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We should remove exemptions and deductions in a phased manner, says CBDT chairman

The stated policy of the central government is to remove exemptions and deductions in a phased manner, Central Board of Direct Taxes (CBDT) Chairman Pramod Chandra Mody said.

“That is what happened when the corporate tax rate was cut and then the personal income tax. Gradually we must move or get ourselves conditioned to the fact that the exemptions and deductions will be ended. So, what will be the resultant gain? You get lower taxes. You cannot have both – lower tax rates and exemptions,” he noted while attending CNBC-TV18’s ‘Budget Townhall’ programme.

Speaking about the long term capital gains (LTCG) tax, Revenue Secretary Ajay Bhushan Pandey observed that the tax was introduced in 2018 and there was a logic behind it. “A lot of discussion takes place that our tax-to-GDP ratio is very low and certain kinds of incomes are not being taxed. Just like the salary income is being taxed, the business profit is being taxed, long term capital gain on the immoveable property and other asset class are taxed, so all classes of income ideally should be taxed. Long term capital gain is also a class of income and this is an established principle of taxation system which is prevalent in most parts of the world,” he pointed out.

Mody further added, “The options which have been given to both corporates and to the individuals, I think that is the way to go, they should have that option. In case the people are more comfortable or they still want to continue and join the deductions and exemptions, they can continue with the old regime.”

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