Pre-Budget Memorandum on Union Budget 2010-2011

Pre-Budget Memorandum for West Bengal: 2010-11

Suggestions on Draft Direct Tax Code Bill 2009

Views & Comments on GST for Updation.

Pre-Budget Memorandum on Union Budget 2009-2010

Memorandum on State Budget 2009-10

Pre-Budget Memorandum on Union Budget 2008-2009

Budget Memorandum on State Budget 2008-2009

Pre-Budget Memorandum on Union Budget 2007-2008

Pre-Budget Memorandum for West Bengal: 2006-07

1. Amendment in Section 2(24)xiii

The amendment has been proposed to plug the revenue leakage on account of receipt of gift from unrelated persons but the drafting of the bill is defective and hitting the receipt of advance/deposits/loan from unrelated persons free of Interest. It is suggested that proper amendment of the bill should be made in order to achieve the objective of the government and not to hit any transaction other than gifts.

2. Section 277A

The provisions of Finance Bill under Sec 56 for inserting new Sec 277A under Income Tax Act is highly arbitrary and objectionable. The course of action as per the draft bill commences on mere allegations without specifying any particular instance or even of any sum of tax, penalty or interest. The provisions as drafted in the bill are subject to misutilisation by the department as well as by the concerned persons. The existing provisions of the Income Tax Act covers the penal actions which can be taken on the tax evaders and in our opinion the existing provisions are sufficient. There is no need of enacting such a draconian law under the IT Act.

3. Annual Information Return (Prop. Sec. 265BA of Income Tax Act)

Under the obligation to file Annual Information Return in case of assessee besides various other provisions mentioned in the bill, A limit of Rs.50,000 fixed for financial transaction during one financial year is not corroborating with other existing provisions of Income Tax such as deemed income under Sec 44AB to 44AF. Under these provisions, the assessees is not required to maintain books of accounts, if the turnover is below Rs. 40 lacs. Therefore, it is suggested that in respect of assessees, the limit of Rs. 50,000 should be enhanced to Rs. 40 lacs and in case of persons other than assessee said financial transaction limit should be enhanced to Rs. 5 lacs in line with earlier provisions of the Income Tax Act whereby assessee was not required to obtain Clearance Certificate from Assessing Officer for transaction of property up to Rs.5 lacs. Moreover, in an era of no tax for an assessee earning taxable income up to Rs.1 lac; nil tax on agriculture income (more than 70% of Indian population survive on agriculture income) Information collected for such persons will amount to futile exercise whereby no one will be benefited. Information providers will have to furnish the details as per the required format as may be prescribed by the Government authorities. Therefore, in order to reach the desired goal, the entire provisions of the Bill require reconsideration and review.

4. TDS: Enforcing Compliance of TDS Provisions (Prop. Sec. 40(a) (ia) of Income Tax Act)

The object of augmenting compliance of TDS provisions is laudable but the way amendment has been introduced in the Bill requires reconsideration.

(a) Deposit of TDS amount before the expiry of due date of filing of return U/S 139(1) should be replaced with the time limit prescribed U/S 200(1). Since the delay of deposit of TDS amount will suffer penalty under existing provisions, disallowance of obtained expenditure will be unwarranted.

(b) In view of the introduction of dematerialisation of TDS certificate, the compliance by tax deductors for furnishing of Annual Return becomes very essential. As because the assessee on whose behalf the tax had been deducted and deposited will not get credit, until and unless the TDS and annual return is furnished by the tax deductors and due dematerialisation of TDS Certificates. Such compliance (filing of return) should also be linked with the expiry of due date 139(1) for the purpose of disallowance.

5. Tax Rebate U/S 88D

The Chamber welcomes the proposals of allowing tax rebate to all assessees whose taxable income is upto Rs.1 lac. But at the same time, the other assessee who are earning marginally higher than the prescribed limit of Rs.1 lac are taxed comparatively more. For example, for an assessee having taxable income income of Rs. 1 lac, tax will be nil and for an assessee having income of Rs 1,01000, tax will be Rs. 9,200 and education cess will be 2% on the same. In other words, the increase of income of Rs 1,000 is not corroborating with the imposition of tax on such additional income. It is therefore, proposed that marginal relief should be given under proposed Sec 88D in line with the existing provisions under surcharge.

6. Capital Gain Tax

While the Chamber acclaims the proposal of tax free long term capital gains on listed securities and levy of 10% on short term capital gain, it is suggested that the difference between capital gain and business income should be properly defined under the beneficial provisions itself in order to avoid unwarranted litigation on some pretext or others between Dept. and the assessees.

7. Gift Tax

The Gift Tax which was defunct for so many years has been reintroduced in the guise of plugging the loopholes on certain gifts. In this respect, it is suggested that the overall policy of the Government is simplification of revenue law and such amendment will not benefit the Government. But, at the same time the Government has allowed certain exemption of such gifts. Therefore, the transaction will be taxable where there is sufficient volume of transaction and that will tantamount to a transaction tax, where the income is higher the rate of tax becomes higher. Therefore, those who are taking the gifts will thus increase their capital and income, which will higher the rate of tax. So, what the government is doing by this act is only imposing the transaction tax. Sometimes, even the rate of tax and education cess imposed by the Government is higher than the gift tax. The administrative cost of managing the gift department will also increase not in the form of professionals but in the form of other expenses.

Secondly, the main objective of the Government is to plug the loopholes by transferring the capital by way of gift from one person to another. Then it can be implemented by other way, not by reintroducing the gift tax which has been defunct for so many years. However, if the government so decides to impose the gift tax, our Chamber feels that limit of Rs. 25,000 is much lower and it should be increased to Rs 1 lac. in line of exemption of personal income tax. However, the Chamber is of strong view that in the light of modern economic development, it is not necessary to impose this type of complicated tax which is not only difficult to manage but it may give rise to unnecessary mismanagement.