Budget 2017 is keenly awaited with expectations riding high from all quarters. After the eventful period of demonetisation, the public expects reward for their patience and support during demonetisation; industry is looking for growth momentum and the Government wants to strengthen its base. The Finance Minister certainly has a mean balancing act to perform.
From a personal tax standpoint, small measures can go a long way to give relief to the common man. We look at these from two perspectives:
a) Personal tax provisions
Overhaul tax slabs – There is a strong public ask to reduce personal tax outflows. Reportedly, recent tax collection figures have exceeded expectations, and there is a need to drive momentum to widen the tax base. Increasing basic exemption limit and revising tax slabs would send positive signals.
Incentives for salaried class – The salaried class has long felt that it is the most compliant group of taxpayers yet always neglected. Reinstating standard deduction on salary income would give much cheer. Current provisions also need a re-look. Exemption limits for child education/hostel expenses, conveyance allowance, medical reimbursements, meal vouchers, etc. need a drastic hike, commensurate with current cost of living. Inconsistencies in valuation of benefits should be removed. e.g. taxable value of car expenses reimbursed by employer should be same, whether the car is owned by employer or employee.
Tax parity in retirement schemes – Tax treatment of PF, NPS and Superannuation schemes should be at par to allow people flexibility to migrate between schemes without adverse tax implications. Let people have the liberty to choose what kind of retirement scheme they wish to participate in, based on associated risks and returns.
Remove tax on deemed let out property – Taxing a second self-occupied/vacant property as deemed let out property is unfair and cumbersome. There should be no tax if there is no income.
Change 80C deduction – Existing limits should be increased. Alternatively, a separate deduction for home loan repayment may be introduced.
Change 80TTA deduction – With interest rates going down, people (especially senior citizens) will suffer loss of income. Hike the current limit and allow term deposit interest within its ambit.
b) Ease of compliance – To make compliance easy, some areas need immediate attention:
Easier ( - Make PAN migration easier for those who have to move to change job locations). The current process is prolonged, convoluted and at the mercy of the locational tax offices.
Relief for cross-border employees by easing TRC requirements for individuals – India’s IT/ITES sector is its major foreign exchange earner. Their employees frequently travel to work outside India, and consequently become subject to tax in multiple jurisdictions. Relief is available under the respective tax treaty but subject to mandatory Tax Residency Certificate (TRC). Due to differing tax years and timing of filing tax returns, obtaining TRC is a difficult task for individuals. Relax TRC rules by permitting individuals to substantiate their foreign tax residency via simpler means like tax returns, proof of physical stay, etc.
Easy compliance for foreign nationals working in India – If India seeks to be valued as a destination country to attract foreign talent, ease of tax compliances plays a big role. Many expatriates struggle with Indian processes like PAN applications, mobile registrations, etc. Many also lose tax refunds processed after they leave India because their bank accounts become dormant. It would be a huge relief if they are permitted to authorise their employers to receive legitimate tax dues on their behalf.
Rationalise interest on advance tax instalments – Advance tax instalments should be payable only when the income arises (as is currently applicable for capital gains). There should be no interest imposed for earlier quarters.
Rationalise scrutiny assessment selection – For cases picked up through CASS, other factors should also be considered before issuing scrutiny notices, e.g. if there is a history of clean assessment orders, the same case should not be subjected to repeated tax assessments if there is no change in circumstances. Furthermore, post demonetisation, while more scrutiny is expected, it would be a good idea to set up a Task Force to issue guidelines for identifying target cases so that it is not just left to the subjective opinions of individual tax officers.
After the eventful last two months of 2016, the New Year opened on a promising note with the PM announcing sops for farmers and senior citizens. So, will the FM change track or will he carry the positive baton forward? We shall soon find out.
(The author is director, personal tax, PwC)
For full coverage of Union Budget 2017 click here.
Updated Date: Jan 30, 2017 18:02 PM