The government would see how it can bring about parity between the new exemption and old income tax regime for individuals to encourage more people to move to the new one, revenue secretary
Tarun Bajaj said. In an interview with
Anuradha Shukla and
Deepshikha Sikarwar, he said revenue assumptions were challenging but achievable.
Edited excerpts:

The government has not offered any tax relief to individuals….

What relief could we have offered. Any tax concession we offer to salaried class, is not specific to them. It is available to everyone. There was also a huge dilemma about what kind of concession we offer, especially with the new exemption-free regime in place. If we offer any concession under the old regime, then the whole initiative of an exemption-free regime would be hurt. After a detailed analysis of the returns received this year, which would be the first year for the new regime, we would have to see what we can do to bring parity to encourage people to move to the new regime. Under corporate tax, as per 2019-20 returns 65% of income and 16% of assesses have moved to the new regime. This year more 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, which is 15% lower because of reduction in rate. If you take out excise duty, then the increase is more than 14%. Revenue buoyancy is more than 1.2-1.3%. These are achievable.

We are also trying to improve on compliances without causing any harassment to taxpayers, both on direct taxes and indirect taxes. That is also showing some impact. We are telling people that we have information about you, we will come back to you and that you must pay your tax. So while economic recovery has helped, tightening of compliances would have also contributed. Changes have also been made to the GST regime that have helped in improving revenues.

Is there a discrepancy in nominal GDP assumptions ?

This year’s nominal GDP is 17.6%, in which real growth is 9-9.2% so the deflator is 8.4%. This is because of high Wholesale-Price Index based inflation. Assumption is WPI should be lower next year because of the high base. There is also a feeling that the advance estimates provided by the CSO of 19.6 was before the Omicron hit us. Omicron will have some effect. If we fall from 17.6% from whatever levels, then the next year the 11% may go up to 12% or whatever. They (economic affairs department) have thought about it and done their calculations. We are not yet out of the woods and we don’t know how the virus is going to behave. Our estimates are realistic.

You have proposed a tax on digitals assets. Does it not give legitimacy to these through backdoor?

We were keen to bring clarity in the taxation regime for these assets. Some people dealing in these assets are already paying taxes. But, there is no certainty and even they are not clear on the treatment of such income. It is not an illegal activity. If it had been illegal, we would have nabbed those dealing in it. Regulated, unregulated or whether we want to ban it, that is not revenue’s concern. We want our due tax. It is with the same logic we have gone ahead. On these issues, the department of economic affairs will take a call whenever they do. Some people are construing this as a step towards legitimising it, I won’t say that.

RBI has backed a ban. Will imposing a tax on such transaction not force RBI’s hand on the matter?

I don’t think so. Economic Affairs was not aware this (tax) provision was being introduced. We did not link taxation with it. I don’t think this will put any pressure on RBI.

Why was there a need to bring a specific provision for digital assets?

We had looked into some of the players in the past. Enforcement Directorate had also done so. We realised that some of them were not pay any tax despite making gains. They were not disclosing it in their returns as well or if they were filing returns it was below Rs 5 lakh. In some cases, sales purchases declared did not match. Thirdly, some were showing it as capital gains and some were showing business income, and some as other sources.

Tax rates are different for all these categories. We wanted to tax it at the highest bracket. We have also said no set off and no carried forward. This was why we had to bring specific provision. This was not aimed at revenues. This basically brings this particular business under our lens. We have brought in 1% TDS, which will create a trail. We will now be able to track such transactions that will address the security concerns. Tax is applicable even today. Assessing officers will look at those. New regime will apply from next financial year.