Taxpayers may face a major setback. The central government can abolish the old income tax system. Along with this, the exemption from income tax to the taxpayers will also stop. Due to which there can be a huge impact on your pocket. Let us know the complete information in the news below.
Taxpayers may get a shock. The central government can abolish the old income tax regime. Along with this, the exemption from income tax to the taxpayers will also stop. At present, taxpayers have the right to choose between the old and the new tax regime. But according to sources, the government wants only one scheme in personal income tax.
For this, the tax rate can be reduced in the new tax regime. The old tax system is very complex and it creates many controversies. Experts say that the government wants to simplify the income tax system and at the same time wants to cut down on litigation.
In the Union Budget 2020-21, Finance Minister Nirmala Sitharaman announced a new tax regime. In this the tax rates were reduced without exemptions and deductions. Individual taxpayers were given the option to choose between the new and old income tax regime. But the taxpayers did not show much interest in the new system. For the assessment year 2021-22, 5.89 crore taxpayers have filed returns, but less than five per cent of them had filed income tax returns under the new tax regime. This is the reason why the government is considering reduction in tax rates to make it attractive.
Disappointment with the new system
Mint quoted officials as saying that the Finance Ministry is considering reducing its rates to popularize the new income tax regime. An official said that people are not enthusiastic about the new income tax regime. Why would those who are taking exemption in the old system want to go to such a system in which there is no incentive for them. There should be only one personal income tax scheme in the country. Tax experts believe that if the rates come down in the new tax regime, it will make the new system more attractive.
The official said that we have to see whether to reduce the tax rates or work on the slabs afresh. We have to simplify the tax system. This will reduce litigation. Those who are earning more money will have to pay more tax. It will be like a corporate tax regime in a way. In 2019, the government had reduced it from 30 per cent to 22 per cent. But with this all exemptions were abolished. On the same lines, the government also wants the same scheme in personal income tax. For this, the tax rate will be reduced in the new tax system and no tax benefit will be available in it.
Exemption in old system-
In the old tax system, taxpayers get many types of exemptions. These include House Rent Allowance (HRA), Leave Travel Allowance (LTA) and exemption under various sections of the Income Tax Act, 1961. Under Section 80C of the Income Tax Act, one can avail tax benefits on the principal of home loan along with insurance, ELSS, provident fund, PPF and tuition fees for children. Also, there is a provision of tax exemption on the interest of home loan up to Rs 2 lakh. Also, there is a benefit of standard deduction of Rs 50,000.
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