The tax rebate of 2% allowed to the property tax payers of the Ahmedabad Municipal Corporation (AMC) if paid digitally, is an intrinsic part of the greater Digital India Mission initiated by the Government of India on July 1, 2015. This mission was launched with the objective to ensure electronic availability of government services to its citizens through improved online connectivity. It is aimed to make the country digitally empowered in the field of technology and connect the rural areas with the high powered network, to enable inclusive services to the deprived masses of India. Any tax rebate or sop provided is intended to boost compliance and give a fillip to the campaign to succeed.
The Ministry of Urban Housing and Urban Affairs of the Government of India has fixed a time frame of 100 days to shift to digital tax paymentacross the 100 smart cities of India. As per their statement, they have announced a 2%tax rebate on all the taxes levied by the civic bodies to encourage people for digital payment for a maximum discount of Rs 1000. The Indian Government has also recently extended 2% tax rebate in GST for entities who use the digital route to transact. As a means to encourage a cashless society, similar tax rebate has been offered to individuals using the Rupay Card or the BHIM app for financial transactions. To comprehend the importance of the extension of such concessions on the overall objective in the larger context, you need to understand theprevailing tax mechanism and the full impact oftax rebates thereon,
In general,Tax can be termed as the levying of monetary charges by the Central Government or State Government or statutory bodies, upon an individual or a company. The administration of multifarious customary taxes in the country is administered by the Department of Revenue under the Ministry of Finance.
Types of taxes in India:
Taxes in India can be broadly divided into the Direct and Indirect tax. However, these taxes depend on where and how it is being levied; whether by the Central Government, Sate Government or any other body like the Municipality.
Direct Taxes:It is a tax that is due to the Government of India. High tax compliance and a healthy rise in the accumulation of this tax is a reflection on the state of the economy in general. The Government also pursues a better tax administration regime, as it is the main source of revenue for the Government, which helps it to fund major infrastructure and social welfare schemes in the country. Some of the direct taxes levied by the Government are:
- Corporate Tax
- Capital Gains Tax
- Securities Transaction Tax
- Personal Income Tax
- Tax Incentives
- Fringe Benefit Tax
Gross direct tax collection rose 16.7 percent year-on-year to Rs 5.47 trillion in the first six months (April to September) of 2018-19, and after accounting for the refunds during the period in question, the net collections stood at Rs 4.44 trillion, 14 percent higher than the preceding year.
Indirect Taxes:Nearly all the productive activity in the range starting from manufacturing and services industryto consumables, export, import, trading business,etc. fall within the purview of indirect taxation. Thus, an indirect tax is not appliedto any particular organization or an individual. The various indirect taxes are:
- Anti-Dumping Duty
- Custom Duty
- Excise Duty
- Sales Tax
- Service Tax
- VAT (Value Added Tax)
- Goods and Services Tax (GST) introduced from July 1, 2017,instead of some of the above-named
- Other Important Taxes:
Income tax:It is a tax levied on all income other than agriculture by the Central Government. It is administered by the Income Tax Act, 1961.
Consumption Tax:It is applicable to the consumption of any type of good or service.
Dividend Tax: It is a type of income tax which is levied on the payments made as the dividend to the shareholders of the company paying the tax.
- Endowment Tax: This tax is levied on business organizations for contributing to educational institutions.
- Gift Tax:All gifts in cash, draft, check or others, received from one who doesn't have blood relations with the recipient are taxable as other income in the Income Tax of the individual, is conditional.
- Wealth Tax: It is normally leviedby the net wealth of the individual, a company or a Hindu Undivided Family.
Tax Rebate in India:
Individuals whose income falls within the parameters of tax slabs are allowed Tax Rebate in India. These slabs are reviewed and modified every year as per the directions of the government,andthe tax rebate structure is announced in the union budget of the respective year.Tax rebates are announced to not only give you relief but also to encourage you to comply with your tax liabilities subject to the application of Income Tax Act, 1961.
Further to this, the Government of India intends to promote cashless drive in every sphere of commerce with the help of their new weapon, GST. Government is making plans to incentivize digital payments, by providing an instant discount of 2% on the GST but limited to only those transactions which are less than Rs 2000, which would be the eligible for this tax rebate.
Tax Rebate in Individual Income:
Section 10(13A):Thistax rebate pertains on rent received to a maximum of Rs.1 lakh during the financial year.
Section 24: This tax rebatepertains to interest paid on a homeloan to a maximum of Rs.2 lakhs.
- Section 80C: The maximum tax rebate allowed is Rs.1.5 lakhs for investment including Section 80CCC, 80CCD during the year about the following:
- Provident Fund: mandatory and voluntary
- Public Provident Fund (PPF) or any other provident fund set up by Government
- Life Insurance premium
- Nation Savings Certificate IX
- Interest on Nation Savings Certificate
- Investments under the Senior Citizens Savings Scheme Rules, 2004
- Sukanya Samridhi Account Scheme (SSAS) Deposit
- Mutual Funds including Equity Linked Savings Schemes (ELSSTax Savings)
- Premium of Insurance on Life of self, spouse and any child of the employee (excluding directly remitted to LIC under Salary Savings Scheme)
- Unit Linked Deferred Pension Plan ( Growth Fund)
- UTI Retirement: Benefit Pension Fund
- Payment to keep a contract for Deferred Annuity for payment of Annuity on the life of self, spouse or children of the employee
- Tax Saving Fixed Deposits in Scheduled Banks for a term equal or greater than 5 years under Bank Term Deposit Scheme, 2006
- 5 year Deposit under the Post Office Time Deposit Rules, 2001
- Repayment of Installments of Principal Housing Loan for purchase or construction of the house
- Tuition fee payment for full-time education in School, College, University or other educational institution within India (Excluding Development fees or Donations / other Deposits)
- Amount invested in approved debentures of, and equity shares in, a public company engaged in infrastructure including power sector or units or units of a mutual fund proceeds of which are utilized for the developing, maintaining, etc., of a new infrastructure facility
- Stamp duty, registration fee and other expenses for the purpose of transfer of such house property to you
- Section 80CCC:Tax rebatefor payment to self and family pension plan
- 80CCD (IB): Tax rebatefor supplementarypayment to NPS (up to Rs.50000)
- 80CCG: Tax rebatefor Rajiv Gandhi Equity Savings Scheme (RGESS) where themaximum investment is Rs.50000
- Section 80D: Tax rebatefor Medi-claim Insurance Premium; Aggregate Maximum Rs.1 lakh
- Section 80DD: Tax rebatefor any expenses borne for health care, coaching,and rehabilitation of disabled dependents:
- Disability of forty percent or more: Maximum Rs.75000
- Disability of eighty percent or more: Maximum Rs.125000
- Section 80DDB: Tax rebate for expenses for therapy related to critical illnesses
- Other than senior citizens: Rs.40000
- For Senior Citizens: Rs.100000
- Section 80E: Tax rebaterelated to Interest on Higher Education Loan for Self or dependents for pursuing regular courses
- Section 80G: Tax rebate for donation to specified funds
- Section 80TTA: Tax rebate towards interest on Savings account limited to Rs.10000
- Section 80TTB: Tax rebate for interest on deposits (Savings Account and Fixed Deposits) Senior Citizens are allowed a deduction of upto INR 50,000
- Section 80U:Tax rebate towards permanent physical disability including blindness for self
- Disability 40% or more: Maximum Rs.75000
- Disability 80% or more: Maximum Rs.125000
- Section 87A:Tax rebatefor marginally lower payment of tax to individuals earning income below Rs.3.5 lakhs maximum Rs.2500 per year.
How does tax rebate work:
Taking a cue from the Central Government, the Gujarat government has contemplated extending this tax rebate to municipalities across the state to encourage the citizens to pay taxes in advance online and save 2% in the process. AMC has shown the way. It is a way of motivating the citizens to comply with regular tax payments in advance digitally and help the bodies to build their corpus.
Extension of a taxrebate is to ensure turning the country into a tax compliant society, which remains the ultimate goal of the Government of India, Announcing various offers and schemes promoting digital cashless payments is an integral part of this drive. The inherent advantages of digitalization and a cashless society shall convert the economy of this country into a formal one. That is the larger goal on the horizon.