BT EXCLUSIVE: Centre considering incentivising alternative tax regime for FY24

The Budget makers are discussing possible provisions that will promote a new regime in personal income tax, sources tell Business Today Television.

One such provision under consideration, according to sources, is a tax-free slab up to Rs 5 lakh in order to lure more individuals to file income tax returns.

"It is important to note that a large number of people in India who file their returns show an income of less than Rs 7 lakh per annum. So, for most taxpayers, the old tax regime is more beneficial as they don't have to pay taxes because of the exemptions and deductions. Tax outgo in the old regime was comparatively low due to deductions under Sections 80C and 80D," said an official.

The centre is in serious discussions on how the salary class can benefit from the alternative tax regime. The government is of the opinion that there is a need to relook the whole personal income tax system and come out with a single regime with larger slabs and a smaller number of exemptions. 

"If we go ahead with a single regime with larger slabs and a smaller number of exemptions, then a large number of people will opt for this," said the government official.

Currently, as per the income tax structure, individuals can voluntarily decide which tax regime they would like to avail themselves of. Taxpayers with an annual income between Rs 5 lakh and Rs 10 lakh are taxed at 20 per cent under the old regime, and in the new regime, they are taxed at half that rate, i.e., 10 per cent. However, deductions under Section 80C and Section 80D of the Income Tax Act make the old tax regime more attractive for many. 

Also Read: Union Budget 2023: Buoyant tax collections cushion Govt on fiscal front, Income Tax Return reforms likely this year