India: Repair. Reform. Reap.

Last Updated: 8 July 2019
Article by SKP  

While the Modi government embraces the second term with a historic mandate, it has its task cut out to deal with several challenges on the macroeconomic front. The new government will consider a clutch of proposals over the next days to complete unfinished goals of fine-tuning reforms.

On July 5, the budget will reveal the government's road-map towards the key economic insights, it is also anticipated to bring significant opportunities for transformation.

Here is a wishlist, that our experts think will be the most beneficial to tax payers:

Tax rates

  • The rate of Minimum Alternate Tax (MAT) / Alternate Minimum Tax (AMT) should be reduced to 12% since the corporate tax rate has reduced to 25% for most assessees.
  • DDT rate should be reduced if not done away with since both dividend and LTCG are taxed in India.
  • Lower rate of tax @ 25% for short term capital gains (other than equity oriented)
  • Tax rate specification for foreign LLP.
  • HRA exemption limit condition should be increased to 60% of basic for Metro cities and 50% for non-metro cities.
  • No surcharge on income up to one crore for individuals.

Ease of doing business

  • Issuance of certificate in Form 16A should be done away with considering the fact that the said information is already available in Form 26AS.
  • The logical process of issuing intimations under section 143(1)/143(1)(a) instead of mechanical processing.
  • Prosecution proceedings in case of TDS defaults should be liberalized.
  • Exclusion for non-resident directors from obtaining PAN in India if the Company and other Directors have obtained PAN.

Providing a stable tax regime

  • The effects of the adoption of IND-AS on the computation of income should be clarified.
  • Providing clarification on the threshold for Significant Economic Presence (SEP) under business connection.

Personal taxation

  • Limit for standard deduction in case of salaried individuals should be increased from INR 40,000 to INR 100,000. Further, leave travel concession exemption should be provided every year instead of two years in a block of four years.
  • Deduction of interest on borrowed capital should be reconsidered for let out and self-occupied properties.
  • The limit for deduction under section 80C should be increased to INR 250,000 from the existing limit of INR 150,000.
  • Gross receipt limit and presumptive income limit should be reconsidered in case of presumptive taxation.

Other aspects

  • The time limit for the disposal of appeals by the Commissioner of Income-tax (Appeals) and Income-tax Appellate Tribunal and for passing orders giving effect to appellate orders should be set.
  • Streamlining mechanism for issuance of refunds in case of foreign companies not having bank accounts in India.
  • Automatic transfer of the file to Jurisdiction officer after filing of rectification for the second time or online facility to enable the assessee to transfer the file to a jurisdictional officer.
  • Provision for past FBT refunds adjustment against income tax due for coming years.
  • Stipulated time period for construction of house property under sec 54 and 54F should be increased to four years.

    As the day approaches, we hope for a favorable roll-out in the interest of all tax payers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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