New Delhi: An across-the-board corporate tax rate cut can only be examined when personal income-tax collection goes up, and businessmen pay more tax than the salaried class, finance secretary Hasmukh Adhia said on Monday.
Speaking at a post-budget interaction organized by industry lobby Confederation of Indian Industry, Adhia said that in many countries, personal income-tax receipts are way higher than corporate tax collections.
“When it comes to the demand for reduction in overall corporate tax rate, we are not denying that claim. However, in India, PIT (personal income tax) collection has to go up. Once that happens, we will have some more scope (for corporate tax cut),” Adhia said.
The most effective tool for improving tax compliance both on the corporate as well as the personal income-tax front is technology, he said, adding that it is important to “remove the unevenness” in tax collections arising from the salaried class paying more tax than businessmen.
The Finance Bill 2018 proposes to give a standard deduction of Rs 40,000 a year and an extra deduction for healthcare expenses and interest earned by senior citizens while seeking to levy a 10% tax on long-term capital gains (LTCG) above Rs1 lakh from equity transactions.
Tax policymakers are not happy with the situation where promoters and directors of companies pay lower taxes than the salaried class, while enjoying perks at the expense of their companies.
Adhia said economic reforms undertaken so far have led to an increase in direct tax collection.
“We are already seeing results from the major structural reforms. Rs90,000 crore of extra personal income tax has come in 2016-17 and 2017-18 (on account of reforms),” he added.
The finance secretary said that notices sent to persons who deposited large sums in banks following demonetization in November 2016 but disclosed very little income, will be taken to their logical conclusion in two-three years. “The inflow of taxes will continue,” he said.
Adhia said the post-budget sell-off in the Indian equity markets was due to weak global sentiment and not because of LTCG tax on equity transactions announced in the budget.
All gains made up to 31 January 2018 will be exempt from the LTCG tax at the time of sale. Currently India imposes a 15% tax on short-term capital gains from sale of shares within a year of purchase.livemint