Budget 2024: The government is expected to extend the timeline for filing a revised tax return by individual taxpayers where foreign income and taxes are also required to be reported in the tax return, says Akhil Chandna, Partner, Grant Thornton Bharat.
In an interview with MintGenie, Chandna said that one expects the Government to provide some relief in terms of introducing monetary limits for the applicability of TCS provisions on credit card payments made on an international trip or reducing the rate of TCS to a nominal level to track such travel. Catch Budget 2024 Expectations Live Updates
Edited Excerpts:
This is the last budget of the existing government. What are your expectations from the coming interim budget?
The forthcoming budget is an interim budget before elections and hence, no major tax announcements are expected. Having said so, like any other year, Individual taxpayers are hopeful to have some tax amendments that can result in tax savings in their hands. Some of the key expectations are:
- To make the new tax regime more lucrative, it is expected to increase the limit of standard deduction of ₹50,000 to ₹1,00,000 because individual taxpayer needs to forgo the majority of tax deductions /exemptions that were otherwise available under the old tax regime. Further, it is important to increase the standard deduction limit to bring salaried taxpayers at par with other individual taxpayers having business /professional income who are eligible to claim a deduction of a variety of expenses against the income earned.
- It is expected to extend the timeline for filing a revised tax return by individual taxpayers where foreign income and taxes are also required to be reported in the tax return. An Individual who is an ordinary resident of India for any financial year may not have the details of his /her foreign taxable income and corresponding foreign taxes by the time he /she files his/ her India tax return for that financial year. This amendment is required due to the financial year from April to March being followed by India vis-à-vis most other countries which follow a calendar year.
- Apart from the above, the current capital gains tax regime can be simplified by harmonising the different tax rates applicable on the sale of listed securities or unlisted securities, or any other long-term /short-term capital asset.
Past interim budgets have never announced any major tax reforms. Do you think things will be different this time?
In our view, the practice followed in the previous interim budgets will be maintained and significant tax amendments are unlikely this time as well. However, the 2019 Interim Budget had seen a deviation from this practice when certain tax benefits were extended. Accordingly, the Finance Minister may offer some relief to salaried employees and individual taxpayers in lower tax brackets to incentivise tax compliance.
India is witnessing a notable upswing in credit card usage, especially, in travel financing. Given this trend, would you want the government to consider excluding international expenditures up to ₹7 lakh from the current 20 per cent Tax Collected at Source (TCS) in the forthcoming interim budget?
The Government had deleted the limit of ₹7,00,000 for applying Tax Collected at Source (TCS) provisions on credit card payments on foreign travel and increased the TCS rate to 20% effective 1 July 2023.
This resulted in the blockage of funds since the TCS is only eligible for credit /refund at the time of filing the tax return by the individual taxpayer. As per reports based on certain surveys, around 95% of Indian travellers prefer payments through credit cards while travelling abroad. Considering this, one expects the Government to provide some relief in terms of introducing monetary limits for the applicability of TCS provisions on credit card payments made on an international trip or reducing the rate of TCS to a nominal level to track such travel.
Do you think it is high time that the government must increase the tax exemption limit under Section 80C to alleviate salaried people’s concerns?
Section 80C of the Income Tax Act, 1961 was introduced with the main objective of promoting investment/retirement savings by incentivising the same through tax deductions.
Over some time, the ambit of section 80C has widened to include multiple categories of investments/ expenses that are eligible for deduction. However, the maximum deduction available under section 80C has remained fixed at ₹150,000 since FY 2014-15. Hence, there is a genuine case for increasing this threshold in line with the increase in the cost of living and to continue encouraging investment habits amongst first-time taxpayers as well.
However, on the other side, the government introduced the new tax regime (NTR) with effect from FY 2020-21 wherein the benefit of section 80C is not available. Subsequently, with effect from FY 2023-24, the NTR has been made the default tax regime which further clarifies the government’s intent to do away with multiple tax deductions/ exemptions.
Keeping the above in mind, it is unlikely that the government would propose any increase in exemption limit under section 80C would be considered under the old tax regime.
What suggestions would you give to simplify the current tax filing process?
Over the last few years, the tax return filing process has been simplified to a great extent. Taxpayers can view details of income earned, taxes withheld, etc. on the income-tax filing portal itself under the Form 26AS, AIS, and TIS. Also, there is an option to work on the pre-filled tax returns. However, some aspects can be simplified for ease of compliance.
Below are some of the key suggestions in this regard
- Alignment of TDS schedule for carry forward of credit to subsequent years: The tax return allows carry forward of TDS where the income pertains to the next financial year but tax has been withheld at source in the current financial year. However, while processing the tax return, this commonly results in a mismatch leading to the issue of notice to taxpayers. It is expected that this anomaly will be corrected to ease the compliance for taxpayers.
- Allowing e-verification through OTP received on foreign mobile numbers in the case of foreign nationals or OCIs not holding Aadhaar.
- Resident taxpayers who claim credit for foreign tax paid are required to file Form 67 before filing the tax return and Form 67 is also required to be e-verified. Currently, there is no option for physical verification of Form 67. However, e-verification is not possible in the following cases:
- Aadhaar-linked mobile number not available
- Net-banking / OTP facility provided by the bank is not available
- A Demat account is not available.
In such cases, an alternate option verification of Form 67 should be provided. Alternatively, details sought under Form 67 may also be part of the Schedule of ‘Foreign Sourced Income’ forming part of ITR.
- Extension in the timeline for verification of return filed – currently the tax return is required to be verified within 30 days of filing the same, whether by e-verification or by way of ITR V being sent to CPC. The tax return is treated as invalid in case verification is not completed within this timeline. This may result in genuine hardship in cases where taxpayers are not able to verify the return within 30 days due to any reason, especially in the case of those taxpayers who opt for the physical verification route. Hence, the timeline for verification of tax returns may be extended to at least 60 days.
- Allow filing of revised tax returns in case of resident taxpayers who have foreign income and are required to claim credit of taxes based on foreign tax returns filed. Given that India follows a different fiscal year compared to most countries, the current timeline of December 31 following the end of the financial year does not provide an opportunity for such taxpayers to make revisions in their India tax returns once the foreign tax return is filed.
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Published: 29 Jan 2024, 09:06 AM IST