homeeconomy NewsFM hints at lowering income tax burden further, says taking 42.7% from highly skilled doesn't look fair

FM hints at lowering income tax burden further, says taking 42.7% from highly skilled doesn't look fair

The government’s intention with the new income tax regime is to give the people the choice and not force them out of the old regime, Finance Minister Nirmala Sitharaman said in an exclusive interview with Rahul Joshi, Group Editor-In-Chief of Network18, on Friday.

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By CNBCTV18.com Feb 3, 2023 5:58:23 PM IST (Updated)

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The government’s intention with the new income tax regime is to give the people the choice and not force them out of the old regime, Finance Minister Nirmala Sitharaman said in an exclusive interview with Rahul Joshi, Group Editor-In-Chief of Network18, on Friday. While hinting at lowering the tax burden further, FM said that new tax regime doesn’t allow taxpayers to claim exemptions but levies a comparatively lower rate of tax.

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“We are not forcing anyone to get out of the exemptions and deductions offered. Eventually the tax rates should be absolutely low,” she said.
Two days after announcing new lower slabs for income tax and a higher level of rebate in the Budget 2023, the finance minister explained that she can incentivise savings but that would mean a higher rate of tax.
"I am more looking at it to make sure every Indian citizen makes his own choice, her choice. You are the best judge of what you want to do with your money," she said.
The philosophy that governed it (old tax regime) was you'll have all those exemptions and you will feel tempted to have yourself cover, insurance cover or savings or whatever. But your tax rates were so high,” she said in an apparent reference to the exemptions given by the UPA government earlier that helped those earning higher incomes reduce their tax rates by claiming exemptions.
The FM observed that this was also the philosophy shared by Prime Minister Narendra Modi. "Prime Minister was very clear that taxpayers should know, actually, what are they paying and exactly feel comforted that they're not paying much. And actually bring the rates down, make it simple, so that anyone sitting at home should be able to file the returns, and that's the end of the story. I don't need to keep immense documents and so on," she said.
On reducing surcharge and bringing down highest tax rate to 39 percent for the super-rich, FM said that taking 42.74 percent from the highly skilled doesn't look fair.
"Indian tax system should be seen for not being so harsh. With 30 percent surcharge, you were reaching a total tax of 42.7 percent. Even a person who's that talented enough, skilled enough, and is paid very well for his contribution to the firm and has a good earning, taking nearly 42.7 percent doesn't make a system look fair and therefore we brought it down," FM said.
Budget 2023 proposed to reduce the surcharge from 37 percent to 25 percent for those earning more than Rs 5 crore a year under the 'new income tax regime'. This means that, with effect from April 1, 2023, all income above Rs 2 crore would be subject to 25 percent surcharge. This brings down the highest tax rate from 42.74 percent to 39 percent.

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