New regime will provide relief to those who cannot use tax sops: revenue secretary
The new tax regime offers a different option to detailed deductions and is in line with tax systems around the world. It may not benefit everyone, but it allows many who cannot claim all exemptions to switch to a better system, says the secretary of income, Surojit Gupta and. Excerpts
The new tax rules have raised several questions. Could you explain how it benefits taxpayers?
give you consolidated wages, asking you to choose how your salary will be distributed. Many people in this segment are likely to win. So, a businessman with a turnover of around Rs 2 crore does not have HRA or LTC or other exemptions. With a turnover of Rs 2 crore, its taxable income is Rs 16 lakh (at a rate of 8%, which will be subject to income tax). You cannot claim all exemptions. In contrast, there may be someone who claims exemptions from Rs 4.5 lakh. But there aren't many people like that. Many can only take an exemption of Rs 1.5 lakh. Many in the age group of 55 to 60, who own a house and no longer pay a loan, do not receive HRA and may not want to contribute to NPS. They will be winners in the new system. The idea is that in this regime full of exemptions there were many people without the necessary savings to save taxes, they were at a disadvantage.
So the number of exemptions was an obstacle to simplify the tax system?
The main objective of this exercise is to move to a simplified tax regime. And to provide some relief to people who, due to their financial situation, cannot access all types of exemptions.
There is a large segment of the population in the 30-40 age group, which earns around Rs 20 lakh to Rs 40 lakh ... this person who has HRA, LTC, etc. it would be worse ...
That's right. Such a person will remain in the old regime.
Could the slabs be increased so that a person is not worse? At present, the slab is not attractive enough.
There may be a situation in which you make it attractive, but you need to see how much revenue the government can give up. This exercise will only cost Rs 40,000 crore. Ideally, we should reduce the tax rate to a level where everyone benefits. Given the tax restrictions, this is not possible.
Can more measures be expected to reduce rates?
It depends on the answer and how much tax we should collect. What should be our relationship between taxes and GDP? There is also the opinion that exemptions should not exceed a certain proportion of income. In the old regime, it is unambiguous for those who cannot accept exemptions.
There is a criticism that there are too many tax slabs.
The number of tax slabs is a progressive model. If you have a minor or gradual tax, you don't feel the pressure. Previously, there were 5%, 20% and 30%. Most countries in the world, China, Thailand , Malaysia , Philippines , United States, Australia, have six and seven slabs. When people move from one tax slab to another, they should not receive a discharge. If the jumps are steep, there will be a tendency to report lower income.
What about the income beyond Rs 15 lakh a year?
Beyond Rs 15 lakh, the rates are the same but also benefit. They pay taxes on the lowest income rate that is less than Rs 15 lakh.
The expectation is that a non-exemption rule will be fully adopted.
There are systems in other places where you take a flat deduction or detailed deductions. There are alternatives in most countries. The situation here was that we were only deducting the deductions but there was no flat rate option. In a country of 130 million crore, there are only about 1.5 million crore that actually pay taxes. Beyond that, one has discovered how many will be beneficial to change to the new regime. People can choose between the two options available. A person may have some limitations that prevent him from taking exemptions. We believe this is an important section. Could we have reduced the rates even more? We have to take into account the fiscal space.
In some ways, efforts to get people with taxable income to enter the tax network have not been very successful ...
We know this, data is collected on property purchases, someone who makes a profit in the stock market, an expensive lifestyle, a mismatch between the declared income and GST.
There is an opinion that the state is not providing any support in areas such as education or health if all exemptions are granted.
No, state support is there for so many services. In fact, many receive services without paying any taxes.
There is the question of why the long-term capital gain was not touched.
The fundamental principle of taxation from the point of view of equity and equity, is that each element of income be taxed. If a salary is taxed, just like commercial income, then why won't capital gain, another form of income, be taxed? If someone has sold a property, it is an income and must pay taxes. If someone has made a profit from the stock market, it is also an income. The risk in the stock market is not different from that of a MSME. It was introduced in 2018, and people say don't keep changing the rules. It leads to distort the fiscal structure, what if the shares are offered as part of the income? Remember, investments in stocks and MF are made on the basis of sound evaluations of the economy and the political environment. Our policy for a country of Rs 130 million cannot have a fiscal structure like a tax haven.
What is the experience with corporate tax cuts?
It seems that more than 90% will opt for the lowest tax.
And the DDT ...
Please see, the previous taxation was almost 25%. The debt fund rate was around 30%. Even someone with income below 5 lakh would be subject to 20-25% tax. Someone with higher incomes also paid at the same rate. Then, people with lower incomes practically subsidized the rich. The industry's demand was to go to the classic tax system, and that is what has been done. Most people with lower incomes will pay a lower dividend tax. Foreign investors will win, dividends will be taxed in the hands of the recipients and will obtain credit at home.
What is the reason behind increasing the number of days for the NRI status?
It is not a matter of number of individuals, it is a matter of principles. This is a provision against abuse. It will not affect a person who works in the Gulf, for example.