Finance ministry looks to widen tax base in FY21 budget

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The finance ministry is examining ways to widen the tax base in the FY21 Union Budget by plugging loopholes in the law, especially in areas of tax exemptions and concessional tax schemes. A government official, who spoke on condition of anonymity, said policymakers will leverage the immense amount of data that the direct and indirect tax authorities have obtained over the last few years including from Goods and Services Tax (GST) returns filed by small businesses to plug loopholes and check tax evasion.

The insights from data analytics could help refine the presumptive tax scheme as well which allows partnerships and individuals to compute income on a presumptive basis. Business Standard on Friday reported, citing unnamed tax officials, that the government was considering a tighter presumptive taxation scheme, given the grim revenue position and clamour for tax cuts for the salaried class.

Eligible assessees with sales up to 2 crore can compute their taxable income at 8% of their gross sales or at 6% if amounts are received through account payee cheque, draft or electronic means. Those who sign up for the scheme need not maintain books of accounts, which, otherwise is required for computing taxable income in the ordinary course by deducting spending from the gross sales.

The move to tighten legal provisions come at a time the government has cut corporate tax rates, expected to cost the exchequer 1.45 trillion going by initial official estimates. “The tax base is finite. If rate is cut for one section of taxpayers, the government has to make up for it as it cannot compromise on public spending,” said another government official, who also spoke on condition of anonymity. The sharp cut in corporate tax rate announced in September also indicates that chances of a tax relief for individuals is extremely low. India has historically been a country of low tax compliance. Of the 1.3 billion people in the country, only 84.5 million paid taxes for assessment year 2018-19.

Read More at: https://www.livemint.com/politics/policy/finance-ministry-looks-to-widen-tax-base-in-fy21-budget-11573203611186.html