STCG, LTCG structure change is more of rationalisation, simplification: Revenue Secretary Malhotra

Revenue Secretary on Budget: At a time when the country is making advancements economically and witnessing overall development, taxation plays an  important role. A day after Finance Minister Nirmala Sitharaman presented the Union Budget 2024-25 in the Parliament, in an interview with Republic Business, Revenue Secretary Sanjay Malhotra says that tweaks in personal income tax and other measures undertaken in the Budget are aimed to make taxation simpler. Here are the excerpts from the interview.

Changes in personal I-T slab  

For us, the public of the country is the most important stakeholder. Keeping in mind their interests, we have reduced tax rates in the new tax regime. There are three major announcements in that regard. The first one is the standard deduction for salaried, which increases from Rs 50,000 to Rs 75,000. 

Then for family pensioners, there is an increase of Rs 10,000 and there are measures for all others, including the salaried, making a change in the tax rate so as to bring down the tax rate by a maximum amount of about Rs 10,000. A salaried person gets a relief of about Rs 17,500 in case he opts for the new tax regime. This we are also hopeful will help in boosting consumption in the economy because this means that there is more money in the hands of the public.

STCG, LTCG structure change  

The main rationale is to simplify taxation provisions that have been a constant endeavor of the government for the last five to seven years. You are aware that in indirect taxation, a transformative change was brought in by the introduction of GST. The simplified taxation has made life simpler for all for the trade and industry while keeping the tax rates or the tax incidence low for the consumers. 

Similarly, the new corporate tax regime was introduced without exemptions and deductions. Personal income tax regime was introduced without exemptions and deductions. These are all moves to make taxation simpler so that it is easy to read, easy to understand, easy to implement for all. A number of announcements have been made with regard to this even in this budget. 

The major ones being a comprehensive review of the income tax laws and reduction in the number of rates of customs duties so as to reduce classification disputes. Besides, a number of measures relating to capital gains being one, charities being another, TDS rates being reduced in this budget itself. 

This exercise of changing the rates is more a rationalisation, more a simplification because till now the number of tax rates, both for long term and short term, as well as the holding periods were different which made the taxation very very complex. For both short term and long term we have two primary rates and for holding period also there is either one year for listed financial assets and for all others it is two years. So it makes taxation simple.

Customs duty on gold, silver and mobiles  

These are two different reductions and both of them have some overlapping objectives, but some different as well. The duties on gold was increased in 2022 after COVID, when our foreign exchange reserves had fallen down to about 550 billion dollars. 

The CAD had also increased and so in order to curtail that, the duties had been increased so as to reduce the imports of these precious metals, especially gold. Now we are in a very very comfortable position both in terms of CAD which is in a region of about one percent and foreign exchange which is in excess of about $650 billion. 

This is an important sector for us because it gives employment to about 50 lakh people both catering to the domestic demand and about eight percent of exports. Of the total exports that we have in the country, making available gold, silver, other precious metals available to our domestic industry was critical and so it should be seen in this light. As far as mobile phone BCD reduction is concerned, this has two objectives. 

The first objective is to make it available at cheaper prices. Those mobile phones which are imported, because large bulk of mobiles today are manufactured in India, but only few of them are imported. The high-end ones, so make it available cheaper to our public here in the country. But the second and the more important reason is to give a signal to the industry that while we raise rates, we support the industry when in need, when in its infancy. Since you are aware this PMP was launched in the year 2017. At that time our total manufacturing was only about 1.30 lakh crore. For the last seven years, it has had a three-times jump and now it is 4 lakh plus crore. 

Exports of mobile phones also have increased from about Rs 1,500 crore to more than 1,30,000 crore last year. So it's matured now and we feel this benefit or this support is not needed. The manufacturers  have to now become competitive so that there is competition. This reduces prices not only for the domestic consumer but also for exports.