ICAI Submits Pre-Budget Memorandum 2024: Seeks clarifications on provisions of section 43B(h)

The Institute of Chartered Accountants of India (ICAI) has submitted the Pre-Budget Memorandum 2024 to the Central Board of Direct Taxes (CBDT). This all-inclusive document provides a range of recommendations for increasing social welfare, promoting environmental sustainability, and driving economic growth through appropriate tax reforms. A few major points from the document are summarized here.

On the company tax front, the ideas include harmonization of the terms of the tax audit with the presumptive income regulations, more simplification of the presumptive income regime, and a hike in the threshold for the computation of the permissible pay of partners. In addition, clarifications were sought on the provisions of Section 43B(h).

The memorandum also proposes ideas for reducing the legislation relating to the taxation of charitable trusts. Allowing the submission of an updated return in case of a reduction in losses and authorizing the filing of such a return when assessment processes are concluded are some significant ideas in connection with return filing.

Given the current relevance and importance of skill development programs, the ICAI is requesting tax incentives for enterprises engaging in green initiatives and those exclusively operating in these areas in the pre-budget memorandum. In addition, there have been proposals to either fully abolish or drastically cut the tax rate on interest income for persons who purchase green bonds.

In keeping with the government’s mission to encourage the education of the female child, a unique provision for deduction of expenses associated to the education of the girl child, both under the default tax regime and the alternative tax regime, has been suggested in the memorandum. The primary ideas associated to the personal tax regime are the possibility of deductions for Mediclaim premiums paid under the default tax regime, continuous adjustments to the standard deduction, and the option of joint taxes for married couples.

On this occasion, CA. Ranjeet Kumar Agarwal, President, ICAI, said, “ICAI has pioneered formulating Standards on Sustainability Reporting, shaping the ESG reporting landscape in the country. In order to enhance green financing and support green initiatives, we have pushed for additional incentives for corporations conducting green projects and suggested an exemption for the interest income of subscribers to green bonds issued by such entities.”

Rationalizing the tax rate under section 115BBE (as well as the surcharge thereon) on deemed income under sections 68 to 69D has been suggested, since these sections can be used at the Assessing Officer’s discretion. Other important suggestions in the Memorandum include not starting prosecution proceedings when there is only a delay in paying tax. The Pre-Budget Memorandum 2024 emphasizes the importance of streamlining direct tax rules, reducing litigation, and strengthening tax collection procedures, all of which are aimed at creating a healthy fiscal climate for 2024-25.

Important Pointers from ICAI’s Pre-Budget Memorandum:

• Tax advantages for environmental initiatives and skill development:
• ICAI encourages tax advantages for businesses who invest in environmentally friendly projects.
• Furthermore, businesses that only participate in skill development programs should receive tax advantages due to their current relevance and usefulness.
• Subscribers to green bonds may be exempt or pay a reduced tax rate on their interest income.

Education of Girl Child:

• In line with the government’s goal to support education for female children, the ICAI proposes a novel provision for deducting expenses related to girl child education.
• This clause should apply to both the default and alternative tax regimes.

Personal Taxation Regime:

ICAI proposes the following enhancements:

• Deduction for Mediclaim Premium: Under the default tax plan, taxpayers should be able to deduct the premium for Mediclaim insurance.
• Regular Enhancement of the Standard Deduction: Regularly increasing the standard deduction amount would benefit taxpayers.
• Joint Taxation for Married Couples: Allowing married couples to file taxes jointly could make it easier for them to comply.

Business Taxation Front:

ICAI suggests:

• Alignment of Tax Audit Provisions: Matching tax audit provisions to presumptive income provisions.
• Presumptive Income system Simplification: The presumptive income system will be simplified even further.
• Raising the threshold for calculating permitted remuneration for partners.