The government’s intent is to move towards an exemption-less direct tax regime. And this is true for both corporate and personal income taxes, according to Sanjay Malhotra, revenue secretary. In an interview with Surabhi, he also countered criticism that removal of exemptions will discourage savings. There are many other ways to spur savings and people are increasingly best judges of how to use their monies, he said. The secretary added that the government expects to rake in Rs 25,000 crore from windfall taxes on oil firms this year and a similar amount may be raised next year also. Excerpts:
How confident are you of meeting the tax collection targets given the expectations of a slowdown?
The growth in tax collections is in line with the nominal GDP growth estimated of 10.5%. In case there is a slowdown, one should expect that the tax revenues will also go down. We are assuming a buoyancy of 1.
The Budget also expects strong growth in GST collections in FY24.
We have a growth rate of 24% (this year). This is because of higher tax collection efficiency, but there are limits to that. To expect similar growth rates, for a very long period of time will be very difficult because the collections have to primarily grow in line with the GDP. There is also an element of increase in the GST rates in July last year because of which too we see higher numbers.
The concessional income tax regime has not been adopted by most taxpayers. Do you think this changing with the rate reductions and increase in rebate?
The benefits will depend from individual to individual, depending on two factors — their income levels and the deductions and exemptions that they claim in the old scheme. We do not expect everyone to shift to the new regime, because there are certain benefits that people enjoy in the old scheme for which we will not be able to provide enough incentives in the new scheme to cancel those benefits. For example, if people are getting house rent allowance, which is exempt to a certain extent. Similarly, if people are taking leave travel concession, then that is exempt. It depends on what value it amounts to.
There is a view that the nudge to the new tax regime will disincentivise savings and investments by households. What is your take on this?
We are moving towards a simplified structure of taxation, away from exemptions. This makes life easier for everyone. People know how much they want to save for the future and there are other means to incentivise savings. The Budget has raised deposits for two schemes and announced one new scheme for women. The banks are also there (to promote savings). They will determine how attractive they want to make their fixed deposits. Are tax exemptions the only way to incentivise savings? Certainly not. There are other ways and the market will find its balance.
Will the old IT regime be phased out eventually?
The intent certainly is to move towards an exemption-less scheme without causing any disruption. Even on the corporate taxation side, the old scheme is continuing as certain concessions have been given. We don’t want to tax retrospectively and do things abruptly. The attempt is to make the new scheme the main scheme, as quickly as possible.
There were a lot of expectations that the capital gains tax would be rationalised…
Also read: Five major announcements on Income Tax in Budget 2023-24
Our attempt is to fulfil as many of the expectations as possible. One can’t say what will happen in the future. The government is always very responsive to the needs of all of the public.
The other expectation was that the sunset date for availing the 15% concessional tax by manufacturing companies would be extended…
It was already extended by one year because of the pandemic. It was to be a limited window and it is in line with what was committed to by the government. As many as 3,500 odd companies have already got the benefit of
the tax and this number will increase further. I can’t say now what will happen in the future.
How many taxpayers have income less than Rs 7 lakh per annum?
Let us note the figures for the fiscal year 2021 and returns of 2021-22 About Rs 35 million people had income less than Rs 5 lakh, about 17 million people had income between Rs 5 lakh to Rs 8 lakh and another 17 million people had income above Rs 8 lakh.
There was also an expectation that the government would either review or abolish the windfall taxes in the Budget. Also, how much revenue has been raised from it?
We are reviewing the tax every fortnight. It will stay as long as the prices of crude and petroleum products are on the higher side. This fiscal we expect about Rs 25,000 crore and we will get a similar number next fiscal also.
The last Budget had introduced a tax on virtual digital assets. Has it had the required effect in terms of stricter compliance?
Obviously, the volumes have gone down, but it’s not only because of what we have done. The crypto market has also deteriorated because of various reasons. It’s speculative, so in a way it’s good that this has happened and the volumes have decreased for everyone.
The Budget has also proposed new tax regime for online gaming?
We have rationalised it and so there is some relief for online gaming platforms as we not taxing them on gross basis but on net basis. Only when money reaches the hand of the player are we saying that we will tax them and similarly for tax deducted at source. It is a relief rather than tightening.
The Budget has announced a number of changes in the customs duty? Are you concerned about the impact of the slowdown on collections?
The duty changes have been done to promote exports and deepen and widen the value addition and as we had mentioned, we will review exemptions. So it’s all in line with that. Regarding collections, we are in a global situation, but we are to a great degree insulated vis a vis some of the other countries. Anything that happens outside will impact us, but it should not be a major cause of concern.