Sitharaman says new taxation regime now has got greater incentives

New Delhi [India], February 1 : Union Finance Minister Nirmala Sitharaman on Wednesday said the new taxation regime has now got greater incentives and attraction so that people can unhesitatingly move to it from the old regime.
"We are not compelling anyone. But the new one is now attractive as it gives greater rebates," Sitharaman said at the post-budget press conference.
"This country has been waiting for direct taxation to be simplified. Therefore, the new taxation regime that we brought in for direct taxation two, three years ago has now got greater incentives and greater attraction so that people can unhesitatingly move from the old to the new."
In her budget speech, the Finance Minister said that the government is also making the new income tax regime as the default tax regime. "However, citizens will continue to have the option to avail the benefit of the old tax regime."
The minister made five major announcements in regard to personal income tax, saying these primarily benefit hard-working middle class.
"The first one concerns rebate. Currently, those with income up to Rs 5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to Rs 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs 7 lakh will not have to pay any tax," she said.
"The second proposal relates to middle-class individuals. I had introduced, in the year 2020, the new personal income tax regime with six income slabs starting from Rs 2.5 lakh. I propose to change the tax structure in this regime by reducing the number of slabs to five," she added.
The minister said this will provide major relief to all taxpayers in the new regime.
An individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000.
"This is only 5 per cent of his or her income. It is a reduction of 25 per cent on what he or she is required to pay now, ie, Rs 60,000. Similarly, an individual with an income of Rs 15 lakh would be required to pay only Rs 1.5 lakh or 10 per cent of his or her income, a reduction of 20 per cent from the existing liability of Rs 1,87,500.
For the salaried class and the pensioners including family pensioners, the minister proposed to extend the benefit of 34 standard deduction to the new tax regime.
"Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500."
Referring to the highest tax rate which is 42.74 per cent at present, the minister said this is among the highest in the world.
"I propose to reduce the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime. This would result in reduction of the maximum tax rate to 39 per cent," the minister said in her budget speech.
She said the limit of Rs 3 lakh for tax exemption on leave encashment on retirement of non-government salaried employees was last fixed in the year 2002, when the highest basic pay in the government was Rs 30,000 per month.
"In line with the increase in government salaries, I am proposing to increase this limit to Rs 25 lakh."
During her interaction with the media, the Minister also referred to the budget taking care of the needs of Industrial Revolution 4.0.
"We are looking at a futuristic fintech sector, people will be trained through Industrial Revolution 4.0, we are trying to unleash digital economy in various walks of life.
"There's a lot of increase in agriculture credit availability. Rs 20 lakh are being made available for agriculture credit. Also, a sub-scheme under PM Matsya Sampada Yojana makes sure that people living in coastal areas are going to benefit from it," she said.
"The Budget gives a big leg-up to capital investment, it also attends to MSMEs as they are the engine of growth, it sustains capital investment and also gives a push to the private sector while also giving tax reliefs to individuals and middle class," the minister added.
She said emphasis points of the budget include empowering women, action plan for tourism, initiatives for Vishvakarmas (artisans) and green growth.
Asked about benefits for households, the minister said there is "a decline in the price of wheat due to the intervention by the government before the Budget and this will in a way bring a relief to the housewife of every household."
The minister said in her budget speech that Deendayal Antyodaya Yojana National Rural Livelihood Mission has achieved remarkable success by mobilising rural women into 81 lakh self-help groups.
"We will enable these groups to reach the next stage of economic empowerment through the formation of large producer enterprises or collectives with each having several thousand members and managed professionally," the minister said.