35 Pre-Budget suggestions by CA Prarthana Jalan

1. Tax Slabs should be revised as per the DTC Bill Provisions

The Parliamentary Standing Committee on Finance (PSC) in its Report on the Direct Taxes Code Bill 2010 (DTC Bill) has appropriately recommended the following revised tax slabs for individual taxpayers.

0-3 Lakh – Nil

3-10 Lakh-  10%

10-20 Lakh – 20%

Beyond 20 Lakh – 30%

2. Rate of MAT/AMT to be decreased

The existing rate of MAT/AMT is 18.5% which is more than half of the corporate tax rate of 30% therefore, it is suggested that the rate should be reduced and rate should be 15%

3. Allowability of CSR Expenditure

The spending of 3% of the net profits on Corporate Social Responsibility as per The Companies Act 2013, should be an allowable expenditure under the provisions of Income Tax Act 1961. In the previous budget the Government has mentioned that CSR expenditure would not be allowed u/s 37 of the Income-tax Act, 1961. Owning to compulsion made by the Companies Act, 2013 it is suggested that CSR expenses should be allowable u/s 37 of the Income-tax Act, 1961.

4. Grant of Infrastructure status to the Hotel industry

It is suggested that like airports, seaports and railways, hotels should be included as an infrastructural facility eligible for benefits under Section 80 I A of the Income Tax Act. In fact under Section 10(23G) of the Income Tax Act, Hotels were added to the infrastructure list so that interest received by the Financial Institutions and banks for loans extended to hotels were tax exempted. However the provision itself was discontinued with effect from 1 .4.2007.Grant of Infrastructure status to the Hotel industry will lead hotels to re-invest their profits in the hospitality sector, channelize huge investment in the tourism sector and help bridge the shortfall of hotel rooms.

5. Export Industry Status To The Hotel Industry

The tourism sector contributes over Rs.100,000 crores to foreign exchange of the country. Deductions in respect of the foreign exchange earnings in convertible foreign exchange should be permitted. The benefits available under Section 80HHD of Income Tax Act 1956, which was discontinued after 2005-06, should be revived. It will enable further investment in this sector.

6. Higher Depreciation for Hotel Buildings

Depreciation on Hotel Buildings under section 32 to be increased to 20% from the present 10% as hotels have to make heavy investment in plant and machinery due to their running on a 24 hour basis and in renovation, up gradation and upkeep.

7. Deduction of employees’ contribution to Provident Fund etc. – Section 43B

Deduction for employee contribution to PF should be allowed even if the employee contribution is deposited after the statutory time limit but before the due date of filing the return of income.

8. Taxability of Unsold Flats in the hands of Real Estate Developers

In case of real estate developers, most of the developers have unsold stock which also includes a chunk of finished flats, apartments and units etc. Such unsold construed flats as per the specific exclusion to be provided in Section 22 of the Act would not attract tax under the head ‘income from house property’

9. Section 43CA needs reconsideration

The harshness of the provision of section 43CA, for real estate developers and general public at large, wherein sales consideration of the immovable property is substituted by circle rate should be mitigated by providing sufficient safeguards for the genuine transactions.

10. Proposed amendment in Section 56

Section 56 of the Income-tax Act, 1961 brings to tax all such properties which have been purchased by Individuals & HUF at a price lower than the Circle Rate. This provision is causing genuine hardships as assessable value under stamp duty act in many states are not yet rationalized and far are more than the market value of property.

11. Suggestive amendment for Section 56(2)(viia) and 56(2)(viib)

As per section 56(2)(viia), a person has to buy shares of a private limited company at NAV, a clarification should come about its inapplicability to right issue or any further issue of capital by the Company. As the investment in the Private Co. have got set back due to it.

The issue of shares pursuant to otherwise exempt transactions such as merger, demerger, inorganic acquisitions etc. should be excluded from the purview of Section 56(2)(viib) of the Act.

12. Section 14A should be made applicable only if exempt income earned

sec 14A-It has been noticed that even if exempt income is not earned during a particular year, the tax officers disallow the expenditure in relation to the investments which have the potential to earn tax exempt income.

13. Scope of Section 32AC should be enlarged

Section 32AC provides for deduction for investment done in Plant and Machinery by the companies only. Benefits of sec 32AC pertaining to investment deduction should be extended to assessees other than companies and also to new individual entrepreneurs so that more industry is setup.

14. Non Taxability of genuine inter-corporate loans and advances as deemed dividend

Section 2(22)e of the Income-tax Act, 1961 considers certain transaction within the ambit of deemed dividend specially the ones done between the shareholder having more than 10% of the shareholding of the company. It is suggested that genuine inter corporate loans and advances should be deleted specifically from the said section.

15. Section 195 clarification required

Clarification on TDS from payments to non-residents having no Indian branch/ fixed place PE should be inserted. In various circumstances when expenses such as commission payment is done by the Indian Residents to Foreign Residents having no branch/fixed place or Permanent Establishment in India and who work outside India and they help in promoting and sales of Indian Goods then the Income-tax department attracts the provision of section 195 and ask the assessee to deduct TDS. In order to avoid litigation it is suggested that a suitable amendment in form of clarification should be in section 195 of the Income-tax Act.

16. Online rectification of Form 15CA should be made

Form 15CA has to be filed online, however, there is no mechanism in the system to edit or rectify the inadvertent errors made while inputting the data in the fields and the taxpayer has to again fill in Form 15CA and upload it on the website. This leads to creation of duplicate form 15CAs, wherein both the forms with the correct details and earlier form with errors remain in the system.

17. Section 54 should be amended to incorporate more than one house

Long-term capital gains deduction for investment in one residential house is available as per the provisions of Section 54 of the Income-tax Act, 1961. Looking at the current scenario and the living standards of the people of the country The limit should be increased to 2 houses.

18. Claim made during the assessment proceedings

It should be suitably clarified in the Act that the tax officer is duty bound to allow the legitimate claim of the taxpayer made before him during the course of the assessment proceedings and assess the total income/ loss after allowing the said claim.

19. Time limit for completion of appeals by appellate authorities

The Act does not specify any time limit within which the appeals filed before the appellate authorities must be disposed of. This results in undue hardship and never ending litigation cost to the taxpayer

20. Rate of Interest on Tax Refunds – Sec 244A

The interest for nonpayment of tax is charged at the rate of 12% whereas the interest given on refund to the assessee is merely 6%. Uniform rate of interest of either 6% or 12% p.a. both for refunds and tax dues payable by the Government and taxpayers respectively may be prescribed.

21. Maintenance of Books of Account in Digital Form – Section 2(12A)

The present law requires the taxpayers to maintain books of account in physical form thus causing a lot of hardship to the taxpayers in the world of digitization and also leading to wastage of valuable resources. Section 2(12A) of the Act needs to be amended to include books maintained in digital form also as ‘books or books of accounts’ for the purpose of the Act.

22. Procedure for surrender of PAN

In case of firms/ companies who have discontinued their business, have to file return under Section 139(1) of the Act, since no procedure has been prescribed for surrender of PAN for such discontinued firms/ companies. This also leads to penalty under Section 271F on account of non-filing of return of income. It is suggested that written guidelines and procedure shall be introduced for surrender of PAN, wherever it is genuinely necessary for the taxpayer to surrender, for instance in the case of discontinuance of business etc. Revival of Standard Deduction

23. Standard Deduction for Salary Class

A standard deduction was earlier available to the salaried individuals from their taxable salary income. However the same was abolished with effect from AY 2006-07.The standard deduction for salaried employees should be reinstated to at least Rs. 100,000 to ease the tax burden of the employees and keeping in mind the rate of inflation and purchasing power of the salaried individual,

24. Section 80TTA to cover FDR interest

At present deduction u/s 80TTA is provided of Rs. 10,000/- to individual and HUF who earn interest income from saving bank interest. It is suggested that the scope of the said deduction should be enlarged and should also covered FDR interest within the ambit.

25. Minor child income exemption to be atleast Rs. 10,000/-

Under the provisions of Act the income of the Minor child is clubbed in the income of the parent. A deduction of Rs. 1500/- is received by the parent in whose income the income of the minor child is clubbed. It is suggested that the limit of exemption under Section 10(32) of the Act should be raised to at least Rs. 10,000 for each minor child

26. Enhancement of Limits for TDS – Section 194C

As per the provisions of Section 194C the TDS has to be deducted if payments of individual transactions is Rs. 30,000/- or above and aggregate if the annual payment is Rs. 75,000/- or above. It is suggested that owing to the inflationary trends the individual transaction limit should be increased to atleast Rs. 50,000/- and the aggregate to Rs. 1,00,000/-.

27. TCS on luxury goods can be made which can be claimed in return

In order to bring super rich in the tax brackets it is suggested that TCS can be made applicable on purchase of luxury goods that is Cars, LCDs etc. and it can be claimed in the return of income.

28. Form 15G and 15H to be filed online

It is suggested that Form 15G and Form 15H should be made online so that the assessees whose TDS is not to be deducted or is to be deducted at lower rate can easily filed the form and claimed not deduction of TDS. Even the payers would be able to see the Form 15G and Form 15H received by the persons to whom they are making the payments.

29. Agriculture activities carried by corporate to be taxed

Though as per section 10 of the Act agriculture income is exempted from tax. It is suggested that many corporate are showing agricultural income in their books of accounts in order to changed their black money into white money. It is suggested that agricultural activities by the corporate should be suitably taxed.

30. 40A(3)- Direct Deposit In Bank A.C And Payment To Electricity should be excluded

As per section 40A(3) payment is excess of Rs. 20,000/- made otherwise than account payee cheque or RTGS or NEFT is disallowable. It is suggested that payment made in cash in excess of Rs. 20,000/- to Electricity companies should be exempted from the said clause. It is also suggested that if a direct cash deposit in the bank account of the payee is made by the payer than the same should also not be disallowed.

31.  50C stamp duty as on day of agreement and tolerable variance

As per the provision of section 50C of the Act circle rate during the year of sale is taken as the sales consideration. It is suggested that the provisions of the section should be suitably amended so that Stamp Duty/Circle Rate as on the date of agreement should be made applicable on the sales transaction. It is also suggested that the tolerable variance of 10% should be made in the section between the difference of sales consideration and the value adopted as per section 50C.

32. Capital gain Fair market value-2001 instead on 1981

As per the provisions of the Act if an asset is purchased before 1981 than the market value in the year 1981 is taken for determining of cost of acquisition of the said asset. It is suggested that year 1981 should be replaced by the year 2001 as the value of the asset in the last decade have increased to manifolds.

33. Advance payment of tax limit -30,000/-

It is suggested that the advance payment of tax limit from the current Rs. 10,000/- should be increased to Rs. 30,000/-

34. Sec 234E- Should be scrapped

Owing to a lot of litigation and also stay put in by many High Courts across the Country the fees charged u/s 234E for non filing of TDS statement should be scraped as it leads to double penalization of the offence by the assessee as interest is also charged for the same default.

35. Air- Transactional Limit To Increase

A lot of income-tax notices are coming on the assessee as per the information received by the department through AIR i.e Annual Information Return filed by the Banks, Mutual Fund Organizations, Registrars etc. It is suggested that the monitory limits of the reporting transaction from the various assessee should be increased from the existence Rs. 2 Lac, 5 lac etc. to atleast more than 10 Lac Rupees.