NEW DELHI: Finance Minister Nirmala Sitharaman, in her 2020 Union budget speech proposed to introduce a new simplified personal tax regime, without exemptions. She said the various exemptions and deductions have not only made tax administration burdensome but also made it difficult for taxpayers to file returns without professional help.

Under the new regime, income between 5 lakh and 7.5 lakh will be taxed at 10%; between 7.5 lakh and 10 lakh – at 15%; income between 10 lakh and 12.5 lakh – at 20%; income between 12.5 lakh and 15 lakh – at 25%; and incomes above 15 lakh – at 30%.

The new income tax regime offers lower tax rates but does not allow for exemptions or deductions. Taxpayers will have the option of choosing wither the old or the new regime, the minister added. The minister said that currently there are more than 100 different deductions and exemptions from which she has removed around 70 of them in the new simplified regime. The ministry shall review and rationalize the remaining exemptions.

A person earning 15 lakhs in a year and not availing any deductions will pay only 1,95,000 as compared to 2,73,000 in the old regime, the minister said, as an example. "Thus his tax burden shall be reduced by 78,000 in the new regime. He would still be the gainer in the new regime even if he was taking a deduction of 1.5 Lakh under various sections of Chapter- VI-A of the Income Tax Act under the old regime."

It has been estimated that the new personal income tax rates will result in 40,000 crores of revenue foregone per year. The minister said that the government has initiated measures to prefill the income tax return so that an individual who opts for the new regime would need no assistance from an expert to file his or her return and pay income tax.