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One should not fear government taxing social schemes: Anurag Thakur

Shishir Sinha New Delhi | Updated on February 17, 2021

Taxation of EPF contribution will affect less than 0.5% of subscribers, says Minister of State for Finance

 

Minister of State for Finance Anurag Singh Thakur has categorically said that taxation of interest on contribution of over ₹2.5 lakh to the EPF does not mean the government is targeting various social security schemes. In an interview to BusinessLine, the minister said he felt there is connect between fundamentals of the economy and the stock market. Excerpts:

What are the big positive messages you have received on the Budget?

There is no additional burden on the common man. We have laid the foundation to make India a manufacturing and economic power hub. The attempt is to make India self-reliant. This is how I sum it up.

Economist, media, industrialists, everyone desired, during the last 12 months, that the government come up with reforms. We did historic reforms during Covid time — power, coal or mining, agriculture, defence production, space — that had not happened even in 1991. Everyone wanted liquidity — we provided it through ECLGS (Emergency Credit Line Guarantee Scheme), immediate tax refunds, reduction in TDS/TCS (tax deducted/collected at source), etc.

The demand was to focus on capital expenditure which will have a multiplier effect and to have the economy grow and also to create jobs. So, a 34.5 per cent increase in the capital expenditure to the tune of ₹5.5-lakh crore clearly shows the government’s vision.

In order to make India a manufacturing and economic powerhouse, PLI (Product-Linked Incentive scheme) was announced for 10 sectors, and we are marking a Budget allocation of ₹1.97-lakh crore over five years (for the same). There is a scheme for creation of seven mega textile parks. There are other schemes, too, such as parks for bulk drug pharmaceuticals, medical devices and diagnostic equipment. These are going to help focus on specific areas and help India become a global leader in these areas.

Critics say that too much fiscal relaxation in the new Budget might create big liability for the future…

You have to work on something. Borrow today, build, monetise and repay. Take the example of highways; you borrow before building highways, and once they are built, you monetise through toll and then you repay. Similarly, here also, the government is borrowing but spending wisely on the capital expenditure to monetise it in future and repay the debt.

There is a fear of disconnect between the real economy and the stock market. What’s your take?

Let the economic pundits do the analysis, but the good thing is that the stock market has shown positive indicators not only on day one (after presentation of the Budget) but even two weeks since then.

If you look at FPI (foreign portfolio investment) and FDI (foreign direct investment) numbers even during the pandemic, when the global situation was not that good, India got good FDI. For example, during April-October, India got around $48 billion worth of FDI. This clearly indicates there is lot of interest in India, whether it is FDI or FPI.

There is a lot of money floating in international markets. People are looking for better avenues, and India is the market for the present and the future. I see a lot of possibility for the right sentiment, which is growing with each passing day.

You mean to say that there is a connect between the fundamentals of economy and the stock market...

Of-course, yes.

Taxation of interest earned on contribution of ₹2.5 lakh or more to the Employees’ Provident Fund Organisation (EPFO) has generated a fear that the Centre is going to target other social security schemes. How true this fear is?

This fear has no grounds. The number of people (who will be taxed for EPF contribution) will be less than 0.5 per cent of the total number of subscribers.

Now, you can’t take advantage of the scheme which is meant for a large number of PF users. You can’t deposit ₹1 crore and ask for 8 per cent interest, and that too tax-free. That puts a burden on the government.

At the same time, why should the government look at cutting down the interest rate for a large section who are depositing less than the capped amount of ₹2.5 lakh. It is in the interest of a large number of EPFO subscribers. The people who are going to be affected by the capping have various other avenues to invest.

States say the imposition of Agriculture Infrastructure and Development Cess (AIDC) will result in less money for them...

AIDC will help develop infrastructure for farmers in all States/UTs. Second, it will help double the income of the farmers. At the same time, infrastructure will bring down the loss on account of perishable goods destroyed — close to 40-45 per cent — due to non-availability of warehouses, etc.

Coming to the second part of the question about the States, the devolution share is same at 41 per cent, as earlier, one per cent extra was for Jammu & Kashmir as a State. Apart from this, there is are revenue deficit grants. Also, a shortfall of up to 14 per cent in GST is also guaranteed for a five-year period.

In a way, the money, what ever way we are collecting, is to be spent in various States to create infrastructure. Now, money is being given through this route or that route; it will have an impact in States as money will be spent there only.

Non-resident Indians are waiting for a circular clarifying the residency aspects under Section 6 of the Income Tax Act, wherein various relaxations were provided to NRIs who could not travel back to their country of work/residence because of the Covid lockdowns. When can we expect that?

Whenever they (NRIs) represented to the Government of India during the Covid period, we have issued circulars. The issue has been addressed in the past; if the situation remains the same in future, the government can take a decision at that time also.

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Published on February 17, 2021
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