There were wide expectations leading up to the announcement of the Union Budget for the next fiscal that Finance Minister Nirmala Sitharaman would provide relief to salaried taxpayers like she did to corporates a few months ago. For quite some time now, the government has also been hinting towards simplification of the income tax regime in India to make compliance easier and also to bring more people under the tax net.
Two hours into the budget speech, the FM finally came to the widely anticipated subject and announced a series of changes and reductions in the Personal Income Tax slabs. As per the government estimates, the new personal income tax rates, which would bring “substantial benefits” for the taxpayer, will entail estimated revenue forgone worth ₹40,000 crore per year for the government.
However, as the finance minister kept listing the details, it became apparent that the new income tax regime would be optional and those who opt for it, would have to forego majority of exemptions and deductions that they avail under the current regime.
“In order to provide a significant relief to individual taxpayers and to simplify the income-tax law, I propose to bring a new and simplified personal income tax regime wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions,” Sitharaman said in her speech.
This, of course, makes matters more complicated compared to a simple rate rationalization. Here we try to explain what the new income tax regime means, what benefits it brings for the taxpayers, who should opt for it, and who should stick to the old regime with all its exemptions and deductions.
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