/Simplify Current Income Tax

1. BASIC EXEMPTION LIMIT & REBATE

Basic exemption limit for Individual and HUF should straight increase to 6.50 lac. No need of Rebate of 12500. So remove Rebate of 87A for Rs. 12500. Please Read 3rd Point for detailed suggestion for taxation of Individuals/ HUF

2. REMOVAL OF NEW REGIME U/S 115BAC

Remove New regime of tax for Individual and HUF as it has not gained popularity. Hardly few have adopted and chances are less for future for any more Taxpayer would like to convert to new regime . Please Read 3rd Point for detailed suggestion for taxation of Individuals/ HUF

3. RATIONALISE TAX RATES IN CASE OF INDIVIDUALS / HUF

Basic exemption limit for Individual and HUF should straight increase to 6.50 lacs

Here are Cumulative suggestions

1. NO NEW VS OLD RATE. NO CONFUSION OF SELECTION OF OLD VS NEW

2. ONLY ONE SET OF TAX RATE SLAB AS BELOW.

3. NO STANDARD DEDUCTION OF 50000 TO SALARAIED \ PENSIONERS as increase in Basic exemption limit

4. NO REBATE OF 12500 AS PER SEC. 87A as increase in Basic exemption limit

5. NO DEDUCTIONS / EXEMPTIONS / ALLOWANCES.NO DEDUCTION AS PER CHAPTER VI-A . ( I.E NO DEDUCTION OF LIC+ PPF+HOUSING LOAN + NSC +SCHOOL FEES + DONATIONS etc). ONLY DEDUCTION ALLOWED IS MEDICLAIM  

6. 6.50 lacs Basic Exemption limit will take care of Deductions / Exemptions / allowances / Standard Deductions WHICH EARLIER WERE AVAILABLE

Currently, The details of the two tax schemes for Financial Year 2020-21 is tabulated below.

 SUGGESTED TAX RATES . ( We need drastic change in age-old slabs)

4. SUGGESTION TO INCREASE TAX PAYER TRUST & TRUST IN OUR TAXATION SYSTEM – HONORING THE HONEST

For those who have paid more than 1 lac Tax – It’s high time that Government should think for giving some benefits to those tax payers (only individuals) who have contributed to the Economy by paying high taxes in last 70 years. They are the true nation building partner. They are the true contributors to growth of our country. Its high time Government should think of giving them back & salute their contribution to economy, honesty & loyalty towards country. We have to see other countries how they respect their High taxpayers like USA giving more retirement benefits based on Tax paid in past.  A proper scheme should be think upon.

So what can be done? – 1. Give priority in passport line, airport ticket counters 2. Give priority in railway reservation 3. Giving priority in getting any government department work done, 4. Giving them some retirement benefit in pension 5.  Healthcare benefits like health insurance freely  etc

5. AIS TIS  26AS

LIC, mediclaim, , donation, PPF, NSC, KVP, home loan interest, home loan principal , NPS, 80G, 80GGB GGC . Please Incorporate these details also in  AIS TIS. So that It will reduce efforts to collect information from client for filling his ITR.

Also, Dept. can simplify user interface on new IT portal. Currently we have to go to here and there in different drop down menus for 26AS & AIS . We suggest that 26AS and AIS TIS buttons must be categorised under one new heading near Help section You can name this as “information”

6. TAX ON AGRICULTURE INCOME

Agriculture income must be taxed at 2% straight irrespective of other incomes. (Token Tax) . (The way Special rate Incomes are Taxed like LTCG  112A AND STCG 111A . ) (Of course Basic Exemption limit must be there for total Income ) . Its high time that we must tax Agriculture income

7. PARTNERSHIP FIRMS TAX

Partnership firm and LLP must be taxed at 25% in line with Companies

8. REMUNERATION SLAB for PARTNERSHIP FIRM

Why no increase in Rs. 3 lac slab? Still old formula for calculation of Max Remuneration?? 40(b) prescribes max. limit of remuneration. This slab of 3 lac should be increased to 10 lacs . Currently 1.5 lac is allowed in case of lower Book profit or loss. . This should be increased to 3 Lac Currently, upto 3 lac Book profit – 90% and remaining 60% of Book profit for calculating Max Remuneration.   . This 3 lac should be increased to 10 lac

9. 44AB & 44AD

Simplify  44AB & 44AD.  Compulsory TAX AUDIT above 2 crore   . And Presumptive scheme benefit  upto 2 crore (both limits should be Increased to 5 crore Gradually for both sections together)

10. ALLOW FILLING OF ITR FOR 3 YEARS FOR LATE FILER

3 years ITR must be allowed even after end of AY  with Per month 2000 late Fee and 2% interest us 234A/B/C if Tax payable  . Govt will get high revenue if the Taxpayer is having high income.. (Earlier 2 years time was allowed to file ITR)

11. INCOME DISCLOSURE SCHEME

And  solution to bring black money / undisclosed assets into system

Income disclosure scheme should be made applicable once every 5 year with 50% straight tax and 50% investments in bond for lock-in of 5 years. Disclose of undisclosed money / property / financial assets.  By one time amnesty scheme.  Money / assets disclosed in this scheme. 50% payment now as tax. 50% of amount to be deposited in bank as fixed deposits with lock in of 5 years.  So that 100% black-money will come into system.

12. REDUCE PRESUMPTIVE  % RATE for PROFESSIONALS

Currently, Sec. 44ADA provides that Professional need to maintain 50% Net profit otherwise go for Tax audit. This % should be reducing to 33%.  As 50% presumptive deeming is to high causing High taxes in case of Professionals. 50% net Profit assumption is very high as compare to Practical life profitability

13. REDUCE PRESUMPTIVE RATE FOR TRANSPOTER

Review presumptions schemes. Sec. 44AE not up to mark. Current presumptive rate is too high. This leads to huge taxes to transporter.  1000 per ton theory is high tax volume. Same assessee same situation same transporter how can give 10 time more income. 44AE needs some correction . Please compare at least from past provisions

14. DEPRECIATION RATES

Depreciation rates should be inline with Companies Act for Companies

15. REMOVE TCS U/S 206C(1H)

This is nothing but useless Formality. Already TDS on purchase of Goods has made this section mostly redundant. Also pity 0.1% is nothing for any use. There is no new revenue coming to Government. Anyways this section is asking Tax on Collection whereas Billing is on mercantile method. It becomes Illogical for Govt and Taxpayer to compute TCS. Also 26AS data is reflected with collection amount and not Billing amount. After 15 months of Implementation, Taxpayers are charging TCS in INVOICE (i.e on sales)   (because many big companies started this from 1-10-20).  Reason is – Levy on “Collection” is an impossible & very Illogical task . In continuation with the above problem, Currently TCS is to be levied on Collection amount which includes GST. This creates Double Taxation as collection includes GST..  Please abolish TCS U/S 206C(1H)

– BY CA HARSHIL SHETH