1.
Rate of Tax:-
This year we saw increase in tax on
super rich. The surcharge was already there now it has increased to following
rates. (Page 4)
So
if you are a company having turnover in 2017-18 400.00 Crore and income Rs.
10.00 Crore your Tax liability will be Rs. 2.78 Crore or 27.82% But An
Individual earning same amount of Income will be paying Tax at 35.66%.
Also
see the co-operative society stuck on same surcharge as Company? The co-operative
societies still has Tax slabs which are more than 15 years old. They are Rs. 10,000
Rs. 20,000 and Above Rs. 20,000. Those tax slabs were never reconciled with
inflation.
There is a growing demand of doing away
with all the number updation in every budget. The amount of Tax Slabs and
penalties should be linked to inflation so no Finance Minister has to spend the
valuable time in determining whether to offer increase in slab limit of Rs.
50,000 this year or next year. Also rather than having Surcharge on Tax, it
would be much beneficial to introduce them as Tax Slab. This makes taxation
process little bit easy without any loss of revenue.
“The entire taxation structure in India,
if not law in itself, needs an overhaul!” Said by many for many years.
2.
Apart from that, the FM declared that companies
with turnover upto 400 Crore will be taxable at 25% rate. I could not find the
said provision in Annexure of Finance Bill 2019. I am little confused.(Page 66)
3.
The another surprising announcement was that
off, allowing Rs. 1.50 Lacs as deduction for interest on loan on purchase of
Electric Vehicle. India as set forth the “Mission 2030 Electric India” under
this mission, India will allow to sell only electric vehicles by 2030. The
infrastructure for electric vehicles in missing. It is easier to implement
infrastructure for Busses, because they have dedicated parking and repairing
space like Depot. But for average individual consumer Rs. 1.50 Lacs deduction
of Interest is not attractive right now. There a re practical problems.
What more I learned that
this deduction will be available for only 4 years i.e. From 1st
April 2019 to 31st March 2023. (page 21 Sec. 80EEB(3) Finance Bill 2019)This is
7 years before India is planning to go full electric. Even after India goes full
electric, the Petrol/Diesel cars will run for few more years. So just 4 years
of deduction without available infrastructure in place does not make any sense.
I am not seeing any of my clients claiming deduction under Sec. 80EEB any time
soon.
4. There is a constant wording replacing transactions
done through “bank account” with “Bank account or through such other electronic
mode as may be prescribed” Is Modi planning to introduce an mobile fund transferring
app? If true then this app will act like a payment bank. It will enable to move
funds from one Bank account/Aadhar No./Mobile number to other without any fee.
The App might be based on E-Aadhar verification. Let’s see.
5.
The one thing that wasn’t mentioned in the
Budget speech of Nirmala Sitaraman was changes in return filling requirement.
Return is normally required to be filled on the basis of income. But few new
clauses were inserted which makes following people mandatory to fill return.
a.
Deposited more than 1.00 Crore in a year in
current account. If a person holds more than 1 current account in same or
different bank then volume of all such cash deposit is to be clubbed. Now Banks
are already reporting such things under AIR. And limit there is 10.00 Lacs. So
I feel this requirement is pointless.
b.
Person incurred total expenditure during the
year of Rs. 2.00 Lacs or more for foreign travel. This includes expenditure incurred
for him as well as family members. Now if you consider standard plane ticket of
Rs. 30,000 round trip will cost you Rs. 60,000 for family of four it will definitely
exceed the said limit. I feel limit is too low here.
c.
Total electricity consumption during the year
above Rs. 1.00 Lac. Now here some small shopkeepers, businessmen, consultants
might have problem. Because you have to add their shop+house electricity
consumption. Consumption of electricity as basis for filling income tax return is
really novel proposal. (Page 25)
d.
“Fulfils such condition as may be prescribed”
opens the door for many such requirement. I am expecting in near future there
will requirement based on daily mobile data usage.
6. I was little confused hearing of interchangeability of PAN and Aadhar. But plain reading of amendment to Section 139A suggest that PAN is not done away with. Person furnishing Aadhar will be allotted PAN. And person who already holds PAN is not at an option to either quote PAN or Aadhar. Person who already got PAN has to mandatorily quote PAN. They do not have Aadhar option.
I was worried on this point because person might quote PAN till he exhaust limit of Rs. 1.00 Lac under 194C and then go on to quote Aadhar so to avoid TDS. But thankfully this condition is only applicable to a person who does not have PAN yet but he has Aadhar.(Page 26)
7. TDS on life insurance sum under 194DA is increased from 1% to 5% (Page 27)
8. New TDS section 194M is introduced for Individual/HUF paying contractor above Rs. 50 Lacs. This section will apply to those contracts which does not fall under 194C and 194J. The rate of Tax under this section will be 5%. (Page27)
9. New TDS section 194N is introduced to tax Cash withdrawals. This provision found mention in the budget speech. Banking company/Co-operative banks and post office are liable to deduct TDS. The TDS will be deducted on amount withdrawn, above Rs. 1.00 Crore. Rate of TDS is 2%. Now this provision is introduced to prevent people from going back to cash economy or keeping track of hording of cash. P Chidambaram tried something similar to this called as Banking Cash Transaction Tax or BCTT in short. This tax existed from 2005 to 2009. The limit set by him ludicrously low of Rs. 50,000. Which comes to Rs. 1.19 Lacs after adjustment for inflation in today’s term. Also this was tax, so amount was payable to government. FM Nirmala Sitaraman introduced TDS, which is available for Credit while paying taxes. The limit I feel is too high to provide any significant data on black money.
10. How income tax act is used and misused to purpose other than collection of tax has fascinated me. I was reading Chinese Individual Income Tax act out of curiosity. That was only 7 pages long. Simple and to the point. This new section 269SU requires any business with annual turnover above Rs. 50.00 Crore to provide facility of accepting payment through electronic mode. Failure to comply will attract penalty of Rs. 5,000 per day under section 271DA(Page 29)
For years income Tax Act used a tool to channelize invest by using Section 80C. Now the responsibility of electronic transaction is also put on the tax administrators. But using income tax act to promote electronic transactions is not proper in my opinion. This is the reason why we have world’s biggest income tax act and not because people trying to avoid tax.
This is just quick review of provision relating to Income Tax. Other provision and remaining part will follow soon.
* All the page numbers are of Finance Bill 2019
* All the page numbers are of Finance Bill 2019
