The market seems to be not having enough, There's more money than you want to have in the market already.
If at all, is 10% really too low when the gains are too high that would be the question.
So I don't know what exactly is the expectation on capital gains tax simplification, certainty, yes, I agree.
As I said, let us say up to30 lakh and just have one simple, real subtle one-page tax return form for compliance.
Do you really need to have separate rates for resident and non-resident?
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Speaking to CNBC-TV18, Sudhir Kapadia, Partner-Tax & Regulatory Svcs at EY believes a 10% long-term capital gains tax for listed securities is one of the most favourable rates globally."There's more money than you want to have in the market already. So where is the need to give further incentive on that," he said discussing market expectations of some favourable revisions in the capital gains tax regime.He suggested that instead of focusing on rate changes, which might be unnecessary given the current market conditions, the priority should be on simplifying and providing certainty in the capital gains tax system.Dinesh Kanabar, CEO of Dhruva Advisors said everyincrease in the minimum threshold limit for income tax leads to approximately ₹14,000 crore decline in government's tax revenue.There are reports the government will increase the minimum threshold for taxes from ₹3 lakh now."While ₹14,000 crore is an approximate number, that leaves a lot of money in the hands of the individuals, that money goes back into the circle for spending, that results again in a higher GST collection," he noted.: The major change which we have seen, which has been introduced in the debt space who have a level playing field with banks, which was the ask from the banks as we know that part of the reform has already been attended to. Real estate keeps coming up and it's counterintuitive that is really two years holding period long-term when you look at an asset like real estate, it used to be three years to give impetus, you made it two years. It's neither here nor there, I don't think there's much scope for tinkering with the rate per se.Long term capital gains tax for listed companies at 10% is one of the most attractive around the world. The market seems to be not having enough, There's more money than you want to have in the market already. So where is the need to give further incentive on that? If at all, is 10% really too low when the gains are too high that would be the question. So I don't know what exactly is the expectation on capital gains tax simplification, certainty, yes, I agree. I think tinkering with rates just doesn't make too much sense at this stage.: As you look at the individual tax proposals, this has been an ask which comes up every year. There was a huge expectation even last year that the government would raise the threshold level. There are two regimes, today, we have the old regime and the new regime.Fortunately, the government wants everybody to converge on to the new regime so that you don't have a lot of deductions and exemptions that you are asking for. But in either regime, every one lakh rupee reduction, or rather increase in the threshold limit, would lead to a reduction of tax revenue by about ₹14,000 crore of rupees. And remember, while ₹13,500 and ₹14,000 crore is an approximate number, that leaves a lot of money in the hands of the individuals, that money goes back into the circle for spending, that results again in a higher GST collection. So it is not ₹14,000 net going away, but really just from a direct tax perspective, that ₹14,000 crore is a number which looks like a more approximate number for every one lakh rupees in the threshold of it.: The question is why now? Shouldn't it have been done before the elections if that was the you know the whole purpose of giving this. However, leaving that aside, I don't know ₹14,000 crore would be really a big benefit or not but I think the larger question is that are we now ready to come out with a clear mandate to say let us not have a choice but simply have only one simplified personal income tax regime without any major deductions and exemptions and in lieu of that have the lower rates across least the lower slabs, let's say up to not15 lakh, but even going up to30 lakh, to give relief for those income earners for whom those deductions will no longer be available.Like when we had GST, we talked about a revenue neutral rate, such that government doesn't lose and at the same time, it is for commodities, etc. which common man uses, it is not burdensome. Similarly, we can do an exercise of a broadly revenue neutral slab rates. As I said, let us say up to30 lakh and just have one simple, real subtle one-page tax return form for compliance. That would be real reform.: As they say sometimes, be careful what you wish for and the point really is that we today do have multiple rates, we do have multiple holding periods. We have a distinction between the rate of tax payable by residents and non-residents. And even as we are putting together this whole chart and sharing it with you could see the complexity involved and therefore rationalisation is indeed needed. But rationalisation towards what is going to be an issue.The fact of the matter is that the markets have stabilised, the markets and the government is looking at huge amount of FDI. A one year holding period has been regarded as long-term for listed equities. The question is, can a similar period be also provided for unlisted equity? How should we look at real estate?So maybe some degree of distinction between equity and real estate may be warranted, but really even within equity, do you need to make distinction between listed and unlisted and do you need to have multiple surcharges? Do you really need to have separate rates for resident and non-resident? Those are the ask, but I think the most important thing, our ask was stability, our ask was that we should not see changes year-on-year. We need to communicate to the world that India is a stable tax regime. So I would rather work more towards that than go on asking for concessions and anything else.: We have talked a lot about innovation and R&D, and income tax is not certainly a driver for this, but it is one of the very important incentives which governments have given, countries that have given around the world, we attempted something, it's a little known provision on patents way back in 2016. Our analysis suggests that it has not been really helpful in any way because of the restrictions.For example, I can only use patents for earning royalties, which is, I think, very, very myopic in that sense. So the suggestion here is you had a good incentive, it's not working, we should expand it. It should be extended to anything which I earn, even through patented products, for example, if you really want to kickstart innovation and be competitive in that sphere. So I think something more meaningful, either have something or, then you not have it, if it is really not working.The second is, you mentioned about the debate around disposable income, and the other is employment. Now there is a section, again, which was introduced eight, 10 years ago, to encourage more recruitment by businesses, 80 JJ AA. But the threshold limit for salaries is very low, ₹25,000 is really low. I think that should increase to really give that incentive to employers and help employment generation in the organised sector.: The one issue which keeps coming up every year, and this year we seem to have a fair degree of acceptance, at least when we are communicating, is how do we resolve disputes sooner rather than later? What has happened today is that we have litigation piled up at Commissioner appeals levels, the tribunal, probably the most up-to-date you could file an appeal before tribunal. But again, everything goes all the way to High Court and Supreme Court and the question is, is there a way in which one can resolve disputes far faster. Is there a way in which one can put a settlement proposition where everybody, everything does not need to go all the way to litigation?So a number of asks here. One was that a dispute committee has been set up, but it has not yet been implemented. It's been out there for a year. Members have not been appointed and then again, it's for small taxpayers. So the one ask was that can this committee be activated number one and number two can we ensure that this committee takes up not just smaller disputes, but a higher level of disputes.The other question was, can we get up the threshold for things that need to go to the court? A lot of work has happened in this, but can we really look at that not everything needs to go to the High Court and the Supreme Court. Once a tribunal has passed a judgment, can resolution come to an end because government is today the biggest litigation. And again, is there a way to settle a dispute outside of the framework, can there be a committee to resolve disputes. So those are the sort of framework of what we are discussing.
