It’s that time of the year again. Come February, and the Budget will be the most discussed subject among the people. However, this year, it is a bit different. The expectations for this year’s Budget were set up by the Finance Minister himself when a gradual reduction in the corporate income-tax rate was announced in the last year’s Budget.
The public and academia alike will have high expectations from this year’s Budget. Talk of the Budget and its expected contours began soon after the Central Board of Direct Taxes (CBDT) issued a press release on November 20, 2015 stating that it will withdraw certain profit-linked and investment-linked income-tax incentives. The reasons were simple — to bring in transparency, clarity and simplify the tax laws.
What the Press release didn’t mention was the ‘reduction in corporate tax rate’ bit of the Finance Minister’s announcement from the last year’s Budget. This did result in some disappointment in corporate forums and academic circles.
Tax-payer friendly
However, the expectations don’t end there. If the CBDT’s actions in the recent past are any indication, it is clear that the Government is keen on following the ‘non-adversarial, tax-payer friendly regime’ promised earlier. Some of my personal favourites are:
Hike in the monetary limits for filing appeals by the Department before the Tribunal, High Court and Supreme Court. While, in the past, such hikes were stated to apply prospectively, this Circular contained a directive that even existing appeals which do not meet the monetary limits therein need to be withdrawn.
Circulars accepting that High Court decisions in certain cases have been accepted by the Department and no further appeals need to be filed on similar issues. This clarification has been issued on contentious issues such as the manner of measuring distance of agricultural land; whether interest earned by banks from securities held on its own (ie not as part of statutory liquidity reserve requirements) is business income or income from other sources; whether tax needs to be deducted on fixed deposits made in the name of the Court’s registrar by parties to a dispute pending the decision of the Court etc.
Circular clarifying that penalty shall not be levied on adjustments made to taxable income under non-MAT provisions when tax is anyways ultimately paid under MAT for assessment years prior to 2016-17.
The CBDT is also pushing for reforms on the operational and procedural side of things — starting from the revision of the appraisal methodology for tax officers, with enhanced focus on closing issues and quality of assessments rather than tax collections, to e-filing of appeals and releasing a white paper on moving to a risk-based assessment methodology rather than asking for bulky submissions.
With the Government keen to push the ‘Make in India’ initiative, and the new push being given to encourage start-ups, this Budget promises to be an exciting one. Whatever be the talk on withdrawal of incentives, I personally hope this Budget is a tax-payer friendly one.
The writer is senior tax professional at EY India. Views expressed are personal.