ClearTax, an Income Tax returns e-filing and enterprise compliance service provider, has observed a trend which, if implemented well, will ultimately result in improving the economic infrastructure of the country. The demonetisation drive was an indicator of the present government’s priority of improving the tax compliance behavior of the nation.
Continuing on the stringency applied during demonetisation, the Finance Minister declared, during the Budget session, that a penalty shall be levied in case of late filling of taxes which must be paid along with the taxes and any interest on dues. He further mentioned that entities which were earlier exempt from tax under special provisions of Section 10 must also file returns now. This is a laudable effort which will bring in more filers and taxpayers, strengthening the government’s reserves, analysed ClearTax.
In a move that will boost the formalisation of the Indian economy, medium and small businesses were encouraged to go the corporate way and get them registered by lowering the tax rate by 5 percent. The Finance Minister, in an attempt to provide relief post demonetisation, also gave an upward push to the thresholds for book-keeping and auditing.
The Government has also lowered taxes for presumptive schemes, allowing MSMEs a greater space to experiment and innovate, added ClearTax. A continued trend over the past few budgets was observed this time as well with tax relief provided to the lower-income groups with a reduction of 5 percent in income tax, from an earlier 10 percent, for those in the per annum income group of Rs. 2,50,000-5,00,000. This is estimated to result in tax savings worth Rs. 7,500 to Rs. 12,500 per annum.
On the other hand, a surcharge of 10 percent on those earning between Rs. 50 lakh to Rs 1 crore has been introduced this year, thus balancing the scales a little. In a move that appears to be anti-taxpayer, but bodes well for the long-term investment economics of the country, tax benefits on interest paid on rental properties have been taken away.
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The government intends to discourage investors from looking at property investment through loans as a tax-saving mechanism. The Union budget also reflected the central government’s commitment towards promising and realising affordable housing by its continued investment in initiatives such as Pradhan Mantri Awas Yojana.
However, responsibility of TDS collection on tenants paying over Rs. 6, 00, 000 annually may be an untimely measure, as a lot of taxpayers continue to grapple with compliance of TDS on properties. “The budget has been positive and in keeping with the needs of a rapidly developing economy.
Agriculture has been given special importance with huge funds allocated to ensure credit, irrigation and MSP for farmers, who have been suffering from the dual menaces of massive crop failure and rising debt. It would suffice to say that the government has rolled out a watchful budget which strengthens India to prepare for the uncertainties of the global economy,” said Archit Gupta, Founder and CEO, ClearTax.