‘Indexation will benefit most. Govt may forego revenue from real estate capital gains changes’

Revenue Secretary Sanjay Malhotra says that the govt has not estimated any revenue gain from changes in capital gains tax on real estate. In an interview to TOI, Malhotra says people are not looking at the reduction in tax rate from 20% to 12.5%
There are apprehensions about the changes to capital gains tax, particularly from the real estate point of view as indexation has been scrapped.

Could you explain the impact on taxpayers?
This exercise should be seen as a rationalisation exercise. It’s a simplification exercise. Govt has always endeavoured towards a simple tax regime, one that is easy to comprehend and easy to implement. In line with this vision, govt introduced GST. It was a monumental reform. Similarly, even on the income tax side, you have seen a number of measures for simplification that have been announced while some are in the pipeline, including the comprehensive review of income tax. Now, this is only one small measure relative to capital gains. Most people will gain from the removal of indexation. Firstly, unlisted companies stand to hugely gain from this 20% with indexation because their returns every year is generally more than 13%- 14%- 5%. They have widely welcomed this move for removal of indexation. My strong belief is that even in real estate, a vast majority will actually benefit. What people are really looking at is that indexation has been removed, not at the reduction in the tax rate from 20% to 12.5%.
What would have been the average?

My understanding is that the average would be much more than 12.5%.
There is apprehension that it is some kind of a backdoor entry of wealth tax…
Not at all. This is a canard being spread by some people. There is no inheritance tax. If you reinvest this money in buying another house, your wealth remains and there is no tax on it. But if you sell it generate cash, then that becomes taxable, as is the case with shares. If you reinvest the proceeds from the shares, or the capital gains part, again into shares, there is no such benefit; or even for equity mutual funds. So, to say this is a tax on wealth or inheritance is totally false and baseless.

Is there any estimate of the revenue that you will get from this measure?
From real estate we have estimated nil. Our estimate is that it is nil, revenue it may even be negative.
FM has promised a comprehensive review of the income tax law. There was a report earlier too so how will you proceed?
That exercise was completed and many of its provisions have been incorporated. The purpose is to really make it more simple, lucid, as the FM announced. People should be able to read and understand it easily. It will be a complete review and wherever we need rewriting we will do it. We will take into account whatever work has been done. An internal committee of officers undertake the review and also consult stakeholders.
There are complaints that the income tax portal is slow. What are your views?
These are implementation issues. The Microsoft servers were down. So these are technology issues. We are monitoring it for the last few days. It’s been very, very smooth. We’ve got about 22 lakh returns on Tuesday. The peak filing is 50 lakh. We are monitoring the performance of the portal and we will do whatever is necessary.
So any possibility of extending the last date for filing returns?
No, not at all. That is not on the cards. We are very confident that we will be able to smoothly accept all returns by July 31.
Why did the govt decide against extending the benefit of lower tax for new manufacturing units?
Our tax rates are very reasonable, it works out of around 25%. We are confident that these rates will help attract good investment. We have taken a number of measures in the budget to further spur investment – angel tax has been removed, tax on foreign companies have been lowered. There have been changes on the indirect taxes side to help manufacturing.