FM has spoken about an overhaul of the Income Tax Act. What is the exercise aimed at?
She has made it clear in her speech that the purpose is to make it simple and lucid. It is not easy to read for the common man, even tax practitioners. There are a number of provisons, exceptions and in some cases provisions related to one subject are scattered across various chapters. Some provisions are obsolete and redundant or related to past periods. There are provisions which are more procedural in nature that could perhaps go in rules. The overall exercise is to look into these and try to make it easy to read and understand. Tax policy change is not the purpose of the exercise.
The budget has removed the Angel tax. What about past cases under the provision?
These will be treated as the law existed on that date.
The budget has rolled out changes to capital gains tax regime. Certain concerns have been raised on removal of indexation benefits in case of property.
There was a valid request from the industries associated with these assets as well as the general public to simplify and rationalise these provisions. The exercise is largely aimed at simplification. Yes, there is an increase in some of the asset classes, but it is very marginal. Capital gains tax of 10% going up to 12.5 % for shares effectively means that your post tax returns are reduced by 2.5%. It is a very minor change.
As for indexation, while it is being pointed out that the indexation has been removed, drastic reduction in rate is not being highlighted. My request to the investors in real estate is to kindly do their calculations. Vast majority of the cases they stand to gain because of the reduction. Gains in real estate are more than 9% to 11% per annum. If that is the case for them they stand to benefit. Besides, tax kicks in only if the gains are not reinvested in a house. If you sell a house and you buy a house using only the gains, there is no taxation. Why should there be indexation for one class and not for another as inflation is felt by all asset classes. I think it is a move in the right direction.
What is the objective behind the customs duty rate review ? How many rates are we looking at?
The objective basically is to have fewer rate categories which will reduce classification disputes, which will lower litigation and provide certainty. A single would be the simplest, but that is not something on the cards. We have multiple rates that go in double digit rates. The idea is to bring this number down. I cannot give a number (of slabs) now, but the idea should be to move to reasonably 3-4 or 5 rates.
Industry was expecting clarity on framework regarding pillar 1 and pillar 2. What is the thinking on this?
We are working on it. So far Amount A and Amount B of pillar one is concerned, you are aware that we have reservations on that. Unless our concerns are met, we are not in a position to move ahead.