Sensational concessions on Income Tax to be announced soon
Posted on: 30/Aug/2019 12:50:09 PM
The Direct Taxes Review Committee has recommended the central government that the present system which has been in operation since the last 58 years badly needs to be revised! Also, the percentage of Income Tax must be reduced. The tax limit percentage must be increased from 4% to 5%.
The NDA government, under BJP, has been showing a keen interest in the collection of Income Tax ever since it came to power in the year 2014.
The central government has been taking various initiatives/actions to increase the number of Income Taxpayers.
New Income Tax system
Appeals were raised by various sectors that the present system of Income Tax system must be thoroughly scrutinized and revised; the system must be revised to entirely cater to the present economic needs of the country.
Subsequently, the central government Ministry of Finance set up a Committee to analyse the present Direct Income Tax System thoroughly and come up with a detailed recommendation.
The committee has been working on this since last 2 years having conducted and consulted over several meetings with different sectors of the industry/economy. The Committee submitted a report to the Central Finance Minister Nirmala Seetharaman on 19th August.
This report has not been released yet. Still, the internal circles of the central government finance department shared the important aspects of the recommendations made by the Direct Tax System Review Committee:
‘The present Direct tax system, which has been in vogue over the last 58 years must be revised immediately. The limits of Income Taxation must be raised from the present 4 to 5.
Presently, the category of people who earn an annual income of Rs. 2.5 Lakhs are exempted from paying Income Tax. This need not be changed.
Again, in the present system, 5% Income Tax is imposed on the persons/companies who earn an annual income from Rs. 2.5 Lakhs to Rs. 5 Lakhs. This upper limit has to be increased from Rs. 5 Lakhs to Rs. 10 Lakhs.
The Income Tax Rate must be fixed at 10%. Still, even after implementing this increase to 10%, the Income Tax deductions should be totally allowed for those who earn an annual income of up to Rs. 5 Lakhs. So, there will not be any requirement for the annual income group up to Rs. 5 Lakhs need not pay any Income Tax!
Presently, for the category of persons/companies which have an annual income from Rs. 5 Lakhs to Rs. 10 Lakhs, 20% Tax is imposed. If this rate is reduced to 10%, this category can savave up to Rs. 37500 per year!
Further, for the category of individuals/companies which earn an annual income of Rs. 10 Lakhs, an Income Tax of 30% is imposed. This can be bifurcated into 2 parts: For the category earning an annual income from Rs. 10 Lakhs to Rs. 20 Lakhs, the tax percentage should be reduced from the present 30% to 20%. This would facilitate this category to save up to Rs. 1 Lakh per year.
For the next higher category with an annual income from Rs. 20 Lakhs to Rs. 2 Crores, 30% Income Tax should be imposed.
For those who earn higher than this category, 35% Income Tax must be imposed.
With this implementation, there would be savings of up to Rs. 8.5 Lakhs for the category earning an annual income of up to Rs. 2 Crores.’
In this regard, a higher official from the central government ministry of Finance shared that it is not mandatory for the central government to immediately adopt the above recommendations. The central government has been reviewing and analyzing the avenues to increase the revenues earned through these taxes. So, it is very doubtful whether the central government would accept/implement the recommendations!
The eminent auditor, Jitendra Chabra, observed:
‘The committee recommendations have been made without considering the additional income taxes imposed. It is better to note here is that the category of persons/companies who earn annual income of over Rs. 2.5 Crores are taxed at a total of 42.7% including the additional taxes.
In case the central government accepts and implements the Committee recommendations, it has to be ascertained whether the additional taxes mentioned above are still to be included or removed! Only then, the percentage of Income Tax can be assessed.
Though the extent of the recommended decrease is lesser, this saving effected by the recommendation will increase the demand for different items – this, in turn, would increase the productivity and thereby lead to a growth in Economy!’
The recommendations of the Committee
Annual Income Income Tax
Up to Rs. 2.5 Lakhs No tax
Rs. 2.5 Lakhs to Rs. 10 lakhs : 10%
Rs. 10 Lakhs to Rs. 20 Lakhs : 20%
Rs. 20 Lakhs to Rs. 2 Crores : 30%
Above Rs. 2 Cores : 35%
Existing Income Tax system
Annual Income Income Tax
Up to Rs. 2.5 Lakhs : No tax
Rs. 2.5 Lakhs to Rs. 5 Lakhs : 5%
Rs. 5 Lakhs to Rs. 10 Lakhs : 20%+ additional
Above Rs. 10 Lakhs : 30%+additional
