InvestorQ : What are some of the personal taxation expectations from the Union Budget 2021?
Crowny Pinto made post

What are some of the personal taxation expectations from the Union Budget 2021?

1 year ago

There is a long list of expectations on the personal tax front too. Here some of these expectations are highlighted.

· Corporate tax rates have been reduced to 22% and this is the time to make life simpler for individuals also. The need of the hour is lower taxes and simplicity.

· Maximum tax free income still continues to be Rs.2.50 lakhs. Incomes up to Rs.5 lakhs get a rebate so the tax is zero. This is unfair to someone earning Rs.5.50 lakhs as the tax bill ticks from Rs.2.50 lakhs onwards.

· The solution is to increase the base exemption limit to Rs.5 lakhs and get rid of the tax rebate concept altogether.

· In addition, filing of tax returns should be mandatory only if income is above this limit of Rs5 lakhs thus reducing wait for refunds and the admin hassles for the IT department.

· Section 80C need to be updated. The current limit of Rs.1.50 lakhs is just too low considering the spread of investments available and can be enhanced to Rs.3 lakhs.

· Similarly limit of Rs.2 lakhs on Section 24 for home loan interest is not pragmatic considering home prices. It is best enhanced to Rs.5 lakhs.

· The road ahead should be to integrate home loan interest and home loan principal payment under a single section and remove principal from Section 80C.

· It is the right time to expand presumptive tax, which is a great system, to individuals, companies with turnover up to Rs.5 crore and NRIs too.

· In fact, the government must consider getting rid of all exemptions and moving to a flat presumptive tax on total income for all, imposed in a graded manner.

The big challenge is to now enhance the tax/GDP ratio. The government must look at ways to enhance tax/GDP ratio, which is low by global standards. One way is presumptive tax covering small traders and professionals. Secondly, scores of rich farmers are not being taxed and it is high time the tax is imposed, even if it be at a concessional rate.

Tax revenues are unlikely to improve if the actual high income groups are allowed to get away with paying minimal tax.