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Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman on 7 August replied to the discussion on the Finance Bill in the Lok Sabha. In the reply she said that the government have actually simplified the taxation regime with greater transparency and ease of compliance and middle class stands to benefit under the tax regime devised by this Government. We are publishing synopsis of the speech for our esteemed readers :
The vision of the hon. Prime Minister has been to establish a simple, efficient, fair and technology-driven taxation regime in this country. The approach to taxation has been to reduce the burden on the taxpayers. We have actually simplified the taxation regime with greater transparency and ease of compliance. Several hon. Members have spoken about the tax burden on the middle class. I believe the middle class stands to benefit under the tax regime devised by this Government. In the year 2023, the slabs for the personal income tax were significantly liberalized. This Government has again revised the slabs in the new tax regime. The standard deduction for the salaried employees has also been increased from Rs. 50,000 to Rs. 75,000. In the last two years, substantial relief has been given to the middle class. We have brought in the faceless system, which is taxpayer-friendly and has infused confidence in the taxpayer. With the help of the ‘Vivad Se Vishwas’ Scheme the pending litigation and
In the year 2023, the slabs for the personal income tax were significantly liberalized. This Government has again revised the slabs in the new tax regime. The standard deduction for the salaried employees has also been increased from Rs. 50,000 to Rs. 75,000
demands have all been sorted out and relief has been brought in to a wide range of taxpayers. For start-ups, the removal of the angel tax has come as a big relief. The UPA Government introduced this tax in 2012 and now they are sitting in opposition and the Leader of the Opposition called it an exploitative tax. We have worked on it so that the burden, because of this angel tax, does not fall on small businesses.
Eventually, we have now removed it. On the Customs side, we have taken several steps to facilitate international trade, ensure processes become simpler and faster, and also to lead to lower logistics costs and compliance costs. This would certainly boost domestic production and enhance export competitiveness. Bringing down the Customs Duty on several of those items listed in this Budget was aimed at reducing the prices of raw materials and inputs, thus making domestic production far more cost-effective.
To promote trade and employment, we have in this Finance Bill proposed rate cuts on certain inputs for labour-intensive industries such as leather and textile sectors. That will boost job creation and address duty inversion issues which are prevalent in the textiles sectors. We have brought down the duty rates on 27 critical minerals, which are necessary for this country’s strategic autonomy, and on precious metals, gold and silver because India is one of the largest hubs for cutting and polishing diamonds and it creates jobs in big numbers. Duty rate cuts have also been made on certain inputs for the aqua-farming area and the marine industry so that we will be able to export more marine products, especially shrimp. I have also announced that
We have brought down the duty rates on 27 critical minerals, which are necessary for this country’s strategic autonomy, and on precious metals, gold and silver because India is one of the largest hubs for cutting and polishing diamonds and it creates jobs in big numbers
there will be a comprehensive review of the rate structure over the next six months and hopefully, at the end of that exercise, we will have a greater simplified tax structure for our country as a whole. I would like to highlight that four major steps have come for the taxpayers’ convenience. If an income tax assessor goes to his portal to file his returns, pre-filled income tax returns based on verified thirdparty information have made income reporting faster and easier. The second thing is a faceless regime of assessment and appeals has automated major IT-related processes and reduced human interface. Now, refunds are issued within days as opposed to several months. A record number of 7.28 crores of income tax returns for the year 2024-25 were filed till 31st July 2024 and 58.57 lakh income tax returns were received from first-time income tax filers indicating a widening of the tax space for which a lot of effort to nudge people has been taken up by us. Litigation mechanism is also something to which we have given a lot of attention. Reopening and reassessment of taxes have been simplified.
I want to highlight that assessment may be opened up to only five years post-assessment, but for the fourth and the fifth years, only if unreported income exceeds Rs. 50 lakh. In search cases, the period of assessment now stands reduced from ten years to only six years. We have brought in a Vivad Se Vishwas Scheme for the settlement of all pending appeals. Also, the monetary limit for filing appeals related to direct taxes, excise and service tax in tax tribunals or in High Courts or in the Supreme Court has been enhanced. This will reduce litigation and promote ease of doing business. Regarding the rationalisation of TDS rates, we have proposed in this Budget to reduce TDS rates from five per cent to two per cent – no different rates– and to eliminate Section 194F where the TDS rate is 20 percent. This will improve cash flow issues for small businesses. We have also decriminalized late payment of TDS if it is made before the deadline for filing the TDS statement itself.
Our tax proposals are aimed at inducing growth, creating employment, and bringing in investments. A few steps have been taken for the shipping companies and mining companies. Different MPs have spoken about the topic ‘tax burden on the middle class’. I would like to highlight that one narrative that corporate taxes are lower than individual taxes is not well founded. It is not based on facts. I just want to highlight that we have created new mechanisms in the last two years to deal with the pendency of appeals. It was mentioned by several Members that Income Tax deductions have been done away with, hence middle class is at a loss. I just want to highlight that the new tax regime which we brought in is simpler, and lower in rates. It also gives flexibility to the taxpayer to see where he wants to put his money in the absence of exemptions. But the old regime has not been dissolved. It is still on and is still available for people to benefit from. The new tax regime is actually helping people to see that they are paying less, they stand to benefit from the simple system. The middle class is losing out is not a right argument. Due to the fintech growth, there is greater awareness and ease of investment is happening. The investments in mutual funds have also increased tremendously. A group of hon. Members’ concern was on the capital gains tax that it is high and that the indexation has been removed. The logic of the budgetary proposal on capital gains is that it has to be standardised, simplified, and also treat equally all asset classes, so that it is easy for computation, for filing, for record-keeping.
The current Amendment that we are bringing is for land and building assets acquired by individuals and HUFs before 23rd July, 2024 and it stipulates that in the
Approximately 73 to 74 percent of this premium benefits the States. Specifically, out of every Rs. 100 collected as GST, Rs. 50 is immediately transferred to the States. Additionally, Rs. 29.55 of the Rs. 50 received by the Centre is also redistributed to the States. Thus, Rs. 74 out of every Rs. 100 in GST revenue ultimately supports the States
case of transfer of the long-term capital asset, being land or building or both, by an individual or HUF which is acquired before 23rd July, 2024, the taxpayer can compute his taxes under the new scheme, which is 12.5 per cent without indexation, and the old scheme, 20 per cent with indexation, and pay such tax which is the lower of the two. Rollover provision exists if the capital gains amount is invested in one or a second property as well. The provision of investment up to Rs. 50 lakh annually in those bonds or items which are notified under 54 EC of the Income Tax Act exists even now, and it stands to benefit the middle class.
A lot of Members have given us suggestions on GST which, certainly, I will take to the Council because the ultimate decision is in the Council. There are suggestions on GST regarding very many items. To curb the misuse of the CTH 9802 chapter in the current Budget of 2024-25, this BCD for this particular category, CTH 9802, was increased to 150 per cent in the tariff. Similarly, the bound rate for any item is determined by WTO. But tariff and ceiling rates are decided by this Parliament.
So, 150 per cent of the tariff rate under this Customs Tariff Act, 1975, which operates as a ceiling, is approved by the Parliament. Again, on the import of rare minerals, these minerals are not available in this country. Therefore, the Ministry of Mines is of the view that we need to get them at concessional or zero per cent rates. That is why we have brought its customs duty down. There was a demand to give relief on excise duty on petrol and diesel. So, the petrol and diesel prices were cut by Rs. 2 per litre across the country even in March 2024. Again, the request was received from the State of Uttar Pradesh to increase the GST rate on synthetic menthol so that the natural menthol, which is produced in this country, can be treated fairly. In this Finance Bill, it is proposed to create a separate HS code for natural menthol, and, therefore, after this, the GST Council can consider and take its decision on the matter. There was a provision regarding pre-GST for every state before GST on medical insurance. This matter was discussed during the 31st, 37th, and 47th meetings of the GST Council, indicating that it was reviewed on three separate occasions. Health insurance is subject to an 18 percent GST, with 9 percent allocated to the States and 9 percent to the Centre. In total, approximately 73 to 74 percent of this premium benefits the States. Specifically, out of every Rs. 100 collected as GST, Rs. 50 is immediately transferred to the States. Additionally, Rs. 29.55 of the Rs. 50 received by the Centre is also redistributed to the States. Thus, Rs. 74 out of every Rs. 100 in GST revenue ultimately supports the States.