Budget 2024 Expectations: 13 ways the Union Finance Minister may help taxpayers by streamlining thing

The finance minister, Nirmala Sitharaman, will unveil the interim budget for 2024 on February 1st. The budget is anticipated to meet specific needs by all sectors of the economy, as usual.

A few key steps that would help to rationalise and simplify taxes are as follows:

Simplify and rationalise the withholding tax rules

TDS/TCS on goods sold or purchased It is advised that only payees or payers who are not registered with GST be subject to the TDS requirements of section 194Q and the TCS provisions of section 206C(1H). The government’s goal of deepening and expanding the tax net will then be in line with this.

Alternatively, the buyers and sellers might have to file Annual Information Returns in place of TDS/TCS. Additionally, since the definition of “goods” under the GST statute and the Sale of Goods Act differ, it is possible to define “goods” exactly while excluding things like securities, actionable claims, shares, and foreign money.

A roadmap for the rates of withholding taxes

The government can think about creating a small “negative list” of payments that are exempt from TDS and limiting the number of payment types to two or three in order to reduce the discrepancy in TDS rates.

The suggested categories of payments could be as follows:

Salary: TDS rate at Normal slab rates

Lotteries and horse race winnings: TDS rate at 30%

All other payments: TDS rate at 2%

The following payments could be illustratively included in the suggested “negative list”:

1. Senior citizen payments.

2. Payments for exempt income (such as those made to farmers or residents of the Northeast).

3. Purchases or payments to GST registered entities on which GST is paid.

4. Payments to registered charities.

5. Existing payees covered by section 196 (Government, RBI, Statutory Corporations and Mutual Funds).

TDS/ TCS Certificate Requirement

It is advised that the necessity to issue TDS / TCS certificates be eliminated, with the following exceptions: (A) Salary TDS certificates in Form 16; (B) TDS certificates to non-residents; and (C) Higher TDS/TCS where PAN is not accessible, in order to lessen the cost of compliance.

Section 194O – Applicability to Farmers and FPOs – Tax Deduction at Source @ 1% Digital platforms run for farmers’ or FPOs’ benefit are proposed to be exempt from section 194O’s requirements.

Banks and Financial Institutions

This will reduce the domestic TDS regime’s complexity, significantly lessen the burden of compliance on taxpayers, and prevent characterization dispute lawsuits.

This will decrease the domestic TDS regime’s complexity, significantly lessen the burden of compliance on taxpayers, and prevent characterization dispute lawsuits.

Inconsistency between Form 26AS’s TDS credit and ITBA

The Government’s concentrated efforts to expedite refunds to taxpayers through quicker processing of returns under section 143(1) are much appreciated by CII. In keeping with this approach, it is recommended that TDS credit as appearing in Form 26AS not be refused on the grounds of discrepancy with ITBA and that the internal systemic issue of mismatch between Form 26AS and ITBA be promptly remedied.

Form 26AS /Annual Information Statement (AIS) to include PAN of deductor, Unique TDS Certificate Number and Invoice wise break for Sales data

Regardless of the time difference between the purchase or sale recorded in the taxpayer’s books and the TDS or TCS credit appearing in a later financial year, TDS credit should be granted based on the Form 26AS credit. As an alternative, the PAN and unique certificate number of the deductor should be included in Form 26AS/AIS as well so that they can be compared and examined with the company’s books of accounts.

In addition, invoice-by-invoice breakdowns with invoice dates should be included in the quarterly TDS/TCS statements for TDS under section 194Q or TCS under section 206C(1H). This will enable automated reconciliation with books of account and show up on the taxpayer’s Form 26AS/AIS.

Personal Tax Provisions

A. Simplified TDS procedure for buying or renting real estate from non-residents

A single challan cum return form (similar to Form 26QB and Form 26QC) could be introduced to streamline the withholding tax obligations and make it easier for residents to comply with procedural requirements when dealing with non-resident sellers and landlords. This would eliminate the need for residents to obtain separate TANs and fulfil withholding tax obligations. As an alternative, Forms 26QB and 26QC’s purview might be increased to include consideration for sales and rental income given to non-residents.

B. Perquisite tax in respect of Electric Cars

It is suggested that an appropriate adjustment be made to the Income Tax Rules, 1962 in order to make clear the requirements for the perquisite taxation of electric vehicles that businesses supply to their employees.

Rationalise capital gains tax structure

a. Rate structure

The tax rates and holding periods for various instrument types that belong to the same asset class are currently inconsistent. Even the benefit of indexation varies depending on the circumstances.

Make procedural compliances simpler

Section 68: Release from onerous requirements to justify the “source of source” of lawful borrowings

Section 68 ought to be modified to provide a carve-out that would prohibit legitimate borrowings. An alternative would be to grant CBDT the authority to inform a “white list” of legitimate circumstances like (illustrative):

• Borrowings from banks, NBFCs and financial institutions
• Borrowing made by banks, NBFCs and financial institutions themselves
• Deposits, vendor or customer advances, EMDs, security deposits, and so forth that are accepted in the regular course of business. The notification of the “white list” has been implemented in conjunction with other laws, such as section 50CA about the transfer of unlisted shares and section 56(2)(x) regarding gift taxation.

Buy-back tax

When a buyback of listed shares is conducted through the “open market through stock exchange” approach, BBT ought to be excluded. Consequently, the transactions should continue to be liable to capital gains tax in the hands of the shareholders and the exemption under section 12 10(34A) should not be applied.

Time limit for filing revised return

In order to allow taxpayers to claim or modify a foreign tax credit in accordance with the extended time limit available for providing Form 67 in order to claim such credit, it is advised that the deadline for filing revised returns be prolonged, if not until the end of the assessment year.

Improve interface with Central Processing Centre (CPC)

In order to achieve desired objectives of section 143(1) of the Act and CPC Scheme 2011, following measures are recommended for kind consideration of CBDT:

• It may be possible to address the abnormalities in the CPC return processing software and ITR application as soon as possible.
• It would be beneficial if DGIT (Systems) or other pertinent CPC departments hosted regional camps to engage with industry/professional chambers and taxpayers in order to comprehend these anomalies and choose the best course of action.
• The scope of CPC’s income tax return processing should be strictly confined to determining any taxes owed, any refunds owed to taxpayers, and any mistakes that are evident from the record, and nothing more. Clarification is required on the extent of the CPC’s jurisdiction under section 143(1), which is the same as the jurisdiction under section 154 to correct errors that are evident from the record and avoid getting into contentious matters.
• CPC may receive instructions outlining that modifications to the disallowance of expenses or increase in income reported in the audit report are limited to items that are clearly prohibited or unintentionally overlooked income that have been missed after providing the taxpayer with a fair hearing opportunity. Specifically, in cases where the taxpayer is the beneficiary of a prior court decision, no such disallowance or addition may be imposed.
• Any adjustment that the CPC proposes should only be made after giving the taxpayer enough legal time to provide a response and all the adjustment’s specifics. A qualified officer who is aware of the legal and technical complexities of the matters at hand must evaluate the response.
• Rule 12(i), which forbids in-person appearances before CPC, may be modified to allow in-person appearances via video conference for the restricted purpose of providing justification for proposed corrections or adjustments that would be detrimental to the taxpayer.
• Applications that have been corrected or electronically filed returns of income should be processed in a timely manner. This will ensure that there is no need to contact the appellate authorities needlessly to request redress for unjustified adjustments. The person who can make the correction should be made clear, and the taxpayer shouldn’t have to alternate between the Jurisdictional AO and the CPC/Faceless Unit.
• Prior to considering the grievance on the CPGRAM portal as resolved or closed, it is advised that the taxpayer confirm that the matter for which the grievance was filed has been handled.

Enhance the mechanisms for alternative dispute resolution

The industry is very grateful that the government continues to take steps to facilitate tax payment. However, according to predictions from the government itself, income-tax disputes would hold INR 20.8 trillion as of 2021–2022. This is equivalent to 8.9% of India’s annual nominal GDP.

Thus, there is a need to minimise Income-tax litigation by improving both alternative and conventional dispute resolution mechanisms, such as:

• Faceless Appeals
• Advance Pricing Agreement (APA) mechanism