Budget lowers burden of tax compliance
Increasing the TDS threshold will reduce the paper trail
If one strings together various proposals, the compliance burden on many taxpayers will be lower from the next financial year. Tax rebate and standard deduction were the most discussed proposals since they directly impact taxpayers. But a series of proposals in different areas could reduce the paper trail.
Take for example the increase in threshold for tax deducted at source (TDS) for bank and post office deposits. At present, if an individual earns more than ~10,000 interest on a deposit, banks deduct the tax and deposit it with the income-tax (IT) department.
The limit has now been hiked to ~40,000. “There are many individuals, like homemakers, who don’t have taxable income. Yet the bank deducts tax at the time of paying interest on the deposit unless Form 15G is submitted every financial year. Now they don’t need to fill out the form if their interest income from deposits is up to ~40,000,” says Naveen Wadhwa, a chartered accountant with Taxmann.com.
In the previous Budget, the government had exempted senior citizens from paying tax on bank and post office fixed deposits up to ~50,000 and, therefore, banks were not supposed to deduct any tax up to this limit. Tax experts say many banks continued with the TDS, and the Central Board of Direct Taxes (CBDT) had to later clarify. Now with the TDS threshold increased above ~40,000, senior citizens subject to TDS will also get relief.
The finance minister (FM) has also hiked the TDS threshold on rent paid under Section 194I. It has been raised to ~2.4 lakh, from the earlier ~1.8 lakh. Under Section 194I, a tenant - other than an individual or Hindu Undivided Family - has to deduct tax at the rate of 10 per cent if the rent is above the threshold limit in a financial year.
“The Budget announcement lowers the compliance for an individual who lets out property to a business owner or company. In case the tax is deducted at source, the property owner has to claim it from the I-T department by filing returns even if his total income is in the basic exemption limit,” says Suresh Surana, founder, RSM Astute Consulting Group. He further adds that many seniors also live off the rental income from a small property. The proposal eases the compliance burden of such individuals and frees up their cashflows.
The most discussed proposal of the Budget –tax rebate for those who will have a taxable income up to ~5 lakh – will be passed on to the employee by the employer. Tax experts say in the past the CBDT had allowed companies to not deduct tax if the employee’s taxable income was below the threshold limit for the rebate. The same will continue in the next financial year.