No one will be a loser in the new income-tax regime, says Revenue Secretary

Shishir Sinha New Delhi | Updated on February 10, 2020

Revenue Secretary Ajay Bhushan Pandey   -  Kamal Narang

‘New regime will benefit those who were not able to take advantage of exemptions’

Revenue Secretary Ajay Bhushan Pandey on Sunday made it clear that people investing in schemes such as Public Provident Fund (PPF) will not be required to pay tax on maturity income, even if they shift to new income tax regime.

Speaking to BusinessLine a day after the Budget was presented, he also clarified that Non Resident Indians will have to pay tax only on income arising in India. Excerpts:

What is the rationale behind conditional changes in income tax slabs and rates?

The purpose of this personal tax reform is to simplify the tax structure and also to provide relief to those people who for various circumstances — may be because of their lower level of income or may be because they have to meet their commitments of expenditures — were not able to avail themselves of the various deductions. These people will be the gainers.

In this proposal nobody is a loser as the option to move or not is available. We have also seen from last year’s returns that most people take certain number of exemptions. We find that people, particularly the lower middle class, because of lower income are not able to take all exemptions so they will be net gainers in this new regime. However, those availing themselves of exemptions will be better off in the old regime.

What will happen to the existing schemes in which investments have already been made...

You can continue, but you will have to take a call as to which one will be more beneficial for you.

Will the tax benefits continue even if one opts for the new regime but has taken some benefits of the old regime?

Under the new regime whatever premium you pay, say for your LIC, you will not get benefit. But supposing your scheme is such that you are taking benefit of the other exemptions, then you can take advantage under new scheme.

What will happen to PPF amount, if one shifts to the new regime on or before maturity of the scheme?

It will neither be taxed in the new or old regime.

Can you elaborate on the new taxation system proposed for NRIs?

Any income arising in India should be taxed here but we have observed that some people, because of tax treaties or zero tax in a few tax haven countries, take advantage of that and pay no tax even on income accruing in India. We have tried to plug this loophole by bringing the anti-abuse provision.

If an Indian citizen is not a resident in any of the country then he will have to pay income tax on income arising in India. We are not going to tax our citizens who go to the Middle East to work and earnthere, even if they are not being taxed in those countries. We are only concerned about taxing income arising within India. If required, necessary clarifications will be incorporated in the law.

What is the rationale behind capping the employer’s contributions in National Pension Scheme, Superannaution Fund and recognised pension fund to ₹7.5 lakh per annum?

You must understand what this ₹7.5 lakh is. The idea is instead of paying salary to a person the amount is being put in PF. There has to be some limit. It will not affect the middle class. This limit is practised is most developed countries.

You will not get tax benefit if you cross the limit or threshold. This is for both the employers and employees.

What are your expectations from the dispute resolution scheme for income tax?

Going by experience in indirect tax we are expecting particularly those tax payers should take advantage. It should motivate people. It is not question of amount. Primary purpose is to not to mop up any money. It is all about trust as is the theme of this budget.

How optimistic you are about new tax targets?

We are optimistic. The nominal growth rate was projected at 12 per cent but due to tax buoyancy we have projected 14 per cent. What we have to keep in mind is that this time growth has been lower at 7.5 per cent and 10 per cent. Also despite the corporate tax cut, the collections have gone up by 4 per cent, which is not bad given the circumstances.