How Budget 2022 can be used to revive consumption for economic growth

After a rumpled beginning in FY 21-22 because of the second wave of COVID-19, the client marketplace zone started out to pick up all through the second half of the year. According to the Confederation of All India Traders (CAIT), retail shopping for all through Diwali season almost doubled to about Rs 1.25 lakh crores vis-à-vis the preceding year. However, with surging instances of the brand new Omicron variant, the arena has been placed returned on survival mode. On the opposite hand, the growing enter expenses bearing on packaging material, labour and freight have all started to decrease the margins of client items companies. With this backdrop, the arena is calling ahead to the imminent Budget 2022-23 with excessive expectations.

The enterprise could maintain an eye fixed out for rest in appreciate of the manufacturing objectives prescribed in these days delivered Production Linked Incentive Schemes for white items, meals and textile. The stated scheme changed into delivered with the aid of using the Government to reinforce the indigenous manufacturing of numerous items. Given that the manufacturing might also additionally see a decline because of gift and proposed lockdowns and curfews, the enterprise might also additionally be looking for out rest withinside the manufacturing objectives that are required to be met beneath the stated scheme. Similarly, the retail enterprise might also additionally be looking for an extension of the time restriction for putting in production gadgets to avail decrease company tax charge beneath Sec 115BAB of Income Tax Act 1961, which currently stands on 31 March 2023.

Secondly, it’s far vital for the authorities to reconsider on implementation of stricter provisions beneath GST like 100% input tax credit score reconciliation, recuperation complaints because of mismatch in returns without the issuance of observing etc., which adversely affect the running capital role for an already distressed zone.

Further, clarity/rest on troubles like input tax credit score regulations on promotional items, samples, worker insurance, de-linking of secondary reductions with the phrases of settlement etc. are a few different regions in which the enterprise is hoping for a few beneficial announcements. Removal of blockage of entering GST tax expenses on creation, maintenance of shops, warehouses were a long-pending call for of the arena. Accordingly, any assertion permitting deduction of tax fee on creation in opposition to output GST could be maximum welcomed with the aid of using the enterprise.

Economic Survey may lower FY23 growth numbers

The Economic Survey with a purpose to be offered in advance of the Budget should forecast the actual financial boom for financial 2023 to be decrease than the 9.2% expected for the modern monetary 12 months, authorities officers stated.

The survey is predicted to task a robust recuperation after the continuing Covid-19 wave, however, the statistical boom is predicted to be decreased due to the waning base impact that has bumped up the modern 12 months’ GDP boom.

The survey for FY22 is possible to be tabled in Parliament on January 31, an afternoon earlier than the Union Budget and might have simply one quantity as opposed to, which has been the fashion for the beyond six years.

It is possible to strain on persevering with financial stimulus in FY23 and reiterate that the effect of the 1/3 wave of the pandemic can be restrained to the continuing final zone of FY22.

“The final results of structural reforms can be seen from subsequent financial 12 months,”

The boom projection could be consistent with the forecasts through the Reserve Bank of India, international establishments and scores corporations. Most establishments agree that a consumer-led recuperation and easing delivery disruptions will make recuperation broad-based.

In October economic coverage report, the RBI has projected the financial boom to be 7.8% in FY23, whilst the World Bank has forecast 8.7%. International scores corporations S&P and Moody’s see the boom at 7.8% and 7.9%, respectively.

The Economic Survey had final 12 months projected 11% boom for FY22. The first develop estimates launched through the authorities on January 7 advised or not it’s 9.2%, a decrease than the RBI’s estimate of 9.5% for the modern monetary 12 months.

The survey units the historical past for the Budget. Until 2014, it reviewed the trends withinside the economic system throughout the monetary 12 months, summarised the overall performance on fundamental improvement programmes, and highlighted the coverage projects of the authorities.

In 2014, the then leader financial advisor (CEA) Arvind Subramanian offered a -quantity survey and the exercise persevered considering then. The first quantity, typically, contained mind at the nation of the economic system, crucial modern troubles, precise demanding situations confronted through the country, and at instances a few forward-searching reforms and suggestions. Volume has been a greater conventional evaluation of the economic system throughout the 12 months.

This time, the survey is being drafted in absence of a CEA because the authorities have but to employ an alternative for Krishnamurthy Subramanian, who demitted the workplace on December 17, 2021, after the stop of his three-12 months term.

The unmarried quantity might also additionally have parts. The first component might also additionally speak approximately the authorities imaginative and prescient briefly. The 2nd should cowl the coverage projects the authorities have undertaken for the reason that outbreak of Covid-19 and the way they helped withinside the fast-moving recuperation in 2021-22.

“In the absence of the CEA, this time, it won’t be as prescriptive in suggesting reforms. Rather, it’ll recognition on projects like production-connected incentive schemes, monetisation plans and the way it has begun out displaying fine results,” stated a supply.

World Bank retains India’s economic growth forecast at 8.3% for 2021-22

India’s financial system is predicted to extend through 8.3% withinside the contemporary financial 2021-22, the World Bank says in its cutting-edge Global Economic Prospects report. The GDP boom projection stays unchanged from the Bank’s remaining June’s forecast. The boom forecast for FY 2022-23 and FY 2023-24 are 8.7% and 6.8% respectively.

The report says that despite the fact that the healing is but to emerge as broad-primarily based totally, the Indian financial system ought to enjoy the resumption of contact-in depth services, and ongoing however narrowing financial and financial coverage support. The boom projections for the subsequent years are primarily based totally on “an enhancing funding outlook with personal funding, mainly manufacturing, profiting from the production-connected incentive (PLI) scheme, and will increase in infrastructure funding,” the report said.

The World Bank additionally says that the boom outlook might be supported through ongoing structural reforms, a better-than-predicted monetary zone healing, and measures to remedy monetary zone demanding situations no matter ongoing risks.

However, the typical international financial boom is in all likelihood to sluggish down due to the emergence of recent editions of Covid-19. “After rebounding to an expected 5.5% in 2021, the international boom is predicted to slow down markedly to 4.1% in 2022, reflecting persisted Covid-19 flare-ups, dwindled financial support, and lingering deliver bottlenecks. The near-time period outlook for the international boom is particularly weaker, and for international inflation extensively better, than formerly envisioned, thanks to pandemic resurgence, better meals and power prices, and greater pernicious deliver disruptions,” the document said.

It notes that the international boom is projected to melt similarly to 3.2% in 2023, as a pent-up call for wanes and supportive macroeconomic regulations remain unwound. “Although output and funding in superior economies are projected to go back to pre-pandemic traits a subsequent year, in the rising marketplace and growing economies (EMDEs) — mainly in small states and fragile and conflict-troubled countries — they’ll continue to be markedly below, thanks to decreasing vaccination rates, tighter financial and financial regulations, and greater chronic scarring from the pandemic,” the report states.

The World Bank report additionally states that the Covid-19 pandemic has raised international profits inequality, partially reversing the decline that turned into accomplished over the preceding decades. It requires a complete package deal of regulations to influence the worldwide healing onto a greater equitable improvement path.

Shouldn’t income tax be payable only on income?

Income tax is a tax payable on income. Unfortunately, at times, the tax laws end up taxing receipts that are not really incomes, or which are really capital receipts or returns of capital. What are these receipts, and how are they taxable?

Gifts are a classic form of capital receipt, which, under tax laws, are treated as a regular income, and are taxed at your slab rate of tax. Exemption for gifts is limited only to gifts up to ₹50,000 per year, or if they are from defined close relatives, or received at the time of marriage, etc. This often results in gifts from close friends or family members, such as cousins, being subjected to tax.

The provision, which is meant to plug loopholes for tax evasion through fictitious gifts, unfortunately, also impacts genuine cases. While there is an exemption on amounts received or paid by registered charitable trusts, it does not extend to socially responsible persons who may raise funds to help persons in distress. Though you may use all the funds you raised for its stated purpose, perhaps even making out-of-pocket contributions to it, tax authorities may seek to tax you under this provision. Instead of being rewarded for charity, you may end up being penalized for it. The income tax department can certainly help alleviate such difficulties by issuing a circular which clarifies that amounts raised by individual benefactors and spent by them on victims of natural calamities or pandemics would not be taxable.

According to the law, even if you help a stranger in need by paying him/her more than ₹50,000, that person is liable to be taxed on such receipts, although he/she may have used those funds and his/her own resources to fulfil the need. Fortunately, the government has realized, though belatedly, the harshness of this provision and announced on 25 June that amounts received by a taxpayer for medical treatment from his/her employer or from any person for treatment of covid-19 during FY20 and subsequent years would be exempt from tax. It also said ex-gratia (without any limit) a person receives from his/her employer is tax-exempt. Further, amounts up to ₹10 lakh that the family members of a person who has succumbed to covid receive from any person will be exempt from tax. This is a welcome relaxation, which applies only to cases where a person contracts covid-19 or dies from the disease. A question that may arise in this context is whether such relief would be available in case a person dies within weeks of recovery from covid, as has happened in many cases. One hopes a legislative amendment would take care of such cases as well.

Another kind of capital receipt that is taxed is gains on sale of assets. While indexation of cost is permitted for computing capital gains on sale of property, such indexation neutralizes only 75% of the impact of inflation. Therefore, though your property may not have appreciated in real terms, if the impact of inflation is factored in, you still end up paying tax on part of your inflation-adjusted capital cost. Besides, on sale of listed shares, such indexation is now not available. Therefore, the longer you hold shares that rise at the same pace as inflation, the greater the tax you pay. Assume you bought shares in 2018 for ₹100,000, whose value of ₹125,000 today in real terms is the same as the value of ₹100,000 in 2018, you would still end up paying tax of ₹2,500 on gains of ₹25,000. But this gain is really nothing but an illusion created by inflation.

The third type of receipt of capital that is taxed is annuity or pension under a pension or annuity plan, where there is no return of capital on maturity or death. The annuity or pension that you receive, therefore, also involves a portion that is really a return of your capital, but yet the entire amount of annuity is taxed as your regular income. Fortunately, in the case of life insurance policies, due to recent amendments in the TDS provisions, it is now clear that only the excess amount received by you over and above the premium paid would be taxable as income. In the case of pension fund policies issued by life insurance companies, there could be situations where you have been allowed a deduction of only part of the amount of premium paid; but tax authorities may seek to tax the entire receipt on premature surrender of the policy. In such situations, an argument available is that only the amount received to the extent of the contribution allowed as a deduction, and the appreciation, can be taxed and not the entire receipt.

These are anomalies in the tax laws that certainly need to be remedied. Taxpayers should not be taxed on amounts that are not primarily of an income character, or that do not result in an enhancement of their capital in real terms.

Otherwise, taxes are taking away a portion of taxpayers’ capital in the garb of taxing them on their incomes, which is not the hallmark of reasonable or fair tax law.

Income Tax Alert: Big CBDT Update On e-Filing Of Forms 15CA/15CB

Income Tax Alert – The Central Board of Direct Taxes (CBDT) has granted further relaxation in e-filing of Income Tax Forms 15CA/15CB. The decision has been taken in view of difficulties reported by taxpayers in filing of the forms online on official portal of Income Tax. Date for submission of forms in manual format to the authorized dealers is extended to July 15, 2021, according to details provided by Income Tax India.

  1. “CBDT grants further relaxation in electronic filing of forms 15CA & 15CB in view of difficulties reported by taxpayers in filing of the forms online on Date for submission of forms in manual format to the authorised dealers is extended to 15th July, 2021,” Income Tax India tweeted.
  2. According to the Income Tax Act, 1961, there is a requirement to furnish Form 15CA/15CB electronically.
  3. Presently, taxpayers upload the Form 15CA, along with the Chartered Accountant Certificate in Form 15CB, wherever applicable, on the e-filing portal, before submitting the copy to authorized dealer for any foreign remittance, CBDT said in a statement date July 5, 2021.
  4. Earlier it was decided by CBDT that taxpayers could submit Forms 15CA/15CB in manual format to the authorized dealer till June 30, 2021.
  5. The date has now been extended till the July 15, 2021.
  6. CBDT has advised authorized dealers to accept such forms till July 15, 2021 for the purpose of foreign remittances.
  7. CBDT has said that a facility will be provided on the new e-filing portal to upload these forms at a later date for the purpose of generation of the Document Identification Number.

Infosys still resolving issues related to new income tax portal: FM Sitharaman

Addressing a press conference on Friday, Finance Minister Nirmala Sitharaman said that Infosys is still resolving issues with respect to glitches related to the new income tax portal as they are working on a few more issues to fix it.

In a meeting with Infosys officials on June 22, the FM reviewed with Infosys officials the technical glitches related to the new income tax e-filing portal. Sitharaman had asked Infosys to address all issues without further loss of time, improve their services, redress grievances on priority as it was impacting taxpayers adversely.

FM Sitharaman had posted a tweet directed at Infosys and co-founder, urging them not to “let down our taxpayers in the quality of service being provided”. Responding to the Finance Minister’s tweet, Nilekani stated that Infosys regrets the troubles and expects the system to stabilise within a week.

Infosys was in 2019 awarded a contract to develop the next-generation income tax filing system to reduce processing time for returns from 63 days to one day and expedite refunds.