A day after she presented her second Budget, Business Today caught up with Finance Minister Nirmala Sitharaman in her North Block office to find out the reasoning behind the key initiatives in Budget 2020
Did you have any particular constituencies in mind while preparing the Budget?
I don't think I had any specific constituency in mind. I didn't go through a sectoral approach where I have to do something for a sector or industry. We were looking at the economy at large and the macro-economic fundamentals being what they are, how are we going to move forward.
What were the assumptions behind the Rs 40,000 crore income tax revenue forgone?
That's based on an approximate calculation. You have a taxation regime with over 120 exemptions. I'm an honest taxpayer and want to pay tax. From the income I get after availing all exemptions available to me which is my right, I can pay this much tax. I pick up a few exemptions for which I can spend money. As a department I will know how much you pay after exemptions used. But it would be very difficult for me to estimate from this, how many would find it beneficial to come into the new regime. If the taxpayer sees benefit in moving to the new one this is what I will forgo. That is the approximation we have done.
The rich are saying that the government wants us to create wealth, yet we are the most taxed...
We made deep cuts in the rate for middle and lower middle income groups. The idea was they should have more money in hand. They may choose to save it, buy a flat or a vehicle or invest in stocks and shares. The money had to go into the hands of the middle and lower middle income groups. The second objective was to gradually move towards a regime where tax rates will be significantly lower than today. And it will be simpler to comply, which could mean remove exemptions. In some countries, they say if you are earning Rs 20,000 you pay Rs 2,000 or Rs 5,000 and the rest is yours. I am not saying we are going towards that. But the system should become simpler to comply. Today, I can easily say, paanch saal ke baad hum simpler system banayenge (we will make a simpler system after five years). The intention is to lay the foundation for it. We started the process not to say the old scheme is removed and everybody should come into this. Who is forcing you? That's the logic.
Are you going to tax NRI income?
An NRI who lives in Dubai or another country, earns money there. He is not taxed at all, but has some earnings through something in India. But since he doesn't live here, he doesn't pay tax here. We are saying, for that income which is generated in India, pay a tax.
If he is earning something in a jurisdiction where there is no tax, why will I include that into mine? That is being generated there. If you have property here and earn rent out of it, but since you live in a tax-free jurisdiction, you carry this rent into your income there and pay no tax there and pay no tax here. Since the rent is coming from here, I have the sovereign right to take that into my consideration or not. I'm not taxing what you are earning in Dubai.
How much revenue do you expect from the direct tax amnesty scheme?
The recent experience in indirect taxation dispute redressal shows that the majority of taxpayers came to a settlement. Yes, in high-value disputes, many chose to go through the legal route. Thats fine, it's a choice we have given. Going by experience, we feel that will happen in direct taxation, too.
When I moved around the country, looking at tax administration, we took inputs from various sections and came up with a scheme. Since there is popular demand, we think there will be a good response.
What are the spending priorities of the government?
The government's responsibility is towards giving the necessary impetus to the economy, which we have taken seriously. We have also laid the path before everybody to see where the money is going to be spent. It is investment in creation of infrastructure and asset creation. There is a cascading effect of that on the economy, like jobs created in situ or core industries, which will benefit by the demand for their products and so on. So, both immediate and long-term infrastructure is an area in which we think it is worth spending and that is how public spending should happen.
What is the reasoning behind withdrawal of tax exemption on life insurance?
I am not sure if every salaried person is waiting for the incentive to insure his life. Today, when you have moved out of the socialist model of governing your economy and opened up stock markets, it is for the person to take a call on where to invest. So if there is a worry that insurance will come down, I tend to believe that this incentive alone is not the reason. If at all it does have a bearing, with other options open, it will only go towards something else which is also going to help the economy. They can put it in mutual funds, they can buy bonds... So there is no need to worry that if it is not invested here, it will be thrown into the sea.
Why the expenditure cuts?
I don't think we have reduced anybody's money. Let's be practical and real. At the time of the July Budget, with not even six months before the Revised Estimates coming in, should we not be realistic enough to understand what the absorption capacity is? I do give an annual target, but actually you have only six months before the RE comes in. So do I, because I have made this Budget Estimate. Whatever you have utilised, that is all I will claim.
How realistic is the Rs 2.1 lakh crore disinvestment target?
The last Budget was in July 2019, and I did not have full 12 months. That doesn't mean DIPAM (Department of Investment and Public Asset Management) did nothing. They have done a massive amount of work. In Air India, for instance, they have already come to issuing the Expression of Interest. Similarly, on others, they are rushing to do the necessary footwork. For every such deal, sufficient time needs to be given to those who want to consider it. Now, if all that is happening, and because I have said (about Air India sale) in July, if I am not getting the money out of the sale by March 31, you can say that you gave a number and you have not even sold it. So what's the guarantee you will sell it the next day? It is a legitimate question to ask. But look at the reasons behind it. Then you may ask, did you know about this in July? Of course, I knew it. But I also need to ensure that these things are happening.