MM TAX CLUB

Recently on 7^th November 2022 the supreme court of India in case of Janhit Abiyan v. Union of India upheld the 10% reservation to the Economically Background Society, the Apex court confirmed that a socially forward community family having income upto the limit of Rs.7,99,999/- per annum excluding assets is a Economically Weaker Section family.

Judgment of Apex Court can be accessed from this link.

Based on above SC Judgement The petitioner, Kunnur Seenivasan, an agriculturist and a member of Asset Protection Council (DMK Party) approached the court to set aside the First Schedule, Part-I, paragraph-A of the Finance Act, 2022 fixing the rate of Income Tax.

The Petitioner contained that, any person whose total income does not exceed Rs. 2,50,000 is exempted from payment of tax. While upholding the 10% reservation as per decision to the Economically Background Society, the Apex court confirmed that a socially forward community family having income upto the limit of Rs.7,99,999/- per annum excluding assets is a Economically Weaker Section family. So The present Income Tax Act schedule is against the Supreme Court judgment, because it would leads to collect tax from the economically poor citizen and they could not compete with the forward community people in status or education or economic.

The Madurai Bench of the Madras High Court has sought the response of the Centre on a plea challenging the fixation of 2.5 lakh as the base income for the purpose of collecting Income Tax in light of the recent Supreme Court decision upholding the validity of 103rd Constitutional Amendment providing reservation to Economically Weaker Sections of the society with gross annual income below Rs. 7,99,999.

The bench of Justice R Mahadevan and Justice Sathya Narayana Prasad on Monday ordered notice to the Union Ministries of Law & Justice, Finance Personnel, Public Grievance and Pension and adjourned the matter by 4 weeks.

It will be good thing to have income tax exemptions to the income group upto 8 lakhs per annum; we have to wait for the centre reply on this plea, however if we see the current structure of levy income tax. as per I.T law income of an individual taxable if its exceeds Rs.2.5 lakhs per annum, however government provides Tax rebate upto Rs.12,500/- under section 87A of Income Tax Act to the individual having annual Income below Rs.500,000/-, apart of this there is standard deduction allowed to a salaried person of RS.50,000/-. So alternatively we can say a salaried person is not paying any income tax if he earned Rs.5.5 lakhs per annum, even they do not claim any deduction allowed under income tax.

The other thing is, as per the SC judgment a family having gross income below Rs. 7,99,999/- is considered to be Economically Weaker Sections family of the society, while as per income tax the exemption limit is for the particular individual of the family. Not for collective income of family, also gross income considers for EWS while taxability comes under income tax on total income which worked out after allowed deduction under income tax. so if government ready to allow exemption on the basis of EWS categories, the Income Tax Department will check income source of all family member irrespective of their income comes under exemption threshold or not, then collective income of family will be considered for taxability, and if it’s happen that will be more tedious.

However whatever will be basis of extending income tax exemption this is need of time to increase income tax exemption limit as the individual who earns 6-8 lakhs per annum hardly can manage their basic needs in this increasing inflation. So it becomes difficult for them to pay tax under this income group and this also lead increase in cases for evasion of tax.

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