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'Going forward, the encouragement would be to move to the new tax regime.'
"The computation of income should be simple, and that can be done by doing away with the deductions and exemptions," Ravi Agrawal, chairman, Central Board of Direct Taxes (CBDT), tells Monika Yadav and Asit Ranjan Mishra/Business Standard.
Finance Minister Nirmala Sitharaman in her Budget 2025 speech mentioned the introduction of a new Income Tax Bill, will it be a fully new law or will the old Act be amended?
It will be a new law, effective from a certain financial year. Till that financial year, the old Act would apply.
But there will be some overlap period also, where the taxpayer for the future years will go by the new Act.
In case, there is some compliance required with respect to the earlier years -- there will be some -- the old Act would apply.
This is how the scheme would work. That's a normal process. So, we will have a saving and repeal section which would take care of it.
How will the government ensure simplification in the new law? There are a lot of tax incentive schemes included in the old law, will those be retained?
Wherever there are redundancies, and sections and provisions are not applicable, those will not form part of the new law.
Essentially, the key features in the old Act, which are applicable, will remain.
If there were some repetitions, we examined if those could be represented in a different manner which is more user-friendly for a common taxpayer. That has been done.
We have also tried to optimise the size of the Act and make it easy for the taxpayer to comprehend, read, and bring more clarity and minimise litigation. That is basically the theme.
Will the government engage stakeholders while finalising the rules of the new law, and has it set any deadline to bring in the new law?
Even during the review process, we had done stakeholder consultation. We received more than 10,000 suggestions. We have incorporated their suggestions.
When it is presented in Parliament, it will go to the standing committee and open for public consultation again.
About timing of the implementation, it will all depend on when the document is approved by Parliament.
After parliamentary approval, rules, forms would be made. Software would also be enabled.
Is the government planning to completely phase out the old tax regime?
Currently, there is no plan to phase out the old regime. Both the options will be available for taxpayers. It's upon them to see which option is beneficial.
Nearly 75 per cent of taxpayers have already moved to the new tax regime.
With the new tax slabs, and the concessions that have been announced, we feel that most taxpayers would opt for the new tax regime.
We will analyse why some taxpayers are still opting for the old tax regime. Identify those areas and then see whether we can actually take care of that, because essentially the idea is that if we want a simpler tax regime, how do we actually do that.
The computation of income should be simple, and that can be done by doing away with the deductions and exemptions which are open for interpretation.
So, going forward, the encouragement would be to move to the new tax regime. I feel most of the people should come to the new tax regime.
The old tax regime helps people develop saving habits. Don't you think that 25 years down the line, people would not have enough savings because of the new tax regime?
The investment habits among people should not be driven by the tax liability.
It should be the call of the taxpayer to make an investment, or where to make an investment.
There are more options available to the taxpayers with the new tax regime. Let that choice be with the taxpayer.
Was US President Donald Trump's influence factored in while framing the tax proposals in Budget 2025?
When you see the direct tax proposals, there's nothing which is actually getting influenced by what is happening across the world.
What we are looking at is we moving towards a progressive tax policy.
Are we bringing clarity for the taxpayer and also the international community with regard to safe harbour rules? All those things are also now part of this Act.
One section is raising concerns that one crore people will be out of the tax net because of the latest Budget proposals. How do you see this? Will they have to file the ITR?
I don't see it as a concern. They will be filing the returns. The participation in the tax administration would remain the same.
It's just that their tax liability has reduced, so it's not a concern.
Ultimately, the economy gets Rs 1 trillion which will spur growth.
What about the taxability of ULIP?
The point was that in 10(DD), 10(10D), if the premium was above 10 per cent, there were two taxes.
The premium of 10 per cent or the premium of 2.5 lakh. Premium above 2.5 lakhs was being reflected as capital asset, and therefore it was charged to capital gains.
But if the premium was more than 10 per cent of the sum assured, that was not specifically mentioned as a capital asset.
Therefore that was amenable to interpretation. It is chargeable, but under what head you charge?
That has been clarified by putting it in the capital asset. Now it is even charged in the capital receipts.
Feature Presentation: Ashish Narsale/Rediff.com
