One major factor that will guide tax administration in the future would be information gathering from third parties about transactions that will help the income tax department nudge taxpayers to comply, explains CBDT chairman Pramod Chandra Mody
NEW DELHI :
The budget has sought to iron out tax policy and offered ease of compliance while trying to ensure certainty in tax rates. One major factor that will guide tax administration in the future would be information gathering from third parties about transactions that will help the income tax department nudge taxpayers to comply, explains Central Board of Direct Taxes (CBDT) chairman Pramod Chandra Mody in a post-budget interview. Edited excerpts:
While personal income tax receipts projected for FY22 have crossed pre-pandemic levels, corporate tax receipts estimated for FY22 are lower than pre-pandemic levels. Why is it so and how will you address this?
The corporate tax rate was slashed substantially. So, as far as personal income tax is concerned, making information available to the taxpayer upfront in form 26 AS (tax credit statement) coupled with simplification of processes and better taxpayer services being made available should usher in that change in personal income tax for individuals to comply with their tax obligations. Broadly this is what is behind the trend.
What are the direct tax goals in this budget?
Tax certainty has been one of the key goals of this year’s budget. The time period available for reopening of assessment has been lowered and no new taxes have been added. All these should give that sense of certainty to taxpayers. The ease of compliance is another goal. This helps taxpayers to file his submissions on time. Getting tax matters settled in a transparent manner from the comfort of one’s house and without having to visit the income tax office is a great thing to cheer. We are trying to give the best possible service to the taxpayer that is feasible and possible. The taxpayer should feel motivated to comply with the laws voluntary.
But has widening the tax base taken a back seat?
The number of tax returns filed has more than doubled from what was the case in 2014. (Return filers rose from 3.3 crore in 2014 to 6.48 crore in 2020). Now, with more of third-party reporting of details, say bank interest, share market transactions etc, and that information being made available to taxpayers in the tax portal, coupled with the ease with which he can discharge his filing and post-filing process, should all be a great motivator for voluntary compliance. This will also help us in pre-filling the return.
A liberal corporate tax rate without tax incentives was offered in 2019 and it was followed up with a similar scheme for individuals. What has been the response?
The tax filing season is yet to get over. It is difficult to say what has been the response at this juncture. But at the same time, the expectation is that people will opt for the new regime because it simplifies the whole structure apart from the lower rates which in themselves are encouraging for both companies as well as individuals. We will have a clearer picture when the first filing season gets over.
The new dispute resolution scheme proposed for taxpayers is available in cases where the disputed income is up to ₹10 lakh. Isn’t that a low threshold as the tax liability in such cases would be around ₹3.3 lakh?
If you see the nature of disputes, they were largely falling in the lower end of the tax bracket (small taxpayers). To give a better facility of alternative dispute resolution, the scheme was brought in. Since a majority of the disputes is in this bracket, we should first give them this opportunity and see the experience. That is the time when we can take a (fresh) call on the threshold.
Over the years, the tax policy was to do away with tax breaks that complicated law and lead to litigation. But now these are coming back, affordable housing, for example. Is this not a U-turn?
No. The tax relief given to affordable housing has been extended by another year because of the exceptional circumstances we are in. People could not start their project or the individual taxpayers could not make the best use of the package given to them in these times. It is only to support them that this relief has been extended by another year. It does not go against the basic grain of doing away with tax exemptions. A specific end date has been given to incentives.