Will Budget 2023 Witness An End To The Fight Between Old And New Tax Regimes?

While the new income tax regime offers lower tax rates of 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 per cent, and 30 per cent, with peak rate applicable to incomes over Rs 15 lakh, the old income tax regime has three slabs -- 5 per cent, 20 per cent and 30 per cent with peak rate being levied on incomes greater than Rs 10 lakh.

Written by: India.com Business Desk Edited by: Sankunni K

Updated: January 23, 2023, 11:59 AM IST

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Will Budget 2023 Witness An End To The Fight Between Old And New Tax Regimes?

New Delhi: It’s highly unlikely that the whole controversy would come to rest, there’s also a possibility of opposition upping the ante once again, but there are also chances of the Modi government reviewing the new, less-populist, exemption-less tax regime in the run-up to the Union Budget 2023.

Only less than half a million taxpayers have opted for the new tax regime since its rollout. The same reason has prompted the government a review the tax regime to see if measures are needed in the budget to promote its adoption, Economic Times reported quoting people familiar with the matter.

As per the report, one of the persons told that the response to the new tax regime has been lukewarm; even though it was expected that the new tax regime for individuals would see traction like the one for the corporate sector, its acceptance has been much below expectations.

In December 2022, Surabhi Marwah, Tax Partner – People Advisory Services, EY India, told TOI that an increase in the basic tax exemption limit to Rs 5 lakh will lower effective tax rates for individual taxpayers. She also said that the standard deduction should be retained at Rs 50,000 and that the benefit of Section 80/CCC/CCD/D deduction up to Rs 2,50,000 should be provided. The benefits of these sections, Ms Marwah added, should be limited to provident fund includung PPF, qualifying life insurance products, interests on housing loan, pension policies, employees/self contributions to New Pension Scheme and mediclaim insurance.

While the new income tax regime offers lower tax rates of 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 per cent, and 30 per cent, with peak rate applicable to incomes over Rs 15 lakh, the old income tax regime has three slabs — 5 per cent, 20 per cent and 30 per cent with peak rate being levied on incomes greater than Rs 10 lakh.

The ET report said that policymakers are now examining the new tax regime more closely to see what could be done to make more people shift to the new tax regime. While one suggestion remains to raise the taxable income from Rs 2.5 lakhs, they’re considering allowing limited deductions on health insurance or housing, as per the report.