Budget 2021

Budget & You: Some relief but a bit of tightening too

Parvatha Vardhini C BL Research Bureau | Updated on February 01, 2020

For the common man, the budget has improved his ease of compliance by widening the scope of the e-assessment scheme, introducing e-appeal and e-penalty schemes and relaxing tax audit requirements for small traders. A Taxpayer’s Charter will be introduced to serve as a model code for stakeholders, empowering taxpayers further. At the same time, to improve tax collections, the tax treatment of employer’s contribution to schemes such as EPF and NPS have been tweaked. Form 26 AS will be replaced by a more comprehensive statement capturing not only TDS deductions but also sale/purchase of property and share transactions.

The background

Over the years, filing and processing of returns, issue of notices and refunds have all been moved online. To further make compliance easy and avoid harassment by tax officers in case your tax return is taken up for scrutiny (under section 143), a scheme where the taxpayer and the tax officer do not see each other and the entire assessment carried out electronically is operational since October 9, 2019. Now, this e-assessment scheme will also be extended to cases under Sec 144 – otherwise called ‘Best judgement assessment’ cases. These are cases where the tax officer will determine the tax liability of an assessee based on the material he has gathered when the assessee has not filed returns or responded to notices. On similar lines as e-assessment, the process of filing appeals and of imposition and payment of penalties will also be entirely moved online, to avoid scope for manipulation at all ends.

Small traders, shop keepers and retailers whose turnover is higher than ₹1 crore and have to get their accounts audited for tax purposes. To improve ease of doing business for these small taxpayers, the Rs 1 crore limit has been moved up to ₹5 crore, provided cash receipts and cash payments don’t each exceed 5 per cent of the total revenues and payments.

There has been some tightening too. To not let any taxable transaction escape the tax net, Form 26AS which captures your TDS details alone now will be replaced by a more comprehensive statement which will be made available in your e-filing account. When you file your return in future, you will need to match your income and tax payment details with this statement, instead of the Form 26AS. Thus, getting away without disclosing any of your incomes may not be easy any longer.

Besides, for salaried tax payers, employer contribution towards recognised provident fund, NPS and other superannuation funds now has an upper limit of ₹7.5 lakh, beyond which it will be taxed as perquisite in the hands of the employee. Accretions to this, such as interest or dividend to the extent of the employer’s contribution included for tax purposes, will also be taxed.

The verdict

A careful balancing act between making life easy for the taxpayer and not letting go tax revenues.

Published on February 01, 2020

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