Corporate India on Tuesday urged the government to introduce simplicity, consistency, and rationalisation of the capital gains tax regime in the upcoming Budget, noting that past policy decisions had led to a complex structure.

At their pre-Budget meeting with Revenue Secretary Sanjay Malhotra and top revenue department officials, leaders of Indian Industry also called for status quo on the corporate tax rates, stressing the need to provide tax certainty for businesses. 

The Modi 2.0 Government had in September 2019 slashed corporate tax rate to 22 per cent for existing companies and introduced 15 per cent cent rate for new manufacturing companies incorporated after October 1, 2019. These rates have remained unchanged since then, bolstering corporate tax collections as the economy continued to record robust average 8 per cent growth rates (other than Covid-affected years).

Apex industry chambers have, however, called for changes in personal income tax slabs in the Budget to boost consumption, aiming to provide the middle class with higher disposable income. This demographic has been squeezed by disproportionately high-income tax and GST rates, it was pointed out.

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“To boost consumption demand in the short term, steps such as providing a marginal relief in income tax at the lower end of the spectrum with taxable income up to ₹20 lakh; reduction in excise duties on petrol and diesel; upward revision of minimum wages of MNREGA and raising DBT amount under PM Kisan are needed,” Sanjiv Puri, President, CII, has conveyed at the meeting at North Block on Tuesday.

PHDCCI has at the meeting called for reduction in tax rates of individuals and limited liability partnerships. 

“Indian middle class is currently taxed at 30 per cent. Because of this they don’t have disposable income for savings and consumption needs. Middle class must be spared from the 30 per cent tax rate and this rate must be applicable only to those with taxable income above ₹40 lakh,”, Mukul Bagla, Chairman, Direct Taxes Committee, PHDCCI, said.

Tuesday’s meetings were also attended by Central Board of Indirect Taxes & Customs (CBIC) Chairman Sanjay Kumar Aggarwal & senior officials of Central Board of Direct Taxes (CBDT) .

CAPITAL GAINS TAX REGIME 

The Confederation of Indian Industry (CII) has in its submissions to Finance Ministry highlighted that at present there is no consistency in tax rates or holding period for different types of instruments falling within same asset class. Even the indexation benefit differs in different situations. The tax rates also differ for residents and non-residents. 

CII has now recommended a capital gains tax regime where financial assets attract 10 per cent long-term tax rate and 15 per cent short-term gains tax rate. Also, the holding period for turning long-term should be 12 months, CII has said. 

For assets other than financial assets (like immovable property etc), the long-term gains tax rate must be 20 per cent (with indexation), short-term gains tax rate must be applicable rates and holding period must be 36 months, CII has suggested.

Dinesh Kanabar, Mentor, FICCI Tax Committee, said the issue of simplification of capital gains tax regime was very much on the agenda of FICCI’s submissions to the Finance Ministry as part of pre-budget consultations.

Subhrakanta Panda, Immediate Past President, FICCI, said the basic approach of the chamber was to drive home the point that the next five years is critical in maintaining India’s growth momentum. 

“In as much as our suggestions, we stayed away from specific asks for concessions or exemptions. It is more important to focus on growth potential and what can be done to actualise it,” he said.

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