Tax base in proprietorships, LLPs, partnership firms may be expanded: Revenue Secy

6 February 2022

Tax Increase, Overtax Concept with wooden cubes. ( 3d render )

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New Delhi, Feb 5: An unbelievingly low Rs 31,500 per return is all the tax that non-salaried and non-corporate tax filers such as proprietorships, limited liability partnerships and partnership firms pay, a top government official said on Friday, emphasising the need to expand the tax base in this segment.

Speaking at a post-Budget event, Revenue Secretary Tarun Bajaj said there have been some “very stark violations” of both direct and indirect tax laws by industry, and nudged industry chambers to be more proactive to see that such instances are minimised.

He said the Budget 2022-23 has not tinkered with individual taxes because the government wanted to spend more on infrastructure to boost the economy.

“Maybe we will wait another year to improve the tax structure a little more,” Bajaj said at the PHD Chamber event.

To a question regarding reduction in tax rates on proprietorship, LLPs and partnership firms, Bajaj said it can be looked at only when the tax base in this segment is expanded.

“…when I look at the figures, I find that if I don’t include salaried class and corporates, the remaining segment if I look at the I-T return that came up in 2020-21 for which we have done an analysis, only Rs 31,500 per return was paid as tax.

“We also need to look at what is happening in that segment, may be a lot of informal business goes on there. But GST, the formalisation that we are doing, I am sure in times to come we will realise the benefits of formalisation of businesses, paying taxes…,” Bajaj said.

He said both the direct and indirect tax departments have a lot of data which they are sharing among themselves.

“We have no intention of trying to give surprises to the corporate sector or the business sector,” he said, adding now all the information that is available with the tax department is also shared with the taxpayer to help him file the return.

“During the course of last 1 year and my first experience of dealing with direct taxes and indirect taxes and on both fronts I have seen some very stark violations from the industry side on the taxation front,” the Secretary said.

Mentioning about recent raids conducted by the department wherein huge amounts of cash were recovered from the premises of some industrial units, Bajaj said, “I would say that sometimes our vision would get coloured by such anecdotal and isolated instances. I think the role of chambers becomes very important in these cases to ensure that such cases are minimised.” Late in December 2021, nearly Rs 200 crore cash was recovered in tax searches on perfume maker Peeyush Jain in Uttar Pradesh’s Kannauj district.

Besides cash, the intelligence unit of the Directorate General of Goods and Services Tax recovered 23 kg gold, and some “offending goods” of high value in searches carried out at Odochem Industries, a manufacturer of perfumery compounds, and its proprietor Jain.

With regard to cryptocurrency, Bajaj said the revenue department would take a call on issuing clarifications or rules regarding its taxation.

The Budget 2022-23 has proposed a 30 per cent tax on cryptocurrencies and other virtual digital assets with applicable surcharges from April 1. Also, 1 per cent TDS (tax deducted at source) on the considerations of the transactions would have be paid from July 1.

“The TDS provision is from July 1, because of some technical reasons. I have asked them to look at it and let us see if we can make some changes and bring more clarification,” Bajaj said.

The secretary said the taxation of cryptocurrency is not prospective as people trading in it presently and making money will have to pay taxes.

“We have only brought some certainty to tax regime which would be applicable from April 1. But before that, because there is no separate head, people would either put it in capital gains, or business income or other sources so then it will be a matter of assessment and things would follow,” he added.