Budget 2020

FM: All I-T exemptions to be phased out

Shishir Sinha New Delhi | Updated on February 01, 2020 Published on February 01, 2020

Finance Minister Nirmala Sitharaman and Minister of State for Finance Anurag Thakur arriving at Parliament to present the Budget on Saturday   -  Kamal Narang

Brushes aside allegations that the new tax system with conditions will discourage savings

Putting to rest all speculation on the income tax rejig in the Budget, Finance Minister Nirmala Sitharaman said the government intends to phase out the remaining exemptions under the Income Tax Act in the long run.

So far, there have been over 100 exemptions, out of which 70 have been knocked out in the Budget. The exemptions which have been retained include retirement benefits such as gratuity payment up to a certain limit, commutation of pension, leave encashment, employees’ contribution in provident fund, payment from National Pension System and payment of awards.

The government has made it clear that if one wants to take benefit of the new income tax slabs and rates, he/she will have to forego all the exemptions/deductions. “We want to remove all the complexities. We wanted to achieve two goals, simplicity and reduced rates,” Sitharaman said, adding that in the long run “we would be ending all the exemptions.”

Addressing a press conference after presenting the Budget, Sitharaman brushed aside contention that the new tax system with conditions will discourage savings. She said as people will have more money in the hand, they will distribute judiciously among consumption and savings.

Revenue Secretary Ajay B Pandey said that norms for non-residents have been re-defined. The existing system says that any individual spending 182 days or more will be termed as Non-resident Indian (NRI) and follow the system of the country of residence. Now, number of days spent outside will be 240 days. Also, if the individual is resident of ‘no country’ (means spending days in many countries), then he will be deemed as Indian resident and his global income to be taxed according to Indian law.

Vivad se Viswas Scheme

Talking about new scheme on the line of Dispute Legacy Scheme ‘Sabka Viswas’ for indirect taxes, Pandey said that such a scheme is required for direct taxes also as number of cases pending before different tribunals and judicial forum is around 5 lakhs. The new scheme will be available till June 30, 2020.

He clarified, if any one wants to take benefit of this scheme on or before March 31, 2020, then he will just have to pay disputed tax amount and that is the end of the case. However, if someone wants to be part of new scheme after March 31 but on or before June 30, he will have to pay disputed tax amount plus 10 per cent of that. If only interest and penalty are disputed, then one can end the dispute by paying 25 per cent of the amount on or before March 31 and 30 per cent between April 1 and June 30.

Charitable Trust

Pandey clarified that anyone contributing to charitable trust can get the benefit of deduction only if he continues to be under existing system of personal income tax. If he opts for newer regime, then this benefit will go. However, there will be no change for charitable trust and they will continue to get the benefit.

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Published on February 01, 2020
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