Prime Minister Narendra Modi on Thursday set in motion a stage to respect the taxpayers of the nation. He said that it will be another achievement in the basic changes started by the government.

“The ‘Transparent Taxation – Honoring the Honest’ stage will get faceless assessments, faceless appeal, and taxpayer charter. Nondescript evaluation and taxpayer’s sanction come in power from today, whereas workaday scheme administration is going to be accessible from September 25,” PM Modi said in his video meeting address.

“Over the most recent six years, put center has been banking the unbanked and making sure about the unstable. Today, another outing begins – concerning the taxpayers,” he included.

The prime minister said that the new change will ingrain a feeling of courage among the legitimate taxpayers who assume a significant job in the national development of events.

“It strengthens our determination of the minimum government, maximum governance,” PM Modi said including, “The accentuation is on making each standard law, policy people-centric and public friendly. This is the utilization of the new governance model and the nation is getting its outcomes.”

With the dispatch of this stage, the government has made another move to make the lives of the taxpayers simpler. Throughout the years, the income tax department has completed a few significant changes, recollecting a reduction in corporate costs. The department had likewise invalidated the profit charge.

It has additionally been concentrating on the improvement of direct tax laws and increasing transparency in communication.

So also, to increase the simplicity of consistency for taxpayers, the IT department has pushed ahead with the prefilling of income tax returns to make consistence more advantageous for singular taxpayers. Consistence principles for new companies have likewise been improved.

The Finance Minister introduced several proposals concerning the personal tax regime in the Union Budget 2020 presented in the parliament on February 1, 2020.

  • Determination of residential status for certain categories of individuals
    • The budget 2020 proposes to introduce the following amendments in determining residential status for certain categories of individuals.
      As per the proposed amendments, a resident of India would be regarded to be an inhabitant of India in any financial year, if such individual is not liable to tax in any other country.
    • As per existing provisions, an Indian Citizen or Person of India Origin, who being outside India, comes on a visit to India in any financial year, would be considered as a resident in India, if such individual stays in India for 182 days or more. The amendment proposed by the budget provides for such an individual to be resident in India in either of the two scenarios –
      • the individual’s stay in India during the financial year is 182 days or more; or
      • the individual’s stay in India is 120 days or more in the current financial year and 365 days or more in the preceding 4 financial years.
        The basic conditions for determining residential status for other categories of individuals remain the same.
  • Conditions to be categorized as not ordinarily resident or ordinarily resident
    • A resident in India would be considered as not ordinarily resident if the individual has been a non-resident in India in 7 out of 10 preceding financial years.
      Individuals should take note of the proposed amendments about residential status since the taxability of income depends on residential status. While non-residents and not ordinarily residents are taxed on India sourced income, ordinarily residents are taxed on their worldwide income in India.
  • Optional new tax regime
    • While there is no change in the existing Income-tax slab rates for individuals, a new tax regime has been proposed under which individuals foregoing exemptions and deductions would be taxed at reduced tax rates.
    • The exemptions and deductions that would need to be foregone include inter alia exemptions and deductions claimed widely by individuals including House Rent Allowance (HRA), Leave Travel Concession (LTA), standard deduction, deductions under Section 80C, deduction to self-occupied house property, set-off of loss from house property against any other source of income, etc.
  • The Income-tax slab rates applicable under the new tax regime would be:
Slab Rates Rate of tax
Up to INR 2,50,000 Nil
INR 2,50,001 to INR 5,00,000 5%
INR 5,00,001 to INR 7,50,000 10%
INR 7,50,001 to INR 10,00,000 15%
INR 10,00,001 to INR 12,50,000 20%
INR 12,50,001 to INR 15,00,000 25%
Above 15,00,000 30%

 

    • Surcharge and education cess would apply as per existing rates.
      The new tax regime is optional. Individuals who opt to claim available exemptions/ deductions would be taxed as per the existing rates.
      Individuals who earn taxable income up to INR 5, 00,000 continue to be exempt from tax liability under the existing and new tax regimes.
  • Certain contributions to be taxed as perquisite
    • Contributions exceeding INR 7, 50,000 made by an employer to an employee’s account in a recognized provident fund, notified pension scheme or approved superannuation fund would be the taxable perquisite in the hands of the employees. The annual accretions to such contributions exceeding INR 7, 50,000 would also be considered as taxable perquisite.
  • Taxation of benefits under Employee Stock Benefit Plans
    • Securities issued under Employee Stock Benefit Plans by employers are taxable in the hands of the employees at the time of their exercise (i.e. allotment). In case of eligible start-ups, the payment of tax on such benefit is proposed to be deferred to within 14 days after (i) 5 years from the end of the financial year in which options are exercised, or (ii) date of sale of such security by the employee or (iii) the date of the employee ceasing employment with the company, whichever is earliest.
  • Taxation of dividend from domestic companies and mutual funds
    • As per the existing provisions of the Income-tax, domestic companies that declare, distribute, or pay dividends are required to pay a dividend distribution tax. Such a dividend was exempt in the hands of the recipients up to INR 10, 00,000.
      It is proposed to remove the dividend distribution tax payable by companies and tax the dividend from such companies and mutual funds in the hands of the recipients at the tax rates applicable to the respective recipients (i.e. applicable slab rates for individuals.)
  • Enhanced timeline to take a loan to buy home under an affordable housing scheme
    • An additional deduction of INR 1, 50,000 were made available in the Finance Act 2019 about interest on loan taken for acquisition of house property for which the stamp duty value does not exceed INR 45, 00,000. Such deduction was available subject to satisfaction of specified conditions including that the loan is required to be sanctioned between 1 April 2019 to 31 March 2020. The present budget proposes to extend the timeline for the sanction of such a loan to 31 March 2021.
  • Efficient tax administration
    • The FM stressed the need for efficiency of tax administration and proposed the incorporation of a “Taxpayer’s Charter” in the statute intending to end taxpayer harassment. The contents of the charter would be notified soon.
      A system to allot Permanent Account Number (PAN) based on Aadhaar would be introduced by which PAN would be instantly allotted online without the requirement to fill up a detailed application form.

In line with the faceless assessment process that has been introduced, the budget proposed to introduce a faceless appeal process.

It has been proposed to bring a scheme “Vivad se Vishwas” for reducing litigations. Under the scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get a complete waiver of interest and penalty provided the taxes are paid by 31 March 2020. Those who avail the scheme after 31 March 2020 will have to pay some additional amount.

 

SOURCES

  1. https://www.financialexpress.com/economy/transparent-taxation-honoring-the-honest-live-pm-modi-to-honor-honest-taxpayers-push-tax-reforms/2053590/
  2. https://www.financialexpress.com/economy/a-wishlist-of-top-five-direct-tax-reforms-to-boost-indias-economic-health/2008863/
  3. https://economictimes.indiatimes.com/wealth/tax/latest-income-tax-slabs/articleshow/62751981.cms?from=mdr
  4. https://economictimes.indiatimes.com/wealth/tax/six-income-tax-slabs-in-70-exemptions-out-impact-on-taxpayers/articleshow/73861843.cms