NEW DELHI: The Centre is planning to overhaul the personal income tax structure as the dual-tax system is creating confusion among taxpayers.
“Tax reform is one of the top priorities of the government. After corporate tax reforms, it is time to re-look personal income tax,” a senior financial ministry official told TNIE.
In her Budget announcement in February, Finance Minister Nirmala Sitharaman had proposed a new tax regime with more tax slabs and lower tax rates for taxpayers who agree to forego all deductions and exemptions available to them in the old tax regime.
Those who wanted to continue with exemptions were given the option to continue with the old structure.
This, however, was not received too well and tax experts pointed out that taxpayers would end up paying more under the new tax regime.
Sources said the Department of Revenue is likely to come up with the new tax structure in the next financial year.
“We have received feedback that there are too many slabs. This is the first year taxpayers are filing under the new tax regime. We are waiting for the returns to be filed, which will give a better picture on how many opt for the new structure and how many stay with the old one. Only after analysing the data, will we go for an overhaul,” said the finance ministry official cited above.
The official added this was also one of the reasons personal income tax slab was left untouched in this year’s Budget.
Under the new regime, all exemptions and deductions under Section 80C (investments in PF, NPS, life insurance premium), Section 80D (medical insurance premium), and HRA and interest paid on housing loan will not be applicable.
Even tax breaks for the disabled and for charitable donations will not be applicable.
Also, the fact that the new tax regime does away with the commonly availed section 80C deductions for provident fund contributions, life insurance premium, school tuition fee for children and various specified investments such as ELSS, NPS, PPF, etc has already miffed the salaried class while critics say it will discourage investment in these instruments among people.