'Too much for too small a population of taxpayers'

The first impression that one gets about the taxation proposals made by the finance minister in Budget 2017 is that they have been made on the basis of a lot of data mining and data analysis from the returns filed by both corporate and non-corporate taxpayers.

Individual taxation

The proposal to halve the tax rate for individuals with taxable income up to Rs 5 lakh may be welcomed by a few. The finance minister is aware that taxpayers with income above this threshold would go up in arms, and hence, has given them a relief of Rs 12,500 per person — a pittance when compared with the fact that this population of taxpayers has nothing to cheer about over the last few Budgets.

The finance minister did not waste much time to come up with measures to make up the tax loss — he simply slapped a surcharge of 10% on individuals with income between Rs 50 lakh and Rs 1 crore.

The Budget 2017 makes another attempt to bring more taxpayers into the tax net through a simple one-page form.

The finance minister made an appeal to Indians to contribute to the development of the nation by paying 5%, and assured them that there would be no scrutiny for one year.

Taxpayers who want to avail of this scheme would be worried about two things — whether a simple one-page form would be enough of a carrot to pay up, and why the assurance of no-scrutiny is there only for a year.

Corporate tax

The proposal to reduce the rate of tax by 5% for companies with an annual turnover of up to Rs 50 crore will be a relief to a large number of companies that fall in this bracket.

There was a general expectation that the Minimum Alternate Tax (MAT) would be gradually phased out, but the finance minister has not only retained the tax, but also increased the period for availing credit to 15 years.

This, coupled with the fact that the small print of the Budget details MAT calculation for companies that are following Ind AS Accounting Standards, is a clear signal that MAT is here to stay. Apart from the rationalisation of income tax rates, 87 amendments have been made to various Sections of the Income Tax Act.

Goods and Services Tax

Probably the biggest disappointment in the Budget has been the lack of an announcement of a firm date for implementation of Goods and Services Tax. All we got was a vote of thanks to the various state governments.

This may have been considered a good Budget had there been no demonetisation. In the present economic environment, the taxation proposals in Budget 2017 has too much for too small a population of taxpayers, and too little for a significant population of taxpayers — exactly the opposite of demonetisation.

(The author is Bengaluru-based Chartered Accountant)