On new income-tax regime
We wanted to be sure that (more) money is in the hands of the people. We have adopted the same principle by which we announced the corporate rate tax cut in September 2019. We wanted to bring the rates down eventually and remove complications in terms of compliance. Too many exemptions make life difficult for tax administrators and people keep taking experts’ advice to plan the taxes. We wanted to achieve two goals: Simplify and reduce income tax. Ideally, no exemptions would have been the best (under the new regime), but we have decided to keep those which are indispensable. In the long term, we would remove all exemptions so that the entire income-tax structure is simple.
I had set the target in July. Between July and January, finance ministry officials put in immense effort, and you will see successful disinvestment taking place in the next few months. Since our accounts have to close on March 31, I could not let the market speculate. Between July and now, a lot of legwork has been done and the benefits will accrue in the next financial year. So, you can hold me for setting the target that I could not fulfil, but for the next six months, I can stand up and tell you we have done enough groundwork.
On fiscal deficit
We had announced (the fiscal deficit target of) 3.3 per cent of GDP during the FY20 Budget
estimate. On the one hand, because of the challenging need to put more money in the hands of the people to improve consumption demand and spur public investments, expenditure went up. On the other hand, due to disaster-related incidents, compliance and goods and services tax collection came down and revenue generation could not be pressed further.
The income foregone due to a corporate tax cut accentuated the problem in revenue generation. With both opposite sides so strongly laid out, it was only obvious that without violating the FRBM (Fiscal Responsibility and Budget
Management) Act, I had to seek that escape clause and therefore sought a forbearance of 0.5 percentage points to evoke it. Going ahead, since GST collection has been robust in the past three months (over Rs 1 trillion) and the fact that more companies will come up and take the benefits of the corporate tax regime, there will be improvement in revenue collection. Also, there are clear signs of improvement in disinvestment.
On stock market reaction
I would wait for a full working day in the stock market. Today being Saturday, I am not sure if every aspect of the stock market was fully open. We would wait for Monday. I would think that the Budget will have a positive impact on stock market, particularly considering the reforms we have proposed to deepen the bond market. This is the first time ever that such a progressive and forward-looking step has been taken in the country. I would reserve my comments till Monday.
On idea behind a tax charter
It’s our commitment to ensure that taxpayers are respected. There are only three countries in the world which have enshrined the rights of taxpayers: Canada, the United States of America, and Australia. This will prove clearly that the government’s intent is not to harass anybody and we believe in it. It’s an article of faith for us to respect wealth creators.