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NEW DELHI: The plans to extend buoyancy in tax collections, widening the tax base and growing the compliance by taxpayers appear to have been aided by the brand new revenue tax (IT) regime within the present monetary yr. Nevertheless, consultants really feel just a few extra tweaks within the tax charges within the forthcoming interim Funds might make the exemption-free regime extra engaging.
Up to now, greater than 80 million revenue tax returns (ITRs) have been filed for evaluation yr (AY) 2023-24, towards 75.2 million filed in AY 2022-23. Private revenue tax collections have additionally seen a strong annual progress of 29.4% in April-November. These had been touted as a “milestone” by the I-T division on ‘X’ on December 29.
The truth is, the expansion charge in PIT collections is the best in no less than 10 years – barring FY22, which was on a low base, as revenue tax collections had contracted greater than 12% in April-November FY21, the pandemic yr.
After the brand new tax regime was sweetened within the Funds for 2023-24, income secretary Sanjay Malhotra estimated that round 50% of the taxpayers would undertake the brand new regime. The sooner model of the exemption-less regime, launched in XX, didn’t get a lot traction among the many taxpayers. This was as a result of the tax slabs within the exemption-less regime weren’t engaging after considering the advantage of varied deductions and exemptions accessible underneath the previous tax regime.
And given the information that has now been compiled by the division for AY 2023-24, official sources say greater than 60% of the taxpayers have adopted the brand new revenue tax regime, which is now the “default regime”. “Over 50 million ITRs have been filed underneath the brand new tax regime,” an official instructed FE.
The brand new tax regime affords decrease revenue tax charges with a threshold of Rs 15,00,000 for the best tax charge as in comparison with the previous regime the place the edge for highest tax charge was Rs 10,00,000. The fundamental exemption underneath this regime has additionally been elevated to Rs 3,00,000 from Rs 2,50,000.
Additional, the rebate underneath the brand new tax regime has been elevated to Rs 7,00,000 from Rs 5,00,000 earlier than and the advantage of commonplace deduction of Rs 50,000 has additionally been prolonged to the salaried class and the pensioners together with household pensioners. Accordingly, a salaried particular person incomes a gross revenue of Rs 7,00,000 wouldn’t be required to pay any taxes even when no investments are made underneath Part 80C.
Furthermore, excessive networth people (HNIs) incomes greater than Rs 5 crore would favor the brand new regime as the utmost marginal tax charge has dropped from 42.74% to 39% resulting from adjustments made within the charge of surcharge. The surcharge charge on revenue over Rs 5 crore was slashed to 25% from 37% within the new regime.
Sudhir Kapadia, partner-tax and regulatory companies, EY stated: “In FY20, when the exemption-less regime was carried out, deductions had been nonetheless relevant, and the slab charges with out deductions lacked attraction. Consequently, whereas low-income earners reaped advantages underneath the FY20 scheme, nearly all of middle-income and high-income earners didn’t expertise important benefits.”
Nevertheless, consultants say that whereas the adjustments within the new regime have made it extra profitable for taxpayers, the previous regime nonetheless has its benefits like availability of deduction for Home Hire Allowance (HRA), Depart Journey Allowance (LTA), and 80C deduction.
“Subsequently to make the brand new regime extra engaging, the federal government could contemplate decreasing the best tax charge from 30% to 25% and growing the edge restrict for the best tax charge from Rs 15,00,000 to Rs 20,00,000,” stated Divya Baweja, Accomplice, Deloitte India.
“Additional, the restrict of the usual deduction and primary exemption restrict may be elevated. Permitting the set-off for Home Property Loss might present additional increase to taxpayers in the direction of the brand new regime,” Baweja stated. Regardless that the aforementioned adjustments could simplify the tax construction and appeal to extra taxpayers, it’s unlikely the federal government would introduce any extra adjustments, given its the interim Funds earlier than the overall elections in 2024.
Supply: The Monetary Categorical
The publish Extra Than 60 Per Cent Of Taxpayers Undertake New I-T Regime first appeared on Newest India information, evaluation and stories on IPA Newspack.
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