Budget 2019: Tax bonanza on cards for income tax payers? Two out-of-the-box ideas for Modi government

Budget 2019 should look to increase tax compliance and also provide benefits to the honest income tax payers, Kuldip Kumar, Partner and Leader Personal Tax, PwC India tells Financial Express Online. From hiking basic income tax exemption limit and Section 80C limit to doing away with the requirement of filing simple income tax returns, here are some interesting ideas for the Modi government this Union Budget 2019:

What is the biggest challenge on the personal tax front right now?

The biggest challenge that the government has from the personal tax perspective is to improve the tax collections. Although the number of taxpayers has increased – 6.5 crore individuals filed their tax returns – but tax collections were not up to the mark. This could be because those who have started filing tax returns do not have enough income to contribute in a big way to tax collections, or they may not be paying the right taxes. But, with the elevated use of technology and government having most of the information from more than one sources, those who are not paying the right taxes, will probably get noticed and the government will tighten the compliance process.

WATCH Kuldip Kumar, Partner and Leader Personal Tax, PwC India talking about Income Tax expectations

On the other hand, those who are paying taxes have an expectation that the government will put more money into their pockets. They want to know when they will start paying lower taxes than at present.

What can Budget 2019 do to address the above concerns?

The government has come back with a stronger mandate and the common man has a lot of hope from this Budget 2019. The government can meet this expectation in the following manner:

1. Increase the basic assumption limit by Rs 50,000 including for the senior citizen. The women taxpayers may also get a higher base exemption limit in Union Budget.
2. Section 80C deduction limit, which is presently available up to Rs 1,50,000, can be enhanced to Rs 2,50,000.
3. For the housing loan interest, there is presently a cap of Rs 2,00,000 for a self-occupied property. That limit may be enhanced to Rs 3,00,000. In case of let out property the set off provision of Rs 2,00,000 can also be done away with. Although these benefits will be there for the common man, those in the higher income groups, they may not actually get the benefits The benefit from this proposal may be restricted to those, for example, who are earning up to Rs 10,00,000 or Rs 20,00,000.

PM Modi wants to build New India. Your out-of-the-box idea for this Budget 2019?

First, the government has the financial information about the income, taxes which have been withheld at source. What is the need to a file a tax return then? In case of simpler returns, where the government already has information about the income and the taxes, the tax filing requirement should be done away with. This will help the government by reducing the cost of managing the processing of a large number of tax returns.

Secondly, the government should recognise those who are paying taxes. The government has already started issuing certificates. Tangible benefits will encourage people to come forward and pay rightful taxes. For example, give them a card and when they are passing through the toll or when they are going to the airport, allowing free access to lounges may be a good idea.