Rumours are swirling that a new income tax scheme to give the cash-strapped Indian government nearly INR 2 lakh crore (approx. $28.1 billion) will be revealed at India's Union Budget 2020-2021 later on Saturday.
In a bid to boost falling revenues, the speculated scheme would focus on resolving income tax legacy disputes, per media reports.
Currently, the flow of nearly INR 5 lakh crore (approx. $70.4 billion) remains obstructed because of pending legacy disputes in personal as well as corporate income tax.
Until now, to resolve Income Tax disputes companies as well as individuals have gone through the courts, which is not only time-consuming, but also a serious roadblock to tax collection targets.
Prime Minister Narendra Modi, who aims to transform India into a $5 trillion economy by 2024, has flagged issues concerning tax disputes, with his government reportedly expecting corporations and individuals to come forward and benefit from this scheme.
In 2019, Union Finance Minister Nirmala Sitharaman unveiled a scheme titled “Sabka Vishwas”, aiming to settle disputes over the service tax and central excise in India. The scheme managed to achieve its target of collecting INR 35,000 crore ($4.9 billion) and was concluded on 15 January 2020.
The success of the “Sabka Vishwas” scheme could be the reason the government might be planning to introduce a similar strategy to resolve legacy disputes.
While Sitharaman will be presenting her second budget for the year 2020-2021, she has to make a choice between growth and fiscal consolidation. The alternative, opting for growth by increasing government expenditures, would mean compromising on fiscal consolidation targets.