ICAI submits Pre-Budget Memorandum to CBDT advocating Tax Reforms

• ICAI seeks tax incentives for entities engaged in Green Projects and Skill Development.
• Separate provision for deduction of expenses relating to education of girl child and Mediclaim premium.

The Institute of Chartered Accountants of India (ICAI) presented its Pre-Budget Memorandum 2024 to the Central Board of Direct Taxes (CBDT). The comprehensive document encapsulates a spectrum of recommendations aimed at fostering economic growth, encouraging environmental sustainability, and enhancing social welfare through prudent tax reforms. Below are some key highlights from the memorandum.

In the Pre-budget Memorandum, ICAI seeks tax incentives for entities engaged in green projects that impact environment positively and entities exclusively engaged in skill development programmes, considering their contemporary relevance and importance. Further, it has been suggested that interest income earned by the subscribers of green bonds may be exempt or, in the alternative, be subject to a concessional rate of tax.

In line with the Government’s campaign to promote education of the girl child, a separate provision for deduction of expenses relating to education of girl child both under the default tax regime and alternative tax regime has been suggested in the Memorandum. The significant suggestions relating to the Personal Taxation regime include provision of deduction for Mediclaim premium paid under the default tax regime, regular enhancement of standard deduction and option of joint taxation for married couples.

On this occasion CA. Ranjeet Kumar Agarwal, President, ICAI, said, "ICAI has pioneered formulating Standards on Sustainability Reporting, shaping the ESG reporting landscape in the country. In order to enhance green finance and encourage green projects, we have advocate for special incentives to entities undertaking Green Projects and propose exemption for interest income of subscribers of green bonds issued by such entities."

On the business taxation front, the suggestions include alignment of the provisions of tax audit with the presumptive income provisions, further simplification of presumptive income regime and increase in threshold for computation of allowable remuneration of partners. In addition, clarifications were sought on the provisions of section 43B(h). The Memorandum also contains suggestions for rationalization of the provisions relating to taxation of charitable trusts. Allowing filing of updated return in case of reduction in losses and permitting filing of such return where assessment proceedings are completed are some important suggestions in relation to return filing.

Rationalization of the tax rate under section 115BBE (as well as the surcharge thereon) on deemed income under sections 68 to 69D has been suggested, considering that these provisions can be invoked at the discretion of the Assessing Officer; and non-initiation of prosecution proceedings where there is only a delay in remittance of tax are the other significant suggestions in the Memorandum.

The Pre-Budget Memorandum 2024 emphasizes the importance of rationalizing direct tax laws, minimizing litigation, and enhancing tax collection mechanisms, all geared towards fostering a conducive fiscal environment for the year 2024-25.