Budget 2024 is an exercise to simplify the tax regime - Revenue Secretary Sanjay Malhotra

The government is making efforts to simplify the tax regime and treat all asset classes similarly for taxation, revenue secretary Sanjay Malhotra said in an interview with Hindustan Times.

The government is making efforts to simplify the tax regime and treat all asset classes similarly for taxation, revenue secretary Sanjay Malhotra said in an interview with Hindustan Times. This principle has been applied when the budget proposed to remove indexation from the long-term capital gains in real estate, he said. Edited excerpts:

The budget’s proposal to remove indexation from the long-term capital gains in real estate is an effort to simply the tax regime, said Sanjay Malhotra (PTI)

The Economic Survey has expressed concerns about rising short-term investments such as futures and options in the stock market. Do you think that more tax measures are required to curb this?

F&O trading in India and the world is high. Whether it is a matter of concern from a systemic point of view, I do not think so. But certainly, like lottery or other sin goods, if some people are indulging in this excessively, then that is not good for them and for the country generally.

This (tax measures) in itself will not reduce this tendency, but is a signal that this is something which should be avoided, like high taxes on sin goods may not necessarily reduce their consumption. But, they do signify that this is something the government does not wish to promote, like cigarette, like alcohol.

There is a perception that the middle class has not been given enough in the budget. Is it true?

I think there is enough in this budget for the middle class. First of all, on the expenditure side, a lot has to be done -- on employment, on skill upgradation and on education. MSMEs (Micro, Small and Medium Enterprises), which are again connected with the middle class, have a number of schemes. Similarly, on the taxation side also there are a number of measures. Three of them are standard deductions for salaried and pensioners have been increased, deductions have been increased for family pensioners, and tax rates have been reduced. So, all these are done keeping the interest of the middle class in mind.

The tax rate has been reduced only for the new regime. People opting for the old regime with exemptions have been given nothing.

It is the stated policy of the government to move away from exemptions and deductions. That’s why whatever tax tweaks have been done, they are done only in the new tax regime.

If that is the stated policy, why not to abolish the old regime now and move to the new tax regime?

We want to encourage people to move to the new regime on their own rather than removing the old tax regime.

There is a general perception that people moving to the new regime may not be compulsorily opt for savings schemes or life insurance policies.

That’s why this new tax regime is there, where people can take their own investment decisions, whether they want to invest in a pension scheme, whether they want to invest in provident fund or insurance scheme or in equities. We have left it to the individuals to decide what is beneficial for them. Why should we push them? The rate is lower in the new regime and they (taxpayers) have the freedom to choose investment assets that they want to invest in.

The budget tweaked the long-term capital gains regime by removing indexation. Why? Is the government trying to extract more from real estate transactions?

First of all, it is a simplification. There is one rate for all assets. I don’t understand as to how the government is trying to extract more from real estate when given from securities, you know, the tax rate is the same 12.5%. It’s the same across all asset classes. To say that the government is trying to extract more from real estate is not correct. It is, as I mentioned, an exercise to simplify the tax regime. It is an exercise to remove the tax arbitrage between various asset classes in so far as capital gains is concerned. It is an exercise to reduce the difference between the tax rates on capital gains and other income.

By removing indexation, the factoring in of inflation is removed.

There is no factoring in of inflation in others such as in interest earnings. There is no factoring in of inflation in salary income. There is no factoring in of inflation in shares. We have removed indexation from all. And, there is the benefit for those who are investing in houses. If they invest the proceeds (only the capital gains from the sale proceeds) in another house, there is no tax. This benefit is not there in shares. Here, you sell the share to buy another share, you still pay capital gains tax.

But in houses, you sell one home and you buy another house in the same city or in another city, as long as the amount is less than ₹10 crore, there is no tax. We have already provided a preferential regime for houses because people can be selling houses to buy another, which is fair enough. There is no tax. But, if that (sale proceeds) is not used (reinvest) in a house, then it is an income. Income does not have any colour. The value remains the same, whether it is from sale of shares or from sale of real estate.