pri Budget 2019: Direct Tax measures to provide relief to taxpayers & promote digital economy Budget 2019: Direct Tax measures to provide relief to taxpayers & promote digital economy

The most awaited Union Budget 2019 is unveiled. This being the maiden budget of Modi 2.0, expectations of stakeholders and public at large were high. In order to provide relief to taxpayers and promote digital economy the Hon’ble Finance Minister Nirmala Sitharaman has proposed the following:

Proposals to provide relief to taxpayers

Interchangeability of Permanent Account Number (PAN) and Aadhaar to enable a person who does not have PAN but has Aadhaar under the Income-tax Act, 1961 (Act) is now a reality. The Income Tax Department shall allot PAN to such person on the basis of Aadhaar after obtaining demographic data from the Unique Identification Authority of India. A person who has already linked his Aadhaar with his PAN may at his option use Aadhaar in place of PAN. It has to be noted that if PAN and Aadhar are not linked within prescribed timelines, the PAN shall be made inoperative.

To enable pre-filling of return of income, government shall obtain information from various sources. This shall be done by widening scope for furnishing of financial transaction statement to persons other than to those who are currently furnishing the same. Current thresholds shall be suitably amended to capture smaller amounts. The move shall save a lot of time involved in preparation of return of income and ease the compliance burden.

Existing system of assessment involves personal interaction between the taxpayer and tax officials. The government is aware that this leads to certain undesirable and unwanted practices on part of tax officials. To eliminate such instances, a scheme of faceless assessments in electronic mode, involving no human interface, shall be launched this year in a phased manner. The cases selected for scrutiny assessment shall be allocated to units on a random basis. Notices shall be issued electronically by the Central Cell (the single point of contact), without disclosing name and designation of the tax official. The proposed scheme of faceless assessment is a welcome move and shall save the taxpayers from undue harassment.

From an effective tax rate reduction perspective, a deduction of INR 1.5 lakhs (subject to prescribed conditions) has been proposed with respect to interest payable on any loan from financial institution for purchase of residential house property. Further, with a view to reduce pollution in the country, government is placing thrust on electric powered vehicles. To facilitate the purchase of electric vehicles, the government has proposed a deduction of INR 1.5 lakhs (subject to prescribed conditions) for interest payable on loan taken from any financial institution for purchase of electric vehicle. This move is encouraging and will help reduce India’s carbon footprint. In fact, the government has led by example by set up charging stations at Prime Minister’s Office’s parking space for its ministers.

Proposals to promote digital economy

Various provisions in the Act prohibit cash transactions and allow or encourage payment or receipt only through account payee cheque, account payee draft or electronic clearing system through a bank account. To promote other electronic modes of payment, payments and receipts (including that of loans and deposits) by other prescribed electronic modes of payment shall also be permissible. To illustrate a few, acceptance of payments by political parties receiving donations exceeding INR 2,000, payment of expenses exceeding INR 10,000 in a day to a person, acceptance and repayment of loans and deposits exceeding INR 20,000, benefit of offering income to tax at 6% by business houses under presumptive scheme shall be permissible if the receipt or payment is through other prescribed electronic modes.

Every person carrying on business, shall be required to provide facility for accepting payment through prescribed electronic modes, if his total sales, turnover or gross receipts in business exceeds INR 50 crores during the immediately preceding previous year. To discourage withdrawals of huge sum from bank accounts, banks shall deduct tax at source of 2% if the cash withdrawal exceeds INR 1 crore in a year.

To ensure compliance of provisions, penalty provisions are proposed to be suitably amended.

It is clear that the Modi government shall leave no stone unturned to move towards a less cash economy, promote digital economy and make extensive use of technology for the well being of the nation.

The article has been authored by CA Anuj Singhal and CA Khanjan Visaria. The views expressed above are personal.

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July 2021