Budget 2022: 64% Taxpayers Expect Hike In The Basic Exemption Limit of Rs. 2.5 Lakh

KPMG in India performed a pre-budget survey ahead of the presentation of the Union Budget for FY23 on February 1 to record key stakeholders' views on many tax-related facets of the upcoming Budget. By asking "Do you expect the Honourable Finance Minister to enhance the basic exemption limit of INR 2.5 lakh which 01 has remained unchanged for the last few years?", sixty-four percent of those surveyed want the government to increase the cap.

KPMG has said in the survey report that "On the individual tax front, most respondents expect an enhancement in the basic income tax exemption limit of INR2.5 Lakh. Respondents also support an upward revision in the top income slab of INR 10 lakhs and above and an increase in the existing section 80C deduction limit of INR1.5 lakh."

The pre-budget report of KPMG further revealed that "Currently, Indian branches of foreign companies are subject to corporate tax at 40 per cent. With the Government reducing the headline corporate tax rate for domestic companies from 30 per cent to 22 per cent starting from the financial year 2019-20, the gap between the rates applicable to foreign companies and domestic companies has widened. A majority of respondents believe there is a need to reduce the rate applicable to Indian branches in line with the 2019 rate cuts, in order for India to remain a globally competitive investment jurisdiction."

KPMG has also highlighted in the report that "With GST revenues on the rise, respondents also felt that the Government should not change the current GST tax slabs. The Survey also found significant support for the Government's Production Linked Incentive Scheme (PLI) applicable to the telecom, pharmaceuticals, steel, textiles, food processing, white goods, IT hardware and solar sectors. Most respondents felt that this scheme would help India become a key manufacturing hub, and a whopping 83 per cent of respondents favoured an expansion of this scheme to cover other sectors."

According to KPMG "The concessional corporate tax rate of 15 percent for new manufacturing companies comes with a condition that manufacturing/production should commence before 31 March 2023. Given the Covid-19 pandemic and the resultant economic disruptions, a majority of the respondents expect the Government to extend the timeline for commencement of manufacturing /production beyond 31 March 2023."

Surveying the credit and investment sector, KPMG has recorded that "To provide a level playing field for REIT / InvIT investors, 53 per cent of respondents feel that the holding period of REIT/InvIT units should be reduced to two years to qualify as long-term capital assets. Such a move is expected to boost participation in REIT/InvITs. Similarly, 63 per cent of respondents feel that there should be parity in the tax treatment for INR-denominated ECB and foreign currency ECB and that the Budget should accordingly extend the reduced tax rate of 5 per cent to INR-denominated ECBs as well."

In terms of taxpayers, KPMG's pre-budget survey discovered that "over 50 per cent of respondents believe that the quality and efficiency of the assessment process has been improved by the introduction of the Faceless Assessment Scheme. Only 21 per cent of respondents expressed a negative view with the balance taking a 'wait and watch' approach"

In terms of the new TDS and TCS regulations and the resultant impact on taxpayers, KPMG has recorded that "Over 85 per cent of respondents believe that the scope of TDS and TCS has led to increased compliance burden on taxpayers."