Impact of taxes on Budget 2020-21 on individual and corporate

Please read my article published in Prothom Alo today that highlights the impact of the major fiscal measures on individual and corporate. It appears that the tax measures in general will have an adverse impact on both individual and corporate. Although some measure have been taken to give relief, there are contrary proposals that will nullify the relief and indeed add to the tax payers woes. For example, personal tax rates have been reduced. This is a long standing demand and the government should be lauded for taking this long overdue step. Unfortunately, the benefit will be more towards the high income individuals rather than the low or middle income individuals who hardly benefit at all. Another example is reduction of corporate tax for non publicly traded companies from 35% to 32.5%. This will give some relief but will be fully nullified by two other provisions where limits on expenditure for overseas travelling and advertising and promotion have been significantly reduced. We all know that in this world of cut throat competition, advertising and promotion is one of the major enablers to establish brand equity and stay ahead of competition.

Every year, we hear of measures being taken to rein in tax dodgers. Unfortunately, we do not see much progress in this area. The honest tax payers continue to bleed while the tax evaders get scot free. It is for this reason that this year the government has again given an opportunity to whiten untaxed income which to my mind, is unfair for the honest tax payers. At the same time, the controversial Section 82C has been enacted a few years back to cover the deficiency of the administration to increase the tax dragnet. This is a strange provision where the tax collected at source becomes the minimum tax even though the company has suffered a loss!! If any assessee is evading tax, the onus lies on the tax authorities to prove it. I am doubtful whether a similar provision exists elsewhere in the world.

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