A lot of effort has been made by the department to develop taxpayer confidence: CBDT Chairman

The income tax department has made a lot of effort to build the confidence of taxpayers through initiatives and the use of technology. This has led to higher compliance and increase in the direct tax collection as well as widening of the taxpayer base, believes Nitin Gupta, Chairman, Central Board of Direct Taxes. In a post Budget interview to BT, Gupta also says that about 60% of taxpayers may move to the new income tax regime. Edited excerpts:

The direct tax-to-GDP ratio rose to the highest level in 15 years last fiscal and tax collection trends have been robust. What do you attribute this increase to?

In FY24, the target vis à vis the actual collections of 2022-23 is 16.95% or Rs 19.45 lakh crore in absolute numbers, which is the highest ever target given to us by the government. We think we would be able to meet it looking to the present trend of growth in collections. This translates into a direct tax to GDP ratio of 6.6, which is also one of the highest never achieved earlier. This is a proud moment for us. In FY25, the target as of now is to grow at 13% to Rs 21.98 lakh crore, which translates into direct tax-to-GDP ratio of 6.7. I think the targets laid down are quite realistic and achievable.

How have you managed to increase compliance by taxpayers?

A lot of effort has been made by the department to develop confidence with the taxpayer, which is now bearing fruit. Over the past few years, we have taken a number of steps to facilitate the taxpayer and the taxpayer is also reciprocating in paying the taxes and in complying with the tax laws. This is visible in the absolute number of collections as well as the increase in the tax base as well. The number of returns filed for Assessment Year 2022-23 was 5% higher and in the current year for AY 2023-24, the number of returns filed are 9% higher. In the last five years or so, there has been greater adoption of technology to benefit the taxpayers, such as the AIS statement or the revised 26AS statement, pre-filled income tax returns as well as updated returns and faster processing of returns. Our approach is to nudge the taxpayer. The last date for filing revised return was December 31, 2023 and we sent around 44 lakh emails in the form of polite emails wherever we found that the return which is filed by the taxpayer and the data which we have about the financial data or financial transactions undertaken or assets acquired is not in sync with each other.

How is the adoption of the new income tax regime?

We expect 60% of taxpayers will be shifting to the new regime. This is because the benefit under the new regime of 2023 is to all categories of taxpayers, it is not limited to low income group or middle income group, it is applicable even to high income group as the surcharge is slashed there. People have tax exemption up to Rs 7 lakh and if they are a salaried employee, then they do not have to pay tax up to Rs 7.5 lakh per annum.  

Would the old tax regime gradually be phased out?

As of now, there is no such plan. It is the choice of the taxpayer. We are not saying anything to the taxpayer as to which regime they should adopt. But the thrust of the tax policy on the corporate tax has been a deduction free, exemption free regime, which is simpler and easy to implement. And I think with that thrust, things will move in that direction.

People were hoping for some more benefit on standard deduction in the Interim Budget?

There has to be stability, we can’t tweak the tax rates every time it should also not be the case. In the last Budget of 2023, we had given this benefit of standard deduction of Rs 50,000 to the new regime.

What has been the collection from the TDS on online gaming and on virtual digital assets?

About Rs 1,080 crore was collected by way of TDS from online gaming by January 31, 2024. This is a new tax and there was no target for it. TDS from virtual digital assets have brought in Rs 180 crore by Janaury 31, 2024, which is comparable to last year when Rs 220 crore was collected.

There is some confusion on tax collected at source on foreign remittances under LRS for the three-month period from July 2023?

The amendment which was made through Finance Act 2023 was applicable from July 1 2023 and then in between in June, a press release was issued, which has now been converted into a legislative proposal in this budget. And for this period from July to October, what the Finance Bill, 2024 says is by way of proviso that the old provision will continue to apply. So, in effect it is the press release which is operational.