Income Tax, then and now
- By Abhirup Dey
- In Blog
- 15 comments
A quarter of century ago, the Govt of India first introduced Income Tax slab rates of 10%, 20% and 30% in the union budget of 1997-98 by then finance minister Mr.P Chidambaram. At that time, the highest tax slab was applicable to incomes above Rs.1.5 lakhs, while the basic exemption limit of income was
up to Rs.40,000/-.
Meanwhile, after almost two and half decades later, in the latest budget
announced by prevailing finance minister Ms.Nirmala Sitharaman, the highest
tax slab of 30% remains as it is but applies to income above Rs.10 lakhs under
the old tax regime and Rs.15 lakhs under the new tax regime.
Moreover, there is no tax on income up to Rs.7 lakhs under the new tax regime.
The new regime allows certain benefits including a standard deduction of
Rs.50,000/-, a tax rebate under section 87A up to 100% of the tax payable on
total income up to Rs.7 lakhs. However, the new tax regime doesn’t allow the
investors to claim most of the deduction benefits, including those under
section 80C of the Income Tax Act 1961.
Since more than a decade, section 80C of the Income Tax Act has been the
most popular destination of investors for claiming both tax benefits and
investment opportunities. This section consists investment avenues like life
insurance premium, Public Provident Fund(PPF), Equity Linked Savings
Scheme(ELSS), National Pension Scheme(NPS) and many more. The maximum
investment limit was increased to Rs.1.5 lakhs per financial year from 1 lakh
per financial year in 2010 but despite repeated demands from a large section
of assessees in recent years, the govt. didn’t increase the limit further.
After the new tax regime was introduced in the Budget of 2020, very few people opted for the same in its initial years as it offered less flexibility as far as tax savings is concerned. However, the scenario changed in the current financial year as both the young generation and the senior citizens are finding the new tax structure attractive and competitive regarding the tax benefits.
The govt. in the recent years has endeavored to simplify the process of tax filing but it is still not clear that whether the assesses are finding the process user friendly as new set of forms released by govt. every year makes the situation a bit puzzling for the taxpayers. However, the system has been fully digitized now and the average processing time of assessment has reduced significantly. In addition to that the prompt refund procedure is also worth mentioning.
It is very much evident that the govt. is encouraging more and more assesses to opt for the new regime so that they can achieve their goal-based investment journey.
However, there is still scope of further simplification and improvement in the entire process especially in the area of Appeal which has become ‘faceless’ in recent years, alongside the other technical and legal interpretation issues.
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Comments
Nice article. Comprehensive and effective. Helpful information and discussion even for a layman like me. Keep going.👍
Wonderfully explained in a very lucid language.
Very informative. I usually do not understand tax jargons but this article explains things very nicely.
Useful in understanding the tax structure… Even the reduction of maximum surcharge is one of the major tax reforms…
A very well written and informative article. It not only helps to understand the process of tax but also put lights on the economic impacts
Beautifully explained.those who don’t know about tax and government policies they can easily understand after read this article.
Too good studu and bery good observation
Thank you for this article! This was quite knowledgeable and helpful. I quite appreciate the simplification of language.
Excellent article. Important for many like us. It’s highly informative! Would like to read more like this one.
Thank you for simplifying old and new regime. It was opt, interesting and easy to understand. Appreciate your efforts for bringing such clarifications and knowledge.
Very crisp, informative , factual and to-the-point article about the tax system of India. This article definitely gives you a clear picture of the existing Tax system of India, like what it is now and what it was then. Definitely a great article.
Very informative article and easy to understand.
Informative indeed….
The very last line of having issues with policies, has drawn my attention.
Nice article.Very informative and easy to understand.
A very lucid article on a topic that always confuses. The historical development is interesting and the step by step analysis will be useful to many. Keep up the good work with more such information.