• Notification Date: 01.03.2022
  • Notification No: N/A

Revenue Secretary Declares the Withdrawal of Older I-T Regime

Revenue Secretary Tarun Bajaj has declared on Saturday that the older Income-tax regime is required to be disincentivised. The various exemptions and special provisions are required to be withdrawn in order to encourage a large number of people to choose the new income tax regime. He added that the new I-T regime will help in the simplification of the Income-tax structure and enhance compliance.

The new tax regime was first introduced in 2020. The new regime consists of fewer tax benefits. It offers a lower rate of taxes. Yet, most of the taxpayers continued to stick with the older tax regime.

The government introduced a new income tax regime in the Union Budget 2020-21. The new IT regime has a simplified structure and it offers a reduced tax rate if the taxpayers accept to forgo some of the exemption and deduction benefits. The standard deduction and 80C benefits would no longer be available under the new tax regime.

Under the provisions of the new income tax regime, the taxpayers are liable to a reduced tax rate of 10 per cent for an income ranging between Rs.5 lakh and 7.5 lakh. The older tax regime used to charge the taxpayers with 20 per cent tax for the same income. For those individuals whose income is below Rs.5 lakhs, there is no income tax charged under either of the regimes. Due to the rebates offered under Section 87A, these individuals are free from any tax charges.

According to the statement of Bajaj, the government has introduced a new income tax with a reduced rate of income tax. He added that those individuals whose income is around Rs.8-8.5 lakhs are not liable to pay any income tax under the benefits offered under Section 80C.

The taxpayers are even demanding an increment in the limits offered under Section 80C in Budget 2022-23. They are asking to increase the limit from Rs.1.5 lakh to Rs.2 lakh. They want the housing loan limit to be increased from Rs.2 lakhs to Rs.3 lakhs. The new regime excludes as many as 70 exemptions and deductions compared to the older tax regime.

The income tax act is amended every year with necessary alterations in the provisions. Considering the current situation, experts believe that there is an urgent requirement for rewriting the Act.