Budget 2023: New Income Tax Regime Changes
Asked about the new income tax regime she notes, “The government has been pushing for more taxpayers to opt for it. But most of the popular exemptions, whether the standard deduction or the HRA, mediclaim payments or the housing loan interest, are done away with if you opt for the regime.”
According to Parizad, the government should not include all tax exemptions, but a few should find their way in the new income tax regime. “…maybe not all because it defeats the intention of the government to move towards a simplified personal tax regime with lower tax rates, but with a flat structure,” she said. “But maybe at least one or two exemptions could be retained, particularly the long-term ones, the mediclaim or housing loan interest, because they will lead to savings from an individual perspective,” she added.
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Additionally, she is of the view that the basic income tax exemption limit should be hiked. “Even under the new income tax regime, the government can look at taking it to Rs 5 lakh from Rs 2.5 lakh and also adjust the subsequent slabs accordingly,” Parizad told TOI.
Parizad extends the recommendation on basic exemption limit to the normal income tax regime as well. “People who are earning income less than Rs 5 lakh, technically by virtue of the rebate of Rs 12,500 and the Section 87A of the income tax, are not paying any taxes, but they still need to file the income tax return and show the rebate,” she explains.
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“So if you get the basic exemption limit up to Rs 5 lakh, then from a compliance perspective, those many taxpayers fall out of the return filing base,” she adds.