Outgoing revenue secretary Tarun Bajaj believes that India’s personal income tax regime requires a “complete overhaul.”
In an interview to Financial Express, Bajaj said the government might be considering tax reforms. He also believes minimal exemptions should be given in personal income tax, and the tax brackets should be expanded.
“For instance, the tax bracket (for 20% tax) can be from Rs 5 lakh to Rs 15 lakh instead of Rs 5 lakh to Rs 10 lakh. This can be a revenue-neutral exercise and the regime will be simpler,” Bajaj told Financial Express.
“Need to align capital gains tax rates”
According to him, there is also an urgent need to align the capital gains tax rates and the holding periods across assets classes to limit market-distorting tax arbitrage among products. “(Now), there are various buckets, time periods, different tax rates, and indexation,” Bajaj said.
The focus should be on ensuring gains for most categories of individual taxpayers and improve revenue buoyancy at the same time with a larger tax base and greater compliance. He feels while certain exemptions, such as insurance premium for senior citizens, were still needed, most concessions could go. “Small savings give better interest rates and tax exemption also,” he noted.
(With agency inputs)