ITR Reform News: Riding on the back of 26 per cent growth in tax collection, the government is introducing the next set of reforms in tax administration by reducing the number of forms available for filing Income Tax Return (ITR) to improve the experience of taxpayers and reduce ready to do. Time taken to file return.
Clear signs of revival of the economy after the pandemic and government efforts to plug tax leakages have resulted in a jump in both direct and indirect tax collections in 2022. Going forward, as it seeks to tighten the noose around evaders, the government may also consider stricter tax deduction norms for e-commerce and online service providers, apart from online gaming.
Taxation of the digital economy, ensuring fair share of taxes to developing countries and global coordination for taxation of cryptocurrencies will be among the priority areas as India prepares to host the leaders of the G-20 countries next year.
The rationalization of long-term capital gains tax structure is also expected to bring parity in holding periods among similar asset classes. Currently, long-term capital gains on shares held for more than a year are taxed at 10 per cent. Sale of immovable property and unlisted shares held for more than 2 years and debt instruments and jewelery held for more than 3 years attract long-term-capital gains tax of 20 per cent.
Some changes in the new tax regime are expected next year as well as the government seeks to make the exemption-free tax regime more attractive to individual income tax payers.
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In the long term, the government wants to do away with the complex old tax regime by establishing a new system without exemptions and deductions. Moving in that direction, the government in the Union Budget 2020-21 gave taxpayers an option to choose between the old regime with various deductions and exemptions and the new tax regime offering lower tax rates without exemptions and deductions. Even after two years of its implementation, the new tax regime has not come into effect and the IT department is now considering making some tweaks in it so that more and more taxpayers can adopt it.
Gross collection of direct taxes (before adjustment of refunds) till December 17 of the current financial year stood at Rs 13.63 lakh crore, a growth of 26 per cent over the same period of 2021-22 on strong growth in advance tax payments and TDS deductions . , After adjusting for refunds, the net collection of tax on corporate and personal income has grown by nearly 20 per cent to Rs 11.35 lakh crore, which is nearly 80 per cent of the budget target for the full year.
The tax authorities are working on a common ITR form for most taxpayers and will continue to have forms (ITR-1 and 4) for individual taxpayers. Taxpayers filing ITR-1 and ITR-4 will have the option to choose which form they want while filing their tax returns – the proposed Common ITR form or the existing one. Currently, there are 7 types of Income Tax Return (ITR) forms which are filed by different categories of taxpayers.
The rising tax revenue provides relief to the government on the fiscal front as it more than makes up for the shortfall in the budgeted disinvestment target set for the current financial year. Nangia Andersen LLP Partner Sandeep Jhunjhunwala said this budget is unique as a post-Covid-19 recovery budget and the last full-year budget of the second term of the current government before the Lok Sabha elections due in 2024.
“Since the disparity between individual tax rates and corporate tax rates has widened over the years, it would only be appropriate if the suffering of the common man is addressed and the overall personal taxation system is made more liberal for individual taxpayers. This indirectly Will be from.” Jhunjhunwala said, help the government to increase the scope of tax collection by paving the way for voluntary compliance in the country.
Rohinton Sidhwa, partner at Deloitte India, said India is expected to push the agenda at the G-20 on areas that will result in higher taxes for developing countries.
“The unfinished agenda of taxing the digital activities of global multinationals is high on the priority list. Also India is expected to move fast on better reporting for crypto transactions. Globally the crypto industry has attracted a lot of attention and There is a motivation to regulate the industry. Better yet, prevent abuse through money laundering and catch any tax leakages”.
Shardul Amarchand Mangaldas & Co-Partner Amit Singhania said that it is expected that the government will rationalize the prosecution provisions under the Income Tax Act, 1961. The current monetary limit for criminal prosecution is as low as Rs 10,000 and may need to be rationalised.
Year 2022:
On the Goods and Services Tax (GST) side, the GST Council, consisting of finance ministers from states and the Centre, has pitched for rationalization of tax rates and merger of slabs on completion of 5 years of the indirect tax regime.
The completion of half a decade of the GST regime was significant as the compensation paid to states for revenue loss ended this year as well as the term of the National Antiprofiteering Authority (NAA) and its job as India’s antitrust watchdog. transferred to the institution. (CCI).
GST collections, which are a barometer of the economy’s performance, are showing signs of improvement and have stabilized at around Rs 1.4 lakh crore on the back of a vibrant economy.
As the government steps up compliance checks and data sharing among departments, tax revenue improves year-on-year and is likely to exceed the budgeted target of Rs 27.50 lakh crore by nearly Rs 4 lakh crore this fiscal , which will help the government maintain its fiscal. Deficit in 2022-23 within the budgeted level.
Keeping a close eye on sectors that could collect more tax, the government this year imposed a 30 percent tax on transactions in virtual digital assets or cryptocurrencies. Also, to establish a money trail, 1 percent Tax Deducted at Source (TDS) has also been introduced. This tax has somewhat dampened investor sentiment in high-risk crypto investments.
In addition, a ‘windfall profits tax’ was introduced to tax ‘above-average profits’ earned by domestic oil and gas companies following a jump in crude oil prices following the Russia-Ukraine war. To tax the above-normal profits earned by upstream oil companies, India imposed a windfall tax on oil producers in July 2022 and reviews it every fortnight.
Also, the concept of updated return has been introduced this year to enable taxpayers to disclose missed income and correct mistakes made in income tax returns within two years. If the updated ITR is filed within 12 months, an additional 25 per cent will have to be paid on the tax and interest due, while the rate will go up to 50 per cent if it is filed after 12 months but before 24 months From the end of the relevant assessment year.
KPMG in India Partner Indirect Tax Abhishek Jain said that the coming year will be exciting for indirect taxes, as the much-awaited new Foreign Trade Policy and DESH Bill are expected to be launched. These new legislations will have a significant impact on the Indian import-export market.
“The GST regime is expected to see long-pending establishment of GST Appellate Tribunal with rate rationalization/merger to reach revenue neutral collections. Additionally with departmental audit and assessment under GST, and some gray areas like Crypto, casino, online gaming taxation need clarification, there’s a lot to look forward to,” Jain said.
Rajat Mohan, senior partner, AMRG & Associates, said effective personal taxes could also go down as a populist measure. This will boost disposable income and set right the demand cycle. Mohan said next year’s budget will have to address key macroeconomic issues such as inflation, demand and unemployment to boost economic growth in the coming years.
(With PTI inputs)