Income Tax rebate will not make tax base narrower: Garg

Income Tax rebate will not make tax base narrower: Garg

In conversation: Subhash Chandra Garg, Secretary, Department of Economic Affairs

All interim Budgets are presented for the full year. The vote-on-account is taken for four months. This government also did the same: Garg

The government’s proposal of Rs 6,000 assured income every year for farmers cannot be called a drop in the ocean. The government provides various layers of support to them in the form of subsidies, Minimum Support Price so on and so forth. The new scheme is an additional layer of monetary security.

The government has decided to give this additional benefit to farmers because their agricultural income is not enough to support them especially when food prices are so low, says Subhash Chandra Garg, Secretary, Department of Economic Affairs in an exclusive interview with Annapurna Singh of DH.

The new income tax benefit gives relief to 3 crore people. Does it mean you are taking as many people out of the tax net and hence making the tax base narrower?

This is not taking people out of the tax net. This means if your taxable income is less than Rs 5 lakh, then whatever taxes you are paying will be given back to you as a rebate. Since everyone, who has an income of up to Rs 5 lakh, will have to file the return, and nobody is going out of the tax net. It is only that they are not paying taxes on a net basis but they are filing returns every year and that means they are very much within the tax net.

Even if they are in the tax net, there is no revenue gain to the government from them?

Yes, but the tax base and income generation from taxes are two different things. So far as revenues are concerned, we have doubled our direct tax collections this year. So, that is not a problem. We have a balance of Rs 4 lakh crore in the personal income tax side. The government is sacrificing Rs 17,000 crore in the exercise but that will be taken care of.

What was the idea behind not increasing exemptions?

In principle, if you raise the limit, then everyone gets the benefit. So, those who pay a higher amount of taxes also get the benefit. In that case, the cost to exchequer will double or maybe even higher. The idea is those who are well off, can afford not to take the benefit of exemptions. In fact, when you raise the exemptions, you facilitate the taxpayers’ movement out of the net.

What about the benefit to farmers? Rs 6,000 per year is not a drop in the ocean? Also, you are giving benefits to those who have two hectares of land but most farmers in India are landless?

If someone is a farmer, he has to have land. The one without land can be called a farm labourer. For them, we have programmes like MNREGS. You have assured employment. For 100 days of work, if the average wage is Rs 250 per day, you are getting Rs 25,000 of income. Farmers are those who rely only on farm income. They are supported by various other programmes. We have subsidy programmes for them whereby we subsidise fertiliser, seed, and electricity for them. We also have the MSP programme, which continues to run. Those are two layers. This is the third layer on top. It should not be seen in isolation or the only programme. It should be seen as a part of the larger programme. The need for this arose when we realised that with low food inflation, the agricultural price income did not support a farmer. We decided to provide supplementary income to support them and that is the whole logic. We have made the provision for all the expenditure in the Budget. Rs 20,000 crore this year and Rs 75,000 crore, the next.

It is because of such measures that we have breached the fiscal deficit target?

The fiscal deficit has been breached from 3.33% to 3.60% only. I am very sure that when the actual numbers come in April, we will have covered that.

This Budget surpassed all the limits of an interim Budget. You also tinkered with direct taxes for the first time ever?

All interim Budgets are presented for the full year. The vote-on-account is taken for four months. This government also did the same. On the taxation side, there is nothing in the Constitution to prevent you from doing that. It is not something being done for the first time. In the last interim Budget also there were duty adjustments on indirect taxes side.

Indirect taxes can be imposed or revoked at any time of the year. But direct tax measures come only in the beginning of the financial year?

Does not matter. You can make adjustments in the duties any time. The enforcement can be done when the financial year begins. Besides, I do not see any reason in doing something which is desirable and which cannot wait. For example, there is an additional item in the finance bill to reform the stamp duty arrangement. It will reform the financial transactions in the stock market. Similarly the direct tax...

This interim Budget was a large exercise. Should we presume that if the same government comes after the elections, there will be no more Budget in July?

A fresh Budget is always presented by the new government. We have taken the grant only for four months. The new government has to present the Budget again in July to get expenditure sanction for the remaining period.

How do we link high economic growth and high unemployment? Do you agree with the charge of jobless growth?

Unemployment in the country is not very high. We have more of disguised unemployment, more of low wage problem rather than unemployment. We do not have any official number yet. We have four different ways to measure employment or unemployment. Let us wait for the final data to come. But, even if officially it is 5% or 6%. For a country like India, it is not very high. We need to probably think of how we increase the income of our people. With low income, low wage jobs, we are not going anywhere. We have to think more in terms of generating economic activities in the country.

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