The new I-T structure offers the option to save taxes: secretary of income
NEW DELHI: The new lower income tax (IT) rates offered in the 2020-21 Budget will leave more cash in the hands of those who do not want to make mandatory investments to save taxes, said revenue secretary Ajay Bhushan Pandey
In an interview with PTI, he said that the Budget gives people an option to migrate to a new regime by giving up their existing exemptions and deductions for a lower tax rate.
We are not saying which is beneficial, which is not beneficial. We have offered an option. We have not imposed restrictions on anyone. This proposal can only benefit someone and not harm anyone, he said. Then, in this whole proposal, not a single person will be a loser.
He said taxpayers have the option of staying with the current regime to obtain a standard deduction of Rs 50,000 and invest Rs 1.5 lakh in savings schemes and pay 5 percent, 10 percent or 30 percent taxes depending on the levels of income.
Alternatively, they can migrate to the new regime and pay lower tax rates without having to invest in any instrument to claim the exemption, he said.
Under the new regime, the 5 percent tax applies to an annual income between Rs 2.5 lakh and Rs 5 lakh. The tax rate increases to 10 percent, 15 percent, 20 percent and 25 percent for each addition of Rs 2.5 lakh. A tax of 30 percent is applied to income exceeding Rs 15 lakh.
Because the proposal is that we will continue with the old scheme and if the new scheme appeals to you, you are coming or not. Therefore, there is no room for confusion or concern, he said.
Pandey said the taxpayer will have to choose between the old and the new regime at the time of filing the declaration for the next financial year, sometime in July 2021.
When you submit the IT statement, there will be an option. If you say option 1, the return form will be opened in the new system and most of your request will be completed. Then, make the appropriate changes and submit the IT statement (return. If you choose the previous system, only that form will be opened. It is easier to complete the form under new tax structures, he said.
He said the data shows that of the 5.8 million people who filed income tax returns in fiscal year 2018-19, 90 percent claimed tax deductions of less than Rs 2 lakh, including deductions under section 80C of the Income Tax Law (for fund provision, PPF, life insurance premium), section 80D (medical insurance), section 80CCD (1B) (additional deduction for the National Pension Plan), interest deduction for loans for housing and standard deduction.
I do not say that (the new scheme) will benefit everyone. It could benefit 30-40 percent of people. But, even if it's benefiting 30 percent of people, it's also something important, he said. We are giving option to those people who cannot use exemptions or deductions. Who are these people? Someone who has just joined the labor market, someone who has not decided to buy a house, does not know how much savings will be, could be putting little money in PF (pension fund) and insurance. You may find that, depending on your income, this new scheme is better.
Similarly, for the elderly who live with a pension and do not have to buy a house or put money in PF, the new regime would be beneficial, he said.
The new tax regime is also beneficial for small entrepreneurs and merchants who do not get the benefit of LTC or HRA.
It is not that our goal is to provide benefits to each and every section of the taxpayer. We have provided options and that should be fine, he said, adding that the new tax rates would lead to a reduction of Rs 40,000 in government revenues in the next financial year.
People who have an annual salary income of more than Rs 13 lakh and current deductions of up to Rs 2 lakh will save on their tax outlay if they opt for the new tax regime proposed in the Budget, government sources said Sunday.
For those who earn a salary of Rs 12 lakh and less and who have deductions of up to Rs 2 lakh, the old tax system will be beneficial since the tax outflow will be lower compared to the proposed new structure.
While people with an annual salary income of Rs 13 lakh and above will pay Rs 1.43 lakh taxes under the proposed tax structure; In the old regime, they would have paid a tax of Rs 1.48 lakh, saving Rs 5,200, a source said.
With a salary of Rs 14 lakh per year, the savings would be Rs 10,400; and for those with an income of Rs 15 lakh and above, the savings would be Rs 15,600, provided that the deductions claimed are up to Rs 2 lakh.
In the case of non-salaried employees, who do not obtain a standard deduction of Rs 50,000, the new tax structure is beneficial for those who earn Rs 9.5 lakh per year and have deductions of up to Rs 1.5 lakh. They would save Rs 5,200 in their annual income tax balance.