The change

This Budget has widened the applicability of the presumptive taxation scheme under Section 44AD for small businessmen and professionals. Higher threshold limits and/or reduced rates for tax deduction at source (TDS) have also been provided for certain types of income. Additionally, measures have also been put in place to move interaction between tax payers and tax officers online.

The background

Under the presumptive taxation scheme, assesses, including individuals whose total turnover in a year does not exceed ₹1 crore, need to only pay tax on the declared profit, which is 8 per cent of the total turnover. They need not go through the rigour of maintaining different books of accounts and getting them audited to calculate the income. The Budget has now pushed up the limit under this scheme to ₹2 crore, to ease compliance burden for more small tax payers. It has also extended the presumptive scheme to professionals; those whose gross receipts don’t exceed ₹50 lakh need to only pay tax on a presumptive income of 50 per cent of the gross receipts, without the hassle of having to maintain books or audit them.

The threshold level of income for triggering certain TDS deductions have also been moved up.For instance, if you withdraw your EPF balance within five years, earlier, TDS applicability would have been triggered if the sum was ₹30,000 or above. Now, it is at ₹50,000. Similarly, the threshold limit for the applicability of TDS on receipt of commission or brokerage stands at ₹15,000 now, as against ₹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. In the case of NSS deposits, rates are down to 10 per cent from the earlier 20 per cent. 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. Finally,the Budget has batted for an online resolution mechanism for scrutiny cases (e-Sahyog scheme). The will help sidestep the hassle of having to go to the tax office several times to resolve the matter.

The verdict

This Budget has shown that relief to the small taxpayers need not come in the form of raising basic tax exemption limits or providing higher tax deductions alone.