Cogencis, Sunday, Feb 2

NEW DELHI - Finance Minister Nirmala Sitharaman today said the finance ministry will soon come out with clarifications and explanatory notes on the new income tax scheme announced in the Union Budget on Saturday.

She said there are clarifications required on what exemptions will be applicable under the new income tax scheme vis--vis the existing tax structure.

"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 while addressing a group of reporters.

She defended the new scheme by saying that it will benefit some taxpayers in a certain income tax bracket, if not all.

"...because the income cuts are deeper in the new scheme, we believe a tax payer 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."

In her second Union Budget, Sitharaman announced a new tax regime, under which personal income tax rates have been slashed on annual incomes of 500,000-1.5 mln rupees, where no exemption can be availed.

Taxpayers will have an option to stick to the existing income tax regime, however, the number of exemptions that one can claim has now been significantly reduced.

Any taxpayer who avails more deductions under the old system, may choose to continue with the earlier tax regime, she said in her speech.

For those earning between 500,000 rupees and 750,000 rupees, the new income tax rate will be 10% and those in the bracket between 750,000 rupees and 1 mln rupees will have to pay a tax of 15%. In the current system, the entire earning between 500,000 rupees and 1 mln rupees was taxed at the rate of 20%.

The new tax rate on income between 1 mln rupees and 1.25 mln rupees is 20%, while on that between 1.25 mln rupees and 1.5 mln rupees will be 25%. In the current regime, the entire income between 1 mln rupees to 1.5 mln rupees is 30%. The tax rate on annual income exceeding 1.5 mln rupees has been kept unchanged at 30%. 

Sitharaman said the government will undertake a review of the current income tax regime and remove the criminal aspects that harass the income tax assessees.

In her speech on Saturday, she said, "There has been a debate about building into statutes, criminal liability for acts that are civil in nature. Hence, for Companies Act, certain amendments are proposed to be made that will correct this. Similarly, other laws would also be examined, where such provisions exist and attempts would be made to correct them."

On the new direct tax dispute resolution scheme, announced in the Budget, Sitharaman said going by the past experience of having settled around 189,000 indirect tax cases, she expects the new scheme will also have a good response.

Earlier this month, the government settled around 161,214 cases blocked in litigation in service tax and excise disputes, and have recovered 380 bln rupees from the same.

The Budget announced a new dispute resolution scheme "Vivad Se Vishwas Scheme", under which the government wants to settle roughly 483,000 direct tax cases that are pending in various appellate forums.

Lastly, when questioned on expectations from the Reserve Bank of India in terms of a rate cut, Sitharaman said she is not in a position to comment on what the central bank will do.  End
Reported by Shubham Batra

Edited by Ramya J.S. D'Rozario