Individual income taxpayers will be free to choose between the old tax return filing structure and the newly introduced structure with lower tax slabs every assessment year. While the old scheme with higher tax slabs allows many investments or expenses to be exempt from the taxable income, the new one has a lower tax slab but without any key exemptions.
Depending on which one is more beneficial, the appropriate option can be chosen, PC Mody, Chairman, Central Board of Direct Taxes (CBDT), said.
Speaking at an interactive session on Union Budget 2020-21, organised by FICCI in Delhi, Mody said the new structure was introduced to give an option to the taxpayer to choose and file the best-suited tax filing structure. “This is an optional scheme and there is no compulsion to shift to the new scheme. This option is available to you on year-on-year basis. I feel that the younger generation will find it very interesting to go in for the new regime,” he said.
According to Mody, the stated policy of the government is to do away with exemptions. He also said that the department’s analysis showed that very few taxpayers are availing exemptions beyond Rs 2 lakh.
“As the tax base gets broader, there is a chance of tweaking the tax rates as there is a large portion of unorganised sector which is outside the tax framework and they should be encouraged to become part of tax framework,” Mody added.
He said that the government wants to trust the taxpayers and is making an effort to move the tax administration in that direction. “Government’s primary onus is to move towards a simple, lean and straightforward tax structure and one that is easy to comply with.”
Incidentally, the new tax filing structure will be flexible only for the salaried class as the option for individual who has business income may have to ensure that the option once exercised remains valid for all subsequent years.
