Tax officers' body moots COVID cess, minimum income scheme in plan to boost revenue, economy

The Indian Revenue Service Association (IRSA), an all-India body of tax officers, has put together a prescription for the government to help mobilise revenues and stimulate the economy amid the coronavirus pandemic.

Key among its recommendations to mobilise revenue include reintroducing a wealth tax for those over Rs 5 crore net worth or raising the tax on the super-rich (annual income above Rs 1 crore) to 40 percent.

The note, called F.O.R.C.E. (Fiscal Options & Response to Covid-19 epidemic) calls for the introduction of a 4 percent COVID Relief Cess, which it said could fetch the government Rs 15,000-18,000 crore.

The government could also consider introducing a coronavirus tax savings scheme, investments into which could bring tax deduction to the tune of Rs 2.5 lakh under Section 80C. The interest rate on this could be similar to other small savings schemes.

Further, it calls for the reintroduction of the inheritance tax, which was abolished in 1985.

Besides, it says the government could consider launching a 'Give It Up' scheme, a voluntary campaign for taxpayers to not opt for Section 80C exemption, on the lines of the successful LPG subsidy surrender scheme.

The note also suggested a number of steps to help rationalize expenditure and boost the economy.

It called for offering a direct cash transfer of Rs 3,000-5,000 every month for six months for the country's bottom 12 crore households, introduction of an MSME support scheme on the lines of one launched in the UK.

To help boost the healthcare sector, the government could consider giving a complete 3-year tax holiday for all corporates, firms and businesses in the healthcare sector.

It also suggested a number of steps to put incomes directly in the hands of the people, including introducing a coronavirus tax savings scheme.

Recent stock market losses made by retail investors should be allowed to be set off against income, it added

Besides, the government could consider incentivising purchase of automobiles and electronic items through tax deduction of payment of interest for loans. It can also increase the deduction of interest for housing loans.

Sources in the revenue department told CNBC-TV18 that the government had received representations from many bodies and will assess the proposals.

"Field formations of CBDT & CBIC will hold extensive discussions with trade, industry & individuals on measures for economic revival," the source said. "Tax field formations to submit areas wise report to rev dept on region-specific suggestions."

Below is a summary of all the key proposals recommended.

Tax the Wealthy

Raise slab rate to 40% for income > Rs 1 crore

Or, introduce wealth tax for those with wealth >Rs 5 crore

Tax slab easier to implement, funds can be marked to an escrow

Increase surcharge on high-income foreign companies with PE in India

One-time additional 4% COVID Relief Cess on those with income >Rs 10 lakh

Companies spending on COVID relief be allowed to claim CSR deduction

Unspent CSR funds can be given to PM CARES FUND (75%), spent on business (25%)

Allow for 4% of profit spend as CSR now, with deduction over 2 years

Float New Tax Saving Scheme with additional deduction like u/s 80C on investments up to Rs 2.5 lakh

Tax Amnesty Scheme for Undisputed Cases

Should move to system of incentivizing compliance via rebates

Introduce Base Eroding Anti-Abuse Tax (BEAT). To work like a MAT for MNCs using related party expenses to lower tax

Reintroduce Inheritance Tax

Increase Capital Gains for Overseas Citizens

Increase marginal rate by 10% on gains from inherited property

Increase Equalisation Levy (Google Tax) for ad services to 7% from 6%, on e-commerce to 3% from 2%

Give It Up Campaign for Tax Deduction: Like with LPG, ask well off to voluntarily give up one tax deduction in FY21

Defense expenditure can be cut by postponing acquisitions

Of Rs 4.12 lakh cr capex budget, Rs 1 lakh cr can be spent on COVID

Ministry of Health can use most of RS 67,111cr budgeted for FY21 in Q1

India’s COVID package at 0.8% of GDP pales in comparison to other nations

Minimum Income / Direct Cash Transfer

Transfer Rs 3,000-5,000 pm to the poorest 12 cr households for 6 months

Need to expand size of MNREGA with focus on creation of durable public assets

Supporting MSMEs: Rather than lower taxes, focus should be on offering wage support

See Healthcare as Growth Engine

Sector can help in high job creation and in absorption of daily wage earners

Tax Holiday for Healthcare: Provide a 3-year tax holiday for all businesses in the healthcare sector

Initial tax incentives for businesses that can operate with COVID restraints

Later, tax incentives for sectors that find it difficult to operate with restraints

Allow set-off of short-term capital loss by retail investors against Salary income

Allow deduction of spend on hospitalization due to COVID

Bonus, allowances to employees with < Rs 10 lakh income not to be taxed

Self-assessment tax can be paid in 6 months

Withdrawal from NPS, tax-savings schemes should be tax-free

Increased deduction for purchase of house, automobile under 80C

Restrore cash transaction limit to Rs 20,000 from Rs 10,000 u/s 40A

Allow carryback of loss in CY for 5 yrs to improve start-up cash flow via tax refunds

Assessees with income up to Rs 10 cr be exempted from tax audit

Presumptive tax at 6% on all transactions, not only digital transactions

TDS for employees to be deposited by end of FY vs monthly now

MSMEs with tax liability of <Rs 10 lakh be given 1 year moratorium

Only 25% Advance Tax to be paid till September

Cut interest on delay in Advance Tax payment to 0.5% vs 1% per month

Allow carry forward of excess Advance Tax paid for FY20

One-time lower corporate tax rate, subject to conditions

Allow carry forward of losses expiring in FY21 to FY22

Expeditious refunds to entities in these sectors

Depreciation rate hike for buildings / plant & machinery acquired in FY21

Interest on late deposit of TDS to be tax deductible

Salaries deduction can be weighted at 200%

Extend Vivaad se Vishwaas till Dec 2020

Extend deductions to sectors u/s 10A for 5 years

TDS deduction for those in travel and related sectors can be waived

Extend time limit for construction of affordable homes to 7 yrs from 5 yrs—to avail tax benefits

Expenses incurred on enabling WFH be allowed 150% deduction

Corporates can cut salaries and offer shares in FY21 under ESOP

Allow hospitals to set off losses u/s 35D with any other biz income

Additional depreciation on equipment to produce ventilators, PPEs, masks…

Zero tax for all health workers in FY21

Increase provisions for bad debts to 12% from 8.5% for banks

Extend benefits u/s 10A to IT services sector by another 5yrs