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Revenue Secretary Sanjay Malhotra says that the revised projection for corporate tax in 2024-25 (FY25) reflects the decline in profits of the top 170 companies during the first quarter of the current financial year. In conversation with shrimi choudharythe senior bureaucrat discusses several tax-related announcements in the Union Budget. Edited excerpts:
Has the projection for corporate taxes been reduced?
There has been a modest reduction. Still, we are projecting a growth rate of about 10 per cent. This aligns with the growth rate achieved to date. The projection incorporates the decline in corporate profits of the top 170 companies for the first quarter (April-June) of FY25, excluding banks and the financial sector.
Including these sectors, there is an approximate increase of 4 per cent. For the 200 companies that reported profits, our growth rates are also reflective of this.
Central goods and services tax (GST) saw a reduction while excise duty saw an upward revision.
These adjustments are aligned with the growth rates observed over the past year.
What was the rationale behind revamping the capital gains regime?
The government, over the past few years, has been trying to simplify various tax provisions, starting with GST, which simplified the indirect taxation regime. Seen in light of that transformative change, this is another change we have introduced.
Revamping the regime has been a request from many stakeholders for some time, given the different rates and holding periods across asset classes. For instance, without indexation, the rate is 20 per cent, and with indexation, it is 10 per cent, and so on.
We have now drastically simplified it, primarily to two rates in long-term capital gains: 20 per cent and the applicable rates. Similarly, in short-term capital gains.
For listed shares, there is a slight increase, but for unlisted shares, where indexation benefits are removed, there is a reduction in rates, benefiting unlisted companies, venture capital firms, etc.
Similarly, in real estate, wherever returns are higher, the new structure is beneficial. In very few cases, returns are lower, and those are more of an exception.
In real estate, it’s more of a rationalisation. My understanding is that more people stand to gain than lose because the rate has been reduced.
Similarly, there is a provision for 54 EC bonds, which is a smaller amount of Rs 50 lakh; that benefit also continues for those who don’t want to pay their tax.
Why has the indexation clause been removed?
It’s a simplification measure. I don’t find any reason why indexation benefits should be applied to certain asset classes and not others.
Some talk about there being an inheritance tax, but there has been no change regarding inheritance.
There was no tax on inheritance earlier, and there is no tax now. Regarding inheritance, whether indexation is applied or not, there was a tax earlier when you sold the property. Now, there is also a tax when you sell a property, whether it is inherited or otherwise.
What if inflation rises?
When you pay interest, one does not ask for indexation. Neither did you ask for indexation for shares. So why is this special dispensation applied to real estate?
With a comprehensive review of the income-tax (I-T) Act, will there be a fresh look at the direct tax code?
This will be an internal exercise, and we have an internal committee for this. We will do a consultation at the right time. The internal exercise aims to review the tax code to simplify it so that it becomes easier for the common man, taxpayers, and practitioners to understand.
There are several Sections with various exceptions that can be simplified. Sections with exemptions could also be simplified. Provisions spread across chapters need to be consolidated.
Besides, there are provisions related to previous periods that may no longer be essential and are still in the Act. We need to decide whether they should remain. I have not given a definitive view, but this is how we are looking into it.
With new changes in the personal I-T regime, do you expect a 100 per cent shift?
There is no sunset clause for the old tax regime. To what extent the change will be beneficial and whether a shift will occur, I can’t say now.
Would granting immunity under the Benami Prohibition Act help in catching the main culprits?
It is important to provide such immunity to gather evidence against the main culprits. Most of the time, these fronts (benamidars) are not aware of their involvement. This could nudge them to reveal the details. Even though the main culprit tries to entice them, it would be at the cost of prosecution.
What is the window to avail of the Vivad se Vishwas scheme?
All appeals pending in various fora as of July 22, 2024, other than those related to searches, are eligible for the scheme. The window is open until December 31. However, it can be extended.
If individuals come in before December 31 and pay 100 per cent of the tax, they will face no penalty, prosecution, or interest. If they come after that date, up to a certain date to be notified, they will pay 110 per cent of the tax. Those eligible for the earlier scheme can also avail themselves of this one.
Could you provide a break-up of revenue mobilisation?
Revenue gain will be Rs 30,000 crore from capital gains (Rs 15,000 crore), buybacks (Rs 4,000 crore), securities transaction tax (Rs 8,000 crore), and miscellaneous sources (Rs 2,000 crore).
The total forgone revenue is Rs 37,000 crore, including Rs 29,000 crore in direct taxes and Rs 8,000 crore in indirect taxes, including Customs.
What will happen to cases under the angel tax regime?
All cases already pending under the angel tax regime will proceed through their due course.
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