Last Updated: January 09, 2023, 15:45 IST
The annual budget session is nearing by the day. Many speculations and suggestions are made for various sectors that may and may not be implemented in the upcoming budget, which will be introduced by Finance Minister Nirmala Sitharaman. As per the tax experts, investments in PPF and other tax saving schemes should be allowed as deductions; and the threshold for 30% tax should be raised to Rs 20 lakh under the concessional income tax regime in Budget 2023-24 to make it attractive for middle-income taxpayers, reported PTI.
In the Budget 2020-21, the central government introduced an optional income tax regime, under which individuals and Hindu Undivided Families (HUFs) were to be taxed at lower rates if they did not avail of specified exemptions or deductions, which included house rent allowance (HRA), interest on the home loan, investments made under Section 80C, 80D and 80CCD. Under this scheme, annual income up to Rs 2.5 lakh will be tax-exempt.
A 5% tax is levied on annual income between Rs 2.5 lakh and Rs 5 Lakh, 10% on Rs 5 lakh to Rs 7.5 lakh, 15% on Rs 7.5 lakh to Rs 10 lakh, 20% on Rs 12.5 lakh, 25% on Rs 12.5 lakh to Rs 15 lakh and 30% on above Rs 15 lakh. The scheme has not gained traction and resulted in a higher tax burden.
Nangia Andersen India Chairman, Rakesh Nangia, said that the biggest drawback of the optional tax regime is for the lower and middle-class taxpayers, and suggested that government should rationalise the tax rates additionally in the optional tax regime to make it proportionate with the deductions or exemptions that the taxpayer is foregoing.
Deloitte India Partner, Sudhakar Sethuraman, had a similar opinion and stated that the Centre could consider allowing certain deductions, which are traditionally claimed by individuals and at the same time not complicate the process.
“Capping the peak tax rate at 25%, from the existing 30%, would make the regime more attractive. This peak rate of 25% would make it somewhat comparable to the tax rates in neighbouring countries, such as Singapore, and Hong Kong,” Sethuraman said.
EY Tax Partner and India Mobility Leader, Amarpal S Chadha, also suggested that the standard deduction of Rs 50,000 and other deductions up to Rs 2.5 lakh should be made part of the optional tax regime.
He also recommended that the basic exemption limit should be increased to Rs 5 lakh from Rs 2.5 lakh and revise the current income slabs to make them more tax efficient. The 30% tax rate should be levied only on income above Rs 20 lakh, instead of Rs 15 lakh currently.
The Union Budget Session will begin on February 1, headed by the Union Finance Minister.
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