NEW DELHI: Forty percent of India's taxpayers are likely to switch to new income tax structure if the government reduces the tax rate by an additional 2-5% in the upcoming budget, revealed a survey by LocalCircles.
In FY20-21, the government gave taxpayers the option to opt for a new tax regime in which one can pay income tax at lower rates on the condition that they forgo certain exemptions and deductions or continue to pay taxes under the existing tax rates where the assessee can avail rebates and exemptions under the old regime.
Some of the common deductions not allowed under the new tax rate regime are Leave Travel Allowance (LTA), House Rent Allowance (HRA), Conveyance allowance, Daily expenses in the course of employment, Relocation allowance, Helper allowance, Children education allowance, Deductions available under Section 80TTA and 80TTB that is interest from Savings Account/Deposits, tax deduction on entertainment allowance, interest amount payable on home loan for a self-occupied or any vacant property u/s 24 maximum deductions of Rs. 2 lakh deductions under Section 32AD, 33AB, 33ABA, 35(1)(ii),35(1)(ii( (a), 35(1)(iii), 35(2AA), 35AD and 35CCC of the Income Tax Act.
If your yearly income is on the higher side, it is safer to choose the old tax regime because you get various investment opportunities due to the variation of deductions and exemptions like PPF, ELSS, Mediclaim etc. The new tax regime there is no obligatory requirement to invest in tax saving schemes and insurance plans.
"The new income tax regime is beneficial for people who make low investments. As the new regime offers seven lower income tax slabs, anyone paying taxes without claiming tax deductions can benefit from paying a lower rate of tax under the new tax regime. For instance, an assessee having total income before deduction up-to Rs 12 lakh will have higher tax liability under the old system if they have investments less than Rs 1.91 lakh. Therefore, if you invest less in tax-saving schemes, go for the new regime," explains ClearTax.
Lowering of tax rates has been a long-standing demand of taxpayers for the last 3 years. While corporate taxes were reduced in Budget 2020, little or no relief has been given to the middle class tax-payers with the new alternate income tax structure that was introduced in 2020.
Thirty seven percent said they would migrate to the new tax regime if the tax rate is “reduced further by 2-5%”, and 3% said if it is “reduced further by 0-2%. 28% of citizens surveyed said “Regardless of tax rate, I will not migrate”. 13% said “I am already on the new tax rate structure and welcome reduction in tax rate". 19% of citizens did not have an opinion. On an aggregate basis, 40% of taxpayers surveyed say they are likely to switch to a new income tax structure if the Government reduces the tax rate by an additional 2-5%." This question received 9,342 responses.
Of the 28,000 surveyed, 47 per cent said that top focus area of Budget 2022 on the social front should be health and have highlighted several areas in the area that need capital allocation.
On the development front, 64% said that top focus area of Budget 2022 should be either roads & highways or agriculture.
