THE NEW tax regime that was announced in the Union Budget 2020-21 has had few takers until now. A big reason for this is the fact that it has no exemption for long-term investments, social security and medical insurance.
Also Read-Air India fleet expansion: Tata-owned airline to order around 500 aircraft
As such, even those in the low-income bracket have steered clear of the ‘new’ tax regime. Nevertheless, sources believe the government is likely to continue with both personal income tax regimes: the older one, which offers tax exemptions and deductions with relatively higher tax slabs, and the regime that offers concessions but no exemptions.
Also Read- UP news: Section 144 imposed in Noida till Jan 31, Lucknow till Feb 10; check restrictions here
However, the finance ministry is said to be mulling the issue of allowing certain exemptions such as those related to house rent, housing loan interest, social security and medical insurance for the newer regime. A decision will be taken within a week, before the budget.
Some experts are of the opinion that as there is not enough government support for social security or medical treatment, individuals should not have to pay tax on investments for pension, provident fund and insurance.
Individuals whose total income during the fiscal year exceeds the exemption limit of more than the gross total income of 2,50,000 are required to file income tax returns in accordance with the law.
The old system had a steep tax rate that ranged from 5 per cent for incomes between Rs 2.5 and 5 lakh to 20 per cent for incomes between Rs 5 and 10 lakh and 30 per cent for incomes above Rs 15 lakh.
Also Read- UP news: Section 144 imposed in Noida till Jan 31, Lucknow till Feb 10; check restrictions here
While there is no official data on the number of taxpayers opting for the concessional income tax regime, it is believed that less than 1 per cent of the taxpayers who filed returns through the Clear (previously ClearTax) portal have actually opted for the new regime.
If there are indeed exemptions made to the new tax regime, the adoption rate is likely to go up.
