After Finance Minister Nirmala Sitharaman announced the government’s new ‘simplified and rationalised’ tax regime in her Union Budget 2020 speech, there has been a cloud of confusion in the country over the new proposal.
Sitharaman announced lower income tax rates under a completely new optional regime. Under the new income tax rules, 70 of 100 exemptions would be scrapped to ‘rationalise’ the regime and transfer the benefits to the salaried class.
One can opt to switch to the new regime or could continue paying taxes claiming exemptions under the current regime. But it was generally perceived that once an individiual switched to the new regime, it cannot be rescinded.
As reported by Live Mint, individuals without any business income can keep switching as many times as they wish between the old and new tax regimes. With this, salaried individuals under different tax slabs can evaluate what is best for them.
This is especially important as the Finance Minister had stated that the onus was on the individual taxpayer to find which regimen suited him best.
Individuals with business income do not have the same liberty as they get to switch between the tax regimes only once. If he/she opts for the new regime in 2021-22 and goes back to the old regime next year, there is no coming back again, reports Live Mint.
However, there is no clarity regarding individuals with income from a profession.
With experts terming the new tax regime complex and unavailing, Finance Minister Nirmala Sitharaman on Sunday (February 2) said the new structure will definitely benefit taxpayers in certain brackets, and more clarification will be issued by the government, if needed.
Under the new tax proposal, people with an annual income of up to ₹2.5 lakh will not have to pay any tax.
For income between ₹2.5 lakh to ₹5 lakh, the tax rate (as earlier) is 5 %. Further, those with an income of ₹5 lakh to ₹7.5 lakh will have to pay a reduced tax rate of 10%; between ₹7.5 lakh and ₹10 lakh 15%; between ₹10 lakh and ₹12.5 lakh 20%; between ₹12.5 lakh and ₹15 lakh 25%; and above ₹15 lakh 30%.
(With inputs from agencies)