Finance Minister Nirmala Sitharaman shall present the 2023 budget to Parliament on February 1. Considering that this Budget will be the last full budget of the government’s current term, the nation awaits for an incentivizing Budget to boost various sectors and a Budget that focuses to scale towards the $1 trillion economy as well as to counter the global headwinds looming during this year. Here are two main expectations for the Union budget 2023-24:
Relaxation in compliance requirement in Income Tax Act:
The objective of the Government to reduce governance is commendable. However, at times, businesses are burdened with excessive of compliances, failing which such businesses could be subjected to penalties. Few examples where the Government may consider relaxing the compliances are as follows:
- Ambit of furnishing of statement of financial transaction u/s 285BA r.w.r. 114E has been widened to cover more transactions including receipt of cash payment exceeding two lakh rupees for sale, capital gains on transfer of listed securities or units of Mutual Funds, dividend income, interest income.
- Reporting in Tax audit report (Form 3CD) of break-up of total expenditure of entities registered or not registered under the GST
- Compliance with ICDS for tax purpose along with AS / IND-AS for maintaining books of accounts.-Section 145.
- Deduction of TDS / collection of TCS has been u/s 194Q / 206C on transactions of purchase and sales.
- Furnishing of details of the donors and donations in Form 10BD (section 80G r.w.r. 18AB) by the Trusts.
- Deduction of TDS on purchase of immovable property, filing of Form 26QB and generation of Form 16B by the purchaser of immovable property – section 194IA.
- Deduction of TDS on payment of rent by individuals or Hindu undivided family – section 194IB.
It is pertinent to note that over the past decade, the cost of compliances have increased significantly leading to small business set ups spending more time and money on addressing the compliances.
Powering SEBI to question companies going for IPO with inflated offer prices:
In the last 18-24 months, the equity capital markets have witnessed listing of many IPOs. Few companies after listing have performed miserably and plummeted down to more than 65% of the listing price. Many small time investors who invest their life time savings get trapped into such IPOs due to information asymmetry, marketing, etc. Therefore, the Government should consider empowering SEBI to question the companies seeking listing as to how such companies have arrived at an inflated offer prices, the data and methodology adopted by such companies during the price discovering process. It is pertinent for SEBI to question the companies on the red line in its past financial statements vis-à-vis the valuation and correlation to its offer prices. The defence of such companies to state that any SEBI directives on the inflated offer prices will be against the fundamentals of a market economy is utterly despicable. Such companies who eye for listing make skyrocketing valuations by adding notional futuristic growth but in reality after listing, the market has seen how miserably such companies have fared. It is time to arm SEBI with powers to veil down such inflated offer prices before small-time investors get trapped and lose their life savings. If the companies do not meet the criteria set out by SEBI, such companies should be grey listed and only after a period of two years, such companies may reapply. Strengthening the role of SEBI in IPOs will create more transparency and also safeguard the life savings of small time investors.
It is hoped that the Ministry of Finance consider the above proposals and look forward to read the fine print of the Budget proposals on February 1.
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