Finance Ministry: 70% of taxpayers will benefit from new income tax rates, slabs

The finance ministry expects a minimum of 80 per cent of the taxpayers to maneuver to the new tax regime, Revenue Secretary Ajay Bhushan Pandey said on Friday.

The budget 2020-21 has introduced more tax slabs and offers higher limits provided the taxpayer is prepared to forego all the prevailing exemptions and deductions including home equity credit interest, other tax savings investments.

"We feel a minimum of 80 per cent of the people will come to the new scheme," Pandey said during an interaction with opinion makers within the financial capital.

He said the govt did an analysis of 5.78 crore taxpayers before the budget and located that 69 per cent of them would save on tax payouts under the new system, while 11 per cent were found to be favouring the old regime.
Of the remaining 20 per cent taxpayers, there'll be people that want to avoid the effort of paperwork and should wish to modify over to the new regime, he said.

The government was during a “catch-22" situation because it wanted to lower tax outgoes for the people and make sure that it eases the method of tax, but didn't want to disturb the system thanks to which it made a beginning by giving people options, he said.

He noted that corporates were also given similar option when the taxes were reduced in September, which 90 per cent of corporates have embraced the exemption-free approach for lower rate now.

“A large majority of individuals will find the new regime advantageous," Pandey said.
The government introduced new tax slabs with reduced rates for an annual income of up to ₹15 lakh for those foregoing exemptions and deductions under a simplified tax regime. The new tax system is optional and a taxpayer can prefer to remain within the existing regime with exemptions and deductions.

Those earning up to ₹5 lakh won't pay any tax either within the old regime or within the new regime.

"To provide significant relief to individual taxpayers and to simplify the tax law, I propose to bring a replacement and simplified income tax regime wherein tax rates are going to be significantly reduced for the individual taxpayers who forgo all the deductions and exemptions," minister of finance Nirmala Sitharaman said within the budget speech.
Under the new tax proposal, people with an annual income of up to ₹2.5 lakh won't need to pay any tax. For income between ₹2.5 lakh to five lakh, the rate (as earlier) is 5 per cent.

Further, those with an income of ₹5 lakh to ₹7.5 lakh will need to pay a reduced rate of 10 per cent; between ₹7.5 lakh and ₹10 lakh 15 per cent; between ₹10 lakh and 12.5 lakh 20 per cent; between ₹12.5 lakh and 15 lakh 25 per cent; and above ₹15 lakh 30 per cent.

"The new tax regime shall be optional for the taxpayers. a private who is currently availing more deductions and exemption under the tax Act may prefer to avail them and still pay tax within the old regime," the minister said, adding the proposal will entail a revenue sacrifice of ₹40,000 crore once a year .
Observing that there are about 100 tax exemptions and deductions, she said 70 of them are being removed within the new simplified tax regime, while the remaining are going to be reviewed and examined in due course.

Many analysts said the move will deter individuals from investing in most asset classes like home, mutual funds and also even taking a medical insurance. Analysts also expect majority to continue with the old slabs as that get them additional deductions.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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