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A day after the Budget announcement of a revamped personal income tax regime, Revenue Secretary Sanjay Malhotra on Thursday said the government would eventually like to move to a simple and exemption-free tax structure with lower rates.
According to an analysis by the Revenue Department, an individual earning Rs 15 lakh in a year will have to claim deductions of at least Rs 3.75 lakh under the old tax regime, otherwise the new revamped tax regime with lower rates proposed in 2023-24 will be more beneficial.
In an interview to PTI, Malhotra said the government does not have any specific timeline to make the new regime mandatory for taxpayers.
"We would like to move towards a lower tax rate, which is simple and without tax exemptions," Malhotra said.
The Budget has proposed changes to the new optional tax regime which provides that no tax would be levied on people with annual income of up to Rs 7 lakh. It also allowed taxpayers to claim standard deduction of Rs 50,000 under the new regime -- a move seen as a push for the salaried class to switch to the new tax regime where no exemptions on investments are provided.
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Malhotra said under the new regime, salary earners with income of up to Rs 7.5 lakh will not have to pay any income tax, after taking into account the standard deduction.
This deduction was earlier available only to taxpayers in the old regime.
The Budget has not given any relief to taxpayers under the old regime and said that the new tax regime will now be the "default option", meaning that taxpayers will now have to opt for the old regime while filing their tax returns.
In addition to extending the standard deduction, the Budget has also raised the exemption limit and tweaked the tax rates to make the new regime, which was originally introduced in 2020-21, attractive to taxpayers.
Under the revamped new tax regime, no tax would be levied for income up to Rs 3 lakh. Income between Rs 3-6 lakh would be taxed at 5 per cent; Rs 6-9 lakh at 10 per cent, Rs 9-12 lakh at 15 per cent, Rs 12-15 lakh at 20 per cent and income of Rs 15 lakh and above will be taxed at 30 per cent.
The new tax regime will be more beneficial for a person who does not have enough investments to claim I-T deductions.
As per the analysis by the Revenue Department, individuals with income of Rs 10 lakh will have to make investments eligible for claiming I-T deductions of at least Rs 2,62,500 to reduce his tax liability to the level of a person who is in the new tax regime.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
