Standard deduction for personal income tax might return after over a decade in the Union Budget for 2017-18, if the finance ministry accepts recommendations of the tax simplification committee chaired by ex-judge R V Easwar.
Sources say the panel, in its second report given recently to the ministry, has suggested doing so. Standard deduction was given as a lump-sum benefit towards cost to income till 2003-04. In simple terms, it refers to a deduction allowed in income tax, irrespective of expenses incurred or investment made by assessees.
"Standard deduction is simple to administer," said Amit Maheshwari, partner, Ashok Maheshwary & Associates. For the deduction, there was no need for a taxpayer to keep proof of expenses such as bills. Then finance minister P Chidambaram did away with standard deduction for salaried personnel in 2004-05, on the reasoning that there was an equivalent increase in the basic exemption limit and other deductions. It was then abolished after the tax exemption ceiling on investment was raised to ~1 lakh. The standard deduction slab was Rs.30,000 for total income under Rs.5 lakh a year and Rs.20,000 for income over Rs.5 lakh.
The Easwar panel has reportedly not recommended any particular rate or amount for standard deduction. It wants smaller deductions given in income tax to be done away after standard deduction comes back. The panel has called for reviewing medical reimbursements. Restoration of standard deduction will not affect the threshold for income tax exemption, currently Rs.2.5 lakh a year.
In its first report, the panel suggested revision of the threshold and rates on tax deduction at source. These formed part of the previous Budget.
The 10-member panel has also suggested incorporation of masala bonds (issued abroad but denominated in rupees, not the local currency) in the Income Tax Act, to bring clarity on the capital gains tax on these. The report also went into nonresident taxation, assessment procedure, property income and salaries, among others.
“Review of the non-resident tax issue, of Section 9 with respect to section 195 of the Act, has been examined by the committee, which forms a major chunk of litigation,” said a source. These sections talk about the income deemed to accrue or arise in India from payments to a non-resident, be it salaries, technical fees, capital gains and royalties, and the procedures. The issues pertain to whether income will be classified as business profit or fees for technical services or some other head, all of which have different rates.
Business Standard New Delhi,12th January 2017
Comments
Post a Comment