Budget 2022 Expectations New Tax Regime: Will there be any prominent changes in the new tax regime structure in Budget 2022? This is something that most taxpayers might be looking forward to during the budget speech by the FM. The NTR has been seen to not have picked up interest among taxpayers. “While the new tax regime was introduced, it is seldom beneficial to taxpayers who are claiming various deductions (e.g., HRA, standard deduction etc.) and hence, the new tax regime is not popular among many taxpayers.,” says Raghunathan Parthasarathy,Associate Partner – Tax & Regulatory Services, BDO India.
Under the new tax regime (NTR), taxpayers may opt to pay lower tax rates but without availing Deductions and Exemptions or may continue to avail Deductions, Exemptions and pay tax as per the old tax regime, i.e.the existing tax structure.
The New Tax Regime or the simplified tax regime was first introduced for income earned during the financial year 2020-21 or assessment year 2021-22 under Section 115BAC and the new tax slabs, new rates are applicable under NTR.
Apart from a very few deductions available under NTR, most of the exemptions and income tax deductions were left out for taxpayers opting for NTR. “The simplified tax regime provides a beneficial rate of taxes but denies some exemptions and deductions that are normally permitted to employees. The government could look at revisiting the tax thresholds for taxation to extend greater benefit to employees,” says Aarti Raote, Partner, Deloitte India.
All deductions such Section 80C, Section 80CCC, Section 80E, Section 80D etc falling under the Chapter VI-A of the Income Tax Act were removed under simplified tax regime. So, all your investments in PPF, EPF, NSC, life insurance, ELSS etc will be left out, if you wish to avail simplified tax regime benefits under Section 115BAC of New Tax Regime.
Further, Leave travel concession, House rent allowance will also have to be foregone by the taxpayer. The home loan tax benefit is also to be left out. The interest under section 24 in respect of self-occupied or vacant property will not qualify for tax benefit anymore. The loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law.
Here is what Parthasarathy suggests:
- Some of the deductions under Chapter VI-A can be considered (contribution to LIC, housing loan principal repayment etc.)
- Extension of the benefit of deduction provided for payment of medical insurance premium/ incurrence of medical expenditure to taxpayers’ opting for concessional tax regime considering the exorbitant hospitalization expenses in the current COVID scenario (Section 80D).
- Increase the highest tax slab to Rs 25 Lakhs from Rs 15 Lakhs to make the new tax regime more enticing.