Union Budget Income Tax 2022: 40% of taxpayers will switch to the new income tax structure if the 2022 budget cuts the tax rate by another 2-5%: Survey | India Business News
In fiscal year 20-21, the government gave taxpayers the option of opting in to a new tax regime where they can pay income tax at lower rates provided they waive certain exemptions and deductions or continue to pay taxes at existing tax rates where the assessee is eligible for discounts and exemptions under the old regime.
Some of the common deductions not allowed under the new tax rate regime are Travel Leave Allowance (LTA), House Rent Allowance (HRA), Transport Allowance, Daily Expenses in employment, relocation allowance, attendance allowance, child raising allowance, deductions available under Sections 80TTA and 80TTB, namely savings account interest / deposits, tax deduction on entertainment allowance, amount of interest payable on home loan for self employed or any vacant property u/s 24 maximum deductions of Rs. 2 lakh deductions under Sections 32AD, 33AB, 33ABA, 35(1)(ii),35(1)(ii((a), 35(1)(iii), 35(2AA), 35AD and 35CCC of the Income Tax Act.
If your annual income is higher, it is safer to choose the old tax regime because you get various investment opportunities due to the variation of deductions and exemptions such as PPF, ELSS, Mediclaim, etc. The new tax regime is not mandatory to invest in tax saving schemes and insurance schemes.
“The new income tax regime is beneficial for people who make small investments. As the new regime offers seven lower income tax brackets, anyone paying taxes without claiming tax deductions can benefit from a lower rate of tax under the new tax system.For example, an assessee with a total pre-deduction income of up to Rs 12 lakh will have a higher tax liability under the old system if he has investments of less than Rs 1.91 lakh, so if you invest less in tax-saving schemes, go for the new scheme,” says ClearTax.
Lowering tax rates has been a long-standing demand from taxpayers for 3 years. While corporate taxes were cut in the 2020 budget, little to no relief was given to middle-class taxpayers with the new alternative income tax structure that was introduced in 2020.
Thirty-seven percent said they would migrate to the new tax system if the tax rate was “further reduced from 2 to 5%”, and 3% said if it was “further reduced from 0 to 2% . 28% of citizens surveyed said: “Regardless of the tax rate, I will not migrate”. 13% answered “I am already on the new structure of tax rates and I welcome the reduction in the tax rate”. 19% of citizens have no opinion. On an aggregate basis, 40% of taxpayers surveyed say they are likely to switch to an income tax structure if the government reduces the tax rate by an additional 2-5%.” This question received 9,342 responses.
Of the 28,000 respondents, 47% said the main focus area of the 2022 budget on the social front should be health and highlighted several areas within it that require capital allocation.
On the development front, 64% said the main focus area of the 2022 budget should be either roads and highways or agriculture.