VIA Pre Budget Memorandum
Vidarbha Industries Association
The Finance Minister
Government of India
New Delhi – 110001.
Subject: Pre-Budget Memorandum
We appreciate the initiatives taken by reducing the corporate tax to 22% which has surely helped in improving the business sentiments in the country. We look forward for the similar steps in the Union Budget – 2020 which will surely lay down the road map to 5 Trillion economy.
We, on behalf of the VIA Tax & Corporate Law Forum hereby request you to kindly consider the following issues in the Union Budget 2020:
1. Removal of Tax Rate of 78% U/s 115BBE :
During demonetization period, section 115BBE was amended so as to make income u/s 68, 69A, 69B etc chargeable to tax @ 78%. The special rate was introduced to take care o the situation during demonetisation. It is suggested that the income referred to in section 68, 69A, 69B etc be subject to tax like other regular income of the taxpayers.
2. Abolish Notional Taxation Provision :
A] There are number of provision in the Income Tax Act which imposes tax on notional income as against actual income. It is seriously affecting the transactions in the real estate sector. It is suggested that following transactions be kept out of the net of notional taxation :
a] Properties auctioned by Banks & financial institutes
b] Sale / Purchase of tenanted premises
c] Sale / Purchase of business assets, real estate in MIDC, etc
B] Both the purchaser as well as seller are liable to pay the tax on the same amount by virtue of simultaneous operation u/s 56 & U/s 50C. It is suggested that the it should be taxed in 50:50 ratio in the hands of the buyer and seller.
C] Builders & developers are liable for notional taxation on unsold stock of flats/units. It is suggested that the unsold stock of the builder be outside the net of the notional taxation provision.
3. Increase in the limit of deduction u/s 80C :
The annual limit for contribution to PPF, LIC, NSC at Rs. 1.50 Lakh was fixed long back. As there is no social security system in the country, It is suggested to enhance the limit to at least Rs. 3 Lakhs from the present ceiling of Rs. 1.5 Lakhs.
4. Small Trust & NGO :
There are lot many trusts and institutions who are playing crucial role in the upliftment of the people and are doing the work of the Government. This are small sized trusts who are not able to comply with stipulations of section 12A registration under the Income Tax Act – 1961 due to cost and compliance burden involved.
It is requested that the small trust having gross receipts less than Rs. 25 Lakh may be exempted from the registration u/s 12A and only the surplus if left after expenses on its object be subject to income tax.
5. Conversion of business assets in to capital assets :
Finance Act – 2018 has introduced a new provision as a result of which conversion of stock in to capital assets is made liable to income tax as Business Income.
It may be appreciated that such conversion doesn’t result in any cash flow to the business entity. It is suggested that suggested that the provision may be abolished and nothing be made liable for taxation during such conversion.
6. Due date under Explanation to Section 36(1)(va) of the income Tax Act – 1961 :
There is a lot of controversy as to the availability of deduction u/s 36(1)(va). It has been held in various judicial pronouncements that the amount disallowable u/s 36(1)(va) may be allowed as deduction u/s 43B if the amount is deposited before the due date of filing the income tax return. The returns are CPC are processed by disallowing the amount u/s 36(1)(va) without simultaneously allowing the same as deduction u/s 43B. It is resulting in artificial demand and additional compliance burden on the taxpayers.
It is suggested that the due date defined under Explanation to Section 36(1)(va) should be amended so as to be same as the due date of filing return of income under section 139(1).
7. Presumptive scheme of taxation U/s 44AD :
The benefit of presumptive scheme of taxation is available only to businesses run by residents Individual, HUF and Firms excluding LLP. The benefit of section 44AD should also be made available to LLP.
8. Capital Gain Exemption u/s 54EC :
Presently, there is a maximum ceiling of Rs 50 Lakh on exemption and the lock in period is of 5 years. It is suggested to raise the threshold limit to Rs. 1 Crore and the lock in period may be restored to 3 years.
9. Removal of restrictions of Rs. 2 Lakh on set off of loss against other income
Presently, Section 71 of the Act allows for set off of any loss arising under the head “Income from House Property” against any other head of income. However, there is a ceiling of Rs 2, 00, 000 for set off against any other head of income. Balance unabsorbed loss is allowed to be carried forward up to subsequent 8 assessment years. It is therefore suggested to withdraw the said restrictions so as to give a boost to the real estate investments.