Published: Mon, February 03, 2020
Markets | By Otis Pena

Tax relief in Budget a 'lollipop', says NCP's Majeed Memon

Tax relief in Budget a 'lollipop', says NCP's Majeed Memon

As per the revision in the personal income tax regime for salaried individuals, a taxpayer would have to forego the deductions allowed now if she/he prefers the new tax regime.

The Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India if he is not liable to be taxed in any country or jurisdiction. "The provisions in the Budget are too damaging and people will not welcome it", said Memon here. "This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India", the government said.

The Narendra Modi government's proposal to tax non-resident Indians (NRIs) if they are not paying duties in their country of residence, has sent shockwaves among the largest diaspora in the world, which is estimated to be 17.5 million, according to a United Nations report. This interpretation is not correct.

Earlier, an Indian citizen would become an NRI if he stayed out of the country for over 182 days and enjoyed tax benefits.

To further simplify the tax system and lowering the tax rate, the FM would remove 70 exemptions and deductions which got inco-rporated in the income tax legislation over the past several decades.

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The government has also stated that "necessary clarification if required shall be incorporated in the relevant provision of the law". "Consequently, it is proposed to relax the provision of "resident but not ordinarily resident" so that a resident who has been non-resident in seven out of ten previous years would be resident but not ordinarily resident".

Hitherto the company or mutual fund house was levying the Dividend Distribution Tax (DDT) at 15 percent on the gross amount of dividend income. "There have been plans raised before about taxing NRIs, but that has not happened yet", said Kumar Mahesh, an engineer in Sur. "Our families depend a lot on this money, so we were very anxious when we heard of this news, particularly since it was not clear", he added. It will not make much difference to those who have been planning for taxes as there will be no tax savings for them.

As per data, as many as 5.3 crore taxpayers out of 5.78 crore claimed deductions of less than Rs 2 lakh (standard deduction, provident fund, home loan interest, contribution to national pension scheme, life insurance, medical insurance etc.) while filing income tax returns.

"We believe that urban income growth, sentiment, and hence, spending on big-ticket items such as automobiles and real estate, are likely to remain muted over the short term", it said. "Those who wish to come into the new one are welcome to do so". This income is doubly vital for blue collar workers, many of whom work in the construction, maintenance, and industrial sectors.

"By splurging their money, people would be happy now but in the long run they will suffer", experts said.

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