• Notification Date: 01-12-2022
• Notification No: N/A

Personal Income Tax Regime needs Complete Reform: Revenue Secretary Tarun Bajaj

Revenue Secretary Tarun Bajaj stated on Tuesday that personal income tax regime needs a complete reinvent. The government is required to introduce something new and only one regime should be introduced in the Income-tax structure rather than two regimes, he added. 

Bajaj said that the aim should not be to increase the tax rates, whether it is revenue neutral or if it gives up some revenue. The exemptions are to be reconsidered and an individual has to pay more taxes if they earn more money. Bajaj said that some people who take benefit of a lot of exemptions will ultimately be the losers in the present scenario. 

The official said that Bajaj’s view was independent of the preparations under way for Budget FY24. But the Revenue Secretary iterated that there was a major necessity to align the capital gains’ tax rates with the holding periods across asset classes. It is critical for minimizing the room for market-distorting tax arbitrage amongst products. Bajaj remarked that minimal exemptions should be given in personal income tax. The tax brackets should also be expanded.  

Bajaj said "the tax bracket (for 20 percent tax) can be from Rs 5 lakh-15 lakh instead of Rs 5 lakh-10 lakh. This can be a revenue-neutral exercise and the regime will be simpler. ” 

About exemptions, he said that exemptions for insurance premium for senior citizens would still be needed. But other unnecessary concessions can be dissolved. Bajaj said that small amount of savings gives better interest rates and tax exemption. He suggested that the tax regime of the country needs to be simplified. The Budget offers an opportunity of a lower personal income tax regime to those earning up to Rs 15 lakh. But they need to forgo certain exemption benefits. 

According to the tax structure, people earning an annual income up to Rs 2.5 lakh is exempt from tax. Those individuals earning between Rs 2.5 lakh and Rs 5 lakh are required to pay 5 percent tax. Income between Rs 5 and 7.5 lakh is charged with 10 percent tax, while those between Rs 7.5 and 10 lakhs at 15 percent. 

Individuals earning between Rs 10 and 12.5 lakh have to pay tax at the rate of 20 percent. Those between Rs 12.5 and Rs 15 lakh are imposed with a rate of 25 percent. Income above Rs 15 lakh is taxed at 30 percent.