India should have single direct tax regime instead of two: Revenue Secretary

India should have single direct tax regime instead of two: Revenue Secretary Sanjay Malhotra

India should have a single personal income tax regime instead of two, said Sanjay Malhotra, Secretary of the Department of Revenue, Ministry of Finance. He noted that a significant 70 percent of taxpayers have already opted for the new tax regime, signaling a clear move towards the simplified new tax regime.

"We are having two regimes under direct tax -- new and old, we should be having one," Malhotra said at the post budget session at PHD House of Commerce and Industry.

Taxpayers in India have a choice between two income tax regimes: the old regime, which offers numerous deductions and exemptions but higher tax rates, and the new regime, which provides lower tax rates but fewer deductions.

On the comprehensive review of Income Tax Act announced in the Union Budget, Malhotra said, "It is a mammoth task. Income Tax Act is of 1600 pages. It's a huge challenge. The aim of the review is to remove the exceptions in the Income Tax Act and remove provisions which are ancient."

Malhotra said that India's real estate sector saw a modest, long-term capital gains (LTCG) tax rate hike at 12.5 percent compared with the effective tax rate of 11.54 percent in 2022-23.

The Union Budget removed indexation benefits for LTCG on residential properties. This change, accompanied by a reduction in the LTCG tax rate from 20 percent to 12.5 percent, may have increased the tax burden for most property owners, especially those who held their assets for long periods. This move aimed to simplify taxes and remove the tax differential between capital gains from real estate and other assets.

Speaking about the higher capital gains announced in Budget 2024, Malhotra said: "We did study of 2022-23 of 10.5 lakh returns which have capital gains from land and building, Effective LTCG tax rate was 11.54 percent on real estate in 2022-23. which is less than tax on salaries. It's a very small tax increase in LTCG on real estate."

"We are Having huge buoyancy in tax revenues. It's growing at 40 percent more than GDP. Increase in tax buoyancy is due to increased tax compliance. Budget is trying to promote Viksit Bharat by 2047, by making tax provisions simple with less disputes as the underlining principle. Comprehensive review of Income Tax Act is a mammoth task of 1,600 pages. It's a huge challenge. Aim is to remove the exceptions in Income Tax Act, remove provisions which are ancient," added Malhotra.