Will the Government abolish Income Tax? This question pops up once in a while in the public domain. To answer this, here is the estimated total Tax revenue of the Union Government for FY23 –
|Corporate Tax (Tax paid by business entities)||Rs.7,20,000 Crores|
|Income Tax (Tax paid by salaried employees, pensioners, etc.)||Rs.7,00,000 Crores|
|GST (Tax on sale of goods and services)||Rs.7,80,000 Crores|
All three components together contribute 46% of total revenue. Income Tax paid by the salaried class and pensioners, etc., is 15%; almost equal to total GST collections!!
Will the Government scrap income tax? It is a daydream.
Any benefit or goodies to the taxpayers? No. It’s like “Your presence is the only present desired”! No bouquets, gifts, or covers, please!
There is one benefit for high taxpayers. For example – Anand sold a residential plot at Jayanagar resulting in a long-term capital gain (LTCG) of Rs.6 Crore. Till this financial year, (up to March 2022), he has to pay 28.496% as taxes. If the sale is made after 1st April 2022, then the tax rate comes down to 23.92%.
Similar rules are applicable for any other long-term capital asset such as the sale of shares of an unlisted company, sale of a flat, etc. This reduced tax benefit is for those taxpayers whose LTCG is over Rs.2 Crores. Even today, the tax rates for LTCG of less than Rs.2 Crore stand at 23.92%.
Tax on Crypto or digital Assets – Some people wrote that India has legalised cryptocurrencies. Is this right? No. Income Tax is a draconian Act, it taxes whatever is smelled as gains or profits. It won’t differentiate between legal and illegal. Thus, by taxing crypto, it can’t be said that it is legalised. Even today trading in crypto is allowed but crypto as a currency for buying goods and services is banned in India.
Currently, we are filing Income Tax Returns showing gains from Cryptos or NFT either as business income or capital gains based on the applicable tax slab rates. Through this budget, clarity is given on the tax rates. Tax on Lottery winning is 30%; now gain from Cryptos is taxed at par with lottery income! One way, it is right, if you make money from Crypto it is a lottery only, isn’t it? Most of them won’t make money and hence Crypto becomes ‘CRY’ – PTO.
Filing of updated return – I read a joke today “Your profits are my profits; your losses are your losses’ says the Government”. A similar Rule is proposed for filing a revised return. In case the taxpayer finds that he has not reported some income, he has an extended period of 36 months from the end of the relevant Financial Year to rectify this error, by paying taxes, additional taxes, and interest.
In case he finds that extra taxes have been paid or losses have not been reported, then the period for revision is restricted to 9 months from the end of the financial year.
That’s it for now. Will come up with some more interesting macro analysis in the next couple of days.