Through the motive to make it effective for the one’s income assessees, the centre would work to rectify the 2-year former exceptions free income tax regime, furnishing fewer tax rates post to the failure of the new system to attain the benchmark.
Finance Ministry, seems to remove the old personal income tax regime, that provides various deductions and advantages. The motive of the government is to ease the income tax law and remove the limitations, learned by the experts. It is a complex process in between various deductions and advantages open to the assessee.
It is effective to mention that the Union budget 2020-21 specified the latest tax regime and the individual assessee, secures the choice to choose either the former regime with the other deductions and exemptions or the latest tax regime which provides lesser tax rates with no exemptions and deductions.
Read Also: Income Tax Conditions When Your Deductions Will Be Taxable
“We have not seen much traction for the new personal income tax regime without exemptions so far… Those already taking benefits of insurance or house rent would not like to opt for a regime that does not offer any incentive. There is a need to sweeten the new income tax regime to find takers,” said a tax expert.
When the rates get lowered in the new tax regime, then the new tax regime shall draw attention. In September 2019, the finance ministry initiate a similar tax regime for corporate assessees through lesser rates and eliminating exemptions.
Recommended: Easy Way to Switch New to Old Income Tax Scheme for Taxpayers
There must be exclusively one personal income tax scheme. “We will need to see if we need to lower the tax rates or rework the slabs to make it attractive … People who make more money should pay more tax; those who make less money should pay less,” said a tax expert.
Under the new tax regime, towards the person notified dated 1st February 2020, an exemption is there for people who have a yearly income of up to Rs 2.5 lakhs, towards the income between Rs 2.5 lakh to 5 lakh, a 5% tax slab is there.
Moreover, the individual assessee, Rs 5 lakh to 7.5 lakh income is obligated to furnish a lower tax rate of 10% i.e between Rs 7.5 lakh and Rs 10 lakh 15%, in the range of Rs 10 lakh to 12.5 lakh 20%, in the category of Rs 12.5 lakh to 15 lakh 25%, and exceeding than Rs 15 lakh 30%.
The former tax regime permits the assessee to carry on with the existing tax exemptions along with the House rent allowance (HRA), Leave Travel Allowance (LTA), and deductions beneath various sections of the income tax act 1961.
