The Budget for the next financial year 2021-22 would be presented in the Parliament on February 1, 2020. It is common knowledge that due to global Covid-19 pandemic, the entire year 2020 has turned out to be a ‘zero year’. The production, sales, earnings, salaries have all been drastically affected due to onslaught of this global pandemic. The exports have also dwindled and the already sluggish economy of our country has taken a major beating on this account. The Government has taken measures to revive the economy but no concrete results are visible. In this grim situation, all eyes are pinned on the FM for providing redressal to the Ailing Economy, the battered Common Man, the shattered MSME sector, the wrecked Real Estate Sector and the bruised Trade & Commerce. The expectations of all sections of the society are very high as all expect that the upcoming budget 2021 would provide much needed respite to them.
The following are some of our expectations for the coming year specially in the field of Direct Taxes.
a) Easing of Rates of Individual Income Tax: The Corporate Tax for most of the corporates is 22%. Adding surcharge and cess, the same is 25.17% without any capping. In contrast thereto, the rates of personal Income Tax are 30% above the income of Rs 10/15 lacs as per the scheme opted by the assessee. On top of these high rates, there is imposition of cess@4%. There are different rates of surcharges for income exceeding Rs. 50 lacs ranging from 10% to 37% better known as the Super Rich Tax. Thus the rate actually goes upto 42.75% in case of individuals having high incomes. This is highly discriminatory & objectionable. There appears no incentive to earn more or in other words there are increased chances of Tax evasion.
b) Lowering of Tax slabs for LLP & partnership firms- The rates of LLP & Partnership firms is 30% plus 12% surcharge (above Income of Rs. 1 crore) & 4% cess. The effective rate works out to 35.95% on income above Rs. 1 crore. The rates for Corporates is 25.17% including cess & surcharge. Thus LLP & Partnership firms are being discriminated which is against the basic canons of Taxation. It would be trite to mention that there are much more LLPs & partnership firms than corporates in our country and their demand of Equal Treatment- Equal Taxes is fairly justified. FM should give the much needed relief to the partnership firms & LLPs on this score.
c) The Super Rich Tax is payable on gross total income including Long Term Capital Gains. Thus, if an individual assessee in distress, with a view to payback his overdue bank or market loans, sells his immovable property, he becomes liable to Super Rich Tax. Instead of capital gains @ 20% he becomes liable upto 28.5% capital gains tax which is abnormally high & uncalled for in the present scenario. This should be retrospectively be amended and the imposition of Super Rich Tax on capital gains should specifically be withdrawn retrospectively.
d) The exemption u/s 87A is available to individual assessees and not to HUFs. This is discriminatory in as much as the rate of Taxation is the same for both these class of assessees. There appears no rationale for denial of this exemption to the HUFs.
e) Exemption u/s 43CA & 56(2) of Income Tax should be retained for the entire financial year 2021-22. It is pertinent that the Atmanirbhar Bharat Package 3.0 was announced by FM to provide relief to Real Estate Developers and home buyers on November 12, 2020. According to the said relief the differential between circle rate and consideration has been increased from 10 per cent to 20 per cent. However this is restricted to primary sale of residential units up to ₹ 2 Crore. This scheme is applicable from the date of announcement of this scheme i.e. November 12, 2020 till June 30, 2021. Consequential relief up to 20% shall also be allowed to buyers of these units under section 56(2)(x) of the Act for the said period.
It is requested that this relief be granted in respect of primary & secondary sale of all types of immovable properties i.e. plot, house, flat, industry and lands. Therefore relief be granted u/s 43CA, 56(2) & 50C of the Income Tax Act. By not providing relief on secondary sale and denying benefit u/s 50C, the said relief measures are discriminatory and violative of Article 14 of the Constitution. Denying relief to secondary sales & sales other than residential units with a limit of Rs. 2 crores is totally against the established principles of law and would not sustain in any court of law.
FM is therefore requested to expand the relief to all types of sales of immovable properties and that too without any capping. The said relief should be applicable till 31 March 2022 and consequencal relief u/s 50C & 56(2)(x) should be allowed along with 43CA of the Income Tax Act. This relief should be provided retrospectively since November 12, 2020.
f) Continue deduction of TDS @ 75% of the prescribed rates for whole of the financial year ending 31 March 2022 as there is liquidity crunch in the market.
g) Increase the limit u/s 40A(3) of the Income Tax Act from existing 10000/- to Rs. 20,000/- to provide relief to the small taxpayers.
h) Increase the limit of Section 269 T & 269 SS to Rs. 50,000/- for cash deposits/loans & repayments in place of the present limit of Rs. 20000/-, which is there in the statute since 1984. The amount of Rs. 20000/- is too insignificant looking to the erosion in the value of currency.
i) Survey, Search & Seizure operations should be minimised & taken in rare of rare circumstances as the assessees are already under acute financial pressures due to onslaught of Covid-19 pandemic and any unwanted tensions would devastate them mentally & emotionally.
j) The number of cases being selected for limited scrutiny/ detailed scrutiny should be very minimal. It is seen that on the same issue cases are repeatedly being selected although no additions on that score have been made in the earlier cases completed in response to notices for scrutiny. Necessary provision should be made in the Budget 2021.
k) There is no ‘Social Security’ provided to taxpayers. The Government should come out with a novel scheme wherein social security should be provided to Income Tax payers in proportion to the Income Tax cumulatively paid by them to the National Exchequer. Similarly, a model ‘ Health Insurance Scheme’ should be launched for senior citizens wherein complimentary ‘ Health/ Medical Insurance’ should be available to all Income Tax Assessees above the age of 60 years when the Insurance companies refuse to give Medical Insurance in the twilight years of life, when they need medical facilities most. The amount of medical insurance would depend on the assessee’s total Income Tax contribution till date. This welcome gesture would be an incentive to taxpayers to pay more taxes and avail higher medical claims when they grow old. This scheme can be launched in line with ‘ Group Insurance’ and would not cost much to the Government.
On the macro front the common man expect the FM to extend CLSS under PMAY for purchase of house for atleast 1 year more i.e till 31 March 2022. Some incentives & relief measures should be given to the cash ridden MSME sector as the role of this unorganised sector is praiseworthy in building our nation. This will help the MSMEs to enhance their domestic production, increase exports & create much needed employment opportunities.