Incentivising green bonds to boost funding for climate adaptation projects and a special dispensation for pregnant women to exempt them from filing tax compliances for a specific period are some of the key items on the wishlist of Gokul Chaudhri, President, Tax, Deloitte India. In an interview with Business Today, he also speaks about tax certainty and providing adequate time to businesses to adapt by releasing consultation papers. Edited excerpts:
There was a lot of discussion around simplification of the capital gain tax regime in the run up to the last Budget. What are your expectations on that?
First and foremost, the Budget in February is probably going to be a Vote on Accounts rather than a full fledged Budget. But that said, the question is, whether we talk about capital gains reforms, or Pillar Two related reforms, there is a need for greater transparency around these measures, by releasing the draft legislation for public debate. We are living in a very complex environment, and what could appear to be a very simple change has a domino effect on many other things. One way to deal with it is bring out a draft discussion paper and let people participate in that because there’s less chance that there will be elements of surprises that will happen. Businesses and investors need time to adapt to a change. One of the things about tax certainty is also tax predictability.
While there is more tax certainty and India has also cut down the corporate tax rate but we are still missing out on investments…
There are two parts to this. If you look at the policy, per se, the legislation and rank it vis-a-vis that of other economies, there is very little to differentiate. I don’t think we can ever fault our tax policy for being inadequate. What really differentiated India was the fact that the same tax law could be subjected to an interpretation, which will take people by surprise.
What are your key expectations or on your wish list in terms of further tax reforms?
One of the issues on my wishlist is around climate and sustainability. Climate adaption is a big issue. SEBI has already come up with a paper which outlines all the type of projects which are entitled to claim as being green projects. All this requires financing and then the question is if green bonds are the way to incentivise flow of capital into climate adaption projects, then will the government be willing to incentivise green bonds? The second thing relates to the conversation on gender budgeting. It is not about offering women a different tax rate. There should be a provision there, that if the woman is of childbearing age, she can log in to the income tax portal when she gets pregnant and then for a certain period, the income tax authorities stop all proceedings and compliances related to her. Such a provision is in some countries.
On the personal income tax, there has been a lot of debate on the new and old tax regime. What is your take?
To each their own. Some people are accustomed to claiming deductions on their life insurance investments and mutual funds. Others like the GenZ and millenials don’t really care about this, they just want to pay their tax and go. So it is probably just two different mindsets. In an economy like India, with its demographics where 60% of people are millennials and Gen Z, requires a tax regime which caters to them. But does it mean that in catering to them, we change the system for a whole lot of people who have been paying taxes in a particular way for 30 years? This doesn’t work. So instead, the two tax regimes deal with the demographic behavioural changes and allow both to exist.