Union Budget 2021: Nirmala Sitharaman offers carrot and stick approach to raise revenue, soothe taxpayers

In line with expectations, considering the pandemic pain, there were no tax sops in the form of exemptions or rebates that Budget 2021 offered, but instead relaxations were given in compliance for senior citizens and incentives for digital transactions in the fine print. To begin with, the Budget has proposed a constitution of a Dispute Resolution Committee who can be approached by small taxpayers having a taxable income up to Rs 50 lakh and disputed income up to Rs.10 lakh through faceless (online window) to ensure efficiency, transparency and accountability. This would facilitate in reducing litigation cost and time of small taxpayers. The Budget has also exempted resident senior citizens above 75 years of age, who only have a pension and interest income (in the same bank) and usually pay tax in the form of TDS (tax deducted at source) from filing their Income Tax Returns. Further, to safeguard welfare funds of employees (like employee Provident funds, superannuation funds, other social security funds), deductions of late deposit of employees’ contributions will not be allowed as the expense in the hands of the employer. To further incentivise digital transactions by replacing cash transactions and reducing compliance burden, persons having turnover up to Rs 10 crores will not be required to get accounts audited under Income Tax Act where cash involved is less than 5 percent of total receipts/payments. Among other changes, the Budget gave its proposal to the announcement made last year to boost the real estate industry. As per the proposal, an individual buying a home or a developer selling it between 12 November, 2020 and 30 June, 2021 will not have to pay tax on the difference between stamp duty value and consideration paid to the builder, if consideration does not exceed Rs 2 crore and the difference is not more than 20 percent. Taxpayers can also draw solace from the fact that the Budget has reduced the period for issuing tax notices by the department for a particular transaction to four years from seven years earlier (i.e. 3 years/6 years from the end of assessment year, respectively). By which, the budget proposal has reduced the uncertainty and anxiety among the taxpayers, unless the transaction value for escaping income is over Rs 50 lakhs. The reason for reducing the period was attributed to technology advancement that enabled getting huge data within a very short period of time. Hence, no notice can be issued after four years in such cases. The Budget has also empowered the tax official to attach property of the taxpayer in cases of false entry made or omitted in the books of accounts including fake invoices to safeguard collection of penalty initiated on such taxpayers. It has also proposed a faceless appeal scheme with the aim of reducing litigation cost and to use resources (i.e. judges of Income Tax Appellate Tribunal) in the best way and reduced the last date of filing belated and revised return to 31st December of the assessment year. Given the bits and pieces changes made, the Budget has made an effort to ease the tax compliance amid the pandemic pain. The writer is Associate Director (Direct Tax), SK Patodia Associates