Revenue Secretary Tarun Bajaj reveals reason why government failed to provide tax relief to individuals

The government would see how it can bring parity between the new exemption and the old personal income tax system to encourage more people to switch to the new one, the revenue secretary said.
Tarun Bajaj noted. In an interview with
Anuradha Shukla and
Deepshikha Sikarwarhe said the revenue assumptions were difficult but achievable.
Edited excerpts:

The government has offered no tax relief to individuals…

What relief could we have offered. Any tax relief we provide to the salaried class is not specific to them. It is accessible to everyone. There was also a huge dilemma about what type of concession we offer, especially with the new regime with no exemptions in place. If we offer any concessions under the old regime, then the whole initiative of a regime without exemptions would be undermined. After a detailed analysis of the returns received this year, which would be the first year of the new regime, we should see what can be done to bring parity to encourage people to switch to the new regime. In terms of corporation tax, according to the 2019-2020 declarations, 65% of income and 16% of contributions went to the new regime. This year, others would have moved.

Have you been conservative in your revenue assumptions?

Excise duty collection has been reduced from Rs 3.94 lakh crore to Rs 3.35 lakh crore, or 15% less due to the reduction in the rate. If you subscribe to excise duties, the increase is more than 14%. Revenue momentum is above 1.2-1.3%. These are achievable.

We also try to improve compliance without causing harassment to taxpayers, both on direct and indirect taxes. It also shows some impact. We tell people that we have information about you, we will get back to you and that you have to pay your tax. So, although the economic recovery has helped, the tightening of compliances would have also helped. Changes were also made to the GST system which helped improve revenues.

Is there a gap in nominal GDP assumptions?

Nominal GDP this year is 17.6%, of which real growth is 9-9.2%, so the deflator is 8.4%. This is due to high inflation based on the wholesale price index. The assumption is that the WPI should be lower next year due to the high base. There’s also a feeling that the early estimates provided by the CSO of 19.6 were before the Omicron hit us. Omicron will have some effect. If we drop 17.6% from any level, then the next year the 11% can go up to 12% or whatever. They (economic affairs department) thought about it and made their calculations. We are not out of the woods yet and we don’t know how the virus will behave. Our estimates are realistic.

You proposed a tax on digital assets. Doesn’t it give legitimacy to them through a back door?

We wanted to clarify the tax treatment of these assets. Some people who sell these assets are already paying taxes. But, there is no certainty and even they are not clear on the treatment of this income. It is not an illegal activity. If it had been illegal, we would have caught those who were trading it. Regulated, unregulated or whether we want to ban it is not the revenue concern. We want our tax due. It is in the same logic that we have advanced. On these issues, the Economics Department will take a call whenever they do. Some people interpret this as a step towards legitimizing it, I won’t say that.

RBI supported a ban. Won’t imposing a tax on such a transaction force RBI’s hand on the issue?

I do not think so. Economic Affairs was not aware of the introduction of this (tax) provision. We have not linked taxation to it. I don’t think it will put pressure on RBI.

Why was it necessary to have a specific provision for digital assets?

We had reviewed some of the players in the past. The Enforcement Department had also done so. We realized that some of them were not paying any tax while making gains. They also did not disclose it in their statements or if they filed statements it was less than Rs 5 lakh. In some cases, reported sales purchases did not match. Third, some listed it as capital gains and some listed business income, and some listed as other sources.

The tax rates are different for all these categories. We wanted to impose it on the highest bracket. We also said there was no compensation or deferral. This is why we had to make specific provisions. It was not about income. This basically brings that particular company under our lens. We introduced 1% TDS, which will create a trail. We will now be able to track these transactions which will address security issues. The tax is still applicable today. Evaluating officers will review them. The new system will apply from the next fiscal year.

Sallie R. Loera