Budget may junk need for proof of investment on tax deductions

Budget may junk need for proof of investment on tax deductions

Budget may junk need for proof of investment on tax deductions

The government may do away with the need to give proof of investment on tax deductions in the Union Budget to be tabled in Parliament on Thursday.

This would help a middle-class taxpayer in a significant way.

The government believes one of the reasons why many salaried and other middle-income groups avoid paying tax is that they have to go through a lot of paperwork.

"A lot of demand has come to the income tax department regarding this. There has been quite a few round of discussions as to why one needs every individual to submit their details in a technologically advanced era when information about a taxpayer is available at the click of a mouse," a senior official said.

This is one of the reasons why the government has made provisions for seeding Aadhaar number with banks accounts, insurance policies and other investments.

Linking Permanent Account Number with Aadhaar is also a step in the direction of helping the public, the official told DH.

He, however, added that a final decision will be taken by Finance Minister Arun Jaitley on whether to bring it from this year or the next.

After an amendment to the income tax rules, the government had also recently empowered the tax officials to use banking, insurance and municipal corporation's database to obtain details about taxpayers or defaulters.

According to a set of official data released late last year by the Income Tax Department, just over 2 crore Indians, or 1.7% of over the 120 crore people in the country, paid income tax in the assessment year 2015-16.

In the case of a salaried person, an employer seeks the proof of actual investments from the employees every year.

Based on this, the tax is deducted from an employee's salary. To save taxes, the employee takes recourse to various tax saving instruments under the Income Tax Act of 1961.

In the Budget, Jaitley is also expected to tweak income tax slabs to do away with various deductions.

The expectation is he will raise income-tax exemption from Rs 2.5 lakh to Rs 3 lakh or above.

The hopes of the middle-class have been bolstered by the finance minister's recent comment that 2018-19 will be the year of reaping benefits of the reforms undertaken in 2016-17.

"The country is going to get enormous benefit of the reforms," Jaitley had said in his New Year message.