On Episode 829 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Shah, economist and co-founder of the XKDR Forum as well as Richa Sawhney, Partner at Grant Thornton Bharat.

SHOW NOTES

(00:00) Stories of the Day

(00:50) Trump makes a fresh gesture of temporary peace even as Israel continues to pound Tehran leaving markets confused as always

(04:28) How India is quite literally fighting to get through a tanker at a time through the Strait of Hormuz

(10:36) Should India allow the rupee to float freely and thus depreciate further?

(27:35) New Income Tax Rules are here, what do they mean?

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

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Good morning, it's Tuesday the 24th of March and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

Our top stories and themes...

U.S. President Donald Trump makes a fresh gesture of temporary peace, even as Israel continues to pound Tehran, leaving markets confused, as always.

How India is quite literally fighting to get each tanker through the Strait of Hormuz.

Should India allow the rupee to float freely and thus depreciate further?

New income tax rules are here, what do they mean?

Markets and War

The good news, if it lasts, is that U.S. President Donald Trump has announced Monday evening India time that the United States and Iran have held productive talks over the last two days and he was halting any strikes on Iranian power plants and energy infrastructure. On Wall Street futures, rose and crude prices fell to below $97 a barrel but they all pulled back a little because it all depends on what or whether Iran says anything about this.

So far, there is no acknowledgement of these talks on the Iranian side, while Israel has continued to attack targets in Tehran, leading once again one to wonder whether this was another state of hand. Pending further developments on this account, there are still a few open questions when it comes to the U.S.-Israel attack on Iran. Will they go in for an all-round attack on civilians and would it be direct attacks or, via obliterating, to use Trump's words, the country's energy infrastructure? The attacks on civilians and civil infrastructure has already started but of course could be taken to another level.

A ground invasion into Iran is also expected any moment at the State of Hormuz specifically and it would take considerable restraint on the United States and its President Donald Trump, which they obviously lack, to not launch a ground attack to open up the strait. Most warmongers, including opinion writers in publications like the Wall Street Journal, are openly calling for boots on ground to finish the project, which usually has meant that the process is already in motion. Iran, of course, has threatened to bomb right back Israel's power plants and those supplying U.S. bases across the Gulf region if Trump carries out his threat to obliterate Iran's power network, the Revolutionary Guard said in a statement on Monday.

So World War III, the stuff of James Bond movies, is already here or on the verge of it. And the script is being written and delivered fresh on Twitter, or X as it's known now, every hour. On Monday, India's Prime Minister said the fundamentals of the country's economy are strong and there was adequate availability of petroleum fertilisers and coal to weather trade and energy disruptions caused by the U.S.-Israel attack on Iran.

India has sufficient petroleum availability with strategic reserves currently exceeding 5.3 million metric tonnes and work underway to create reserves another 6.5 million tonnes, the Prime Minister told the Lok Sabha, which is the lower house of Parliament, on Monday, according to a Reuters report. He also said that the United States of India's economic fundamentals has provided significant support to the nation during this period and adequate arrangements have also been made for fertiliser supply for the summer sowing season that starts in June-July, that's when the monsoons set in, and for coal to meet the rising demand for electricity as temperatures rise. Remember, India relies on coal for almost 75% of its electricity generation.

The Indian markets had already closed by the time Trump made his five-day pause announcement and also appeared not to have taken much solace from Prime Minister Modi's assurances. So it was another tough day. The Nifty 50 was down 601 points to close at 22,512.

The Sensex was down 1,836 points to 72,696. The Nifty India Volatility Index closed 17% higher to 26.73 according to Business Standard. The Nifty mid-cap and small-cap indices were down about 3.7% and 4.1% each.

The Rupee hit another fresh all-time low and more on that shortly. The larger point is that there is extreme volatility across asset classes from stocks and bonds, where yields are rising by the way, to gold, silver, and other metals as we see. Ten-year treasuries in the US are at about 4.4% compared to about 3.9% before the US attacked Iran.

This is clearly a very tough market to call in whichever asset class you are invested or want to invest in unless you play a very long game, which of course the majority do not do.

Oil and Gas Shortages

It is tough to analyse the full impact of the energy prices and shortages that countries like India will face. Remember, there are industries which have shut down across the country.

There are industries equally which are not getting as much gas as they used to, so are therefore working at reduced capacity. Even restaurants across the country are working with much less fuel, which was usually or originally in the form of gas, or have switched to other fuels which make them less efficient. A note from Axis Capital says that nearly 4% of energy supply may remain disrupted, which means 4% of global GDP would be affected.

It also says economic damage may be exacerbated by supply chain disruptions like shortages, hurting house constructions, scarcity of fertiliser, helium, sulphur, carbon black, and so on, and then reflexivity, which is financial market turbulence. Despite efficiency gains, which are somewhat inbuilt nowadays into the overall economic system, this can hurt global GDP by more than 3%. Now this is significant.

Not many economists have released figures on impact because they're all looking for an end point, or alternatively interpreting it as a war that might last several months, but that too is a little open-ended, and I'm sure we'll start seeing figures very soon. The International Energy Agency's Executive Director Fatih Birol has said the energy crisis is very severe and that the global economy is facing a major, major threat. The situation he said is worse than the two consecutive oil crises in 1973 and 1979, in which the world lost about 10 million barrels of oil per day, and the gas market crash following Russia's invasion of Ukraine.

CNN reported Birol speaking at the National Press Club of Australia on Monday, saying that not only oil and gas, some of the vital arteries of the global economy like petrochemicals, fertilisers, sulphur, helium, their trade is all interrupted, which would have serious consequences for the global economy. Asia, he said, is at the crisis due to its reliance on the state of Hormuz, the vital waterway which Iran has effectively closed. Asia, of course, includes India.

CNN also quoted the IEA chief saying they were talking with countries including Canada and Mexico to increase oil production and release into the global market. Following the IEA's historic release of 400 million barrels of oil to ease the markets, Birol said the organisation was consulting with governments around the world and more oil could be released if necessary. But he also said that while they could put more oil in markets, that's both crude oil and products, the stock release would only help comfort the markets, but that was not the solution.

It would only help reduce the pain. He also said that at least 44 energy assets in the region, that's West Asia, have been severely or very severely damaged across nine countries, and added that rationing and COVID-style measures to conserve energy may be needed for some time with poorer nations suffering the most. And that's something that India also needs to take note of and in many ways has already taken note of and we're already seeing the rationing and in some ways the COVID-style measures of restraint.

Meanwhile, in a sign of how each day's supply of gas has to be fought for, two more Indian flagged vessels carrying liquefied petroleum gas or LPG are making their way through the Strait of Hormuz. Bloomberg quoted ship tracking data saying and adding that they were following a route taken by other ships approved by Iran that hugs the country's coastline. The two India flagged very large gas carriers Jagvasanth and Pine Gas have travelled northwards from the UAE coast towards Iran's Qeshm and Leraq islands early Monday, according to that data.

Now here are some interesting facts. A full Hormuz transit can take up to 14 hours. If Jagvasanth and Pine Gas continued on their current trajectory unhindered, they're likely to reach the other side of the Strait in the Gulf of Oman by Monday evening, said the Bloomberg report.

Now both the ships have been in the region for a while. Jagvasanth had entered the Persian Gulf via Hormuz on the 26th of February, which means two days before the war broke out. It filled up with LPG from Kuwait just hours before the war broke out and has been stuck in that region since.

Pine Gas entered on the same day and picked up its full load from Ruwais in the United Arab Emirates. These carriers were chartered by Bharat Petroleum and Hindustan Petroleum, according to sources who spoke to Bloomberg. But here's the bottom line.

The two tankers, together with an earlier pair which arrived, carry what India consumes in just two or three days, Bloomberg quoted analysts saying. And that's what brings us to the original point that each tanker has to be literally fought to ensure safe passage.

Gold Prices

Gold prices have now fallen about 22% since the conflict began on the 28th of February and about 25% from its record peak of $5,594 per ounce.

If you remember when that was reached, well, it was January 29th. That seems obviously like a long, long time ago. US gold futures for April, according to Reuters, were at about $4,267.

Now gold prices are of course swinging wildly and falling about 8% or rather more than 8% at one point on Monday, hitting a four-month low after logging its biggest weekly loss since around 1983 or 43 years. Now the stated reason for gold prices falling is that investors are unwinding positions even as the dollar strengthens and there are growing expectations of a rate hike in the United States. Spot gold has now fallen for the ninth straight session and is now, like we said, close to its futures position of about $4,266 per ounce.

Gold has fallen sharply in the past as well in 1978, 1980, 1983, and during the 2008 financial crisis, but none of these falls match the intensity of what we're seeing right now, according to Reuters.

The Rupee Interventions

The rupee hit a record low on Monday, falling to about Rs. 93.98 against the U.S. dollar, eclipsing its previous low of Rs.

93.73 on Friday and was just past the 94 per dollar mark on the interbank order matching system after the session ended at 3.30 p.m. on Monday, according to Reuters. So past 94 or at that point. Now, the rupee's depreciation has been concerning for some time now, given that it has fallen more than all other major currencies, including Asian, but this dates back to more than a year and the war has obviously accentuated it.

Ajay Shah, economist and co-founder of the XKDR Forum and who's earlier worked with India's Department of Economic Affairs and the Ministry of Finance, recently wrote in a Business Standard column that India should essentially stop intervening in the currency market and let it find its own level, a proposition that many would obviously find difficult to digest. Now, there is a reasoning, of course, and also because the rupee is a window in many ways to the health of the larger economy. I reached out to Ajay Shah and I began by asking him firstly why the rupee, in his view, was depreciating in this manner.

INTERVIEW TRANSCRIPT

Ajay Shah: Well, we in India clearly have a significant exposure to the war in Iran. Let me list the ways. We've got a chunk of remittance money coming into India from Indian migrant workers that live in the Middle East.

Potentially, if there is a big economic disruption in the Middle East, as had happened when Saddam Hussein had invaded Kuwait, then many of our people might choose to come back to India because of economic circumstances in the Middle East. And that would have an adverse impact upon the remittance flows into India. The remittance flows are probably 30-40 billion dollars a year, just money at stake.

Second, we do a significant amount of goods exports to the Middle East. So we sell clothes and shoes and frozen meat and basmati rice and fruit and so on. A lot of this goes up the Persian Gulf through the Straits of Hormuz.

And that number is similar. It's about 30-40 billion dollars. And so that is also at stake.

Case one, if the shipping is blocked, then straight away, you're stuck. There may even be a customer at the other end, but they are blocked from being able to deliver goods to the customer. Or case two, if there's an economic downturn in the Middle East, then those purchase flows would diminish, and that is not good for India.

Then the third dimension is crisis. When the flow of oil and gas from the Middle East to the world goes down, then the global price of crude oil goes up. I just want to put up a warning here that too many of us are looking at the Brent or the WTI.

These are Atlantic-based prices of crude oil. The focus here should be on the Dubai benchmark. It takes two weeks, three weeks for the global arbitrage to take place.

And so I feel you haven't seen the full impact of this war on Brent and WTI just yet. And so things are a bit worse than they seem. India is a net importer to the tune of about 4.5 million barrels a day. And so that's a direct adverse impact. It's like a consumption tax. As an aside, parenthetically, I want to say India is a big crude oil processor for about 1.5 million barrels a day. Crude oil gets imported into India, processed at refineries in India, and re-exported. So while the raw number for crude oil imports for India looks like 5.5 million barrels a day, that's not the net exposure. The net exposure is probably more like 4 million barrels a day.

So there's a price impact that Indian users of petroleum products have to pay more. And in the short term, these purchases tend to be price inelastic. So in the short term, it's like a consumption tax.

Finally, there is the problem of gas. In the case of gas, it's not just prices, but even quantities. In the short term, there's just a physical shortage of natural gas, and that could even lead to factories closing down.

So by and large, India's exposure to gas is relatively low. There are other countries with bigger exposure to gas. But still, there is exposure to gas in India, and that will also be one of the problems that we deal with.

So these are the four exposures that we have. We have an exports problem, we have a remittance problem, we have a price of petroleum products problem, and we have a physical availability of gas problem. And so this is going to affect the economy.

And I don't say this in a negative way. This is just part of life. When you are a modern, sophisticated economy, you will be connected into the world, and you will be exposed to shocks.

So there are people in India who think of strategic autonomy in an autarkic way. You know, I am a rock, I am an island, I have no connection to the world. No, that's neither desirable nor feasible.

We will be North Korea if we cut ourselves off from the world. The idea is to be deeply engaged in the world and to be resilient. Shocks will come.

Good times will come, bad times will come. And as a country, we should be resilient. Our institutions should be able to handle ups and downs, which is a natural segue into the question of the exchange rate.

So now, because of these four kinds of exposure, many Indian securities look less attractive. So for example, if you believe that there's going to be an inflationary shock and RBI is sworn to inflation targeting, they have to deliver 4% inflation. So when there are pricing shocks, they will be forced to increase interest rates, as they should.

That is their legal obligation. It's written into the law that RBI will deliver a 4% inflation target. And so bond prices will go down.

And so there should be a sell-off on the bond market ahead of time. People are not stupid. They're not going to wait for the MPC decision.

They're going to sell bonds preemptively. So the price of Indian assets goes down when all this news builds up. Similarly, equities.

Think of many companies where their prospects of earning revenues in India might be a little bit worse when faced with these four shocks. Then there has to be a decline in their share prices. So the securities markets are forward-looking.

They pick up information ahead of time. And foreigners respond to these things and they sell securities. Indian persons take money out of the country.

So all these effects play out and you get a capital flow out of the country.

Govindraj Ethiraj: Right. And so your answer is reflecting what has happened since February 28th after the United States and Israel attacked Iran. But the rupee has been depreciating steadily even before that, including against other Asian currencies.

So and why is that? I mean, why the disproportionate depreciation against the dollar when the dollar itself has been weak?

Ajay Shah: You're absolutely right to point out dollar weakness, that there has been a secular decline of the dollar after Trump took charge because the whole world is seeing a decline of American institutions. And whatever you thought the S&P 500 was worth, it's not worth as much today. And the currency is doing that work of handling the depreciation.

So if INR hangs on to the dollar, it's actually getting a depreciation. And if INR depreciates to the dollar, it's getting even more of a depreciation. I think that there's a bit of a larger problem in India about growth, that when you look at the corporate data, we're not doing well on getting sustained growth of the top line, growth of operating profits, growth of net profits.

So there's a bit of a concern that what is the dynamism of the economy? Do we have enough dynamism? And I feel that's been a drag on the economy for a couple of years now.

Govindraj Ethiraj: And you're saying that is really what's causing capital outflows and that is affecting the rupee?

Ajay Shah: See, there are also problems with Indian institutions. So many FIIs are now scared that will they face new difficulties with the income tax department because of the Mauritius Treaty. FDI flows into India have done pretty badly because too many foreign companies are fearful of economic nationalism by the Indian government.

So I think these are long term issues that have cumulated and turned into hesitation on the part of the foreigners. And what that turns into is currency depreciation. So the currency market has to keep on depreciating until Indian assets become sufficiently worthwhile.

That's how the asset markets work. That currency depreciation is the bomb that overcomes fundamental difficulties in the country. So in Iran, the exchange rate has depreciated by a huge extent to show the fair value of the exchange rate reflecting the new conditions.

Govindraj Ethiraj: And you've argued that given where we are now, for example, on Monday, we hit another fresh low that we should not be intervening in the market, as in the central bank should not be intervening or trying to prop up the rupee and rather let it depreciate further. Now, that obviously is tough to digest for most people. Why would you argue that we should not intervene?

Ajay Shah: Most people see an exchange rate depreciation as a problem that foreign goods will become costlier and that there will be a pass through to inflation. I want to show how an exchange rate depreciation is actually a part of the self-healing properties of the market economy. This is the economy healing itself.

It's like a fever. Don't bring down the fever because the fever is a part of what cures the disease. It is like that.

So an exchange rate depreciation is the solution by the market economy to problems in the economy. And let me list the ways. So way one, that there's an exchange rate depreciation that Indian exports become more competitive.

So if I'm making a shirt for 500 rupees and a foreigner will divide 500 by 100 rupees to the dollar, then it's a $5 shirt. Earlier, the foreigner was dividing at say 50 rupees to the dollar and it was a $10 shirt. So the shirt becomes cheaper and Indian exporters become more competitive.

So we get more business into India. We get more orders. They create more jobs and that is what pulls back the economy.

So exchange rate depreciation rescues the economy, makes the economy stronger. Second, there is an Indian company which faces competition from foreign goods. And this is there all over the place.

There are many many goods in India where by now India is a sophisticated modern country and many tariffs have come down quite a bit. We're not done. We're far from done.

There are many many goods in India where tariffs are 10% or above which is just unconscionable. There is no reason why Indian consumers should pay a 10% premium compared to the global price. But there are many goods where the tariff is less than 10% where the overall availability in India is really very comfortable between foreign goods and Indian goods.

Well, when the exchange rate depreciates, then the foreign goods become costlier in India. And so the Indian producers get a better market share in the country. So this bolsters production in India.

This bolsters jobs in India and it upholds the economy. So in a difficult time, currency depreciation brings more business to India, brings more jobs to India, because exporters buy more, because Indian buyers switch from imports to domestic goods. Okay, so this is pathway number two.

There is an interesting pathway number three, that we say when the exchange rate depreciates, foreign goods become more expensive. Yes, that's true. But also there are many goods where the Indian price is the world price multiplied by the exchange rate.

So for example, there is no Indian price of steel. There's only the LME price, the London price of steel, multiplied by the exchange rate. So Tata Steel gets a better revenue realisation by selling the same steel to the Indian customer.

And so once again, that bolsters revenues and profits of some kind of firms. So finally, on the capital account, Indian assets appear more attractive. So once an exchange rate depreciation takes place, then a foreigner starts thinking, okay, maybe I should be buying shares of Infosys after all, because I've also got a potential currency protection in the future that the currency might come back.

So in all these ways, a currency depreciation upholds the economy. It supports the economy. A friend in need is a friend indeed.

Exchange rate depreciation is the friend in need. In bad times, the market economy spontaneously produces an exchange rate depreciation. It is good.

It is healthy. We should embrace it. And while I'm on this subject, I also want to flip this around.

In good times, all this works in reverse. So in good times, an exchange rate appreciates and we should not protest. We should not become angry.

We should be happy. This is a force for stabilisation. In good times, it holds back the irrational exuberance.

In bad times, it holds back the irrational pessimism. That's the beauty of exchange rate volatility.

Govindraj Ethiraj: Are there many countries who intervene in the forex markets the way India's central bank does or are we one of the few ones?

Ajay Shah: Advanced emerging markets tend to grow up and step away from intervening in the currency market. So it's a bit of an underdeveloped thing that when you're a really poor country, when financial markets work poorly, when economics knowledge in the country is poor, you tend to do more exchange rate management. As countries grow up, they graduate to inflation targeting.

They open up their capital account and they get out of exchange rate targeting. So for example, in India, we have graduated to inflation targeting. It's a whole new level of economics.

The old knowledge of economics in India did not understand that the job of the central bank was to deliver a 4% CPI target. But then India evolved. Our economics improved.

And now we have it written in the law that the job of RBI is to deliver 4% inflation. So it's a part of that learning journey that as a country becomes more sophisticated, you do an inflation target. You free up the exchange rate.

The exchange rate fluctuates. Nobody should see the exchange rate as manhood. It is not a comment on whether we are a good country or a bad country.

It's a force for stabilisation. That's all. And we have to open up the capital account.

So you remove all the capital controls. This is the modernity package. All the advanced economies do this.

So if you go to any Western successful country, they do this. It's a floating exchange rate. It's an open capital account.

And it's an inflation target. This is how all the advanced countries work. And one by one, as poor countries grow up, we develop the economics knowledge in the country to graduate to this level of capability.

Govindraj Ethiraj: Right. Last question. So one of the concerns I'm guessing is that, you know, when currency depreciates and the rupee in this case, suddenly, that sends off its own signals.

I mean, what you're arguing is obviously the more macro longer term view, but in the near term to short term, it can cause panic leading to other second order effects. How does one address that?

Ajay Shah: So let's think about it. I want to break it up into two parts. The first is you do need a deep and liquid market.

So we need sophisticated markets. We need thousands of players. We need an open living playing field.

Like, for example, RBI shut down the currency futures market. That is not wise. We need more and more people participating in these markets, making them deep and liquid.

Luckily for India, the rupee is now a globally traded currency. And a lot of that trading is happening overseas. And it is beyond the reach of Reserve Bank of India.

So I think we are in good shape that we're getting sophisticated liquid market. It is just that participants in are being denied access. And I would say, why is that fair?

Why should folks in London be able to trade the rupee, but people in India are prevented from trading the rupee. But we do need to work on deep liquid market so that you get market efficiency and the currency is not jittery, doesn't just jump around irrationally. But then part two, the news breaks.

Would you rather have a price respond slowly or would you rather have a price respond quickly? Think hard. We want prices to move because we believe that they will kick off adjustments in the economy.

So for example, exchange rate depreciates. Now there are more orders for shirts made in Coimbatore and Tirupur for the world market. Would you rather have that happen quickly or would you rather have that happen slowly?

So there's nothing wrong with big, fast movements by financial prices. That's the job of finance. Finance looks forward and delivers a price change today.

The real sector moves slowly. It looks at the financial sector and it slowly responds. So would you rather have a one week delay for the guy in Tirupur to call his buddy in Japan and say, look, we are now able to give you the shirt for $4, but earlier it was $5.

Don't you think you should be giving me orders? Would you like to delay that response? I don't see why.

So we should have no hangups about rapid movements of prices. So markets should move quickly and then human beings respond. So after the price hike comes, then you start thinking, should I drive my car so much?

If the price hike doesn't come, then you'll just keep on driving your car and you'll be using petrol and that's not an efficient response for the country.

Govindraj Ethiraj: Ajay, thank you so much and always a pleasure speaking with you.

Ajay Shah: Always a pleasure being here with you. Thank you.

New IT Rules

In all of this, India is now set to see a new set of income tax rules. The Income Tax Act 2025 is replacing the existing Income Tax Act 1961 and is being implemented from the 1st of April. There'll be several shifts, small and big, for instance, in the way benefits in your salary package are taxed including company paid rent and office cost, free meals and club memberships, and there's much more.

I reached out to Richa Sawhney, partner tax at Grand Thornton, and I began by asking her how the new income tax framework was different from the existing one.

INTERVIEW TRANSCRIPT

Richa Sawhney: Govind, it's not something which we say that there is a substantive changes in law, but yet it is still very significant because the whole framework has been rewritten. And when I say framework, it means both the act, the rules, and the forms. Now, what has been done here is that the government wanted a taxation regime which is more in tune with times, something which is more modern.

So, the need was felt to replace the Older Income Tax Act, which was crafted 60 years ago. And changes have happened in that act in a very peaceman manner. So, it had become a patchy sort of a piece of legislation.

So, what has been done now is that simpler language has been used. The obsolete sections have been removed. There has been clubbing of provisions.

There is use of tables and formulas. Technical jargon has gone away. So, when I say technical jargon, there were provisos and explanations which were making it difficult for a layperson to understand law.

They have all been subsumed within the section itself. And the rules and the form, they carry the theme of simplification in a similar manner. So, overall, this is the essence of the change.

And yes, one very critical thing, we had the concept of an assessment here and a previous year earlier, which again, used to confuse many taxpayers. So, that has been done away with. Now, what we'll be using is a tax year.

So, in crux, the idea or the essence of the changes, simplicity, ease of compliance, and consequently, the ease of administration that comes along with these changes.

Govindraj Ethiraj: Right. So, one of the changes that's been talked about is in the way your perks are interpreted, or whether you can get the same tax treatment as you did earlier. So, that I'm assuming is one illustration.

Are there others?

Richa Sawhney: So, I think on the individual tax front, if I were to say, you know, last year, when the changes were made in the new tax regime, many people felt that now it is time to write off the old tax regime. You know, we had a situation where the changes in the slab rates happened and up to 12 lakh rupees, nobody was paying taxes. People felt that maybe this is how the old regime becomes redundant, it loses its sheen.

But now, what has happened is, in the rules now, changes have happened not only in allowances, in perquisites, there are changes the way HR is computed for certain cities such as Bengaluru, Pune, Hyderabad, Ahmedabad. So, all these thresholds, the exemption thresholds that have increased, they kind of give a new lease of life to the old regime. So, what it means is that even though prior to this change, 88 percent people had already moved to the old regime, but we can't really say that, you know, it's done and dusted thing.

This year, again, taxpayers can have a fresh look at their assessments, at their tax computation, see which regime works for them, and it will primarily work more for the people in the older regime with these changes, because these changes are not there in most of the new regime.

Govindraj Ethiraj: Right. And how long can one continue to use the old regime?

Richa Sawhney: There is no sunset date as such, which has been prescribed. But then, you know, you have to be conscious of how your salary structuring has been done. So, you know, for somebody where the salary structuring already is not where you can avail these benefits which are now coming in, you may still be better off in new regime.

So, case-by-case analysis would be required. And for salary, you can always do it on a year-on-year basis. If your employer, you know, re-validates or reworks your compensation structure based on these changes, then maybe you may be better off in the older regime.

You'll have to redo your computation for this year.

Govindraj Ethiraj: Right. And what is the most significant or amongst the most significant changes on the corporate tax side?

Richa Sawhney: I would say that, you know, it is more on the ease of compliance. You know, the number of forms, for instance, they have been reduced by 50 percent, almost 50 percent. These forms that have been introduced are more, these are smart forms.

They would be preferred to the extent possible. There'll be automated reconsolations. So, what it will ensure is that, you know, there are lesser chances of errors.

And therefore, compliance becomes easier for taxpayers and tax administration becomes easier for the tax department. Again, you know, on the rules, again, there's a simplification which has happened. So, I wouldn't say that there are any changes which are very significant.

There'll be more disclosure requirements. For some companies, again, you know, you make your analysis basis, which sector you're part of it. For instance, crypto exchanges, a lot of reporting requirements have come in.

So, a case-by-case analysis for each industry sector required, you know, whether read the case if you were using a particular form, more disclosure requirements have come in. So, those sort of changes are there. The substantive changes, actually, which have come in are more through the budget, 2026.

So, that in any case, you know, one has to factor in.

Govindraj Ethiraj: Right. And we've, of course, seen all the discussions and various committees working on these new income tax rules. And there's been a fair amount of, let's say, cynicism about whether this actually changes things much.

But anyway, from the other side, is the tax department also equally ready for this change? And what's your sense?

Richa Sawhney: I believe a lot of things are happening at the tax department level also. And I think taking cue from what they've presented in the standing committee report at the parliament that was at the Lok Sabha that was presented. So, it seems that a lot of training has happening for the tax officers.

There are awareness campaigns which are being considered. We've already seen some of them being launched. The e-filing portal that is being equipped to handle the parallel operation of both the regimes, how data will be synchronised at the back end.

In fact, the forms, there are about 190 forms in the new regime. So, what they are looking at is that the 54 time-sensitive forms which are immediately required by taxpayers, the utilities for those forms will be immediately made available by 31st March. And beyond that, you know, they will keep releasing the utilities in a phased manner so that there is a smooth transition for the rules also, the forms also.

Govindraj Ethiraj: Right. Thank you so much for joining me.

Richa Sawhney: Thanks for having me here.