New Delhi, Jan 10 The government should consider enhancing standard deduction for salaried employees, allowing more time for belated tax returns and several measures to improve ease of doing business in the upcoming Union Budget, a report has said.
The report from KPMG India said India’s top expectations from the budget include a raise in the standard deduction for salaried employees to Rs 1 lakh and extension of timelines for filing revised or belated returns to help taxpayers with cross‑border income reporting obligations, the report said.
"In cases, especially when individuals with cross border investment and income file tax returns their home or host country are not finalised, which may lead to under-reporting and over-reporting of income," the report explained the rationale for allowing more time for revised or belated returns.
The business advisory firm also recommended allowing housing loan interest deductions against salary income, including for self-occupied property.
"Considering the significant burden of home loan repayments and the goal of promoting home ownership, it is recommended that the Government allows such interest deduction on self-occupied property under the new tax regime," the report said.
Further on the corporate tax front, the report sought clear exemption for foreign companies under presumptive tax regimes and urged a minimum alternate tax (MAT) exemption where incidental income accompanies specified business income such as shipping, civil construction or oil exploration.
The current provision creates a challenge when incidental income is earned alongside business income, potentially exposing these foreign companies to MAT, it said.
A clear exemption would help improve India’s competitiveness for foreign companies engaged in these businesses in India, according to the firm.
In certain cases, courts have treated redemption premium on debentures as interest. Section 76 of the Income Tax Act, presumes redemption premium on debentures to be short-term capital gains. This creates uncertainty for issuers and investors on the treatment of such income, impacting tax computations and withholding obligations, the report noted.
On the indirect tax front, the report called for allowing provisional refund sanctioning for inverted duty structure cases, which will help expedite refunds, improve liquidity, and reduce delays through a risk-based approach.
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