The federal government is making efforts to simplify the tax regime and deal with all asset lessons equally for taxation, income secretary Sanjay Malhotra stated in an interview with Hindustan Occasions. This precept has been utilized when the finances proposed to take away indexation from the long-term capital positive factors in actual property, he stated. Edited excerpts:
The Financial Survey has expressed issues about rising short-term investments corresponding to futures and choices within the inventory market. Do you suppose that extra tax measures are required to curb this?
F&O buying and selling in India and the world is excessive. Whether or not it’s a matter of concern from a systemic perspective, I don’t suppose so. However definitely, like lottery or different sin items, if some persons are indulging on this excessively, then that isn’t good for them and for the nation usually.
This (tax measures) in itself won’t cut back this tendency, however is a sign that that is one thing which must be averted, like excessive taxes on sin items could not essentially cut back their consumption. However, they do signify that that is one thing the federal government doesn’t want to promote, like cigarette, like alcohol.
There’s a notion that the center class has not been given sufficient within the finances. Is it true?
I believe there’s sufficient on this finances for the center class. Initially, on the expenditure facet, rather a lot must be accomplished — on employment, on ability upgradation and on training. MSMEs (Micro, Small and Medium Enterprises), that are once more related with the center class, have plenty of schemes. Equally, on the taxation facet additionally there are a selection of measures. Three of them are commonplace deductions for salaried and pensioners have been elevated, deductions have been elevated for household pensioners, and tax charges have been lowered. So, all these are accomplished maintaining the curiosity of the center class in thoughts.
The tax charge has been lowered just for the brand new regime. Individuals choosing the outdated regime with exemptions have been given nothing.
It’s the said coverage of the federal government to maneuver away from exemptions and deductions. That’s why no matter tax tweaks have been accomplished, they’re accomplished solely within the new tax regime.
If that’s the said coverage, why to not abolish the outdated regime now and transfer to the brand new tax regime?
We need to encourage folks to maneuver to the brand new regime on their very own somewhat than eradicating the outdated tax regime.
There’s a common notion that individuals transferring to the brand new regime is probably not compulsorily go for financial savings schemes or life insurance coverage insurance policies.
That’s why this new tax regime is there, the place folks can take their very own funding selections, whether or not they need to put money into a pension scheme, whether or not they need to put money into provident fund or insurance coverage scheme or in equities. Now we have left it to the people to determine what is useful for them. Why ought to we push them? The speed is decrease within the new regime and so they (taxpayers) have the liberty to decide on funding property that they need to put money into.
The finances tweaked the long-term capital positive factors regime by eradicating indexation. Why? Is the federal government making an attempt to extract extra from actual property transactions?
Initially, it’s a simplification. There may be one charge for all property. I don’t perceive as to how the federal government is making an attempt to extract extra from actual property when given from securities, , the tax charge is similar 12.5%. It’s the identical throughout all asset lessons. To say that the federal government is making an attempt to extract extra from actual property isn’t appropriate. It’s, as I discussed, an train to simplify the tax regime. It’s an train to take away the tax arbitrage between numerous asset lessons in as far as capital positive factors is worried. It’s an train to scale back the distinction between the tax charges on capital positive factors and different revenue.
By eradicating indexation, the factoring in of inflation is eliminated.
There isn’t a factoring in of inflation in others corresponding to in curiosity earnings. There isn’t a factoring in of inflation in wage revenue. There isn’t a factoring in of inflation in shares. Now we have eliminated indexation from all. And, there’s the profit for individuals who are investing in homes. In the event that they make investments the proceeds (solely the capital positive factors from the sale proceeds) in one other home, there isn’t any tax. This profit isn’t there in shares. Right here, you promote the share to purchase one other share, you continue to pay capital positive factors tax.
However in homes, you promote one house and you purchase one other home in the identical metropolis or in one other metropolis, so long as the quantity is lower than ₹10 crore, there isn’t any tax. Now we have already supplied a preferential regime for homes as a result of folks will be promoting homes to purchase one other, which is truthful sufficient. There isn’t a tax. However, if that (sale proceeds) isn’t used (reinvest) in a home, then it’s an revenue. Earnings doesn’t have any color. The worth stays the identical, whether or not it’s from sale of shares or from sale of actual property.