The government would want to eventually switch to an exemption-free tax regime with lower tax rates, revenue secretary Sanjay Malhotra told news agency PTI on February 2, 2023. “We would like to move towards a lower tax rate, which is simple and without tax exemptions,” Malhotra said.
The comment by the revenue secretary comes a day after finance minister Nirmala Sitharaman while presenting the Budget for FY2023-24 announced several measures to make the new tax regime more lucrative for taxpayers in India. Making Rs 7 lakh of annual income free, the finance minister also extended the benefit of the standard deduction to the new tax regime in her Budget Speech on February 1, 2023.
While stating that under the new regime, salary earners with income of up to Rs 7.5 lakh will not have to pay any income tax after taking into account the standard deduction, Malhotra said the government was certain that these measures would encourage over 50% of taxpayers to switch to the new tax regime.
“Taxpayers’ response (to the new scheme) was poor and that is why we have made it more attractive. We are confident that at least 50% of taxpayers should shift (to the new regime). And I am being conservative here,” he said. The government has also made the new tax regime as the default tax regime while giving taxpayers the option to continue paying taxes under the old tax regime if they so wish.
An analysis by the revenue department shows a taxpayer earning Rs 15 lakh in a year will have to claim deductions of at least Rs 3.75 lakh under the old tax regime. Otherwise, the new revamped tax regime with lower rates proposed in 2023-24 will be more beneficial for him.
