Tax-burden on India's GDP to rise further, hitting consumption and savings

The latest increase in indirect taxes on commodities like diesel, petrol and alcohol by the central and various state governments is likely to lead to a further rise in the tax burden on India's Gross Domestic Product (GDP). In FY19, indirect taxes (net of subsidies) accounted for nearly 10 per cent of GDP, up from 9.3 per cent a year ago and a low of 6.1 per cent in FY10. This, say economists, will negatively impact household disposable income and may hit consumer demand and savings and investments by the household.
According to the Organisation of Economic Co-operation and Development (OECD), disposable income is closest to the concept of income as generally understood in economics. It measures the income of households (wages and salaries, self-employed income, income from unincorporated enterprises, social benefits, etc.), after taking into account net interest and dividends received and the payment of taxes and social contributions.
"Disposable income is the portion of GDP that accrues to households that they consume, save or invest. If it grows slower than the overall GDP or declines, households will either cut back on consumption, or savings & investments, or both," says Devendra Pant, head economist India Ratings.
According to various estimates central government can earn up Rs 1.7 trillion in additional tax revenues from diesel and petrol in FY12 besides additional revenue mop-up by state governments.
Against this, India’s GDP is expected to either decline marginally or stay stagnant according to various estimates depending on the extent of the Covid-19 lockdown.
In the last five-years, indirect taxes such as excise, customs and Goods & Service tax net of subsidies has grown at a much faster pace than the growth the country's Gross Domestic Product (GDP). The trend is similar in case of direct taxes such as personal income tax and corporate income tax.

For example, in the last five-years net indirect tax grew at compounded annual growth rate (CAGR) of 16 per cent growing from Rs 8.7 trillion in FY4 to around Rs 19 trillion in FY19. Direct Taxes during the period grew at a CAGR of 13.1 per cent from Rs 6.5 trillion in FY14 to Rs 13.5 trillion in FY19 according to figures from Reserve Bank of India.

Big taxpayers yet to take benefits of Sabka Vishwas amnesty scheme

Current Affairs
As many as 87.5 per cent of the eligible taxpayers have taken advantage of Sabka Vishwas, a dispute resolution-cum-amnesty scheme, which has been extended till January 15.
However, the large taxpayers who are almost 12.5 per cent of the total eligible taxpayers with total tax amount of Rs 1.7 trillion under litigation has yet to make declaration under this scheme.
According to sources, the government is unlikely to further extend the scheme which went live on September 1, 2019. The sources said till now, 161,214 taxpayers (87.5 per cent) out of the total 184,000 eligible taxpayers have already availed the scheme.
These taxpayers have declared tax dues of around Rs 79,968 crore and after availing the various reliefs and amnesty as per the rules of the scheme, they would pay around Rs 35,094 crore, sources said.

However, only 23,000 (about 12.5 per cent of the total) eligible taxpayers have not yet applied under the scheme while the vast majority of the smaller taxpayers have already opted for the scheme. The sources said its officers are pursuing taxpayers to avail this scheme before January 15 as it would not be extend further.....Read More

Concessional income tax rate in traders' list of demands for Modi govt

Economy News

After successfully campaigning for Prime Minister Narendra Modi in the Lok Sabha elections, the more than 60-million traders’ community is ready with its list of demands, including a concessional income tax rate, for the new government.

Seeking a meeting with Modi, trade leader Praveen Khandelwal said they would apprise him of core issues merchants faced and ask for promises be fulfilled in the next six months.

Apart from this, there are a few other demands.

The BJP, in a bid to woo traders, made promises in its manifesto, such as a pension scheme for shopkeepers and a merchant credit card on the lines of the Kisan credit card.

“We will remind the government of all the promises. We will press for a quick implementation of these schemes by including them in the upcoming Finance Bill in July,” said Khandelwal, secretary general, Confederation of All India Traders (CAIT).

In addition, Khandelwal said they would seek a concessional income-tax rate for traders. “Being the unsaid collector of taxes for the government, we will seek a special income tax rate for trading community. There is merit in our demand,” he added.

The CAIT had declared support for the BJP and its allies in the Lok Sabha election. It said the decision was taken after analysing the election manifestos of political parties. Besides, the CAIT will press for a single licence for traders.

“Currently, traders require many licences. There should be a single licence,” he said.

Homeowners in India roll up sleeves to complete their unfinished flats

Company News

Lalit Vazirani, a computer programmer from Mumbai, never reckoned on having to turn amateur property developer.

Yet here he is, a decade after putting down a deposit for an apartment near the city's airport, dealing with architects, taxes, various planning permissions and even court hearings. All because the developer behind the $50 million project has gone bust, and nobody else has stepped in to finish the work.

"We never in our wildest dreams imagined one day we would take on the functions and the role of a developer,” said Vazirani, 45, who bought the two-bedroom unit before construction started. “But fate had other plans.”

Few things illustrate the malaise in India’s property market as starkly as would-be homeowners having to dedicate untold hours to completing the flats they spent years saving up for. While no estimates exist for the number of people in Vazirani’s position, India’s property market is struggling to digest some $65 billion worth of projects in various stages of completion -- or, in many cases, non-completion.

It’s an issue with the potential to sap confidence among house buyers, further complicating developers’ attempts to claw their way out from under a mountain of debt.

Weakened Faith

So many delayed building projects have “severely weakened faith in any under-construction properties and reviving buyers’ trust is a Herculean task,” said Anuj Puri, the chairman of Anarock Property Consultants Pvt. “If buyers stop purchasing, builders will have a far more challenging time to get funds from external sources for construction.”

 Two years ago, India introduced a law with strict punishments for building delays...Read More

File your I-T return on time or you may end up in jail like this jeweller

Company News

If you have received a notice for not filing income tax returns within due date, you might want to pay heed to it. In what could probably be the first such instance, a director of Mumbai-based firm Ms Shah Time and Jewels was sentenced to jail for three months on Wednesday for not filing income tax returns within the due date for the assessment year 2014-15, according to The Times of India.

When repeated notices sent to the firm and its director Paresh C Shah did not elicit any response, the deputy commissioner of Income Tax on November 22, 2017, filed a show cause notice seeking an explanation as to why sanction for their provision should not be given under the Income Tax Act. After that also went unanswered, a complaint was filed against Shah and the firm.

The Ballard Pier magistrate court rejected Shah's defence of 'lack of knowledge' and held him and the firm guilty of deliberate non-compliance. The court observed that imprisonment under the Income Tax Act was an exceptional and extreme move and was given only when it established deliberate failure to file returns."In the present case, the accused received the notice, but no explanation was given despite repeatedly serving the notices," additional chief metropolitan magistrate R S Sarkale told TOI. He further said that the explanation given by the director was "not at all acceptable."

The maximum sentence over failure to file I-T returns is two years imprisonment. However, since Ms Shah Time and Jewels did not have a poor history in filing returns, Shah was given a minimum jail-term of three months.

Filing Income Tax returns


 It is mandatory for all registered taxpayers to file income tax returns every year, except for those who are over 80 years of age and do not have any source of income from a business or profession.

No tax liability if your income is up to Rs 9.5 lakh, but conditions apply

Personal Finance News:

Stressing that tax concessions have been provided with a view to help poor and middle-class people living on a tight budget, Finance Minister Piyush Goyal said that now individuals earning up to Rs 9.5 lakh can escape liability by taking advantage of saving schemes.

Replying to the debate on the Finance Bill in Lok Sabha, the Minister said he did not propose any change in the tax rate but only provided few rebates which will boost spending and help the economy.
The Finance Bill, which contains tax proposals, was passed by the Lok Sabha with a voice vote, completing the budgetary process in the lower house.

In a swipe at the Congress, the Minister said that unlike the previous UPA dispensation, the present Modi government in the interim budget did not reduce levies of SUVs which are used by rich persons.

In the Finance Bill 2019, the Minister proposed to raise tax rebate for people having annual income up to Rs 5 lakh from Rs 2,500 to Rs 12,500, which will effectively ensure that they don't have to pay any tax.

In the Bill, standard deduction has also been raised from Rs 40,000 to Rs 50,000, besides a host of tax benefits to home buyers.

The concessions proposed in the Finance Bill, Goyal said, are aimed at helping "poor and middle-class people living on a tight budget...This is interim budget. We have not brought any tax proposal...we will bring them in July," he said.


 The next government, which will be formed after the upcoming general elections, will come out with a full budget in July. The next government will also come up with a Finance Bill containing the tax proposals for 2019-20.

Interim Budget 2019: Using technology to increase tax base and reduce rates

Economy & Policy:

In the Interim Budget 2019 speech, Finance Minister Piyush Goyal has reiterated the government's aim to continue technology-led tax reforms.

Technology to increase tax base and reduce rates

The use of technology is the only sustainable measure to increase tax compliance, tax base and eventually, tax collections. It is only when the government has reasonable surety of tax collections, can it take the steps to reduce tax rates and lower the burden on existing tax payer base.

According to government data sources, FY18 saw a 26 per cent rise in the number of income tax returns filed compared to last year, effectively adding 9.95 million new income tax payers. Estimates, according to statements of senior revenue officials, for new taxpayers to be added in 2019-20 is around 10 million. Consequently, there has also been a steady increase in tax collection year-on-year. This has allowed the government to reduce tax rates, for instance slashing the rates for companies having turnover below Rs 250 crore to 25 per cent and recent reductions in GST rates. Major contributors to these initiatives are technology-led reforms.

Digital tax administration and taxpayer experience


 It is not too far in history when individual taxpayers had to undergo several rounds of follow-up with the tax office to initiate refunds. With the set-up of Bangalore CPC, refunds for individual taxpayers are swift and relatively quite easy...Read More

Non-filers will have 21 days to file I-T returns, submit response: CBDT

Economy & Policy:

Individuals who have carried out high-value transactions but have not filed their income tax returns for the assessment year 2018-19 would get 21 days time to submit their responses, the CBDT said Tuesday.

The 21-day time period would be from the date of receiving e-mail or SMS from the I-T Department regarding non-filing of tax returns.

In cases where no return is filed or no response is received for Assessment Year (AY) 2018-19 within the stipulated time, the department would consider initiating proceedings under the Income Tax Act 1961.


 The Central Board of Direct Taxes (CBDT) said data analysis has identified "several potential non-filers" who have carried out high value transactions in 2017-18 but have still not filed returns for AY 2018-19. CBDT, however, did not disclose the number of such non-filers...Read More

Income Tax return processing time to reduce from 63 days to just 1 day

Economic & Policy News:

The Union Cabinet approved an integrated income-tax e-filing and centralised processing centre (CPC) portal, which will reduce the return processing time from 63 days to just one day. The new portal is also expected to process the refunds within one day of filing of tax returns, in huge relief for taxpayers. However, one will have to wait for 18 months to see its launch.

“Earlier, taxpayers would face troubles because of delay in refund processing and the CBDT used to spend a lot of money every year as interest on pending refunds, which will be history now,” Union minister Piyush Goyal told reporters after the Cabinet meeting here.

Also Read:Companies can raise $750 mn yearly via external commercial borrowings: RBI


 Last month, Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra had said a simplified return form and process would be put in place soon in which the department would process the self-declaration made by the taxpayer. The new Rs 4,241-crore project will incorporate these changes...Read More