New I-T Bill intended to simplify language, law remains same on search, seizure, says tax panel chief Panda

Panda: Well, first of all, I must thank my parliamentary colleagues. You know, a select committee constitutes members across the political spectrum—government, opposition—but all of them worked with the spirit that we are doing this for the nation. And they rose above party lines. They spoke in the interest of the taxpayer. They spoke in the interest of the job that we had on hand. And they all worked very hard.

At the same time, you’ve seen an overhauling of many obsolete and old acts. Many acts were there from the 19th century, early 20th century, which were bogging us down or holding us down in the ease of doing business index and many other things. So, when finance minister Nirmala Sitharaman announced in Parliament that we are going to overhaul the old act...the old act from 1961 had more than 4,000 amendments; it had become extremely complex.

And so, this first big step, our mandate was to vet the new draft bill which had come in. So, the government had already done a good job—that the draft bill had seen a reduction of about 50% of the verbiage, the words. The old act had five lakh-something words; the new act was 50% of that. Also, it got rid of many 19th-century language, which was very complex to understand. You had descriptive language, which is much better explained in a formula or a table.

So, this framework is, you would say, the big bang, based on which, you know, whenever policy changes are also happening, if the act is complex, even a liberal new policy gets drowned in a complex act.

Absolutely. And in India, often very simple laws are drafted in a manner that makes it very inaccessible and very, very complicated.

Panda: So, let me give you an example. In the existing act, you know, to get an idea about what kind of income is exempt from tax?

Seems like a simple question. But the answer was very complex, because there were a dozen different references in different sections and sub-clauses, and words like "notwithstanding that," "but heretofore this and that." So even experts with decades of experience would not always be able to give you a clear answer if a particular kind of income was legally exempt or not. So, in the new act, it’s all classified in one place. You go to—if you want to know what’s an exempt income—it’s listed in one place. And you don’t need to be an expert; any taxpayer can themselves look at it and understand it quite clearly.

If you could, you know, take us through the terms of reference that the committee was told to adhere to.

Panda: So, the job of a select committee is essentially to vet a piece of draft legislation, which has already been introduced in the house. So, as I said, the ministry had already done a lot of work in bringing this draft bill to Lok Sabha, which was already 50% of the size of the old act—existing act—and was much simpler. Now, our task as a select committee was to vet it: to make sure it is internally consistent; to make sure that in the process of simplification, something inadvertently unexpected was not developing because of the choice of words. So obviously, we are not going to change the policy because that’s not our mandate. Our mandate is the act as it exists—to make it simple, easy to understand, easy to comply, less ambiguous, therefore less dispute and less litigation.

So, were you able to get consensus considering, you know, there were different political parties whose representatives were part of the committee? And the number of hours that was spent in doing this—if you could take us through some of that as well.

Panda: So, I would really like to thank the members of parliament who participated, and they really took this with the national spirit. Cutting across party lines, people—the members of the committee—went over and beyond the party lines. They all spoke in the national interest and in favour of the taxpayer. In the end, we got only one dissent note. And even that is in the nature of suggestions. So, we received several suggestions; we received tens of thousands of pages of suggestions. And there were many suggestions which were in the nature of policy changes, which was not in our mandate. Our mandate was simplification: easy to understand, easy to comply, less dispute, less litigation.

Now, these are all policy changes that government takes up annually in the budget or in the finance bill. Our mandate was to make sure that the new draft bill, which seeks to replace the existing act and make it far easier to understand, far easier to comply—that it should happen in a proper fashion. And that has happened with enormous effort by all the members on the committee. We work like a team. I would really like to thank them. And, of course, the secretariat that the honourable Speaker gave us—very, very good people working, you know, burning the midnight oil on many days.

So, I wanted to come to the substantive issues that have been in the news and that have raised concerns—some of them being streamlining the TDS slabs. There are some 30 slabs, you know, ranging from 0.3% to 30% where TDS is concerned. Then the tax department getting access to an individual’s digital assets, right? So, when do we see resolutions to those kinds of concerns?

Panda: There’s a lot of misunderstanding and miscommunication. So, let me clarify. Again, let me reiterate: the new draft bill, which was introduced in Parliament, was not intended to change any policy. It is the act as it exists, but again, simplified—easy to implement and have clarity—no disputes, no litigation. Now, the misunderstanding comes from all kinds of reportage. And I hope that platforms like yours will help to clarify. So, let me explain. The search and seizure about access to digital information—so nothing has changed. The law remains exactly the same.

What has happened is some people are reading the old act, which was written in 1961, and then reading the new draft bill, and they think there is a change. That’s not the case. So, for example, in the Act as it existed—even before computers existed—the law was very clear that when a search happens, or a search and seizure happens (by the way, that has to happen not whimsically and not subjectively, but if it meets certain criteria)—when a search happens, if the person is non-cooperative—suppose they have a safe and they refuse to open it—then the department is authorized to break the lock on the safe.

Now similarly, in the digital era—even before this new draft bill—the original act itself doesn’t refer to computers because it was written in 1961. But there are court judgments. And based on those court judgments—high court judgments, Supreme Court judgments—there are internal circulars and internal rules, which today constitute the law as it exists. So same principle: if a raid happens, if a search happens, it happens because of certain criteria. It’s not whimsical. Somebody can’t decide, "I’ll just raid you." So, when a raid is—when a search is going on—whether you refuse to open a physical, like a safe or a suitcase or an almirah, or you refuse to open a laptop which has information, the principle is the same: that they’re allowed to break into it. That’s the law today.

So, some people are not comparing apples to apples. They’re looking at the old act in 1961, and they’re looking at the new draft bill. So, nothing has changed in the law.

How about the many TDS Slabs. When do we see simplicity there?

Panda: That’s a good question. So, the TDS slabs have actually come down quite a lot. Even in recent years, they used to be as many as, I believe, 15. Now they are down to six. So again. The TDS slabs have come down from about, I think, 13 or 15 to about six now. Now whether they should go down further, whether you should have only two or three rates of slabs—these are policy decisions. These decisions happen not with a change to the act, but with every year budget—the government decides further liberalization, further simplification. That happens.

The purpose of this overhaul of the act itself was that if the act is complex, no matter what new liberal policy the government introduced, it will get caught up in the convoluted act. And it will not give the benefit to taxpayers as it is intended to.

Let me go through some of the amendments which I thought were interesting—in terms of the flexibility to taxpayers. The amendments you don’t have to file returns just to escape prosecution.

Panda: Let me explain. The suggestions by a select committee are suggestive in nature. Any act which comes to parliament—any bill which comes to parliament—has to be put up by the government. So now today, our bill—as amended—as we made 334 suggestions. It’s quite a lot. So, the government had already done a very good job in simplifying the Act into this new bill—reduced word count and all of that. We further simplified it—another 334 suggestions. Now this goes back to the government, and the government is going to go through it, and it may accept it, or with some minor changes it may make. It may accept some parts and not some other parts, and then bring it back. So, we’ll have to see what is the final bill that comes to parliament.

But let me say this: the simplification—you know, you talked about whether returns are to be filed. Now remember, the number of returns that are being filed has grown exponentially. So, in the current situation, well over nine crore returns are being filed—over 90 million. One of the things the committee did was we went to Bengaluru, and we went to the central processing facility, which is world-class. Keep in mind something: out of these tens of millions of tax filings, how many get scrutinized? Only a couple of lakhs. Now, which is a very tiny fraction—very tiny fraction—of the tax filings are scrutinized. And how are they scrutinized? It’s not somebody who says, "Ah, I don’t like so-and-so." And it doesn’t happen like that.

So nowadays, because it’s all computerized, it’s data-based, and data will then generate that this needs to be scrutinized. For example, if somebody is traveling abroad ten times a year and they are filing a bare minimum income statement, it’s logical that the computer algorithm itself will suggest that you need to look at it. Now there’s a very major change that has already happened. Now in the old days, maybe there was an attitude of "gotcha"—meaning you wait for the taxpayer to make a mistake and then you grab hold of them. So, the rules have already changed, and that will carry forward into the new bill—is that it’s not a "gotcha" system. So, when something is flagged, the information is shared with the taxpayer—that "look, we have all this information, which doesn’t seem to add up with what you have filed. Do you want to look at it?"

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Now, you know, so it encourages them that "look, we have all this information, and we are giving you an opportunity to comply with the law." So, there’s no need to have any kind of coercive action or any kind of penal action. In the old days, if you had a scrutiny, it would be without sharing the information; then they might make a blunder by not declaring a proper income. Nowadays, if the full information is shared, then it encourages the taxpayer.

But there’s been a flurry of tax notices that has been sent from the tax department to startup founders left, right, and center. And the tax department has been working really overtime in terms of sending out notices because of various reasons.

Panda: So, a tax department’s job, of course, is to collect revenue. So our approach—and by the way, this is the government’s approach as well—the government’s approach is that we must find the balance: that the nation needs revenue, whether it is indirect taxes like GST (which has been giving us record revenue, which is what is making possible all the infrastructure that’s happening, all the benefits that are being given to poorer sections of society), or whether it’s income tax. But at the same time, the department’s interest in collecting revenue must be balanced with taxpayers’ interest and fairness and simplicity—ease of compliance—so that you don’t get caught up. It is well understood that historically, there has been this attitude among taxpayers—those who are first-time taxpayers—they’re even willing to pay, but they may have an attitude, right?

That is changing. As I said, that’s changing because the norms are not to trip you up and put you into trouble, but to share the information with you and encourage you to comply. And if the information is wrong, then you can dispute it. Now let me put it this way: you talked about notices going out to various people. So, notices will go out as per the laws of the land. And the laws of the land will keep evolving. By the way, every tax jurisdiction in the world—whether it is in the US or whether it is any other country—has a lot of complexity. Now in our situation, the complexity has been reducing year by year by year by year. And it will keep on reducing as the tax policy evolves, as the central government’s policy changes every year. It will keep on getting simpler and better.

And of course, our intention—apart from having a simple tax act which is easy to comply—is also that we must benchmark with other jurisdictions around the world. And the ease of doing business must be such that whether it is startup founders, or whether it is salaried employees, or whether it is small businesses, they should not feel intimidated by the system.

In terms of first appeal cases, there are about 560,000 cases that have been pending. So, what’s the thinking on that? And this acts as a big blot on our system because it’s a deterrent not only for individuals—it’s a deterrent even for companies looking at investing into the country, because this really flows into your ease of doing business.

Panda: I think you’ve raised a very important point. Of course, we must see the five lakh cases in the context of nine crore filings. We have to see it in the right perspective. But any pendency is not a good thing. Whether it is five lakh pendency, one lakh pendency, fifty pendencies—it is not a good thing. So, a lot of this happened just post-COVID. Because post-COVID, you saw systemic changes happen. And new systems were put into place such as faceless. And it led to a lot of new appeals.

Also, you have recently seen a lot of dramatic efforts being made to reduce the pendency. There are two things that agitate taxpayers and agitate policymakers: one is pendency, and one is any delays—any delays in refunds, for instance. So, if you notice, during the course of our committee’s hearings, we kept seeing newspaper reports of many new initiatives that were being taken to dramatically reduce the pendency. So, if you look at disposals, I think that’s a good way to look at it. So you’ve seen a very sharp increase in disposals of appeals within the last two years. Because certain new measures were taken. And I think more resources are being devoted to this. And you’re quite right—the pendencies should be brought down. Measures are being taken. They will be brought down.

Any specific amendments, Mr. Panda, that are your personal favorites? For instance, this one I really like—the flexibility to taxpayers. I think it will come as a huge relief to senior citizens who are just filing returns because they don’t want to be prosecuted. And it could give them a big relief.

Panda: Look, out of 334 changes that we have suggested, there are small, medium, and somewhat more important big changes. In some cases, we added back a few words. So, I’d not like to point out any favourites because there are so many different kinds of stakeholders. There are individual taxpayers, there are senior organizations, there are large multinational corporations including Indian ones. There are so many stakeholders.

So, I will just say that when, you know, five lakh-odd words had been brought down to 260,000 words, we took the attitude that, "Okay, you can add back a few hundred words if it improves clarity, if it improves ease of compliance, ease of comprehension and ease of compliance." And in a couple of cases—not very many—in a couple of cases, we actually took the stand that go back to the original wording in the existing Tax Act.

It may be slightly longer, but it is actually clearer. And so that was in a few cases. But of course, in 99% of the cases, we have found that the new simpler wording is actually better. And we’ve taken that extra effort to make sure that the vetted revised version of the draft bill, which I have laid in Parliament today, is even more simple and even easier to comprehend and comply than what was presented in Parliament five months ago.

I also want to talk to you about a recent report that you tabled in the Parliament on public sector units. And you’ve made very specific recommendations for making PSUs more accountable. So, what are the three key issues according to you that are really hurting the competitiveness of these public sector undertakings?

Panda: So that’s a different committee which I’m chairing—which is the Committee on Public Undertakings. And you’ve brought up HAL, but we’ve reviewed many, many companies in various sectors—including logistics, Container Corporation; including energy, Rural Electrification Corporation; many other kinds. The good news is that we were pleasantly surprised to see how the public sector actually has turned around in many cases. Now it’s a similar story to the banking story. If you turn the clock back a few years ago, India was saddled with huge number of NPAs and huge number of banks that were being rocked by these kinds of situations. Today, you’ve turned that around. And the banks today are much healthier today than a decade ago. Many banks are doing very well; they’re profitable; they’re increasing their reach.

I’ll give you an example: in my rural constituency of Kendrapada, I used to have a perennial request from my constituents—"Please go and talk to the banks to open a branch here, open a branch there." Today, it’s the reverse. I was driving around my constituency—you will find in fairly remote areas, there are public sector banks and private sector banks opening. So, coming back to the issue—the macro picture is that more and more public sector companies are doing better. Okay? Many of them are graduating into, say, Mini Ratna status. Those who are Mini Ratna have gone into Maharatna status, Navratna status. So, these are good signs.

Now you mentioned HAL. Being a helicopter pilot myself, I have a great deal of interest. And HAL has brought many new products, which are at various stages—either they’re at pilot testing stage, or they’ve become—they’ve got a few units produced, or they’re already into mass manufacture. It’s one of the issues was with their ALH—the Advanced Light Helicopter. Those issues have been resolved, and the light helicopters have been pressed back into service, which is very important considering our Operation Sindoor situation. So HAL is doing much better than it had done traditionally. And many of the other PSUs that we have seen are also doing very well.

The monsoon session is expected to be quite volatile. The opposition is going to be going after the BJP on several issues. You know, and after the Pahalgam attack, you were also part of the delegation that travelled to Riyadh. And this is something that might come up in the parliament as well. Did India not manage its narrative as effectively post the attacks? Because when one talks to or when one looks at Western media, there seems to be a more sympathetic outlook towards Pakistan vis-a-vis India. Did you feel that when you went to Riyadh? And do you think we could have managed that better?

Panda: Not at all. In fact, the reality is somewhat different. You mentioned this session is going to be stormy. When is it not stormy? I will reiterate the government’s stand that the government is prepared to discuss any issue—including Pahalgam, including Operation Sindoor—and it will be discussed. I think the opposition should also focus on discussing rather than disrupting, because the government is prepared to discuss. It’s not like government is shying away from it. So, I led one of the groups, and you’re right—this is the one that went to Saudi Arabia, Kuwait, Bahrain, and Algeria. And, you know, one would expect these are countries that Pakistan has cultivated over decades. These are countries that Pakistan thinks is part of its brethren. But we were all pleasantly surprised at how empathetic they were to India’s situation.

There are two, three reasons for this. These four countries have themselves faced a lot of terrorism. And they’ve taken hard action against terrorist bases, just like we have taken. And they have acted against some terrorist groups whom Pakistan has sheltered. For example, Al-Qaeda. Now Pakistan sheltered Osama bin Laden—the world’s most infamous terrorist. And these countries have faced attacks and assaults by Al-Qaeda. So, they completely understand the situation. Now, over the past decade, Prime Minister Modi has also emphasized building relations with the Middle East, with Gulf countries, with West Asia.

And several of these countries have given their highest honors to Prime Minister Modi. Now this is not just a personal thing. When our Prime Minister is given their highest civilian honor, it’s not just a personal thing for him. It’s a—it’s not just a matter of pride. Of course, we are all proud; all Indians are proud. But it goes beyond that. Because this becomes crucial in our outreach, in building our rapport with these countries. Now, Pakistan runs a narrative game. They’ve always done. You know, back in the day also—50 years ago—Pakistan used to hire lobbyists in Washington DC even though they couldn’t afford many of the basics. Yes. Because they’re always focused on narrative building.

Absolutely.

Panda: So, you could see in the popular media—even domestic and even abroad—some of this narrative. For example, many of the allegations that Pakistan made had no basis at all. There’s no satellite imagery. There is no photographic evidence. Whereas every single assertion made by India’s forces was backed up. Whether it was the Noor Khan Air Base hit, whether it was the terrorist base—everything was backed up with satellite imagery, aerial photography, everything was backed up with cross-referenced recordings. So I’ll tell you an example. Right from the beginning, India pointed out that this attack in Pahalgam was conducted by TRF—The Resistance Front—which is a new name for Lashkar-e-Taiba. Okay? Now this is an entity India had pointed out about a year ago. And again, post this, it had pointed out. What did Pakistan do? Pakistan immediately—as usual, every single time—say, "No, no, no, they’re not involved." Pakistan, in fact, took it up in the UN so that TRF should not be named as a terrorist organization. So that played to the narrative. What was the narrative? "India doesn’t have evidence." Remember that narrative?

Yes, yes.

Panda: And yet, two months later—just two days ago—the United States has now recognized and named TRF as a named terrorist organization. So, I will say this: nations have to act in their own self-interest. Now we may be friendly with many nations, but they have their own geopolitical interests. Why some nation wants to again give funds to Pakistan after that—after earlier funds have been misused so many times—you know, we have to understand they have their own geopolitical interests. Our geopolitical interest is to be very clear that this is India’s interest. This is what we have done. And we have not bluffed. Everything we have said has been backed up—including the evidence that we have given about Pakistan’s complicity—like we did for Mumbai, like we’re doing now.

Right. So, the United States, in fact, coming out with TRF being a terrorist organization is—could be considered as a validation for India?

Panda: Exactly right. Exactly right. See, since we talked about narrative—what are those narratives? There are so many fake narratives run by Pakistan. And one of the fake narratives is that India hasn’t given evidence. So that is countered and validated. India’s position is validated by the TRF being named by the US as a terrorist organization. There are many other such things. Now in the heat of the moment, so many claims and counter-claims were going around. But if you recognize, post the cessation of hostilities, Pakistan’s own politicians in their National Assembly, in their Senate, have openly acknowledged the damage that Indian forces did. So, this is the same old, same old, same old story that is spun in a new cycle. And some people seem to bite. We saw the same thing after 26/11. We saw the same thing after Pulwama. We saw the same thing after Pathankot. Pakistan has a set game plan. They first deny any involvement. They first run a narrative war that India hasn’t achieved anything. They then run a narrative war that they caused a lot of damage to India. And a few weeks or a few months later, they keep getting exposed. And then the same cycle starts again. We have to get out of this.

After 26/11, India adopted a very different strategy from the one that we adopted now.

Panda: This is a new normal. So earlier, India did not retaliate.

That’s right.

Panda: Okay. India tried...

Because we did not want to be hyphenated with Pakistan.

Panda: Look, whatever be the reason—you know, we’ve for 78 years been facing cross-border terrorism from Pakistan. The first cross-border terrorists came in 1947 October in Jammu Kashmir. Now we’ve tried everything. We’ve tried agreements with them on water, on land, on prisoners of war returned. We’ve had bus diplomacy. We’ve had cricket diplomacy. We’ve had cultural exchanges. We have had the so-called Aman Ki Asha. None of it has worked. But now there is a new normal. Under Prime Minister Modi, the Indian position has changed. We’ve had surgical strikes. We’ve had air strikes in Balakot. And this time—the first time—we’ve hit military bases of a nuclear nation. Now what is the new normal? The new normal is: we will not sit by while they attack us. While their proxy terrorists cause murder and damage in India, we will hit back. We will not intend to escalate. We intend to first hit only terrorists. Only if they escalate with military action, then only we will retaliate. Otherwise, we don’t want to escalate.

Also, it now goes further beyond. This is not a one-time thing. It was followed by the outreach visits that our delegations went on. Now there are economic sanctions. There are economic sanctions on water. There are economic sanctions on shipping. There are economic sanctions on trade and visas.

And the idea is that we want to nudge Pakistan in the right direction of course-correcting. Pakistan itself has to learn that this is not going to pay.

Do you think India is alone in this? Or do you think we have support from the other countries?

Panda: We have huge support. Listen, it is no secret to anybody in the world—unless they’ve been living on Mars or something—that Pakistan is the epicentre of terrorism. Who in the world—which policymaker—does not know that Pakistan sheltered Osama bin Laden right next to its military bases? Who doesn’t know that Pakistani involvement was there in the 9/11 attacks? Who doesn’t know that Pakistani involvement was there in the terrorist attacks in London (7/7), in Spain, in other parts of the world? They all know it. The reality is, all countries—you know, the Pakistanis themselves—when caught in difficult situations, like India has been rescuing Indians stranded abroad, and you are aware that Pakistanis have often waved the Indian flag to get rescued from war-torn countries by pretending to be Indians—that should tell you something.

The reality is, all countries know it. There are two or three countries which have helped Pakistan because of their own interests. You know the countries which provided the military assistance. They have their own interest. Even countries which play to a certain narrative globally—it’s not that they don’t know what is Pakistan; they have their own geopolitical objectives. But the reality is that everybody knows what is the situation in Pakistan. Any reprieve that Pakistan gets is not a real solution for it. Because they all siphon out the money. You know, everybody knows that whatever money Pakistan is given by whoever—international organization or nation—it doesn’t go to building roads and improving the lives of ordinary Pakistanis. It goes to funding these terror camps. It goes to funding their generals’ illegal properties abroad. They all know it.  And you know the situation—the Pakistani army was just a year ago—when common people in Pakistan were barging into the army headquarters and setting it on fire. This kind of tactical diversion is not a solution for their problems.

Okay, last question. I’m just going to get you to wear your political strategist hat on. What’s happening in Bihar? We have Mr. Chirag Paswan saying that they want to contest all 243 seats. How are you reading into, you know, what’s really going to happen in Bihar elections?

Panda: I’m not going to go into areas that I have not been focusing on. I have in the past headed my party’s responsibilities in Assam; for a while in Uttar Pradesh; recently in Delhi, where we won. I can talk about that with firsthand familiarity. I can just tell you this: look at the track record of the party—not just over the decades and over the last one year—particularly over the last one year. We’ve won states that people didn’t give us any chance. We won Haryana, we won Maharashtra. We won Delhi. So, we have done much better in J&K than we were being given credit for. I am very confident we will win. People of Bihar will bless us again. But beyond that, I don't want to comment on something I am not directly handling.

Sure. Alright. Thank you so much, Mr. Panda.