Union Budget 2024: What India Inc expects on tax front

Every CFO during interaction with me has certainly applauded the India growth story. But the biggest concern most of them have is compliance. Over the years the compliance has gone up which makes CFOs pay more and spend more time. At the same time, finance heads and India Inc as a whole always look for clarity on certain issues.

The mandatory filing of Income Tax returns for defunct partnership firms and companies with no taxable income needs to be reevaluated as also relaxing calculation of interest for missed due dates of advance tax instalments.

India Inc and economists want the government to manage fiscal consolidation and spend wisely. Generally they pitch for high government spending, but pandemic impact on the government's balance sheet is strongly visible.

As the budget announcement approaches on February 1, 2024, expectations are high for potential changes in taxation policies. While the upcoming budget is interim, there are several key issues that taxpayers hope the Finance Ministry may address.

Presumptive taxation rates need a look, particularly the disparity between businesses and professions. Businesses can presume their profits based on a percentage of turnover, while professionals face a higher benchmark. Suggestions have been made for a reevaluation of presumptive rates, especially for professionals, to foster a more balanced system.

For Tax Deducted at Source (TDS), concerns have been raised about the administrative burden on individuals making TDS payments. The current quarterly filing requirement for TDS returns, even for a single payee, has prompted a call for simplification, proposing an annual TDS return instead.

The mandatory filing of Income Tax (I-T) returns for defunct partnership firms and companies with no taxable income needs to be reevaluated. Advocates argue that compelling these entities to file tax returns serves no purpose, and a more pragmatic approach could be adopted.

Tax audit requirement

Another area of concern is the discrepancy in tax audit requirements between business entities and professionals. The business community enjoys higher turnover limits for exemption from tax audits, while professionals face lower thresholds. Calls for a more equitable approach in aligning these limits have been voiced, emphasising the need for fairness across different categories of taxpayers.

One pressing concern revolves around the calculation of interest for missed due dates of advance tax instalments. Currently, a taxpayer facing a delay of just a single day incurs interest charges for three months. Advocates for change argue that interest should be proportionate to the delay, preventing undue burdens on individuals with varying periods of delay.

Medical expenses and deductions have not escaped scrutiny either. With the increasing costs of medical treatments and changing healthcare landscapes, there are calls for a revision of the upper caps on deductions for preventive health check-ups, medical treatments, and health insurance premiums.

There is a need for clarity on the deductibility of fees related to income from equities and mutual funds. The ambiguity surrounding the deductibility of these fees has led to conflicting judgments, prompting a call for a clear policy for High Net Worth Individuals (HNIs) in their investment decisions.

Lastly, the CFO community has been pitching for lowering the compliance burden. Asks are many from India Inc and the finance minister has to be more cautious. On one hand, she has to maintain the growth and manage the fiscal budget at the same time she has to craft a road map for the economy which is marching towards the third largest.

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(Editor's Note is a column written by Amol Dethe, Editor, ET CFO. Click here to read more of his articles exploring several buzzing topics.)