While the government has no intention of moving towards a single Income-Tax regime, it will continue to plug loopholes in taxation so that people do not avail themselves of unintended benefits, said TV Somanathan, Finance Secretary, Government of India.
In a conversation with Raghuvir Srinivasan, Editor, businessline, at the ‘Breakfast with businessline’ event organised in Chennai today, Somanathan emphasised that taxpayers would continue to have the option of choosing between the old and new regimes of taxation.
In the recent times, the government has brought several investments into the ambit of taxation, such as market-linked debentures, high-value insurance products, capital gains on high-value housing, and EPF. Asked if the idea was to push people into the new tax system, Somanathan noted that sometimes people take advantage of loopholes to avoid tax. Admitting that “tax avoidance is legal”, Somanathan said, “It is equally legal for us to close it”.
“We will come back and close it as soon as we can, as fast as we can and as effectively as we can. Our policy is very clear: a simpler tax system with lower explicit rates but fewer places to hide,” he said.
Asked if people were shifting to the new tax regime, Somanathan noted that there had been a shift, “we expect a big shift to happen after this Budget”. On the point of whether the new tax system could affect savings, he said that it was not true that tax exemptions necessarily fostered savings.
“There are a lot of people in the middle-class earning ₹7-12 lakh per annum, who actually end up paying more tax in the old system because they cannot afford to subscribe to all the savings instruments because they have too much of expenses,” Somanathan said, pointing out that “the largest number of tax filers are in the ₹5-15 lakh bracket.”
He noted that only 0.2 per cent of LIC’s policyholders pay a premium above ₹5 lakh a year.
On indirect taxes, he said that collection efficiency had led to better GST revenues in 2022-23. However, in the current year “at the margins, there cannot be much more that can happen.” The projected increase in GST collections (₹8.54-lakh crore in 2022-23 to ₹9.56-lakh crore in 2023-24) is “pure buoyancy”.
The event was held at ITC Grand Chola, a LEED Zero carbon hotel. Zubin Songadwala- Area Manager-ITC Hotels and General Manager, ITC Grand Chola, who said he was “delighted and honored” that ITC Grand Chola was chosen for the event, noted that the “food choices reflect sustainability” (drinking water from an atmospheric water generator and millet-based foods, showcased especially because 2023 is the ‘year of millets’).
Asked whether taxing premiums paid on health insurance policies would affect healthcare, Somanathan observed building public hospitals was a better way of providing healthcare to poor people than through insurance. Building hospitals need money, he said.