The Interim Budget 2024 is set to be announced by Finance Minister Nirmala Sitharaman on February 1, 2024. With various sectors in India presenting their needs and demands, here are 15 key points from the common man's wish list concerning income tax:
1. Simplify capital gains taxation:
a) Suggest a consistent holding period for all Indian domestic shares and mutual fund units to qualify as long-term capital assets.
b) Align long-term capital gains tax rate at 10% and short-term capital gains tax at 15% for all financial assets.
c) Consider eliminating indexation benefits for long-term capital gains if tax rates and holding periods are aligned.
d) Allow offsetting of long-term capital loss with short-term capital gains.
2. Increase standard deduction limit:
There is a strong case for raising the standard deduction limit from Rs 50,000 to Rs 1,00,000 annually. This adjustment is necessary due to inflation, the impact of COVID-19, and to maintain parity with business-income earners. The current deduction of Rs 50,000 is insufficient considering the current economic conditions and increased living expenses for salaried individuals.
3. Grant Tax Break of Rs 50,000 for NPS Investment
Individuals can currently claim a tax deduction of up to Rs 50,000 for their contributions to the National Pension System (NPS) under Section 80CCD (1B) in the old tax regime, but not in the new tax regime. Encouraging retirement savings is a priority for the government, which is why this deduction was permitted in addition to the tax-saving investment limit of Rs 1.5 lakh under Section 80C in the old tax regime.
4. Simplify TDS Rules for Property Purchases
To streamline property transactions and reduce compliance burdens for purchasing from Non-Resident Indians (NRIs), the government should simplify the Tax Deducted at Source (TDS) process for individual buyers. This can be achieved by aligning the TDS requirements for individual buyers when purchasing from both resident and NRI sellers. Eliminating the requirement for buyers to obtain a Tax Deduction and Collection Account Number (TAN) for transactions with NRI sellers and allowing the use of PAN-based challan-cum-return forms, similar to purchases from resident sellers, would facilitate smoother transactions.
5. Claiming Last Year's TDS Online
Claiming a refund for TDS from the previous year can be a hassle. Normally, the Centralised Processing Centre (CPC) handles most refunds. But sometimes, the process involves the assessing officer (AO), which can make things more complicated for taxpayers.
To make it easier, the PHD Chamber of Commerce suggests an online option. This would let taxpayers claim TDS credit for the income reported in their tax returns for the relevant year or as per Form 26AS, which shows TDS details, provided the income is taxed in either year.
6. Reducing Tax Burden for Homebuyers
While the Interim Budget 2024 is just a temporary budget, homebuyers hope for some tax relief. Here are a few measures that could help:
• Increase in Deduction Limit: The deduction limit for interest paid on home loans hasn't changed since 2014. It's currently set at Rs 2 lakh. Raising this limit to at least Rs 3 lakh would benefit all homebuyers, whether they live in the property or rent it out.
• Removing Capping for Rental Properties: For properties given on rent or declared as 'deemed to be let-out', there's a cap of Rs 2 lakh on set-off against salary income. Removing this cap would provide relief to those paying taxes on rental income or on 'deemed to be let-out' properties where no real income is earned.
These changes could ease the tax burden for homebuyers and make owning property more affordable.
7. Tax-free Premium on Life Insurance Increased to Rs 10 Lakh
The government has made a significant change regarding taxation on life insurance products. Now, individuals can enjoy tax benefits on premiums up to Rs 10 lakh. This move aims to encourage more people to invest in life insurance.
One major concern in the insurance sector has been the double taxation on annuities. India has faced challenges in this regard, which have affected the growth of annuities. By addressing the taxation structure at entry and exit points, the government aims to stimulate the annuity market.
There have been persistent requests from the industry to remove the Goods and Services Tax (GST) on insurance. This step would further simplify the taxation process and make insurance more accessible to the masses.
Increasing the cap from Rs 5 lakh to Rs 10 lakh would be beneficial. This adjustment would provide individuals with more flexibility in choosing insurance policies according to their needs and preferences.
8. Simplification of the ITR Filing Process for NRIs
Despite the government's efforts to simplify the income tax return (ITR) filing process, there are still challenges, particularly for Non-Resident Indians (NRIs) filing returns in India.
NRIs often encounter complexities in the filing process, leading to delays or even avoidance of filing altogether. While they can seek assistance from tax consultants in India, completing the entire process and receiving tax refunds can be cumbersome.
To address this issue, there is a need for further streamlining of the ITR filing process, especially for NRIs. Simplifying procedures and providing better support would encourage more NRIs to fulfill their tax obligations in India, contributing to a more efficient tax system overall.
9. Increase Savings Account Interest Deduction to Rs 50,000
Saving money in bank accounts or fixed deposits may not seem like the best investment option due to low-interest rates and minimal tax benefits, especially when compared to riskier investments like stocks. By raising the deduction limit and expanding the scope of section 80TTA, more people might be encouraged to invest in the banking sector. This could gain popularity because of its simplicity and ease of understanding compared to other complex investment choices available.
10. Expand AIS to Include 6 More Incomes of Individuals
Since its introduction in November 2021, the Annual Information Statement (AIS) has been helpful in reflecting various incomes regardless of whether taxes were deducted on them or not. However, there are areas where the AIS could be expanded, such as reporting bank account details or ensuring consistency in reporting rental income from property.
11. Simplify TDS/TCS Certificate Requirements
To lessen the burden of compliance, it's suggested to eliminate the requirement for issuing TDS/TCS certificates, except for (A) Salary TDS certificates in Form 16, (B) TDS certificates for non-residents, and (C) Higher TDS/TCS instances where PAN information is unavailable. Exemption for Farmers/FPOs from 1% TDS under Section 194O
It's proposed that digital platforms operated for the benefit of farmers/FPOs should be excluded from the purview of section 194O, which imposes a 1% Tax Deduction at Source (TDS) rate.
12. Aligning TDS Credits: Bridging Form 26AS and ITBA Discrepancies
We greatly value the Government's proactive approach in swiftly refunding taxpayers via expedited returns processing under section 143(1). To uphold this efficiency, it's imperative to promptly address the internal issue of disparities between Form 26AS and ITBA. Denying TDS credit based on ITBA mismatches contradicts the data reflected in Form 26AS. Resolving this disconnect promptly ensures accurate crediting of TDS amounts.
13. Clarifying Electric Car Perquisite Taxation
It's recommended to introduce a clear amendment to the Income Tax Rules, 1962, outlining the criteria for taxing perquisites related to Electric Vehicles provided by employers to employees. This clarity ensures consistency and compliance in the taxation of such benefits.
14. Streamlining Capital Gains Taxation Structure
Currently, there exists inconsistency in tax rates and holding periods for different instruments within the same asset class. Furthermore, the benefit of indexation varies across different scenarios. It's crucial to establish a rationalized structure to ensure fairness and coherence in capital gains taxation.
15. Extending the Time Limit for Revised Return Filings
We propose extending the time limit for filing revised returns until the end of the assessment year. This extension facilitates taxpayers in claiming or adjusting foreign tax credits in alignment with the extended time limit provided for furnishing Form 67 to claim such credits.