In paving the way for a new tax regime, the government intends to give more freedom to individual taxpayers to invest in the way they want to — in mutual funds, in equity, or in debt. Tax is not the only way through which an individual gets returns on savings and investment, but that pushed it higher. Markets will now have to recalibrate and find the best fit, says Revenue Secretary Sanjay Malhotra in an interview to businessline. Excerpts:
Is the estimate of tax collection growth rate at 10.5 per cent realistic or too conservative?
It is a very, very realistic target.
There is the impression that when you are placing more emphasis on the new tax regime, ultimately the older tax regime will go away. This also means end of incentives for saving and investment. What do you have to say?
The Government’s efforts have always been to ensure simplicity and transparency in knowing what the effective tax rate is. This was reflected in moving away from the VAT plus Central Excise and Services tax regime when 17 types of taxes were subsumed into one. Similarly, in terms of corporate tax, we removed the exemptions and brought in a new simplified scheme without exemptions with 22 per cent lower tax rate. Here also (in terms of Personal Income Tax), our effort is that we reduce the tax rate — the effective tax rate is lower here — remove exemption and make life simpler for everyone. Let everyone spend money the way they want to, whether investing in insurance or in mutual funds, or in equity or in debt. This helps in compliance and also in administration. Simplicity is a big virtue.
Considering the lack of social security, it is important that incentives for savings and investments also help in providing some kind of social security. Now when there are no incentives, do you think, people will still go for saving and investment?
Incentives come from the returns that you get from the savings and the various instruments in which you invest. Tax is not the only way that you get the returns, but because of that you get increased returns. So the market will recalibrate accordingly and find the best fit. And let people decide, in which particular instrument they would like to invest and safe.
Before the Budget, there were lot of discussion around complexities involved in capital gain tax and there were expectations for some corrective measures. The Budget just skipped that. Any reasons?
The Finance Minister said in the Budget that we have taken steps to meet the aspirations of all segments of society. I’m not saying that we have been fully successful in meeting all the expectations and aspirations. So there is still work to do, and we’ll continue to do that
What do you have to say about the measures proposed in the Budget for improving compliances?
A lot of measures have actually been taken over the years to bring more and more people in the tax net through the various TDS and TCS provisions.
In this Budget, number of measures have been taken to deepen, if not widen, the tax base. One of them is the taxation on MLD (market-linked debentures). They were already being taxed, but at a lower rate. Tax rates applicable for debt instruments were not applicable to them but it was in line with equities that we have plugged.
Similarly, in insurance, a lot of investments and savings through equities and debts were getting away with benefits of insurance. That has also been plugged. Then we have put a cap of ₹10 crore for deduction on long-term capital gain tax for re-investment in residential properties. Then non-resident investors have been brought under the ambit of Angel Tax, but this will exclude start-ups registered with DPIIT, etc. These are some of the measures plugging tax avoidance.
One thing we have noticed is that there is a shortage of manpower in both the tax bodies —CBDT and CBIC — that is impacting your tax collection and various compliance measures. How are you going to address this?
So far as appeals are concerned, the FM has announced and we have made changes in the Income Tax Act to include certain kinds of appeals to be heard at the level of the Joint Commissioner. That will certainly help in getting revenue stuck in litigation. More and more the move is now towards technology including faceless, where there is no human interface and without being too intrusive. That will be the way forward.
But the litigations are still on rise in a very significant amount of direct as well as the indirect taxes are in stuck in the litigation, how you are planning to reduce the litigation?
Some measures have been taken to provide clarity. If a person gets a property developed jointly with a contractor or someone else, then the consideration paid to him other than cash is mentioned but that did not include other instruments and that is the cause of litigations with tax authorities. Now, other considerations will also be included. Similarly, there used to be instances when value of certain intangible assets was not mentioned. Now we have said that even intangible assets, if they are not mentioned but if they can be of some gain, their value will be treated as acquisition value and will be treated as NIL. It will help in resolving disputes.
Like this, there are a number of other measures, which will help us improve clarity and reduce litigation. Then this year, we are planning to do lower scrutiny, as announced by the FM in the Budget. We will also use the existing appellate machinery to push them to increase the pace of decidable cases.
GST collection is on rise. Now, what is the roadmap for this in next fiscal?
GST is a subject of the States and the Centre and the GST Council takes decisions. One thing which is urgent is setting up a GST Tribunal. In fact, this issue popped up during the recently-held States’ Chief Secretaries conference. Other thing is to improve compliance we have to use more and more technology. So, right now, there is a limit of ₹10 crore for e-invoicing. Gradually, we have to reduce that limit so that things become more automated and tax avoidance becomes more difficult. Those will be the priorities in times to come.
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