80 pc may opt for new tax regime: Govt

The budget 2020-21 has introduced more tax slabs and offers higher limits provided the taxpayer is ready to forego all the existing exemptions and deductions including home loan interest, other tax savings investments. “We feel at least 80 per cent of the people will come to the new scheme,” Pandey said during an interaction with opinion makers here.

He said the government did an analysis of 5.78 crore taxpayers before the budget and found that 69 per cent of them would save on tax payouts under the new system, while 11 per cent were found to be favouring the old regime. Of the remaining 20 per cent taxpayers, there will be people who want to avoid the hassle of paperwork and may wish to switch over to the new regime, he said.

The government was in a “catch-22” situation because it wanted to lower tax outgoes for the people and ensure that it eases the process of tax, but did not want to disturb the system due to which it made a beginning by giving people options, he said.

He noted that corporates were also given similar option when the taxes were reduced in September, and that 90 per cent of corporates have embraced the exemption-free approach for lower tax rate now. “A large majority of people will find the new regime advantageous,” Pandey said.

The government introduced new tax slabs with reduced rates for an annual income of up to Rs 15 lakh for those foregoing exemptions and deductions under a simplified tax regime. The new income tax system is optional and a taxpayer can choose to remain in the existing regime with exemptions and deductions.