BUDGETS EXPECTIONS 2014

The full Budget of 2014-15 is going to be the first official opportunity to implement the economic agenda where in Government will have to do a fine but difficult task of managing the conflicting needs of variety of stakeholders – business & industry, trade, commerce, exporters, banks, investors, agriculturists, house-holds, society and politics as well. The forthcoming budget should not only be investor friendly and taxpayer friendly but also be forward looking and progressive giving policy directions and accelerating growth.

Initiated by earlier NDA Government, GST has been talked about by all Governments since then. Now that we have a stable Government, the Budget should clearly redefine the road map to much awaited GST and announce a sunset date for the transition to GST regime. It could be 2015 or even 2016, given the issues pending with the Empowered Committee of State Finance Ministers on GST.

The BJP Government is likely to make implementation of the Goods and Services Tax (GST) a priority as it gets down to work. The Finance Minister held a meeting with officials of the Revenue Department of direct tax and indirect tax to get an overview of the taxation issues. The Revenue Department has been asked to prepare a presentation for the new Finance Minister, detailing the features and architecture of GST, the areas of disagreement with State Governments and other issues that have delayed the implementation of the indirect tax regime. The Finance Minister is also expected to soon meet various State Finance Ministers to sort out differences and ensure an early rollout of GST. It is hoped that new Government may be able to move the official amendments to the Constitution Amendment Bill, key to the introduction of GST in the monsoon session of Parliament.

It has already been hinted out that the Government is keen on early rollout of GST. The BJP manifesto had promised to bring on board all State Governments in adopting GST. Earlier Gujarat and Madhya Pradesh were opposed to GST format but since both these states are governed by the same ruling party as at the centre, there is bound to be greater harmony this time which may pave a way for earlier implementation. Finance Minster will have to build consensus about the GST among State Governments. GST ought to be the top priority in the Budget.

On indirect tax front, while there is a need for systemic reforms and forward looking pro-growth steps in general, the Budget should lay emphasis on the following specific issues, besides laying a clear-cut road map for GST implementation:

Enhancement of basic exemption limit: Every individual has the expectation from this budget is to enhance the basic exemption limit from the current limit of Rs.2 Lakh. In the view of current inflation & price level, the enhancement of basic exemption limit will lower the tax of an individual and increase the spending habit.

Revision in conveyance related allowances: Current exemption limit of transport or conveyance allowance u/s. 10(14) Rs. 800 per month has been fixed long years back. However the fuel price has been increased twice or thrice comparing old rates. But the limit of conveyance or transport allowance still in the same limit. The same issues are facing in the valuation of car perquisite which contains the fuel expenses. These limits related to fuel expenses can be relook by the government.

Revision in the medical expenses related exemption: The exemption of reimbursement of medical expenses limit of Rs.15000 per annum is the very low limit comparing the cost of medical expenses in current scenario. This can be relook and correct the limits.

Revision in education allowances: The exemption of educational allowance Rs.100 per child per month & hostel expenses allowance Rs.300 per child per month is the limit fixed long back. The same limit can be revisited and correct according to the current cost of education. Even though the deduction of tuition fees allowed under section 80C up to Rs. 1 Lakh, expenses other than tuition fees also is the major amount in current educational costs.

Deduction in respect of notice period pay: This is most debatable issue during the change of employment. If employee resigns from the current employer and going with serving notice period, the payment made by the employee to employer to compensate will be deducted from his salary payable. But as per tax calculation it will be shown as income but there is no clear provision in deduction for the same. So it can be considered in this budget.

TDS problems facing by individual: Common problem facing by salaried individual/ non salaries case also is that TDS credit is not reflecting in the form 26 AS and unable to match the TDS amount. Even though TDS amount recovered from the income and deductor fails to pay the TDS or not update the TDS return, it is not reflecting in the form 26AS. This is very embracing situation for any person, after paying tax also not getting credit due mistake of others. Even though some recent judgments are favored to the deductees, however this has to be provisioned in the act itself to avoid the litigation issues.

Simplification of tax / duty structure with few rates at least for one year till economy is back in blac

Reduction of Excise and Service Tax rates by at least two percent to boost production, growth in services and address inflation

Abolish education cesses and have separate allocation for the same

Remove confusion and double taxation / overlapping tax regime with simultaneous levy of VAT as well as Service Tax in certain cases

Refunds in Excise and Service Tax should be made simpler, faster and hassle free

Benefits / exemption to special economic zones be rationalized

There should be no retrospective tax provisions which give rise to tax liability. There has to be no room for uncertainty

Multiple audits and investigations must be stopped. There should be single point jurisdiction for enquires, investigation, audit, adjudication etc.

Tax administration ought to be made more accountable and assessee friendly

Tax reforms must also look at lowering of compliance costs.

Cenvat credit mechanism may be made simpler and reduce administrative cost

Excise duty cuts shall boost industrial growth and consumption

Tax audit on the lines of income tax may be introduced in Service Tax

Department officers ought to be trained in law, interpretation and time management skills

CST rates may be lowered in the wake of GST.

Conclusion: As per the purview of income tax act, Salary income is treated as risk free nature, hence most of the part of income is fully taxable, however the expenses depends on the inflation and other factors has to be revisited by the department and may make the changes accordingly. It is the very basic expectation from the upcoming budget by the salaried cases.

Good luck.