Tax Proposals to deal with Covid 19
Below are some of the proposal received by the Govt to deal with covid-19 situation. Please share your inputs on what makes Immediate sense and what it outrightly ridiculous.
Below is a summary of all the key proposals recommended.
REVENUE GENERATION
Short term measures
Tax the Wealthy
Raise slab rate to 40% for income > Rs 1 crore
Or, introduce wealth tax for those with wealth >Rs 5 crore
Tax slab easier to implement, funds can be marked to an escrow
Increase surcharge on high-income foreign companies with PE in India
One-time additional 4% COVID Relief Cess on those with income >Rs 10 lakh
Companies spending on COVID relief be allowed to claim CSR deduction
Unspent CSR funds can be given to PM CARES FUND (75%), spent on business (25%)
Allow for 4% of profit spend as CSR now, with deduction over 2 years
Float New Tax Saving Scheme with additional deduction like u/s 80C on investments up to Rs 2.5 lakh
Tax Amnesty Scheme for Undisputed CasesMedium-term measures
Should move to system of incentivizing compliance via rebates
Introduce Base Eroding Anti-Abuse Tax (BEAT). To work like a MAT for MNCs using related party expenses to lower tax
Reintroduce Inheritance Tax
Increase Capital Gains for Overseas Citizens
Increase marginal rate by 10% on gains from inherited property
Increase Equalisation Levy (Google Tax) for ad services to 7% from 6%, on e-commerce to 3% from 2%
Give It Up Campaign for Tax Deduction: Like with LPG, ask well off to voluntarily give up one tax deduction in FY21
EXPENDITURE RATIONALISATION
Defense expenditure can be cut by postponing acquisitions
Of Rs 4.12 lakh cr capex budget, Rs 1 lakh cr can be spent on COVID
Ministry of Health can use most of RS 67,111cr budgeted for FY21 in Q1
India’s COVID package at 0.8% of GDP pales in comparison to other nations
Short term measures
Minimum Income / Direct Cash Transfer
Transfer Rs 3,000-5,000 pm to the poorest 12 cr households for 6 months
Need to expand size of MNREGA with focus on creation of durable public assets
Supporting MSMEs: Rather than lower taxes, focus should be on offering wage support
Medium term measures
See Healthcare as Growth Engine
Sector can help in high job creation and in absorption of daily wage earners
Tax Holiday for Healthcare: Provide a 3-year tax holiday for all businesses in the healthcare sector
Initial tax incentives for businesses that can operate with COVID restraints
Later, tax incentives for sectors that find it difficult to operate with restraints
TAXPAYER WELFARE
Short-term measures - individuals
Allow set-off of short-term capital loss by retail investors against Salary income
Allow deduction of spend on hospitalization due to COVID
Bonus, allowances to employees with < Rs 10 lakh income not to be taxed
Self-assessment tax can be paid in 6 months
Withdrawal from NPS, tax-savings schemes should be tax-free
Increased deduction for purchase of house, automobile under 80C
Short term measures - MSMEs
Restrore cash transaction limit to Rs 20,000 from Rs 10,000 u/s 40A
Allow carryback of loss in CY for 5 yrs to improve start-up cash flow via tax refunds
Assessees with income up to Rs 10 cr be exempted from tax audit
Presumptive tax at 6% on all transactions, not only digital transactions
TDS for employees to be deposited by end of FY vs monthly now
MSMEs with tax liability of
Only 25% Advance Tax to be paid till September
Cut interest on delay in Advance Tax payment to 0.5% vs 1% per month
Allow carry forward of excess Advance Tax paid for FY20
Relief for impacted sectors
One-time lower corporate tax rate, subject to conditions
Allow carry forward of losses expiring in FY21 to FY22
Expeditious refunds to entities in these sectors
Depreciation rate hike for buildings / plant & machinery acquired in FY21
Interest on late deposit of TDS to be tax deductible
Salaries deduction can be weighted at 200%
Extend Vivaad se Vishwaas till Dec 2020
Extend deductions to sectors u/s 10A for 5 years
TDS deduction for those in travel and related sectors can be waived
Extend time limit for construction of affordable homes to 7 yrs from 5 yrs—to avail tax benefits
Expenses incurred on enabling WFH be allowed 150% deduction
Corporates can cut salaries and offer shares in FY21 under ESOP
Allow hospitals to set off losses u/s 35D with any other biz income
Additional depreciation on equipment to produce ventilators, PPEs, masks…
Zero tax for all health workers in FY21
Relief for services sector
Increase provisions for bad debts to 12% from 8.5% for banks
Extend benefits u/s 10A to IT services sector by another 5yrs more
Below is a summary of all the key proposals recommended.
REVENUE GENERATION
Short term measures
Tax the Wealthy
Raise slab rate to 40% for income > Rs 1 crore
Or, introduce wealth tax for those with wealth >Rs 5 crore
Tax slab easier to implement, funds can be marked to an escrow
Increase surcharge on high-income foreign companies with PE in India
One-time additional 4% COVID Relief Cess on those with income >Rs 10 lakh
Companies spending on COVID relief be allowed to claim CSR deduction
Unspent CSR funds can be given to PM CARES FUND (75%), spent on business (25%)
Allow for 4% of profit spend as CSR now, with deduction over 2 years
Float New Tax Saving Scheme with additional deduction like u/s 80C on investments up to Rs 2.5 lakh
Tax Amnesty Scheme for Undisputed CasesMedium-term measures
Should move to system of incentivizing compliance via rebates
Introduce Base Eroding Anti-Abuse Tax (BEAT). To work like a MAT for MNCs using related party expenses to lower tax
Reintroduce Inheritance Tax
Increase Capital Gains for Overseas Citizens
Increase marginal rate by 10% on gains from inherited property
Increase Equalisation Levy (Google Tax) for ad services to 7% from 6%, on e-commerce to 3% from 2%
Give It Up Campaign for Tax Deduction: Like with LPG, ask well off to voluntarily give up one tax deduction in FY21
EXPENDITURE RATIONALISATION
Defense expenditure can be cut by postponing acquisitions
Of Rs 4.12 lakh cr capex budget, Rs 1 lakh cr can be spent on COVID
Ministry of Health can use most of RS 67,111cr budgeted for FY21 in Q1
India’s COVID package at 0.8% of GDP pales in comparison to other nations
Short term measures
Minimum Income / Direct Cash Transfer
Transfer Rs 3,000-5,000 pm to the poorest 12 cr households for 6 months
Need to expand size of MNREGA with focus on creation of durable public assets
Supporting MSMEs: Rather than lower taxes, focus should be on offering wage support
Medium term measures
See Healthcare as Growth Engine
Sector can help in high job creation and in absorption of daily wage earners
Tax Holiday for Healthcare: Provide a 3-year tax holiday for all businesses in the healthcare sector
Initial tax incentives for businesses that can operate with COVID restraints
Later, tax incentives for sectors that find it difficult to operate with restraints
TAXPAYER WELFARE
Short-term measures - individuals
Allow set-off of short-term capital loss by retail investors against Salary income
Allow deduction of spend on hospitalization due to COVID
Bonus, allowances to employees with < Rs 10 lakh income not to be taxed
Self-assessment tax can be paid in 6 months
Withdrawal from NPS, tax-savings schemes should be tax-free
Increased deduction for purchase of house, automobile under 80C
Short term measures - MSMEs
Restrore cash transaction limit to Rs 20,000 from Rs 10,000 u/s 40A
Allow carryback of loss in CY for 5 yrs to improve start-up cash flow via tax refunds
Assessees with income up to Rs 10 cr be exempted from tax audit
Presumptive tax at 6% on all transactions, not only digital transactions
TDS for employees to be deposited by end of FY vs monthly now
MSMEs with tax liability of
Only 25% Advance Tax to be paid till September
Cut interest on delay in Advance Tax payment to 0.5% vs 1% per month
Allow carry forward of excess Advance Tax paid for FY20
Relief for impacted sectors
One-time lower corporate tax rate, subject to conditions
Allow carry forward of losses expiring in FY21 to FY22
Expeditious refunds to entities in these sectors
Depreciation rate hike for buildings / plant & machinery acquired in FY21
Interest on late deposit of TDS to be tax deductible
Salaries deduction can be weighted at 200%
Extend Vivaad se Vishwaas till Dec 2020
Extend deductions to sectors u/s 10A for 5 years
TDS deduction for those in travel and related sectors can be waived
Extend time limit for construction of affordable homes to 7 yrs from 5 yrs—to avail tax benefits
Expenses incurred on enabling WFH be allowed 150% deduction
Corporates can cut salaries and offer shares in FY21 under ESOP
Allow hospitals to set off losses u/s 35D with any other biz income
Additional depreciation on equipment to produce ventilators, PPEs, masks…
Zero tax for all health workers in FY21
Relief for services sector
Increase provisions for bad debts to 12% from 8.5% for banks
Extend benefits u/s 10A to IT services sector by another 5yrs more
Viewed by 306
Its ridiculous to suggest such tax measures. Instead we must demand that how crores of rupees of donations that were given & its accountability, bringing back black money, stop huge expenditure of politicians and their lavish luxurious life etc will boost economy. If we add additional burden on domestic and international companies it might prove an adverse impact on attracting new foreign businesses to establish. We must be very rational by giving any proposals etc. What measures govt is taking to extradite Mallya, Norav Modi etc who are hiding abroad? these are my views to boost economy without puttung any additional tax burden on existing and new taxpayers. more
Apr 26
Bring all institutions (charitable,NGOs,, religious.....) under the tax net since they receive money. Audit their finances and file returns. more
Apr 27
Why keep confusing with more tax implications, instead why not provide relief to all and encourage people to start new businesses and industries to create employment. Simplify the tax rules, do not penalize for unintended mistakes. Allow more exemption for Health insurance premiums, do not tax the savings of senior citizens. Remove GST on insurance premiums, electricity, transport, exports, food, etc. more
Apr 26
Once again, the tax proposals prove that India is anti-business and anti-entrepreneur. After a lifetime of struggle and payment of tax, one collects wealth, for ones old age. Then Robin Hood comes along in the guise of tax officials. In India it is better to be poor than to be rich by legal means. This is why you see a large number of really wealthy people never paying tax, this is why people would rather pay bribes than follow rules, because once you are on the government's list, you will always be attacked. The wealth tax was abolished in the Union Budget (2016 - 2017) presented by Union Finance Minister Arun Jaitley on 28 February 2016. The wealth tax was replaced with an additional surcharge of 2 per cent on the super rich with a taxable income of over 1 crore annually. Now this surcharge has grown to 10% and 15% and beyond. There are different rates of surcharge applicable to different taxpayers under the Income Tax Act, 1961. Taxpayer Income limit Surcharge Rate on the amount of income tax Individual/HUF/AOP/BOI/ Artificial Judicial Person Net income exceeds Rs.50 Lakhs but doesn’t exceed Rs. 1 Crore 10% Individual/HUF/AOP/BOI/ Artificial Judicial Person Net income exceeds Rs.1 Crore but doesn’t exceed Rs 2 crore 15% Individual/HUF/AOP/BOI/ Artificial Judicial Person Net income exceeds Rs.2 Crore but doesn’t exceed Rs 5 crore 25% Individual/HUF/AOP/BOI/ Artificial Judicial Person Net income exceeds Rs.5 Crore 37% Firm/LLP/Local authorities/Co-operative Society Net income exceeds Rs.1 Crore 12% Domestic Company Net income exceeds Rs.1 Crore but doesn’t exceed Rs.10 Crores 7% Domestic Company Net income exceeds Rs.10 Crores 12% Foreign Company Net income exceeds Rs.1 Crore but doesn’t exceed Rs. 10 Crores 2% Foreign Company Net income exceeds Rs.10 Crores 5% Has any tax ever been temporary? Even income tax was first introduced as a temporary measure. Instead of going after those who do not pay tax, the easier option is to increase the burden on those who already pay their due tax. On one hand we are talking of attracting foreign investment, on the other we are planning to increase the tax on foreign companies. Instead, tax collection should be improved. Agricultural income, of rich farmers, who are BIG politicians should be taxed. I foresee a major dampening of the entrepreneurial spirits in India if Wealth tax is re-introduced and the higher slabs of Income tax are levied further. It would be really suicidal for the government to further tax the entrepreneurs and businesses, who are reeling under impact of Chinesevirus. These are the people who have already been hit in demonetisation and were only just re-emerging but are struck down by COVID19. Another blow will finish off the MSME sector for good. If government is serious about collecting more money, let them increase Customs duty on imports from China. This will increase tax collection and also give a shelter to Indian MSME to manufacture the goods within MAKE IN INDIA. It will give employment to millions of youth. Already in mobile handsets we have seen what MAKE IN INDIA can do. No, do not tax further those who are already contributing to the Nation. Tax the rich agriculturists and tax imports from China. This will take care of everything. Jai Hind! more
Apr 26
I wonder why retired people living off their savings and investments are never considered for any policy planning. Their returns from investments have shrunk, many are not even beneficiaries of any pension. Their medical expenses are from their own pocket. And these people have paid taxes all their life. I think inclusiveness demands they be given a thought and some relief. They neither belong to the rich class who'd be given incentives, nor the poor who will have various government schemes to help them - and rightly so. They are the ones who feel voiceless and powerless. And yet they are the ones who have diligently paid taxes all their life. Yet they are invariably left out of all fiscal planning and consideration. more
Apr 26
You are suggesting very major changes e.g. Allowing set-off of short-term capital loss by retail investors against Salary income is a major change. As per current system such losses can be carried forward for 8 years. It is more pragmatic to stop wasteful expenditures like statue building, Central Vista redevelopment plan etc. more
Apr 26
