Tax deductions

“The government’s objective is to move away from tax deductions”

NEW DELHI : About 16% of corporate taxpayers accounting for 61% of business income have adopted the new reduced tax regime without incentives, making it a resounding success, said Chairman of the Central Board of Direct Taxes (CBDT), JB Mohapatra , in a post-budget interview. The government’s aim is to move from tax deductions to a simplified regime with no or fewer deductions, he said, adding that the budget for the fiscal year 22-23 introduced major changes to strengthen compliance. Edited excerpts:

What has been the experience with the new personal income tax and corporate tax regimes with a lower tax rate without exemptions? Do we have enough experience to review them and make them more attractive?

The simplified corporate tax regime includes articles 115 BAA of the income tax law (tax rate of 22% without benefiting from exemptions and tax incentives) and 115 BAB (tax rate 15% for new manufacturing companies). Section 115 of the BAA came into effect in 2019. Feedback on this particular amendment has come in and we have addressed it. We found that 61% of total corporate income moved from the old regime to the new regime. Renouncing the exemptions and deductions provided for by this section, legal persons who have switched to this regime pay less tax at 22% compared to 30% previously. We have a clear idea now that the BAA section is working and a resounding success. In terms of number of companies, just over 145,000 of the 924,000 companies that filed declarations have switched to the new system. That’s 15.81%.

Regarding the new personal tax regime, the data is not yet processed because it arrived much later. We will have an analysis of the data on the number of people who have migrated to the new tax system. Only then can we ask whether the new tax regime also requires an adjustment to make it more attractive. The idea of ​​the Income Tax Department is to move from a regime focusing on exemptions and deductions to a simplified regime, with no deductions or with fewer deductions and exemptions.

What is the direction and direction of the measures in the 2022 finance bill?

The appropriation bill indicates that the policies of the income tax department are long-term. We stayed the course. The budget indicates the continuity of our reforms. We continue to push forward the reforms undertaken in process and substantive issues over the past two years. In addition to big budget bill events such as digital virtual assets etc., the main focus of the budget is to work on consolidating the gains of the past few years – how to capitalize on the information we have to improve the ease tax payers and also to increase income. We also believe in the goodness of the general public who pay taxes. It is possible that they made a mistake by not declaring their income correctly. This is why provision for the discounted return has been given. To reduce litigation, we put a measure to eliminate repetitive appeals, into the act itself (the budget proposed that no appeals be made by the department if the legal matter at issue is pending in another case ). The new Section 158 AB extends the previous legislation in such a way that for the foreseeable future the filing of appeals in the Tribunal and High Courts will be minimized to a large extent. The department will not rush to court and high courts on the same question of law for all assessees. If a question of law has been resolved by the High Jurisdictional Court, that Jurisdictional Senior Chief Commissioner will not refer more cases to the same High Jurisdictional Court or Income Tax Appeals Tribunal raising the same question. many times. This will give us ample opportunity to focus our energy on other elements of serious work.

One trend we have seen is to increase withholding taxes. Will this continue?

One of the department’s goals is to generate resources at a consistently higher level year after year. Broadening the taxpayer base by expanding the withholding tax (TDS) window is one of our main areas of focus. The more reporting entities that provide information, the more opportunity the Department has to review various aspects of a taxpayer’s financial history and decide whether the correct income is determined and reported. In this budget, we expanded the TDS in a small but significant way under proposed sections 194R and 194S (to be added to the Income Tax Act). Article 194R will deal with cases where benefits greater than 20,000 is given to a person as part of the business. On this, we ask for a TDS of 10% on these amounts.

How does the Finance Bill encourage reporting?

We made a significant change to Section 206 AB of the IT Act, which provides for higher TDS rates for entities that have suffered TDS from 50,000 each for two years but failed to file a tax return. The amendment seeks to reduce this period to one year. This is a very important enforcement measure. This will encourage those who suffer from TDS (from 50,000) but did not file returns even for a year to file returns.

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