Exemptions checklist in new tax regime might get longer

With an goal to incentivise the brand new non-obligatory revenue tax regime launched within the final Budget, the federal government proposes to tweak the checklist of eligible rebates and exemptions to permit some extra classes of monetary financial savings devices for taxpayers.
The rising view within the discussions within the run-up to the Union Budget is in favour of lowering the tax burden to push extra demand by making certain extra disposable revenue. This is aimed to be performed via tax proposals to incentivise the brand new tax regime moderately than any main overhaul within the revenue tax slabs within the earlier regime, two officers concerned within the train stated.
“The new income tax regime did not pick up the way it was anticipated. So there is a consideration to include more exemptions like provident fund in the new income tax option,” a authorities official informed The Indian Express.
In a number of of the representations made earlier than the Budget, calls for have been positioned to increase the go away journey concession money voucher scheme, extension of tax advantages for medical expenditure to all taxpayers, a hike in rate of interest limits for dwelling loans, and tax concessions for first-time homebuyers within the previous tax regime.
However, the federal government is inclined to supply extra advantages beneath the brand new regime, sources stated. The long-term focus is on ultimately shifting in the direction of a no-exemption regime – so, the brand new tax system will get precedence and incentives in comparison with the older regime, an official stated.
While presenting the Union Budget for 2020-21 in February final 12 months, Finance Minister Nirmala Sitharaman had introduced the brand new concessional revenue tax regime, whereby decrease tax charges had been launched, however at the price of foregoing numerous deductions and exemptions together with these presently out there on EPF contribution, tuition payment cost, principal and curiosity outgo on dwelling loans, normal deduction of Rs 50,000, and medical insurance coverage premium, amongst others. The new tax regime co-exists with the sooner tax system, and was made non-obligatory for taxpayers.
Under the brand new regime, a person is required to pay a ten per cent tax for revenue between Rs 5 lakh and Rs 7.5 lakh, and 15 per cent for revenue between Rs 7.5 lakh and Rs 10 lakh towards the present charge of 20 per cent within the previous regime.
There is a 20 per cent tax for revenue between Rs 10 lakh and Rs 12.5 lakh, and 25 per cent for revenue between Rs 12.5 lakh and Rs 15 lakh towards the present charge of 30 per cent for every of those classes.
Income above Rs 15 lakh is taxed on the charge of 30 per cent in each the regimes.
Queries despatched to the Finance Ministry by The Indian Express remained unanswered. The Union Budget for 2021-22 will probably be offered on February 1.
Pre-Budget discussions throughout the authorities have additionally focussed on making certain decrease oblique taxes moderately than main adjustments in direct taxes, in order to guard the federal government’s personal revenues, and unfold the advantages wider. Cuts in import duties for sectors the place the scheme for manufacturing linked incentives has been launched, could possibly be within the offing. A lower in GST on some objects might also be thought of later, which will probably be outdoors the ambit of the Budget and as per the choice of the GST Council, officers stated.
Goods and Services Tax (GST) collections have recorded an enchancment in the previous couple of months with a pickup in consumption for the reason that opening up of the financial system, whereas direct tax collections proceed to be muted with the pandemic having hit incomes.
Though direct tax collections are learnt to have picked up tempo in December, cumulatively, for the April-December interval, the federal government’s direct tax revenues declined by practically 12 per cent year-on-year to round Rs 6.12 lakh crore. On a cumulative foundation, gross GST collections, together with the shares of each the Centre and states, have contracted 14.1 per cent year-on-year throughout April-December, however have recorded a year-on-year enhance in month-to-month collections since September final 12 months.
As a part of measures to enhance demand within the financial system, the federal government final October introduced that central authorities and personal sector workers will probably be allowed to make use of their Leave Travel Concession tax-free profit for numerous kinds of purchases topic to sure circumstances. They can be required to spend 3 times the LTC fare part for buying objects that appeal to 12 per cent or extra GST.