Middle class may rue the absence of any tax exemptions in this Budget, but Finance Minister Nirmala Sitharaman has argued that relief does not mean tax benefits alone. Also, the definition of middle class is very wide.

At a post-Budget press conference, she parried questions on the middle class not being given relief in the form of tax cuts or raising of exemption, saying the Budget has not raised taxes last year or this year. “We did not try to raise money through higher taxes as we did not want to burden people with taxes during a pandemic,” she said.

She also highlighted that definition of middle class is very broad. Such a population could be farmers, one those who is going to purchase affordable house, one who is engaged in start-up or one who is taking benefit of Liberalised Remittance Scheme to send money abroad for his son or daughter. Various measures have been initiated for all these, which is going to benefit middle class.

New IT-return scheme

In her Budget speech, she gave a one-time window to taxpayers to correct any discrepancy or omissions in their ITRs within two years of filing, subject to payment of taxes. “This is an “affirmative step in the direction of voluntary tax compliance”.

Currently, if the IT department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication, and the new proposal would repose trust in the taxpayer. “To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year,” Sitharaman said.

The Minister said that the I-T Department has established a robust framework of reporting of taxpayers’ transactions and some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment. “Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return,” she said.

Unlisted Securities

Besides, rationalising the surcharge regime, Sitharaman said, she proposes to cap the surcharge on long-term capital gains arising on transfer of any type of assets at 15 per cent. This step will give a boost to the startup community, she said. Currently, the long-term capital gains on listed equity shares, units etc are liable to maximum surcharge of 15 per cent, while other long-term capital gains are subjected to a graded surcharge, which goes up to 37 per cent.

Explaining her proposal for co-operative sector, she said, “To provide a level-playing field between cooperative societies and companies, I propose to reduce this rate (AMT) for the cooperative societies also to 15 per cent.” Currently, the cooperative societies are required to pay AMT at the rate of 18.5 per cent, while the companies paid at the rate of 15 per cent, she added.

The finance minister also proposed to reduce the surcharge on co-operative societies from present 12 per cent to 7 per cent for those having total income of more than ₹1 crore and up to ₹10 crore.

“This would help in enhancing the income of cooperative societies and its members who are mostly from rural and farming communities,” she added. However, the surcharge at the rate of 12 per cent will continue to be levied in case of a co-operative society having a total income exceeding ₹10 crore.

“On satisfaction of certain conditions, a co-operative society resident in India has the option to pay tax at 22 per cent as per the provisions of Section 115 BAD of the Income Tax Act. Surcharge would be at 10 per cent on such tax,” the Budget document said.

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