Finance Minister Nirmala Sitharaman on Saturday said the government plans to remove all income tax exemptions in the long run. Addressing a press conference after presenting the Union Budget, Sitharaman said the intention was to reduce the rates and simplify the tax structure.
“We wanted to place money in the hands of the people, particularly the middle and lower middle classes,” she added. “Also wanted to simplify income tax process, increase compliance.”
In the Budget speech, the minister announced significant cuts for individual taxpayers who choose to forgo exemptions and deductions. However, those who wish to avail of the deductions will pay taxes at the existing rates.
Sitharaman said the income tax-related announcements followed the government’s decision to cut corporate taxes from 35% to 22%. In November, the finance minister had announced the tax cuts for domestic companies and new manufacturing firms in an attempt to boost economic growth. “Corporate tax cut and benefit derived by new companies, as well as improved GST collections will improve revenue generation and give the comfort to bring down fiscal deficit next year, with disinvestment too improving,” she added.
Under the optional new tax regime, people earning between Rs 5 lakh and Rs 7.5 lakh annually will be taxed 10%, down from the existing rate of 20%. Taxpayers in the Rs 7.5 lakh-Rs 10 lakh bracket will have to pay 15% tax instead of the current 20%, and those earning between Rs 10 lakh and Rs 12.5 lakh will have to pay 20% income tax – reduced from the existing 30% rate.
Taxpayers earning Rs 12.5 lakh to Rs 15 lakh will be charged 25%, down from the current tax rate of 30%. However, those earning beyond Rs 15 lakh will continue to be charged 30%.
“You will definitely benefit in terms of money that will remain in your hand under the new regime,” Sitharaman said.
The finance minister said improvement in revenue generation might lower fiscal deficit to 3.5% of the Gross Domestic Product in the next financial year, PTI reported.
Reacting to Congress leader Rahul Gandhi’s criticism of her Budget speech, Sitharaman said she spoke about employment generation for the youth. “I agree that my budget speech was lengthy,” she added.
Gandhi said the minister’s speech ws “hollow” and did not have a strategic idea or anything concrete.