The Finance Ministry is planning to review the tax system free from exemptions or concessions. Sources said that reducing the tax in the new system will make it more attractive. A similar tax system was introduced for corporate taxpayers in September 2019. In this the tax rate was reduced as well as exemptions or concessions were also abolished.
Sources said the government intends to set up a tax system that does not have any concessions. Along with this, the government wants to do away with the complicated old tax system with exemptions and deductions. A new tax system was introduced in the General Budget 2020-21.
In this new tax system, taxpayers were given the option to choose between the old regime with various deductions and exemptions and the new regime of lower rates with no exemptions and deductions.
People liking the new tax system
Sources said there are clear indications that those who have repaid their housing and education loans are willing to switch to the new tax system.
The goal is to simplify the tax system
Sources say that the purpose of introducing the new tax system in 2020-21 was to make the tax system easier for the income tax payers. At the same time, he had to further improve the choice of investor options as per his convenience, in which he should avoid making unnecessary investments in the name of tax exemption unnecessarily.
What is the current situation
In the new tax regime introduced on February 1, 2020 for individual income tax payers, people with an annual income of up to Rs 2.5 lakh would not have to pay any tax. Income between Rs 2.5 lakh and Rs 5 lakh attracts a tax of five per cent. Similarly, 10 per cent on income between Rs 5 lakh to 7.5 lakh, 15 per cent on Rs 7.5 lakh to Rs 10 lakh, 20 per cent on income between Rs 10 lakh and Rs 12.5 lakh, 25 per cent on income between Rs 12.5 and 15 lakh and Rs 15 lakh. Income above 30 percent is taxed.