Old Income Tax Slab Structure May be Phased Out, No Exemptions will be Granted: Revenue Secretary

Old Income Tax Slab Structure May be Phased Out, No Exemptions will be Granted: Revenue Secretary

Reetu | Mar 3, 2022 | Views 282889

Old Income Tax Slab Structure May be Phased Out, No Exemptions will be Granted: Revenue Secretary

Old Income Tax Slab Structure May be Phased Out, No Exemptions will be Granted: Revenue Secretary

In response to soaring inflation, the government is ready to hit taxpayers hard. The former tax structure, which had 70 different sorts of exemptions, could be scrapped. According to Revenue Secretary Tarun Bajaj, there is a need to lessen the appeal of the previous income tax system to people. This will encourage more people to switch to the new income tax structure.

In the year 2020, a new income tax system will be implemented. Even if the tax rate is low in this case, there is no deductible option. Taxpayers have showed little interest in the new tax structure due to the lack of exemptions. The majority of taxpayers still use the previous tax system to file their income tax returns.

New Tax Slab Implemented in 2020-21

In the fiscal year 2020-21 budget, the government introduced a new tax structure. This tax system was claimed to be quite simple. Individual taxpayers pay a reduced tax rate in this case. They do not, however, have access to the standard deduction or Section 80C. The standard deduction and section 80C make it easier to pay less tax.

No Tax on First Five Lakhs

Taxpayers having an annual income of Rs 5 to 7.5 lakh must pay a 10% tax under the new system. In the old system, this income was subject to a 20% tax. People earning up to Rs 5 lakh per year, however, are exempt from paying any tax under the new or old regimes due to a rebate under section 87A.

No Tax on Earnings of 8.5 Lakhs

According to Bajaj, the government has implemented a new approach to reduce personal income tax. However, it has piqued the interest of only a few people. The reason for this is because individuals believe that if they pay less tax by even Rs 50 under a certain system, they will continue to utilise that system. People with an annual income of 8-8.5 lakhs in the country who use the 80C and standard deduction do not have to pay any tax.

That’s Why People Don’t Choose New Slab

This, he claims, is why people are reluctant to utilise the new system. As a result, unless we lessen the appeal of the old system, individuals will be hesitant to adopt the new one. We won’t be able to lower our tax rate unless we do this.

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