Some exemptions likely in new income tax regime, inflation adjusted income tax slabs possible: Rakesh Nangia

There is speculation that the new IT legislation will do away with the concept of assessment year and stick to just one year. What is your prediction?

There are 298 sections in present Income Tax Act. Then you have rules, schedules et al. In one section, there are 10 sub-sections and many court judgements have been bundled up. So many amendments have taken place. Simply speaking, the Act has become cumbersome. If you make the law easy, it becomes easy to comply. So long as the revenue of the government is going up, the government can afford to give more flexibility and simplify the Act. Everything has a shelf life. The 1961 Act has lived for 65 years. In my view, the proposed legislation would be a cleansed document. Sections will be reduced. Section which have sunset clause, would be taken off. Sections which have become redundant because of court judgments, would be taken out. You’ll see a much more linear document.

Latest data shows almost 3 out of 4 assesses are moving to the New Income Tax regime even when it gives no exemption. How do you read this trend? Also, can we expect some changes in the old as well as the new regime?

I do not see major changes in the old regime. However, I expect some changes in the new regime to make it more effective. These are exemptions which have been withdrawn. For example, some deductions under HRA were given under the old regime. It has been taken away in the new regime. In my opinion, it should be given in some form or the other.

The big question at this moment is how to boost consumption? What kind of tax benefits should be given for the purpose?

Unfortunately, manoeuvrability in the hand of the government to reduce taxes and increase cash flow in the hands of the taxpayer is limited. Till ₹15 lakhs in the new regime. What has been done above that, the government may not like to touch. So, where is the manoeuvrability? You may see some exemptions in the new tax regime. That will be the extra cash flow which will have a direct bearing on private expenditure. You can’t do much in GST because that is a different ball game in terms of compliance and it is independently regulated. In such a situation, you can only touch direct tax assesses and direct taxes. You may find slabs going down in the new regime. The government may make it inflation-adjusted basic exemption. If inflation goes up by 10 per cent, your basic exemption will increase by 10 per cent.

Is there any possibility of reduction in corporate tax rate?

I don’t see any change except one restoring manufacturing tax rate of 15 per cent which had a sunset. Government thought it is not possible to really bring it back. But it appears that the government has realised that manufacturing thing needs a boost. This boost is available everywhere in the world to the small sector. Why not India? It is a catalyst which will help you in growing the bank. It will give you GDP. It will give you employment. It will create capital. It will give you private expenditure. This is a very important sector. Else, the government may give it to MSME only. About 98 per cent of the production is happening in MSME in the country. So the government may give some benefit there, make it easier for MSMEs. We need to remember that corporate tax collection growth rate is lower this year as compared to personal taxes. The government is concerned about that.

Any possibility of changes in capital gains tax structure?

I represented to the government that there should not be any concession in that. I don’t want the government to lose tax. But I want the government to reduce the slabs. There are slabs of 0 per cent, 5 per cent, 10 per cent, 15 per cent and 20. Make it into two rates without compromising on the government collection. I think the government is looking into this. We are not asking any exemption on debt fund or equity. Neither can the government afford to give that. The government will make it leaner, thinner, easy to understand and easy to calculate.