Rationalising the capital gains tax structure, stability in tax rates, and liberalising exemption from the angel tax provisions for strategic foreign direct investment (FDI) are among the key demands of India Inc from the upcoming Interim Budget.
According to a document titled ‘EY’s point of view on Budget’, the industry also wants the government to give incentives to new manufacturing companies, extend sunset dates, and facilitate business restructuring by expanding the definition of demerger to cover investment or shares of operating subsidiaries.
The companies also demand an extension of the benefit under Section 72A to service and trading organisations. Section 72A of the Income Tax Act allows taxpayers to carry forward and set off the business loss incurred in a previous year against the profits earned in subsequent years.
EY’s document said the government would continue its focus on the ease of paying Taxes, while legislative reforms would stay work-in-progress.
According to the document, no major tax amendments or reforms are expected in the upcoming Budget as evidenced from the previous Interim Budgets of 2009, 2014, and 2019. Finance Minister Nirmala Sitharaman has said the Interim Budget would solely be a ‘vote-on-account’ due to the impending general elections, with the full-fledged Budget anticipated in July 2024.
However, EY’s list of India Inc’s demands includes the simplification of procedural compliances, such as extension of the time limit for filing a revised return, improving the interface with the Central Processing Centre, and relief from the compliance burden to explain the ‘source of source’ of bona fide borrowings. Corporate India also wants targeted incentives for research and development and a liberalised patent box regime to boost innovation.
“For further relief to taxpayers from persistent delays in refunds, tax deducted at source (TDS) credit etc., the government may examine the interface with the Central Processing Centre,” EY’s point of view on Budget said.
It expects that the government will announce steps to reduce the pendency of disputed cases with measures such as monthly disposal targets by the Central Board of Direct Taxes (CBDT). Other measures could include setting up a separate technical unit for faceless appeals and rationalising safe harbour rules to make them attractive.
EY’s wish list on the personal tax front includes the extension of the benefit of tax payment deferment for employee stock options (ESOPs) to the stage of sale to all employers and not merely eligible startups, and raising the standard deduction threshold from Rs 50,000 to Rs 1,00,000.
The document also pitched for clarity on a range of issues related to personal tax in the upcoming Budget, such as the taxability of the amounts received through systematic lump sum withdrawal under the National Pension Scheme, tax treatment for the provision of electric vehicles by an employer to its employees, and whether tax collected at source paid by the employees can be considered by the employer at the tax withholding stage.
On housing, EY’s wish list has sought an enhanced limit for the deduction of interest on housing loans for self-occupied property from Rs 2 lakh to at least Rs 3 lakh.