New Delhi: In order to make the exemption-free new tax regime more appealing to individual income taxpayers, the finance ministry is reportedly planning to review it soon.
Eventually, according to sources, the government wants to implement a system in which there are no exemptions, ending the intricate old tax system that included exemptions and deductions.
A new tax regime was introduced in the Union Budget 2020-21. Taxpayers were given the option of choosing between the old regime, which included various deductions and exemptions, and the new regime offers lower tax rates without exemptions and deductions.
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The goal of the move was to provide significant relief to individual taxpayers while also simplifying income-tax law. When asked about the new tax regime’s experience, sources stated that there are clear signs that people who have completed their home and education loans are willing to shift to the new tax regime because they have no exemptions to claim.
According to sources, lowering taxes in the new regime would make the new tax regime more appealing.
In September 2019, a similar tax regime for corporate taxpayers was implemented, with significantly lower rates and fewer exemptions.
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The government had announced a reduction in the base corporate tax rate for existing companies to 22% from 30%, and a reduction in the base corporate tax rate for new manufacturing firms incorporated after October 1, 2019, and beginning operations before March 31, 2024, to 15% from 25%. Companies that choose these new tax rates must forego all exemptions and incentives.
Individual taxpayers with an annual income of up to 2.5 lakh rupees pay no tax under the new tax regime announced on February 1, 2020.
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The tax rate for income between 2.5 lakh and 5 lakh is 5%.
Furthermore, those with an income of 5 lakh to 7.5 lakh must pay a reduced tax rate of 10%; between 7.5 lakh and 10 lakh 15%; between 10 lakh and 12.5 lakh 20%; between 12.5 lakh and 15 lakh 25%; and above 15 lakh 30%.
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