New Delhi: The debate between old and tax new regimes has once again come to the forefront with Union Budget around the corner. While the new income tax regime offers lower tax rates of 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 per cent, and 30 per cent, with peak rate applicable to incomes over Rs 15 lakh, the old income tax regime has three slabs — 5 per cent, 20 per cent and 30 per cent with peak rate being levied on incomes greater than Rs 10 lakh.
On 23 January, India.com reported that the government is reviewing the less-populist, exemption-less new tax regime ahead of Union Budget 2023. Only less than half a million taxpayers have opted for the new tax regime ever since its rollout.
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As per a report published on Mint today, the government has held extensive discussions over the past few weeks to overhaul the new personal income tax regime without exemptions, with a new plan expected to be announced in the Union budget on 1 February.
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The report that quoted two persons in the know of things said that one of the proposals being examined is to add more slabs to the new income tax scheme so that the income range covered in each slab is narrower, preventing taxpayers with diverse incomes from clustering in wide slabs.
“Extensive discussions have been held, and you have to wait for the budget for the revised scheme,” the first person said, as per the report.
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“First, you have to see whether moving to the new system should be revenue-neutral or you can give up, say, 20,000-25,000 crore or so in revenue. Also, the slabs should not be such that it gives a perverse incentive for people to remain in a lower slab,” the second person cited in the aforementioned report said.
In the 23 January report, India.com had mentioned that policymakers are now examining the new tax regime more closely to see what could be done to make more people shift to the new tax regime. While one suggestion remains to raise the taxable income from Rs 2.5 lakhs, they’re considering allowing limited deductions on health insurance or housing.
Today’s report on the Mint also mentions that the discussions in the finance ministry were around two key aspects — making the new personal income tax regime simple and more acceptable, and whether the shift to the new income tax regime by a large number of individuals should be a revenue-neutral affair for the exchequer and to what extent, if at all, the government can forgo revenue so that the Centre’s overall fiscal maths does not get upset.
