The Center is likely to adjust the list of eligible discounts and exemptions to allow taxpayers to add more categories of financial savings instruments under the optional income tax system introduced in the last budget.
According to an Indian Express report, the emerging view in the run-up to the Union budget discussions speaks in favor of lowering the tax burden in order to increase demand by ensuring higher disposable income. This is to be achieved through tax proposals to incentivize the new tax system, rather than a major overhaul of income tax plates in the previous regime.
Several statements made in advance of the budget called for the cash voucher system for vacation travel concessions to be extended, the tax benefits for medical expenses to be extended to all taxpayers, an increase in the interest rate limits for home loans and tax breaks – time home buyers in the old tax regime.
When presenting the Union budget for 2020-21 last February, Finance Minister Nirmala Sitharaman announced the new system of concessional income tax, which introduced lower tax rates, but at the expense of foregoing various deductions and exemptions, including the currently available EPF contribution , Tuition fee payment, capital and interest tax on home loans, standard deduction of Rs 50,000 and health insurance premium among others. The new tax system exists alongside the previous tax system and has been made optional for taxpayers.
Under the new regime, a person must pay a tax of 10 percent for incomes between Rs 5 lakh and Rs 7.5 lakh and 15 percent for incomes between Rs 7.5 lakh and Rs 10 lakh against the existing rate of 20 percent in the old one Regime.
There is a tax of 20 percent for incomes between Rs 10 lakh and Rs 12.5 lakh and 25 percent for incomes between Rs 12.5 lakh and Rs 15 lakh over the existing rate of 30 percent for each of these categories.
Income over Rs 15 lakh is taxed at 30 percent in both regimes.