Simplicity, Equity, Fairness Are Three Reasons Bringing Back CGTs: Revenue Secretary

The capital gain tax has drawn immense attention after post-budget conversations. The Revenue Secretary Sanjay Malhotra explained the government's point of view on the same referring to simplicity, equity and fairness as the key reasons to implement the taxation, at an event held by PHD Chamber of Commerce and Industry (PHDCCI).  

“You people suggested that we should make it simple both for long-term capital gains (LTCG) and short-term capital gains (STCG). We made it even simpler. You asked for something. We gave you more. We made it even one, primarily now it has become one. It has become even simpler," he said.

Talking about fairness he pointed out the rationality of taxation. He gave the example and said, “All food items should attract one rate say of 5 per cent or they should be the same. You know if coffee is at 18 per cent and tea should also be at 18 per cent and similarly you know even in direct taxes. So if capital gains on one asset class are at X per cent then why on the other asset class it should be some other per cent.”

He claimed the government has made everything equal.   Rejecting all discourse criticising the removal of indexation benefit he cited a study. Malhotra added, “We did a study for FY 22-23.  10 and a half lakh returns in FY 2022-23 have capital gains from land and building which has indexation benefit. They have taken indexation benefits FY 22-23. But the effective tax rate after that is almost 12 per cent, not 10per cent, it is more.”  

He mentioned that in any case, 10 per cent here is way less than the tax on salaries, the tax on interest, and the output tax, and this is the tax which is paid by more affordable people in society.  

Talking about bringing back buyback tax he stated that the reason for equity, meaning, only those who need to pay those taxes should pay tax. Malhotra clarified, “What is happening is that people were paying for tax. What this means is that like in dividends, it was being taxed in the hands of the company. We brought it into the hands of the shareholders. Now because of this reason what happens is that a person should not be paying any tax if he is in a nil tax bracket. Or he should be paying 5 per cent if he is in 3 to 6 lakh or he should be paying 10 per cent if he is in 6 to 9 or he should be paying 15 per cent if he is in 9 to 12 lakh.  That is for the new regime, he is paying 20 per cent and he should be paying lower taxes. He is paying higher. Those who should be paying 39per cent taxes effectively they are paying 20per cent, so the whole motivation for taxing, buyback tax in the hands of the shareholders is primarily all reasons of equity.”

He even responded about the provision of block assessments.  “The primary purpose of doing this block assessment is to provide all of you an early certainty. Of course, a search is done and some tax evasion is found, let's have that certainty and we have given you the option, there in that itself. At that moment itself, after the assessment is made okay, within 60 days you file the return, you pay 60 days, 60 per cent within 60 days matter is over. So block assessment can be a success,” he commented.

Further, he praised the performance of the Indian economy. He said that the world is growing at a very small rate, larger parts of Europe and other developed worlds are not growing, they are de-growing, However, India is growing by 7 per cent.