Finance Minister Nirmala Sitharaman has proposed a slew of measures to make compliance easier for taxpayers and leverage technology, including inter-changeability of Aadhaar and permanent account number (PAN). The move would allow all those having an Aadhaar to file tax returns without needing a PAN from September 1. At present, 1.2 billion people have Aadhaar card.
Presenting the first Budget of the Narendra Modi-led government's second term, Sitharaman said the Income-Tax department shall allot PAN to such a person on the basis of Aadhaar after obtaining demographic data from the Unique Identification Authority of India (UIDAI). “It is proposed to provide that a person who has already linked his Aadhaar with his PAN may at his option use Aadhaar in place of PAN under the Act,” Sitharaman said in her Budget speech on Friday.
In an another significant change, Budget 2020 has proposed to eliminate the high level of personal interaction between the taxpayer and tax department, which leads to certain undesirable practices on the part of tax officials. A scheme of faceless assessment in electronic mode involving no human interface has been launched.
According to this, the cases selected for scrutiny would be allocated to assessment units randomly and notices issued electronically by a Central Cell without disclosing the name, designation, or location of the assessing officer. The Central Cell will be the single point of contact between the tax departments and assesses.
In a relief for businesses, the FM proposed an amnesty scheme called “the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019” for pre-GST old disputes regarding Central Excise and Service Tax for faster closure of such disputes and litigations.
“An area that concerns me is that we have huge pending litigations from pre-GST regime. More than Rs 3.75 trillion is blocked in litigations in service tax and excise. There is a need to unload this baggage and allow business to move on. I, therefore, propose a Legacy Dispute Resolution Scheme that will allow quick closure of these litigations. I would urge the trade and business to avail this opportunity and be free from legacy litigations,” Sitharaman said in the Budget speech.
The proposed scheme covers past disputes of taxes, which have got subsumed in GST, namely central excise, service tax and cesses. All persons are eligible to avail the scheme, barring a few exclusions.
The relief under the scheme varies between 40 per cent and 70 per cent of the tax dues for cases other than voluntary disclosure cases, depending on the amount of tax dues involved. The scheme also provides relief from payment of interest and penalty. For voluntary disclosures, the relief is regarding waiver of interest and penalty on payment of full tax dues disclosed. The person discharged under the scheme shall also not be liable for prosecution.
To ease the process of filing tax returns, the Centre has introduced pre-filed returns. These will enable taxpayers to get pre-filed details when they download the pre-filed form from the I-T website. Accordingly, they need to verify the details and submit the form. The pre-filed information will be collected from banks, mutual fund houses, registrar, EFFO, stock exchanges and so on.
To make the pre-filing of returns viable, the Finance Bill proposed to widen the scope of furnishing statement of financial transaction (SFT) by mandating producing information other than prescribed persons (MFs, banks, post office). They also removed the current threshold criteria of Rs 50,000 to ensure that a small amount of transactions are also pre-filed.
To bring high-value transaction under the tax net, the Bill has mandated compulsory filing of return by those who have incurred certain expenditures, including deposit in current account exceeding Rs 1 crore, foreign travel for self or others exceeding Rs 2 lakh, electricity expenses more than Rs 1 lakh. Besides, for those claiming capital gains exemption, if the income before exemption is more than the minimum, exemption limit shall also be required to furnish a tax return.
To widen and deepen the tax base, the Finance Bill makes it obligatory for individual or Hindu undivided families to deduct Tax Deduction at Source (TDS) at the rate of 5 per cent on payments made to resident contractors or professionals when it is for personal use or the said entity is not subject to audit. This will be applicable if annual payment made to such a contractor exceeds Rs 50 lakh.
To further curb cash transactions, businesses will be required to pay TDS at 2 per cent for cash withdrawal of more than Rs 1 crore a year. The Finance Bill also mandates quoting and authentication of PAN or Aadhaar number by the person receiving the documents for high-value transaction and if he fails to do so, a penalty of Rs 10,000 will be levied for each default.
In a filer does not link an Aadhaar with PAN, the latter will be made inoperative.
Sudhir Kapadia, national tax leader, EY India, feels that some of measures are far reaching, such the acceptance of Aadhaar as the single identity proof for tax purposes, the transformative introduction of pre-filled tax returns with data available with the government and further streamlining of electronic filing under the GST law.
To cap up, some of the policy measures announced are expected to go a long way in removing current challenges on financing faced by businesses and also increasing economic activity, especially in areas of construction and manufacturing. However, in the short-term till such policies get fully implemented, there is a relative lack of demand stimulus that India Inc was hoping would accelerate economic growth, added Kapadia.