The central government is considering lowering rates under its voluntary income tax (I-T) framework and could introduce revised slabs in the forthcoming Union Budget slated for February 1, citing two government sources news agency Reuters reported on Tuesday.
According to the report, a final decision would be taken by the Prime Minister’s Office (PMO), both the sources privy to the development told Reuters. The finance ministry, however, did not respond to a Reuters email seeking comment.
While the new optional income tax scheme, announced in 2020 to make tax compliance simpler, offers lower headline taxation rates on annual income, experts say it is unattractive to many as it does not allow exemptions on housing rentals and insurance among other things.
“Allowing exemptions and tax deductions in the new income tax regime would make it complex and this wasn’t the intention while introducing the scheme,” said one of the government sources.
Individuals can currently decide which set of rates they want to be taxed under. The government has not made data on the number of individuals availing the new tax system public. Income tax in the country is levied from a minimum individual earning of Rs 5 lakh per year.
Those making between Rs 5 lakh and Rs 7.5 lakh per year($6,135.72-$9,203.58) pay 10 per cent tax under the new scheme against a 20 per cent rate applicable under the old set of rules, while annual income above Rs 15 lakh is taxed at 30 per cent.
Meanwhile, the gross direct tax collections up to January 10 stood at Rs 14.71 lakh crore which is 24.58 per cent higher than the gross collections for the corresponding period of last year, according to data released by the government.
The Ministry of Finance released the provisional data for the direct tax collection till January 10, 2023. According to the latest data, direct tax collection, the net of refunds stood at Rs 12.31 lakh crore which is 19.55 per cent higher than the net collections for the corresponding period of last year.
This collection is 86.68 per cent of the total Budget estimates of direct taxes for FY23.