Budget 2025-26: What To Expect On Income Tax - See PHD Chamber's Suggestions

PHD Chamber of Commerce and Industry (PHDCII) has issued suggestions for personal taxation ahead of Budget 2025-26. The body issued detailed guidelines about personal taxation, issues around it, and possible solutions.

1. Amendment Of Section 89A

PHDCII says section 89 A needs more clarification about taxes imposed on income from foreign retirement accounts, especially accrued before Assessment 2022-23. "The government should suitably amend Rule 21AAA," says PHDCII, to clarify it adds

a. Applicability of benefit under section 89A of the Act, that is, who exactly benefits from Section 89A.
b. Manner of taxability of income from the “specified account” (after withdrawal in a foreign country) in India and manner of exclusion of income specified in Rule 21AAA(2), i.e., how matching needs to be done or the order to follow (say FIFO, etc.)."

Another suggestion by PHDCII is to tax all business-related perks should be taxed under Section 28(iv) of the Income Tax Act. Currently, cash benefits are not taxable in this section.

The Finance Bill 2023 had proposed that taxing cash benefits under Section 28(iv). The courts have ruled that loan waivers for capital purposes are capital receipts and not taxable under this section. PHDCCI suggested that the budget stick to this ruling. Also, bank loans forgiven under the Insolvency Code must be excluded from taxation under Section 28(iv).

2. Scrap TDS/ TCS certificates

"Section 203 read with Rule 31 requires all tax deductors to issue TDS certificates to the deductees. Similarly, section 206C(5) read with Rule 37D requires all tax collectors to issue TCS certificates to the collectees. There is a penalty prescribed of Rs. 100 per day for default in the furnishing of such TDS/TCS certificates under section 272A." PHDCII wrote.

However, these certificates do not hold any practical relevance.

PHDCII suggests TDS certificates should be required only in a few cases:

a. Salary TDS under Form 16, which is needed by salaried employees
b. TDS certificates for non-residents so that they can claim Foreign Tax Credit (FTC)
c. Cases under Section 206AA/206CC where higher TDS/TCS is applied due to the unavailability of PAN

3. Improve Interface With Central Processing Scheme (CPC)

The agenda of CPC is to determine tax payable or tax refund. In this regard, PHDCII gave some suggestions:
a. Eliminate athematic errors. 
b. Work on incorrect claims and missing information
c. Disallowance of loss, that is, non-acceptance of loss claimed by a taxpayer, under Section 139(1)
d. Disallowance of expenditure, that is, non-acceptance of certain expenses by the taxpayer. This also includes an increase in income.
e. Disallowance of deductions under Section 10AA or Chapter VIA-C, if filed beyond due date.

4. Ease Out Lawsuits

A vast number of lawsuits happen over a few common issues in the Income Tax Act. To reduce the burden on courts and provide a faster resolution, the CBDT can issue clear instructions when courts rule in favor of taxpayers. The CBDT should track the issues that are most contested. They should also consult with the public, businesses, and experts to understand their concerns and make the tax system more responsive. Issuing regular guidance and FAQs on common issues, like ESOPs or MSME expenses, will help clarify easily. 

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