It is that time of the year when the common man breaks into a sweat, anticipating taxing times ahead. For most people -- be it salaried individuals, freelancers, families or NRIs -- tax worries can be quite a bother.
In order to get an understanding of the tax scenario, IBNLive organised an online chat with Amitabh Singh, Partner & Country Leader for Human Capital, Global Mobility & Employment Taxes, Ernst & Young.
N Raja: How many countries have FBT other than India?
Amitabh Singh: Very few. If I recall, Australia has FBT but there were talks of removing it.
Ashutosh Mishra: What do you think of the disallowance of expenditure on non-deduction of TDS clause? Is some amendment proposed?
Amitabh Singh: Not likely. The disallowance does seem unfair due to the extreme onus put on the deductor. However, this is one of the measures from the government to curb tax avoidance.
Avinash: I have taken a personal loan but spent it on a house. Can I get benefits of housing loan? I took the loan to avoid the lengthy documentation work in getting housing loan.
Amitabh Singh: If you can clearly establish that the loan was spent on the house property, it may be possible. However, this situation needs to be further analysed and I suggest you consult your tax consultant before you proceed.
Avinash: Who prepares the Budget? Are CBDT members, ICAI direct tax committee members or other such professional bodies’ members called before the finalisation of Budget for review?
Amitabh Singh: The Budget is prepared by the Finance Ministry and many people are involved including the PM, FM, Revenue Secretary, Finance Secretary, CBDT members and officers of the Tax Policy and Legislation (TPL) department. As a part of the Budget process, the CBDT and Finance Minister meet many chambers of commerce and professional bodies to take their views and expectations.
N Raja: By widening the tax net, do you think India's per capita income will increase?
Amitabh Singh: In a way yes, if we keep the lowest slab at Rs.1.1 lakhs and more people earn more than that and start paying taxes, that is a sure sign of increase in per capita income. However, the government has to generate employment and improve social and production infrastructure to enable increase in per capita income.
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Shamik: Why is there double taxation for NRIs? It can be a painful process. Please give your inputs.
Amitabh Singh: Double taxation happens when two countries simultaneously exercise their right to tax a particular income. This is unavoidable in the current globalised economy as all countries fiercely protect their sovereign rights to tax. The pain is sought to be mitigated by countries entering into Double Taxation Avoidance Agreements (tax treaties).
Shreika: Petrol prices have gone up and I find that the govt sticks to the age old limit of Rs 800 for two-wheelers and Rs 1400 for cars which is now a pittance . Also the HRA is very low when you compare to the standards of living. Is there any chance of expecting more?
Amitabh Singh: The old limits are now gone as these are now subject to Fringe Benefit Taxes. I agree with your observation on HRA and believe that a higher percentage of the basic salary should be made exempt. However, we are not expecting any such tinkering in the current Budget.
Ravish: What are the tax instruments that single, employed women can invest in order to earn tax rebates?
Amitabh Singh: There are many instruments described under section 80C of the Income Tax Act which allows deductions.
Liston M. Dias: I wanted to know if there is any book for Income Tax for NRIs.
Amitabh Singh: There are many books on taxation of NRI, there are many web-sites also. Just "Google"
N Raja: Why not abolish Personal Income Tax? Reports suggest only 1 pc of the population pay Personal Income Tax. Moreover, the cost of collecting this amount doesn't prove economically viable. Instead, CBDT can think of alternate means.
Amitabh Singh: Personal Income Tax accounts for significant revenues for the government. Moreover, the government wants per-capita income to rise and thus bring more people into the tax net. I remember reading reports that India's cost of collection is amongst the lowest in the world.
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Avinash: Will ESOP FBT go away?
Amitabh Singh: Unlikely but I really hope it goes away.
Avinash: There is a panic to get refunds from ITO. Is there any solution or alternative way coming in this Budget?
Amitabh Singh: The current tax forms have provisions for crediting refund directly into your bank account. Hence systems are in place, we can just hope for robust implementation.
H R Sampath Kumar: Will FM tax hefty (running into crores) dividends received by Promoters of Closely held Companies?
Amitabh Singh: Dividends are paid out of post-tax profits and also attract dividend distribution tax. Hence there is no case for further taxation.
S R Rajagopal: I am in receipt of Rs.2000/- every month through a cheque in my name, as a gift/help towards my hearing-impaired disabled son (who is studying in engineering college) from my friend. Can it be exempted under Gift Tax exemption or Casual Income exemption? Please clarify.
Amitabh Singh: If the money is given as scholarship, it should generally be exempt. However, this needs more analysis and not strictly related to the Budget.
Manish Desai: In case of shares of a foreign company granted to employees of Indian subsidiary, FBT is applicable. The question is for the purpose of calculating the FBT the exchange rate as on the date of vesting or on the date of exercise is to be used to determine the FBT liability.
Amitabh Singh: The valuation of fringe benefit is to be done on the date of vesting. My preliminary view is that the exchange rate as on the date of exercise is to be applied since the liability to pay FBT arises on exercise. However, this may need more analysis at my end.
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Karthick Ganesh: Though the subsidies are offered for petroleum products, the product (petrol, Diesel, LPG) are higher in India when compared to neighbouring countries. What's the use in fixing higher tax for petroleum products and then offering subsidies? Is there any fix for this?
Amitabh Singh: Prices of petroleum products is a sensitive issue as it has ramifications on price of general commodities. You have a good suggestion that the tax rates should be lowered rather than provide subsidies and the government should consider such options.
Vinod Kumar Mishra: We pay tax every year. You can say I have to pay tax in advance by 10% TDS but this is very tough job to take return. I can praise the Finance Minister's approach to expand the tax net, but it should be rational.
Amitabh Singh: If TDS is going to be more than actual tax liability, one can always apply to the ITO for obtaining a certificate for lower rate of TDS. The provisions are given in the law.
Sonal: What do you think about the FBT? Don't you think it’s a regressive measure? Salaried employees will be left with hardly any thing thanks to this?
Amitabh Singh: FBT has its lacunae and we have brought it to the notice of the tax department. However, now that it is law, we have no choice but to comply. However, we can continue to ask for lowering of the FBT rates.
Cheena: Can you tell the tax slabs of countries like US, UK, Singapore for income tax? Do you think we need more slabs?
Amitabh Singh: If I recall correctly, UK has 3 slabs, USA has 6 slabs and Singapore has 7 slabs. There could be a case for insertion of another slab, say Rs. 2.5 lakhs to 5 lakhs and the residuary slab being more than Rs. 5 lakhs. However, the maximum rates should be kept constant and not increased.
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Aarif: I would like to know if there is anything for the salaried class. We would like to rise the cap for medical reimbursement, conveyance and also lunch allowances. These limits have to be increased since the expenses are more in these categories. Also the income tax exception has to be increased considering the cost of living is touching the roof.
Amitabh Singh: I expect some relief on personal taxes keeping in view the rising price levels. However, it is difficult to predict in what mode and manner that will be delivered.
Prashant: What should be the policies to avoid tax evasion and frauds by politicians? How can the government control/detect the fraud of Co-Operative Organisations owned by political leaders?
Amitabh Singh: I presume that by "politicians" we mean the leaders that we ourselves elect. Should we not be more discriminating in whom we elect than leave everything to government policies? At the end, we get the government that we have elected.
Vishvesh: Will the FM include re-payment of loan for purchase of plot under the repayment of housing loan for tax benefit? As the middle class in India cannot afford to buy plot/site and construct immediately, they will have to wait for a couple of years to accumulate funds for acquiring property.
Amitabh Singh: The FM wants people to construct houses and not just buy land and keep as investment or value appreciation. Hence I do not expect any relief limited purely to purchase of plot.
Subramani: Why are these service taxes included? Can’t it be reduced to 4 pc?
Amitabh Singh:As we move towards harmonisation of Good and Services Tax, it is expected that all taxes (VAT, Service Tax, Excise duty) will converge somewhere between 15-20 pc (purely my guess). However, since all these taxes will be mutually off-settable, there need not be any adverse consequence largely.
Abhay Kumar Singh: How will salaried persons be affected or benefited from this Budget?
Amitabh Singh: I expect some benefits, mainly in terms of some reduction in overall taxes (by increasing the slabs or marginally lowering the rates) or increasing the investment limits u/s 80C
Prashant Sinha: What could be the likely Standard Deduction and Tax Slabs this year? Any incentives for people in IT sector?
Amitabh Singh: Please see my earlier responses on these topics.
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Mruthunjaya: What is the expected relaxation for tax that might be announced? And anything near 1,50,000 for men and 1,75,000 for women?
Amitabh Singh: Some relaxation is expected but may not be as high as you are expecting. Let us hope for the best.
Siddharth: Should the government bring tax reduction considering in mind the welfare of the ordinary public?
Amitabh Singh: Income Tax reductions bring relief only to the tax payers which constitute a very small section of the population. As tax payers, I would be most happy if all the taxes that I pay was more productively applied for lifting the country out of poverty.
Mohan Singh: What will be new in this Budget for salaried persons?
Amitabh Singh: Very difficult to predict. We all know this is the last Budget that the present government will present before the General Elections (the next year Budget will be a vote-on-account). With the UPA's commitment to aam aadmi, we can expect some relief for individuals including salaried persons. However, the government needs to spend on infrastructure and social welfare and also control the fiscal deficit so we do not expect any "big bang" relief.
T V Sekar: Will the FM increase the minimum salary structure to Rs 5 lakhs?
Amitabh Singh: Not likely. He may widen the initial slabs to give relief at the lower income groups and that may push up the highest slab (Rs.2.5 lakhs) marginally but no drastic measures expected.
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Gayatri S: Is there any increase in the tax slab for IT professionals?
Amitabh Singh: Not at present and not expected either.
Richa Tewari: How is the new Budget going to affect the IT sector?
Amitabh Singh: IT sector has enjoyed income tax holiday which is entering its sunset year. The resultant tax hit may adversely impact the growth and competitiveness of the IT / ITES sector since their market is largely international and they are already faced with the challenge of a depreciating dollar. There is an expectation that the tax holiday period may be extended for a few more years, atleast for companies who are yet to exhaust the 5-year period.
Benjamin: Will standard deduction for personal income/salaried tax payers be reintroduced?
Amitabh Singh: It has been a long standing demand because unlike self-employed individuals, the salaried class do not have any deduction for employment linked expenses. There is a fair case for reintroduction of the standard deduction so lets hope for the best.
Raja N: Why have this Budget exercise every year? To bring in stability don't you think taxes and rates must be fixed for a minimum of 5 years?
Amitabh Singh: The Budget exercise is composed of broadly two parts - one being the statement of revenues and expenditure for the current year and estimates for the next year, the other being the tax proposals. The first part has to be an annual event as required by the constitution. The clubbing of tax proposals with the Budget is more of tradition and convenience than anything else. You are right in saying that tax proposals should be tinkered on an exception basis and there should be a larger time horizon for the same. I believe China does something like this.
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