Union Budget 2022-23: Taxpayers may get incentives for moving to new income tax regime

 








Taxpayers may be offered some incentives for switching to the optional income tax regime in the upcoming Union Budget 2022-23.

A large number of individual taxpayers are still filing income tax under the older structure as it offers many exemptions and benefits, unlike the new regime. Though the new regime has worked well for corporates, the same result has not been seen in case of individual taxpayers.

The finance ministry is examining the matter and it could take a call on incentivising individual taxpayers for moving to the new income tax regime, reported livemint.com after speaking with two people familiar with the developments in the run up to the budget.

It may be noted that the government decided to reduce tax rates for corporates in September 2019 15 per cent for new companies and 22 per cent for existing firms if they were willing to forego exemptions.

A similar alternate income tax structure was announced by Finance Minister Nirmala Sitharaman on February 1, 2020 for individual taxpayers. Tax rates came down under the new income tax regime, but individuals opting for it had to forego exemptions such as provident funds, home loans, life insurance, medical insurance, education fees for children and more.

While the new regime offers lower tax rates, the fact that it does not provide concessions for investments made by individuals is one of the reasons why many taxpayers still prefer the old income tax regime.

Experts feel that the new income tax regime has not got a big response due to lack of exemptions and the government should look at including some benefits or concessions that will attract more people to the simplified tax regime.

One of the two people quoted by livemint.com said all issues faced by taxpayers under the new regime are under examination and “suitable solutions” will be announced to make the new taxation system attractive.

There are chances that the government will increase the basic exemption limit or standard reduction, besides introducing some exemptions under the optional income tax regime.

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