The reviews of India’s Income Tax Act and the Customs duty rate structure, announced in this Budget, could likely be completed in time for the 2025-26 Budget, while the GST Council is expected to restart parleys on rationalising the multiple rates next month, a top government official indicated.
Finance Minister Nirmala Sitharaman has proposed a comprehensive review of the Customs duty rate structure for ease of trade and to slash disputes, along with a review of the 1961 Income Tax law to make it concise and easy to understand. Both these, she had said, would be completed in six months.
Asked if the reviews, and a policy decision based on it, may find mention in the next Budget, the official, speaking on condition of anonymity, said: “it is also possible that it may take a little longer than planned, and we can’t be certain if a final policy decision is reached on both these taxes before the Budget,” adding the exercise would be concluded by the end of this financial year.
Ms. Sitharaman had also said in her speech that the Centre would strive to further simplify and rationalise the GST structure and “endeavour to expand it to remaining sectors” such as petroleum and electricity.
“We will take stock of the progress made on GST reforms by a ministerial group, in a GST Council meeting likely in August, and seek inputs from States on the way forward. This is not something that can be wrapped up in a single meeting, and we will have to move forward working in tandem with the States,” the official said.
Seeking to quell concerns about the proposed changes in the capital gains tax regime, the official said the new tax rate structure will benefit people in almost all cases. The tax on long term capital gains has been reduced to 20% with indexation benefits, to 12.5% without indexation benefits.
“Nominal real estate returns are generally in the range of 12%-16% per year, much higher than inflation, so substantial tax savings are expected for a vast majority of such tax payers, while only cases where the returns are below 9%-11% a year, may find it problematic. But such low returns are rare in real estate,” the official said.
“In any case, investment of capital gains in bonds notified under section 54 EC of the IT Act is tax-free up to ₹50 lakh, and there is an exemption of up to ₹10 crore for buying or constructing a house with such gains,” he pointed out.
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