The new tax system (NTR) will now be regarded as the default regime, but experts cautioned that not all taxpayers may find it to be the best alternative.
Preeti Sharma, Partner, Tax and Regulatory Services, BDO India, said that Finance Minister Nirmala Sitharaman has made conscious efforts to make the NTR more attractive for the taxpayers.
“The NTR shall now be considered as a default regime for all the taxpayers, but that does not necessarily mean a better regime for all. Taxpayers still need to look at their personal situation, various investments and expenditure that are eligible for tax exemption under the old regime and then decide which regime is better for them,” Sharma said.
Although the NTR is the default regime, an individual still has the option to opt for the old regime if the same is more beneficial in terms of tax outflow, Sharma said.
Deepashree Shetty, Associate Partner, Tax and Regulatory Services, BDO India, said several measures have been introduced to promote the NTR for individual taxpayers. These include increasing the basic exemption limit, change in the income slabs, extending the scope of tax rebate, extension of standard deduction, etc.
“The changes in the Income tax slab structure has enhanced the purchasing power of the populace. This move will encourage the adoption of cleaner, cost effective means of travel for their daily commute and the availability of FAME-II subsidy will further boost the sales of electric vehicles in the coming fiscal. Additionally, the extension on customs duty on the import of capital goods and machinery for developing lithium-ion cells would also enable EV manufacturers to localise their products in the long term, leading towards reduction in the cost of an electric vehicle for the consumer in the years to come, particularly for a brand like ours that are 95% indigenously manufactured in India.” added Mr. Kapil Shelke, Founder & CEO, TORK Motors.
The proposal to make NTR as the default tax regime supports the government’s initiative to digitise and simplify the tax process for the individuals. This would also mean significant changes in the payroll procedures of employers for salaried taxpayers, Shetty said.
It is anticipated that the revenue from personal income tax will increase discretionary incomes and ease the transition of taxpayers to the new tax system.
Suman Chowdhury, Executive Director and Chief Analytical Officer, Acuite Ratings & Research, said, “The rationalisation of the personal income tax structure is expected to lead to two things (i) raise disposable incomes for the middle class, particularly the younger taxpayers (ii) transition of the taxpayers to the new tax regime with minimal exemptions and lower and simpler tax slabs. This is expected to give a moderate boost to domestic consumption.”
S. Ranganathan, Head of Research at LKP Securities, said, “Thee Budget has put more money in the hands of the people through relief from income tax which to our mind is a very positive step.”
Sitharaman on Wednesday announced new tax slabs for 2023-24, under which no tax will be payable for income up to Rs 7 lakh per annum under the new income tax regime.
“Currently, those with an income of up to Rs 5 lakh don’t pay any income tax. I proposed to increase the tax rebate limit to Rs 7 lakh in the new tax regime,” Sitharaman said in her Budget speech.
A tax of 5 per cent would be levied on total income between Rs 3 lakh and Rs 6 lakh, 10 per cent tax would be imposed on income between Rs 6 lakh and Rs 9 lakh, while it will be 15 per cent on income between the range of Rs 9 lakh and Rs 12 lakh.
On the income range of Rs 12 lakh to Rs 15 lakh, 20 per cent tax would be levied, while the tax would be 30 per cent on an income slab of Rs 15 lakh and above, the finance minister informed.