Union Budgets are expected to throw up some tax concessions. Of course, the government has its own resource constraints. The question is if the budget has done a good job on taxation within the limitations. One needs to admit that it has done well!
Tax rates and slabs
The interim budget which was presented in February 2019 had already made a sharp reduction in taxable by giving a rebate of Rs.12,500 under Section 87 for incomes up to Rs.5 lakhs. So, you are now paying tax only if your net taxable income is more than Rs.5 lakhs. Even here, you had all the exemptions plus the standard deduction of Rs.50,000. Effectively, for a regular tax payer, incomes were virtually exempt from tax up to Rs.8-9 lakhs of income. There was a hope that this rebate would be converted into an exemption but that was not done.
The real tax burden came on the high income group. People earning above Rs.50 lakhs were already paying 10% surcharge while those earning above Rs.1 crore were paying 15% surcharge. Now the government has added two more slabs. Persons earning more than Rs.2 crore have to pay surcharge of 25% while those earning more than Rs.5 crore will have to pay surcharge of 37%. This is the highest top bracket tax level since 1985. It is surely going to hit the super high income groups.
Push for digital
The current government has been trying to push for digital shift to curb evasion of tax. Due to lack of digitization, a lot of transactions could not be tracked as they were paid for in cash. The budget has taken two initiatives. Firstly, the digital transaction charges and the MDR have been done away with. Now these costs will be borne by the respective banks out of the cost savings accruing to them from the use of digital. Secondly, the budget has also proposed a TDS of 2% on cash withdrawals exceeding Rs.1 crore from a bank account during the entire year. This is a tax where you can claim refund but the reporting will curb misuse of the cash route. This is a big story on tax!
The budget also took two important initiatives on the simplification of the tax process. Firstly, the IT department will move towards faceless assessment to avoid any instance of officers trying to misuse their positions. This will be applicable up to a certain threshold of income. Secondly, the budget has made PAN and Aadhar literally interoperable. Now Aadhar becomes the default identity for all purposes. Individuals can file tax returns by quoting Aadhar instead of PAN. All high value purchases will not require quoting of PAN but Aadhar will be good enough. That is surely the way forward! ©