88% of Individual Taxpayers Opt for the New Tax Regime
The transition from the old tax regime to the new one is a significant development in India’s taxation landscape. The old tax regime features higher tax rates but allows taxpayers to claim various deductions and exemptions. In contrast, the new tax regime offers lower tax rates and provides a full exemption for individuals earning up to Rs 15 lakh annually.
Key Insights from CBDT Chairman
– Widespread Adoption: CBDT Chairman Ravi Agrawal announced that 88% of individual taxpayers are now utilizing the new tax regime.
– Targeting Presumptive Tax Cases: Among presumptive tax cases, the adoption rate is even higher, with 97% of taxpayers opting for the new structure.
– Corporate Shift: Approximately 60% of corporate income is now reported under the new tax regime.
Agrawal emphasized that selecting a tax regime is ultimately a taxpayer’s choice, but noted that the response to the new regime has been very good.
Future Changes and Expectations
– New MAT Provisions: The upcoming FY27 Budget intends to introduce new Minimum Alternate Tax (MAT) provisions, which could further encourage taxpayers to transition to the new tax regime.
– Confidence in Revenue Targets: Agrawal expressed confidence in meeting the direct tax collection target of Rs 24.21 lakh crore for the fiscal year 2025-26.
Comparison of Old and New Tax Regimes
– Old Tax Regime:
– Higher tax rates.
– Eligibility for various tax deductions and exemptions.
– New Tax Regime:
– Lower tax rates.
– Full exemption for those earning up to Rs 15 lakh.
Impact of Proposed Changes in Tax Structure
– Increase in Securities Transaction Tax (STT): The FY27 Budget includes proposals to raise STT, particularly on futures contracts and options. This is aimed at moderating aggressive trading among retail investors, although its effectiveness will need to be assessed over time.
Conclusion
With 88% of individual taxpayers opting for the new tax regime, it’s clear that the shift towards this model is gaining traction. As more updates and adjustments to the taxation system are announced, including new MAT provisions and STT changes, taxpayers will continue to evaluate their options. The move towards a streamlined, lower-tax approach is a significant step in modernizing India’s tax landscape and enhancing compliance.