In an effort to make the new tax regime more attractive and put more money in the hands of salaried people, Finance Minister Nirmala Sitharaman on Tuesday announced raising the standard deduction by 50 per cent and tweaked the tax slabs under the new income tax regime.
Following these changes, salaried employees in the new tax regime could save up to ₹17,500 in income tax annually. The standard deduction for salaried employees is proposed to be increased from ₹50,000 to ₹75,000 annually. Similarly, the deduction on family pension for pensioners is proposed to be enhanced from ₹15,000 to ₹25,000. “This will provide relief to about four crore salaried individuals and pensioners,” Sitharaman said in her Budget speech.
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In the last fiscal year, more than two-thirds of individual taxpayers availed themselves of the new personal income tax regime. Over 8.61 crore I-T returns were filed in the 2023-24 fiscal year. During the current fiscal year, over four crore people have filed IT returns so far, out of which nearly two-thirds have opted for the new regime.
The Budget also proposed several changes in the tax deducted at source structure, including reducing the rate for e-commerce operators to 0.1 per cent from the existing 1 per cent, and allowing TCS credit against TDS deducted on salaries. “A beginning is being made in the Finance Bill by simplifying the tax regime for charities, TDS rate structure, provisions for reassessment and search provisions, and capital gains taxation,” Sitharaman said.
In the first Budget of Modi 3.0, Sitharaman proposed that the 5 per cent TDS rate on many payments be merged into the 2 per cent TDS rate, and the 20 per cent TDS rate on repurchase of units by mutual funds or UTI be withdrawn. The TDS rate on e-commerce operators is proposed to be reduced from 1 per cent to 0.1 per cent. Additionally, credit of TCS is proposed to be given in the TDS to be deducted on salary.
“Further, I propose to decriminalise delays in the payment of TDS up to the due date of filing the statement for the same. I also plan to provide a standard operating procedure for TDS defaults and simplify and rationalise the compounding guidelines for such defaults,” the minister said.
Also, the amount of TCS was to be claimed by the employee in the tax return since there was no specific provision to consider the same by the employer while deducting tax at source on salaries. “This has now been enabled, mitigating cash flow challenges for employees.” Sitharaman said all the major tax payer services under GST and most services under customs and income tax have been digitalised. All remaining services of customs and income tax, including rectification and order giving effect to appellate orders, will be digitalised and made paperless over the next two years.
Sitharaman further said that while the government’s concerted efforts to reduce the pendency of appeals at various appellate fora are beginning to show good results, it will continue to engage our highest attention. “To dispose of the backlog of first appeals, I plan to deploy more officers to hear and decide such appeals, especially those with large tax effect,” she said.