Income Tax exemption limit may go up to Rs 5 lakh: Budget Expectation
The Budget FY16 may carry an assurance, possibly fortified by a new insertion into the Income Tax Act, that the 2012 retrospective amendments to tax laws won’t be invoked afresh for transactions that were consummated prior to the changes.
According to sources who were privy to the Budget discussions, finance minister Arun Jaitley may also raise the overall personal income tax exemption level by R1 lakh to R5 lakh.
While the basic exemption limit for individuals (other than senior citizens) could go up from R2.5 lakh to R3 lakh, the investment limit for claiming deduction under Section 80C will increase to R2 lakh from R1.5 lakh at present. The present higher limits for senior citizens would be correspondingly raised.
Sources said that the two measures, together, could result in an annual revenue loss of around R30,000 crore to the government and a corresponding boost to household savings, but added that the revenue loss could be stemmed with the current focus on compliance.
The immunity to past cases from the much-decried retrospective amendments implies the following: Besides Vodafone and over a dozen other similar high-profile cases in the courts/under arbitration already and the Cairn India’s case, tax liabilities from these amendments could arise only for indirect transfer of Indian assets after March 2012, when the amendments were introduced in the I-T Act.
In his first Budget presented in July last, Jaitley said the government would avoid retrospective amendments to the extent possible, and added that all new cases (except those with courts) that arose from the 2012 changes in the I-T Act that overrode a Supreme Court ruling, would be referred to a high-level committee at the Central Board of Direct Taxes for sort of a third party overview. This hasn’t made the foreign investors any happier who wanted these retroactive changes to be withdrawn.
In fact, not many cases came up before the CBDT committee as the field officers have turned cautious.
The new proposal to shield past cases from any adverse effect from the controversial tax proposals will make the panel’s role more redundant, even as the government hopes that it would soothe investor sentiments. In parallel, the cases which are pending with courts, involving tax demands of tens of thousands of crores, will be pursued and taken to their logical (judicial) conclusion.
Meanwhile, sources added, the CBDT has identified 35 lakh people who have made substantial transactions but have not filed income tax returns and is slated to send letters and notices to them in the coming months seeking explanations. This is part of a process to bring more people into the tax net and could give a fillip to revenue mop-up.
Jaitley, however, is unlikely to alter the income tax rates in the Budget; while some new tax exemptions are on the anvil, several existing ones are set to be scrapped.
Winds of change
Retrospective amendments of 2012 won’t be invoked afresh for transactions prior to the changes
Besides some high-profile court cases, tax liabilities from these amendments could arise only for indirect transfer of Indian assets after March 2012
Basic I-T exemption limit for individuals may go up to R3 lakh and the investment limit for deduction under Section 80C may rise to R2 lakh
Source : Financial Express