The central government is planning on lowering the income tax rates under its voluntary income tax framework and could introduce revised slabs in the upcoming Union Budget due on 1st of February, reported by Reuters on Tuesday.
However the final decision will be taken by the Ministry of Finance. The finance ministry did not respond to a Reuters email seeking comment.
While the new optional income tax scheme, which was announced in 2020 with the aim of making 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.
The individuals can currently decide which set of rates they want to be taxed under. The government has not made the data on the number of individuals availing the new tax system public.
A 5% tax is levied on total income between 2.5 lakh to 5 lakhs.
10% tax is levied on total income between 5 lakh to 7.5 lakhs.
15% tax is levied on total income between 7.5 lakh to 10 lakhs.
20% tax is levied on total income between 10 lakh to 12.5 lakhs.
25% tax is levied on total income between 12.5 lakh to 15 lakhs.
30% tax is levied on total income of above 15 lakhs.
The Union Budget 2023 will be presented by the Finance Minister Nirmala Sitharaman for 2023-24 in the Lok Sabha on February 1st with the expectations that the government will raise the income tax limit which will provide a relief to the middle-class taxpayers.
“I too belong to the middle class so I can understand the pressures of the middle class. I identify myself with the middle class so I know,” she said while speaking at a function organised by the Panchjanya magazine, an RSS- associated weekly.
