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New tax regime to definitely benefit taxpayers in some brackets — FM

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By PTI Updated: Feb 02, 2020 11:17 pm
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New Delhi, Feb. 2 (PTI): With experts terming the new tax regime complex and unavailing, Finance Minister Nirmala Sitharaman on Sunday said the new structure will definitely benefit taxpayers in certain brackets, and more clarification will be issued by the government, if needed.

Soon after the announcement of new income tax regime, the government on Saturday evening came out with a list of exemptions applicable for taxpayers switching to the new tax system.

“Last night one set of clarificatory notes was released, today there will be more. That the new scheme will eventually result in people paying more than in the old scheme, why would I come with such a system,” Sitharaman said here.

She defended the new scheme by saying that it will benefit some taxpayers falling in certain brackets, if not all.

“ because the income cuts are deeper in the new scheme, we believe a taxpayer from a particular income bracket will be much better off coming into the new system. And the new system, however much I repeatedly say has no exemptions, there are some exemptions that we have allowed in the new system also,” she said.

Industry experts, however, said that two tax regimes with optionality for personal tax, as in case of corporate taxes, only make the structure more complicated.

“With the optional new regime, taxpayers will have to evaluate what works better for them. Those committed to long-term savings and investing via 80C may be discouraged and this may likely de-motivate them from investing in tax-saving asset classes,” said Archit Gupta, founder of Cleartax.

Biocon CMD Kiran Mazumdar Shaw tweeted that removal of exemptions and DDT will hurt individual tax payer and affect consumer spending.

Ajit Mishra of Religare Broking said the widely expected personal income tax cuts have come in with lots of caveats, leaving no major impacts.

The government on Saturday introduced new tax slabs with reduced rates for an annual income of up to INR 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.

It is to be noted that once the option to opt for new tax regime is exercised, it will remain valid for subsequent years.

“In order to provide significant relief to the individual taxpayers and to simplify the Income-Tax law, I propose to bring a new and simplified personal income tax regime wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions,” Sitharaman said in her Budget Speech.

Under the new tax proposal, people with an annual income of up to INR 2.5 lakh will not have to pay any tax.

For income between INR 2.5 lakh to 5 lakh, the tax rate (as earlier) is 5 per cent.

Further, those with an income of INR 5 lakh to INR 7.5 lakh will have to pay a reduced tax rate of 10 per cent; between INR 7.5 lakh and INR 10 lakh 15 per cent; between INR 10 lakh and 12.5 lakh 20 per cent; between INR 12.5 lakh and 15 lakh 25 per cent; and above INR 15 lakh 30 per cent.

“The new tax regime shall be optional for the taxpayers. An individual who is currently availing more deductions and exemption under the Income Tax Act may choose to avail them and continue to pay tax in the old regime,” the minister had said.

The proposal would lead to a revenue sacrifice of INR 40,000 crore per annum.

No intention to tax global income of NRIs in India, says FM

Finance Minister Nirmala Sitharaman on Sunday said that there is no intention to tax global income of NRIs and only income generated in India will be taxed.

Following the Budget announcement on Saturday there was confusion about the tax liability of Non-Resident Indians (NRIs) on their global income.

“What we are doing now is that the income of an NRI generated in India will be taxed here. If he’s earning something in a jurisdiction where there is no tax, why will I include that into mine that has been generated there.

“Whereas if you have a property here and you have a rent out of it, but because you are living there, you carry this rent into your income there and pay no tax there, pay no tax here … since the property is in India, I have got a sovereign right to tax,” she said in a post Budget interaction with media.

“I am not taxing what you’re earning in Dubai but that property which is giving you a rent here, you may be an NRI, you may be living there but that is revenue being generated here for you. So that’s the issue,” she added.

The Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India, if he is not liable to be taxed in any country or jurisdiction.

This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India, the finance ministry said in a statement.

“The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. In some section of the media the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct,” it said.

In order to avoid any misinterpretation, it is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession, it added.

6092
By PTI Updated: Feb 02, 2020 11:17:55 pm