In its pre-budget expectations, Deloitte India called for a reduction in the top tax rate from 30% to 25%, as well as an increase in the threshold for the top tax rate from 10 lakh to 20 lakh . Deloitte believes this measure is necessary to bring personal income tax on par with the corporate tax rate which was reduced in 2019. Deloitte also requested additional deductions for expenses incurred by employees during home work.
In a note on budget expectations, Deloitte India states: “An individual is required to pay taxes on the basis of slab rates. The highest slab rate (after including surtax and tax) for income over 5 crore in India is currently 42.744%. “
“There has been a drop in corporate tax rates in recent years. Therefore, to bring the personal tax rates in line with the corporate tax rate, it is advisable to reduce the top tax rate from 30% to 25% and also increase the threshold of the rate d. highest tax of ₹ 10 lakh to ₹ 20 lakh. Therefore, the highest proposed slab rate (including surcharge and royalty) can be reduced from 42.744% to 35.62%, ”he adds.
The agency also requested additional deductions on “work from home” expenses for employees. “Given the current situation, employees work from home in all companies. Employees are likely to incur “additional work related to household expenses” such as Internet costs, rent, electricity, furniture, and so on. 50,000 “home work” allowances are granted to employees who work at home.
The cabinet also highlighted cases of double taxation in the provident fund and other contributions and called for a correction to these through an amendment to the income tax law. In accordance with the provisions in force, the employer’s contribution of more than 750,000 to the PF, the pension fund or the national pension scheme is taxable at the hands of the employee in that year.
“The same PF balance, once withdrawn, would be subject to withholding tax, if the conditions for exemption (for example, five years of uninterrupted service) are not met and there is no specific exemption provided to exclude the already taxed income mentioned above. Therefore, there could be double taxation, at the withdrawal stage to the extent that the contribution / accretion has already been taxed, ”explains Deloitte.
“It is recommended that there be a specific provision in the Law, providing for an exemption for contributions / accretions which are already imposed upon withdrawal from the FP,” adds Deloitte.
A similar proposal was made by the industrial body Assocham. He called for a reduction in tax rates for individual taxpayers in the next budget. The industry body also urged the finance ministry to ensure parity in tax obligations between small businesses, limited liability companies (LLPs) and the corporate sector.