In relief for small taxpayers, old demands to be dropped
Tax claims of up to ₹25,000 pertaining to the period till FY 200910, and up to ₹10,000 for FY 2011 to 2015 will be withdrawn; one crore people to benefit, says Finance Minister
hile maintaining the status quo with respect to direct and indirect taxes, Union Finance Minister Nirmala Sitharaman, in the interim Budget presentation on Thursday, proposed to withdraw small, nonreconciled, and disputed direct tax demands. This implies that tax demands of up to ₹25,000 pertaining to the period till FY 200910, and up to ₹10,000 for FY 2011 to 2015 will be withdrawn. Ms. Sitharaman held that that the moves were part of the Treasury’s intent to improve ‘ease of living and doing business’.
This turned out to be the major policy announcement as Ms. Sitharaman maintained the status quo for direct and indirect taxes, including import duties.
Elaborating the rationale for the withdrawal, she told the House that there
Wexisted a “large number of petty, nonverified, nonreconciled or disputed direct demands”, many of which went as far back as 1962. As they continue to remain on the books, they were “causing anxiety to honest taxpayers and hindering refunds of subsequent years”, she said.
The Minister said the move would benefit “about a crore taxpayers”.
Gouri Puri, partner at law firm Shardul Amarchand Mangaldas & Co., said the issue [about direct tax demands] has been pertinent to smaller taxpayers. Further, this will help address “legacy demands” that have been existing in the system but might be lacking merit.
Before announcing the tax proposals, Ms. Sitharaman had highlighted the government’s prerogative to improve taxpayer services. She pointed to how the “ageold jurisdictionbased assessment system” was transitioned to “faceless assessment and appeal”.
This, according to her, imparted greater efficiency, transparency, and accountability. The Finance Minister said the introduction of updated income tax returns, a new form 26AS, and prefilling of tax returns have made filing “simpler and easier”. Further, the average processing time for returns stands reduced from 93 days to 10 days at present, she stated.
Same tax rates
Stating that she would be “keeping with the convention”, Ms. Sitharaman proposed to retain the same tax rates for direct and indirect taxes, including import duties. This is in contrast to the last interim Budget (201920), which proposed amending Section 87A of the Income Tax Act to increase the income base for tax rebates from ₹3.5 lakh to ₹5 lakh, breaking from the convention of announcing populist measures before the country heads into election.