Budget 2023: What the new income tax regime 2023-24 misses out on – explained
However, some of these benefits come with an important prerequisite – namely, participation in the new Individual Tax Scheme. And there are some changes that are sure to leave some parts deeply unsatisfied. So what are some key elements that have been left out, contrary to our expectations? Let’s take a closer look at the three big mistakes of this Budget.
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New personal tax regime (NPTR): Most beneficial tax provisions such as a higher base exemption limit from Rs. 2,500,000 to 3 lakh, rationalize tax tables, reduce peak surcharge from 37% to 25%, limit income to get 100% tax relief from Rs. 5 lac to Rs. 7 lacs are all tagged with NPTR. Until now, most people continue to opt for the old tax regime because of common exemptions and deductions such as HRA, LTA, Chapter VIA deduction (includes PF, PPF, premium, medical insurance) economy, NPS contributions, etc.) as these are important elements of ordinary people’s spending.
Although the Government wants to simplify the tax regime and only continue with the NPTR in the future, not allowing exemptions and deductions under this scheme may not help achieve this goal in a hurry. Furthermore, knowing that the majority of low- and middle-income groups put their money into various options for savings and investments, eliminating deductions and exemptions under the NPTR would be discouraging. Just as FM included the standard deduction in the NPTR for salaried people, bringing these existing deductions into the NPTR along with the sunset provision could be a more efficient approach.
Taxpayers must smile… agree from me to the budget: Ishita Sengupta
capital gains (CG) tax: Regulations related to corporate governance are in dire need of simplification. Factors like different asset class, holding period, multiple tax rates, indexing terms/considered/until year end, exemption criteria, reporting requirements, etc. key in calculating income and taxes accurately but very confusing. Streamlining and simplifying the scope of this clause may have helped taxpayers to calculate income and tax incurred accurately and easily.
Procedure problems: As we all know, the Government of India has been taking several steps to make it easier for taxpayers to comply with their taxes. Mandatory online application, linking Aadhaar and PAN, online and anonymous assessment procedure, linking bank account to PAN for faster refund processing, easy access to personal data through Schedule form 26AS, AIS, etc – all of these measures have resulted in remarkable reductions in average return processing time from 93 to 16 days! As mentioned by FM, 45% of profits are processed within 24 hours nowadays. This is no trivial feat and really makes a difference for taxpayers.
Explanation: Budgeting for your money – taxes, wages, seniors, etc
Now is the time to move on to the next level of change. There are practical challenges taxpayers face while complying with all requirements. Algorithms established in the department’s technology and software are not adapted to the different and unique situations that taxpayers may encounter during tax returns or other compliance procedures. Example: A Tax Residency Certificate (TRC) is required for treaty relief but in case the TRC is not issued by a foreign jurisdiction, taxpayers face real hardship in requesting this reduction. This goes against the spirit of double taxation agreements, in which India is a signatory to the agreed protocol with another country.
Another situation is when the electronic verification of Form 67 is for an individual who has left India and does not have access to the available electronic verification methods. The individual cannot follow the online steps required by the software. Again, in the absence of an overseas tax return by the due date for filing the Indian income tax return/amended return due to time difference between the two countries, the taxpayer cannot claim claim foreign tax credits, belong to them. The government needs to urgently consider these issues.
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This year’s proposals are clearly aimed at simplifying and reducing the administrative time of taxpayers, employers and tax authorities on compliance procedures. Some of the points above will add to this goal. We hope this is an early enough call for the Government to take the necessary steps in this regard.
(Ishita Sengupta is Partner and India Leader at Vialto Partners. Manavi Gupta, Deputy Director and Sagar Dhamija, Manager also contributed to the article. Opinions expressed are personal)