The government had introduced two separate systems of income tax in the budget 2020. Under the new system, the tax rate was cut, but all the exemptions were abolished. This is the reason that only 29 lakh people who filed returns in 2021-22 have adopted the new income tax system.
New Delhi. For the first time in the history of Income Tax, two separate arrangements were made by the Central Government in the budget presented two years ago. The government hoped that it would be successful in wooing the taxpayers, but only 5 percent of the taxpayers joined the new system. In view of this, the government can make the new tax system more attractive in the budget to be presented on February 1, 2022.
Archit Gupta, founder and CEO of tax portal Clear, says that the Finance Ministry did a lot of brainstorming about the new New Tax Regime and learned the reasons for its failure. It has been found in the review that there has been confusion among the people regarding the two tax regimes. In the assessment year 2021-22, 5.89 crore taxpayers have filed returns, out of which only 5 percent i.e. 29.4 lakh people have adopted the new system.
Why is the new tax system failing?
Corporate taxpayers were very happy with the new income tax system, but individual taxpayers distanced themselves from it. The Ministry of Finance found that the tax exemption option in the new regime has not been more attractive after it was done away with. At the same time, it also affected the savings of the people, because most of the people insist on saving only to save tax. In the new income tax regime, the tax exemption on savings was completely abolished.
Many types of discounts can be found
Finance Minister Nirmala Sitharaman can announce many exemptions in this budget under the new system of income tax. Archit Gupta says that with certain conditions, tax exemption on home loan and exemption on standard deduction can also be included in the new system of income tax. Apart from this, the limit of highest tax slab can also be increased from the current 15 lakhs to 20 lakhs.
What are the rates of new Income Tax Slab
In the new slab of Income Tax, there is no tax on the annual income of 2.5 lakhs. At the same time, income from 2.5 lakh to 5 lakh is taxed at 5 percent. Then 10 percent income tax has to be paid from 5 to 7.5 lakh and 15 percent from 7.5 lakh to 10 lakh. Apart from this, income tax has to be paid at the rate of 20 percent on income from 10 lakh to 12.5 lakh, 25 percent on income from 12.5 to 15 lakh and 30 percent on income above 15 lakh.
