PERSONAL TAX. Budget 2016: Three measures to help small tax payers breathe easy

What’s changed

The budget has made life easier for small businessmen and professionals by widening the applicability of the presumptive taxation scheme under Sec 44AD. Higher threshold limits and /or reduced rates for tax deduction at source (TDS) have also been provided for certain types of income. Thirdly, measures have been put in place to help interaction between tax payers and tax officers move online.

The background

Under the presumptive taxation scheme, assessees including individuals whose total turnover or gross receipts in a year does not exceed ₹1 crore can declare their profit/gains at 8 per cent of the total turnover or gross receipts, pay tax on it and be done. They need not go through the rigour of maintaining different books of accounts and/or getting it audited to calculate the income. The budget has now pushed up the limit under this scheme to Rs 2 crore, thus helping ease out compliance burden for more small tax payers who will now fall under this net. The budget has also extended the presumptive scheme to professionals ( law, technical consulting, medicine, accounting,etc.). Here, those whose gross receipts don’t exceed ₹50 lakhs can now pay tax on a presumptive income of 50 per cent of the gross receipts, without the hassle of having to maintain books or audit it.

Secondly, the threshold level of income for triggering TDS deductions have been moved up for certain types of income. For instance, if you withdraw your EPF balance within five years, TDS applicability would earlier be triggered if the sum was Rs 30,000 or above. Now, it has been moved up to Rs 50,000. Similarly, the threshold limit applicability of TDS on receipt of commission or brokerage stands at Rs 15,000 now(Rs 5,000 earlier).TDS rates have also been brought down to 1 per cent from the earlier 2 per cent for receipts from a life insurance company, to 10 per cent from the earlier 20 per cent in case of NSS deposits and to 5 per cent from the earlier 10 per cent in case of commission or brokerage. The much expected increase in the threshold limit and lowering of TDS rate for bank deposits has not come through. Yet for small taxpayers, the changes will bring down the trouble of being subjected to high TDS at the time of the transaction, only to be entitled for a refund later on. It also prevents the tax payer’s money from being unnecessarily locked-up in the department’s hands.

Finally, given the increasing cases of random scrutiny assessments these days, the budget has batted for an entirely online resolution mechanism for such cases ( e-Sahyog scheme). The will not only help side step the hassle of having to go to the tax office several times to resolve the matter, but also help avoid harassment by the officers.

The verdict

This budget has shown that relief to the small taxpayers need to come in the form of raising basic tax exemption limits or providing higher tax deductions alone.

Takeaways :

* Widening of the presumptive taxation net

* Lower TDS burden for certain incomes

* Scrutiny assessment process to be online

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