The government had made a provision of double tax slabs three years ago to give relief to the taxpayers.
In the new tax regime, the tax rates were reduced by eliminating the option of income tax exemption, but its benefit did not show and till now the number of taxpayers adopting the new regime is negligible. Keeping this in mind, the government is considering ending this system.
New Delhi. In the general budget to be presented on February 1 next year, the government can make a big announcement regarding personal income tax. A high official related to the matter says that in the budget of the financial year 2023-24, an announcement can be made to abolish the new tax regime. Under this, taxpayers get the option of lower tax rate, but the benefit of tax-exempt investment options ends.
According to media report , an official related to the matter said that the government had implemented the new tax regime in the financial year 2020-21. In this, taxpayers get the option of low rate tax slab. However, taxpayers who adopt this regime stop getting the benefit of tax exemption on any investment. Now that three years have passed since the introduction of the new tax regime, most of the taxpayers have adopted the old tax slab.
finance ministry now budget and is also reviewing the rules related to income tax. The official says that the purpose of the government regarding tax is to reduce the burden on the taxpayers. We introduced the new tax regime so that taxpayers with low tax brackets do not get burdened.
Why the new tax regime failed
Under the new tax regime, taxpayers have to pay tax on income above Rs 2.5 lakh. At the same time, income up to Rs 5 lakh in the old tax regime remains tax free. This is the biggest reason why taxpayers insist on adopting the old tax regime. About 75 percent of the taxpayers who file income tax returns every year fall in the income bracket of less than 5 lakhs and they get tax exemption up to Rs 5 lakhs. On the other hand, even though the rate of tax is lower in the new tax regime, there is no exemption in it at all. Only 1% of taxpayers who filed returns this year on the income tax web portal Clear had adopted the new tax regime.
Government should make something special
The high official said that the government will have to make some special plans regarding the tax exemption limit along with reducing the slab. People will also benefit from this and if more taxpayers file returns, then the tax collection in the government treasury will also increase. Actually, in the old tax regime from 2.5 to 5 lakhs, the tax rate is 5 percent, but as soon as your income goes above 5 lakhs, the tax rate increases to 20 percent, which remains the same till 10 lakhs. It does not seem logical in any way to suddenly increase the tax rate from 5 per cent to 20 per cent.
