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The Finance Ministry has proposed to review the exemption-free new tax regime soon. The Finance Ministry says that the review is necessary to make personal income more attractive to taxpayers. Sources say the government aims to set up a system where there are no exemptions. The government wants to do away with the complicated old tax regime with exemptions and deductions.
Significantly, a new tax regime was introduced in the Union Budget 2020-21. In this, taxpayers were given the option to choose between the old regime with various deductions and exemptions and the new tax regime offering lower tax rates without exemptions and deductions. The objective behind this move by the government was to provide significant relief to individual taxpayers and simplify the Income Tax Act.
On the experience of the new tax regime, government sources said there are clear indications that those who have exhausted their home and education loans are willing to migrate to the new tax regime. Actually such people have no exemption to claim. Reducing taxes in the new regime will make the new tax regime more attractive.
A uniform tax regime for corporate taxpayers was introduced in September 2019 by significantly reducing rates and removing exemptions. The government had announced to reduce the base corporate tax from 30 per cent to 22 per cent for the then existing companies. People with annual income up to Rs 2.5 lakh pay no tax under the new tax regime for individual taxpayers announced on February 1, 2020. The tax rate is 5 per cent for income between Rs 2.5 lakh and Rs 5 lakh.
In addition, people with an income of Rs 5 lakh to Rs 7.5 lakh will have to pay a lower tax rate of 10 per cent. Similarly, between Rs 7.5 lakh to Rs 10 lakh, 15 per cent, between Rs 10 lakh and 12.5 lakh 20 per cent and between Rs 12.5 lakh and 15 lakh, at the rate of 25 per cent and above Rs 15 lakh at the rate of 30 per cent. Will have to do