The changes in the capital gains tax have been brought about due to widespread requests. Simplification does not always mean that rates or the tax incident will ultimately decrease. It is a simplification measure, not a revenue-augmenting measure. The revenue increase is marginal at 10 to 12.5 per cent. All stakeholders will benefit by avoiding the burden of complexity, said Sanjay Malhotra, Secretary, Department of Revenue, Ministry of Finance, while discussing changes to capital gains at the Assocham's post-budget conference to analyse the tax-related proposals in the recent budget.
Malhotra underscored the significance of consultation in the budget process. “Consultation is an important part of the budget process, and many of the proposals we received from industry bodies like Assocham have been incorporated in the budget and the finance act. Simplification of capital gains is one such example, and we look forward to your continuous feedback,” Malhotra stated. He emphasised that the proposed Section 11A in the GST Act is designed to remove ambiguities and should be used only in exceptional cases.
Highlighting the industry's role, Malhotra said, “Not only are you the taxpayers, but you are also the tax collectors, the tax deductors, and the eyes and ears of the government. I am confident that you will continue to support the government in this endeavour to raise revenue for the welfare of the country, and I assure you that the government’s efforts have always been to make life as simple as possible while you are paying your taxes.”
Ravi Agrawal, Chairman, Central Board of Direct Taxes (CBDT) highlighted the budget's focus on simplification, standardisation and compliance in his address. “The purpose of tax administration is not penalty and prosecution but to provide comfort to the taxpayers. We are one of the leading nations to provide the facility of pre-filled forms, and compliance has improved because of that. Last year, we saw about 8.5 crore income tax returns, which is a significant increase. Also, about 72 lakh updated returns were filed, indicating the enhanced ease in compliance,” Agrawal stated.
Agrawal added, “The Honourable Finance Minister has announced a review of the Income Tax Act. The goal is to rationalise and simplify the act, reducing the need for professional assistance, especially for common taxpayers. We aim to make substantial progress on this in the next few months.”
Sanjay Kumar Agarwal, Chairman, Central Board of Indirect Taxes and Customs (CBIC) spoke about the budget's vision for India's development by 2047. “The goal of the government is to make India a developed nation by 2047. The budget indicates the need for simplified taxation and rationalised rates to ensure our industries remain globally competitive. The proposal to reduce import duty on 25 critical minerals to zero will boost domestic manufacturing. The reduction of Basic Custom Duty (BCD) for critical mobile components to 15 per cent reflects the sector's maturity and deeper value chain,” Agarwal noted.
Agarwal also highlighted GST revenue growth surpassing GDP growth, which reflects the GST regime's efficiencies and improved compliance. “The proposed amendments to reduce the pre-deposit amount required for filing appeals at the first stage and second stage to 10 per cent, with a cap of Rs 40 crores, will ease cash flow for businesses. The comprehensive review of the rate structure over the next six months will aim to rationalise and simplify the rate structure to facilitate ease of trade, address duty inversions, and reduce disputes,” he added.
Rahul Garg, Advisor, National Council on Direct Taxes, Assocham, set the context for the direct tax matter. He emphasised the budget’s goal of enhancing industry competitiveness by aligning with industry objectives. “Simplifying compliance through digitisation has made progress, but challenges remain due to complex laws that sometimes hinder effective digitisation. We need a two-way effort to streamline processes where digitisation may become ineffective and to adapt laws to better accommodate digital advancements,” Garg remarked.
Pratik Jain, Chairman, National Council on Indirect Taxes Assocham focused on the Indirect tax matter. He underscored the importance of simplifying the tax structure and expanding the GST framework to include additional products. Jain also praised the government’s initiatives to streamline customs processes and support Make in India. Overall, he lauded the Union Budget for aligning with the government’s goals of enhancing simplicity, transparency, and stability in the tax system.
In the panel discussion on direct tax proposals, Vikas Vasal, Co-chair, National Council on Direct Taxes, Assocham noted that the balance between public expectations and governmental revenue needs. “Every year, there is an expectation that tax rates will be reduced significantly. However, the government's need to meet its socio-economic goals often tempers this. The budget this year ticks most of the boxes and is directionally on the right track. The rationalisation of capital gains and TBS regimes are welcome steps, supporting businesses amid macroeconomic conditions,” Vasal stated.
Raman Chopra, Joint Secretary (TPL-1), CBDT, highlighted the government's responsiveness to stakeholder feedback. “We consistently receive and incorporate feedback from stakeholders. This government is extremely sensitive to stakeholder consultation. The Finance Act this year introduced 99 clauses of the Finance Act that have come up this year. Just one amendment of Section 48 is under discussion and in the remaining 98 clauses, most people have no problem. Simplification requires substantial effort in decision-making and legislating,” Chopra said.
Addressing the rationale behind the buyback tax, Chopra explained, “Promoters and substantial shareholders of private limited companies were using buyback schemes to benefit from a 20 per cent tax rate instead of the actual 37-38 per cent rate, with companies bearing the buyback cost. Buybacks emerged as an alternative due to the dividend distribution tax, with companies using this method to pass on profits to shareholders.”
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