New I-T regime needs stability: CBDT chair

“The direction of the tax regime is towards one that is free of exemptions and deductions. So (offering) any more deductions or exemptions will not be aligned to that intent. A standard deduction (of ₹50,000) is already granted under the new personal income tax regime. Last year, the extent of rebate has also been increased under the new personal tax regime. Now, let us wait. When individuals file their tax returns in July, we will know how many are in the new tax regime, which is the default option, and how many opt to switch to the old regime," Gupta said in the post-budget interview.

Last February, finance minister Nirmala Sitharaman’s budget for FY24 had raised the tax rebate available to low income earners from ₹500,000 to ₹700,000. Taken together with the ₹50,000 standard deduction, a person with income up to ₹750,000 a year does not have to pay any tax in the new personal tax regime now.

Meanwhile, the income tax department on Friday notified I-T return forms 2, 3 and 5 for filing tax returns for assessment year 2024-25. The ITR-1, which is filed by individuals with a total income of up to ₹50 lakh, and ITR-6 for companies were notified earlier in December 2023, and January 2024, respectively.

On whether any further tweak in the new regime may only be possible after July, by which time the full-year budget for FY25 would have been announced, Gupta said it is difficult to hazard a guess. “The tax regime has to be stable also," Gupta said.

The CBDT chairman said that India is currently engaged in multilateral negotiations being spearheaded by the Organisation for Economic Cooperation and Development (OECD) on global tax reforms, and a call on framing domestic rules can be taken after the talks are over.

“That can be examined at the time of the full year budget," Gupta said. For some of the negotiations, the cut off date has been shifted from last December to March 2024, the he said.

This pertains to discussions on a global framework for digital services taxation. OECD had said on 18 December that the negotiating team was committed to achieving a consensus-based solution and to finalize the text of a multilateral tax treaty on digital services tax by the end of March. Negotiations are also on for a framework for global common minimum corporate tax rate of 15%.

“Let us see what is the outcome in March and then we can take a call at the time of regular budget in July," Gupta said.

Experts said that under Indian G20 Presidency last year, OECD had mentioned that a part of the global tax reform, known as pillar-two global anti-base erosion (GloBE) rules for a global minimum corporate tax rate, is to be implemented and to be brought into domestic legislation from 2024.

“The recent Indian budget was an interim budget, and hence there were no major policy announcements, including in relation to pillar-two GloBE rules. We should expect an announcement in the ‘full budget’ post the general elections," said Utkarsh Trivedi, partner at Deloitte India. Once implemented, it will mean additional annual compliance for the Indian multinational enterprises.

Gupta explained that not extending the 31 March due date for securing 15% concessional corporate tax rate for new investments into manufacturing was a conscious decision. “Those who start manufacturing within this due date will be eligible for the 15% corporate tax rate."

The regime of 22% corporate tax rate without tax exemptions continues and is available to businesses, he said.

The interim budget sought to extend certain tax exemptions available to transactions done through stock exchanges in International Financial Services Centre (IFSC) that was expiring in March this year, by another year. Also, the income and capital gains tax exemption for sovereign wealth funds for investments into India’s infrastructure projects, which was expiring by end of March this year, has been extended by another year. But, the sunset clause of beneficial 15% corporate tax for new manufacturing companies starting production before end of March this year has not been extended.