[Opinion] A Round Up of Budget 2024 Expectations

CA V K Subramani – [2024] 164 taxmann.com 317 (Article)

Every year the plan card of the Government in the context of mobilization and utilization of resources is presented broadly by the finance minister by means of a budget. It sets the tone on priority of the expenditures to be incurred in the ensuing fiscal and how the resources would be galvanized say by way of taxes or by way of borrowings including printing of currency. A deficit budget is resorted to fund various projects though in household parlance it is like spending more than the income. In macro-economic management, government spending provides extra flow of money in the economy and trickle-down effect to various stakeholders in such process. Most of the countries prefer deficit budget to fuel the economy particularly after the recent pandemic.

Modi 3.0 has started somewhat slowly though it is premature to comment or draw any conclusion. However, the usual buoyancy is missing besides the rhetoric claims which were regularly heard in the last decade or so. From the taxpayers’ perspective, income-tax is an expenditure out of income and it pinches the pockets of the earners of income. Therefore, being a direct outlay for a person having income exceeding the exemption limit, it is but natural to have expectations though many a times such expectations goes out of the radar of the lawmakers.

This refresher takes a snapshot of some of the expectations of the taxpayers taking note of their difficulty or desire, as the case may be.

1. Default regime vis a vis old regime: Section 115BAC being the default regime was inserted by the Finance Act, 2020 and applicable from assessment year 2021-22. The Finance Act, 2023 enhanced the basic exemption limit and moderated the rates of income-tax. Besides providing enhancement of exemption limit and moderation of tax rates, relief under section 87A with marginal relief has been inserted from the assessment year 2024-25 onwards. It seems that the basic philosophy of inserting section 115BAC is to moderate the tax liability and deny exemptions and deductions which are otherwise allowable. The thrust is to leave more money with the taxpayers for better circulation of money in the economy.

The old scheme provided for deduction in respect of various incomes and savings which was to leave less money for discretionary spend by the taxpayers. The default regime seems not to have eroded the tax base and hence it got further acceleration in Finance Act, 2023. However, the taxpayers who have already committed to housing loans and especially salaried sector desiring to avail HRA exemption and PF contribution would look for some tax incentives. The old or regular regime too requires some incentive by enhancing the basic exemption limit and saving options so that the class of taxpayers habituated to savings and investments are also encouraged and recognized. This could be in the form of providing enhanced monetary limit under section 80C besides sections 80D, 80E, 80G, 80TTA and 80TTB.

2. Presumptive provisions: Sections 44AD and 44ADA have provided huge relief to the taxpayers in compliance cost by admitting income on presumptive basis. However, one lacuna in adopting both the provisions would be the missing trail with regard to wealth accumulation by the taxpayers who have taken shelter under these provisions. It would be fair and equitable if such taxpayers are mandated to declare the investments made during the year in the ITR itself so that the spurt in wealth is not puzzling or controversial at a later date. A comparison of the income declared vis a vis the investments would act as a good check for the taxpayers besides self-regulation while concurrently ensuring that the presumptive provisions are not abused.

Section 44AD(4) says that where a taxpayer who has declared income under presumptive provisions wants to declare income less than the presumptive limit, such taxpayer cannot claim the benefit of the presumptive provision for 5 subsequent assessment years subsequent to the assessment year in which he has opted out. For example, if a taxpayer who was all along admitting income under section 44AD wants to declare income less than 8% / 6% for assessment year 2024-25 then such taxpayer cannot revert to section 44AD for 5 assessment years i.e. assessment years 2025-26 to 2029-30. In a nutshell, the assessment year of opt out + 5 subsequent assessment years, he cannot revert to presumptive provision.

However, if the taxpayer has gross receipts exceeding Rs.2 crores and does not fall in the proviso to Explanation to section 44AD and admits income by getting the books of account audited under section 44AB, may have his turnover below Rs.2 crores in the immediate subsequent year and may desire to revert to presumptive provision contained in section 44AD. In such a scenario, the taxpayer who has not opted out of section 44AD may become ineligible because of the legal provision. When such is the case, he must be permitted to admit his income under section 44AD without having to wait for 5 more assessment years. This benefit is not specified in the legal provision nor any circular of the CBDT provides for the same. It would be fair that a proviso to section 44AD(4) is inserted to provide for such an exception. Certainly, there is a school of thought which says that such benefit is available even now but it is not backed by any legal provision or CBDT circular.

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