Budget 2020 India: After the cut in corporate tax rates, individual taxpayers are hoping for some tax benefits to come their way as well in the forthcoming Budget
By Amarpal S. Chadha
Union Budget 2020 India: We are a few days away from Budget 2020 and expectations are riding high. With the reduction in corporate tax rates and the government’s commitment to reforms, individual taxpayers are hoping that some benefits will come their way as well. Some of the key expectations are as follows:
Increase in taxable income threshold & tax slabs
While the tax rate has been reduced in the last few years, it has been six years since the last increase in the taxable income threshold or change in the tax slabs. An increase in the taxable income threshold or widening of the tax slabs, would be beneficial to individual taxpayers.
Increase in deduction for interest on housing loan
Individuals are eligible for a deduction of up to Rs2 lakh towards interest paid on housing loan on a self-occupied property. This limit was last increased in 2014-15. Considering the increase in the cost of housing over the years, the government could look at increasing the deduction for housing loan to Rs3 lakh. Further, currently, loss from house property can be set-off against other sources of income to the extent of Rs2 lakh only. This may be revised and enhanced to Rs4 lakh.
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Changes in capital gains tax
Long-term capital gains on sale of listed equity shares, units of equity oriented mutual funds and units of a business trust are now taxable at 10% on gains exceeding Rs1 lakh. To increase investments in equity, the government may consider any of the below options:
— Increase exemption limit to Rs3 lakh;
— Increase the holding period for classifying assets such as listed equity shares, units of equity-oriented mutual funds and units of a business trust as long-term capital asset from 12 months to 24 months.
— Securities Transaction Tax (STT) may be done away with as the levy of both income-tax and STT raises the tax burden.
Deduction for interest income
A deduction for savings bank interest income up to Rs10,000 is available under Section 80TTA for individuals (other than senior citizens). It would be beneficial if the availability of this deduction is widened to cover interest earned from fixed deposits and recurring deposits as well. Also, an increase in the amount of deduction would be a welcome move. Further, in order to address the liquidity crunch faced by Non-Banking Financial Corporations (NBFCs), the deduction may be extended to interest income earned from NBFCs.
Taxation of dividend
The government has been receiving requests from the industry to review taxation of dividends and re-introduce the system of dividend being taxed in the hands of shareholders. Given this, it is expected that some changes may be introduced in the taxation of dividend in this Budget.
Disputes settlement mechanism
Encouraged by the success of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, the government may announce an income-tax litigation settlement scheme. The government may institute a mediation mechanism and try to resolve tax disputes at the assessment stage itself, in a time-bound manner.
Given the government’s focus on digitisation and improving the taxpayer experience, there are some expectations around faster processing of past tax refunds, clarity on the timing of submission of Tax Residency Certificates by non-resident individuals claiming relief under double taxation avoidance agreements.
The writer is tax partner and India Mobility leader, EY. Views expressed are personal