New Delhi, January 17
India is considering lowering rates under its voluntary income tax framework and could introduce revised slabs in the upcoming Budget due on February 1, two government sources said on Tuesday.
New optional income tax scheme
- While the new optional income tax scheme — announced in 2020 to make tax compliance simpler — offers lower headline taxation rates on annual income, experts say it is unattractive to many as it does not allow exemptions on housing rentals and insurance among other things.
A final decision would be taken by the Prime Minister’s Office, both the sources, who did not want to be named because the talks are private, said. The Finance Ministry did not respond to a email seeking comment.
While the new optional income tax scheme — announced in 2020 to make tax compliance simpler — offers lower headline taxation rates on annual income, experts say it is unattractive to many as it does not allow exemptions on housing rentals and insurance among other things.
“Allowing exemptions and tax deductions in the new income tax regime would make it complex and this wasn’t the intention while introducing the scheme,” said one of the government sources.
Individuals can currently decide which set of rates they want to be taxed under. The government has not made data on the number of individuals availing the new tax system public. Income tax in the country is levied from a minimum individual earning of Rs 5 lakh per year.
Those earning between Rs 5 lakh and Rs 7.5 lakh per year pay 10% tax under the new scheme against a 20% rate applicable under the old set of rules, while annual income above Rs 15 lakh is taxed at 30%. — Reuters
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