New regime to benefit many: Officials

INCOME TAX RULES For income between ~5 lakh and ~7.5 lakh, a taxpayer will pay at the reduced rate of 10% against the current 20%

NEWDELHI:Out of total 57.8 million tax filers in the fiscal 2018-19, about 53 million claimed less than ~2 lakh income-tax deductions, while only 10% of them claimed deduction of over ~2 lakh that year, two government officials said.

Only a meagre 377,000 taxpayers claimed deductions exceeding ~4 lakh, they said.

The deductions included income-tax exemptions available under the section 80C [such as public provident fund and life insurance premium], the section 80D [mediclaim insurance], the section 80CCD(1B) [additional deduction of New Pension Scheme], deduction for housing loan interest and standard deduction, they said, requesting anonymity.

“It may be noted that in this budget proposal, not a single taxpayer is going to lose. There are significant numbers of people, who for various reasons are not able to spare money from their income to invest in the various saving instruments such as provident fund, pension schemes, interest on house loans, insurance etc., and therefore are unable to take full advantage of all deductions.Therefore, they end up paying more tax in the old regime vis-a-vis the new one,” one of the officials said.

Finance minister Nirmala Sitharaman proposed a new and simplified personal income-tax regime on Saturday that provides for significantly low tax rates for those who would opt to forgo “certain” deductions and exemptions. The old taxation regime, however, continues for such taxpayers who would like to avail exemptions.

Under the proposed new regime, an individual shall be required to pay tax at the reduced rate of 10% for income between ~5 lakh and ~7.5 lakh against the current rate of 20%. For income between ~7.5 lakh and ~10 lakh, the new tax rate is 15% against the existing rate of 20% with all exemptions.

Similarly, for the income between ~10 lakh and ~12.5 lakh, the taxpayer will pay at the reduced rate of 20% against the current rate of 30%. The income in the ~12.5 lakh to ~15 lakh slab will be taxed at the reduced rate of 25% against the existing rate of 30% as proposed in the budget. Incomes above ~15 lakh will be continued to be taxed at the rate of 30%.

“The proposed new tax regime will immensely benefit the lower incomeandlower-middleincome segments,” a second official said.

Also some of the micro, small and medium enterprises, pensioners and young people who have joined jobs recently may prefer to go for new tax regime as it would be more beneficial for them, the official said.

For example, a pensioner or senior citizen who need not make any investment in provident fund or buying a home and, therefore, he may not be able to enjoy all deductions in the old system, he said. This person would have ended up paying tax at the higher rate in the old regime, the official said.

Whereas in the new regime, even if, say, he takes exemption for the premium paid for the health insurance etc., he would still be a gainer in most of the income tax slabs. Similarly, an MSME or an entrepreneur who runs his own business and not getting any benefit like leave travel allowance, various other food coupons and housing allowance may be able to find new system beneficial.