Income Tax: In the budget of FY 2020-21, the government has set a new tax regime. Now the government hopes that at least 80 percent of the country’s taxpayers will adopt this new system. Revenue Secretary Ajay Bhushan Pandey said on Friday that the Finance Ministry expects at least 80 percent taxpayers to adopt the new income tax regime. The new tax category was proposed in the budget for FY 2020-21. But by adopting this, taxpayers will have to give up the benefits of home loan interest, existing exemptions, and deductions including other tax saving schemes.
Talking to reporters here, Pandey said, “We believe that at least 80 percent of people will adopt the new schemes.” Pandey said that the government had analyzed 5.78 crore taxpayers before the budget and found that 69 percent of people there will be savings on adopting the new system while there is 11 percent who like the old system.
Out of the remaining 20 percent of taxpayers, there will be some people who want to avoid paperwork and wish to adopt the new income tax system. Pandey said that when the company tax was cut in September, he was given a similar option and 90 percent of the companies adopted the exempted system with a lower tax rate.
He also said, “Most people will find the new tax system beneficial.” The government has proposed a new tax system in the budget. In this new system of personal income tax, at the rate of 5 percent on income of Rs 2.5 lakh to Rs 5 lakh, 10 percent on Rs 5 to 7.5 lakh, 15 percent on Rs 7.50 to 10 lakh, the income of Rs 10 lakh to Rs 12.5 lakh. It is proposed to impose tax at the rate of 20 percent and 25 percent on income of Rs 12.5 to 15 lakh and 30 percent on income above Rs 15 lakh. The new tax regime is optional and taxpayers can choose any of the old or new arrangements.
Provisions like standard deduction of Rs 50,000 in the current income tax regime and rebate on investments up to Rs 1.5 lakh in various savings schemes including LIC premium, provident fund under Section 80C of the Income Tax Act are applicable. It is taxed at various income levels at the rate of 5 percent, 20 percent, and 30 percent. Those whose income is up to Rs 5 lakh in the old and new system will not have to pay any tax.
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