No tax rate reductions for old regime, clarifies Nirmala Sitharaman

New Delhi, Sep 17, 2024

Finance Minister Nirmala Sitharaman said that the government is not compelling anyone to switch from the old to the new tax regime

Finance Minister Nirmala Sitharaman has confirmed that there will be no tax rate reductions under the old tax regime, despite increasing demands from taxpayers for equal rate cuts across both the old and new systems.

Speaking at a News18 event, the minister made it clear that the government is not compelling anyone to switch from the old to the new tax regime. “We are not forcing anyone to make the change,” she remarked, pointing out that over 78 per cent of taxpayers have already chosen to move to the new regime, which was introduced to simplify direct taxation and ease compliance for individuals.

The new regime features lower tax rates and an increased standard deduction of Rs 75,000, aimed at reducing the tax burden for the middle class. In contrast, the tax rates under the old regime remain unchanged. “We incorporated the standard deduction into the new system after considering public feedback,” Sitharaman added.

No changes to old tax regime rates

Despite these improvements, some middle-class taxpayers have voiced concerns that the reductions in tax rates under the new system should also be applied to the old regime. Sitharaman acknowledged these concerns but reaffirmed the government's position. "I understand the desire for similar reductions under the old regime, but the changes have been kept exclusive to the new scheme," she reiterated.

The Finance Minister stressed the government's commitment to simplifying the tax system, particularly for the middle class, with the aim of further streamlining direct taxation. She pointed out that since 2019, efforts have been ongoing to make the tax process more straightforward. “That is why we introduced the new regime with lower rates, offering taxpayers the option to remain in the old scheme if they prefer exemptions,” she said.

Although the new scheme initially came without exemptions, the government later introduced a standard deduction to address taxpayers' needs. “In the Union Budget (presented in July), we revisited this matter and further reduced rates for the middle class while also increasing the standard deduction,” Sitharaman added.

Income tax rates under the new regime for FY25:-

Upto Rs 3 lakh -- Nil

Rs 3 lakh to Rs 7 lakh -- 5% (Tax rebate under section 87A up to Rs 7 lakh)

Rs 7 lakh to Rs 10 lakh -- 10%

Rs 10 lakh to Rs 12 lakh -- 15%

Rs 12 lakh to Rs 15 lakh -- 20%

Above Rs 15 lakh -- 30%

Income tax slabs under the old regime (below the age of 60 years):-

Upto Rs 2.5 lakh -- Nil

Rs 2.5 lakh to Rs 5 lakh -- 5%

Rs 5 lakh to Rs 10 lakh -- 20%

Above Rs 10 lakh -- 30%

Income tax slabs under the old regime (from age 60 to 80):-

Upto Rs 3 lakh -- Nil

Rs 3 lakh to Rs 6 lakh -- 5%

Rs 6 lakh to Rs 9 lakh -- 10%

Rs 9 lakh to Rs 12 lakh -- 15%

Rs 12 lakh to Rs 15 lakh -- 20%

Above Rs 15 lakh -- 30%

Income tax slabs under the old regime (above 80 years):-

Upto Rs 5 lakh -- Nil

Rs 5 lakh to Rs 10 lakh -- 20%

Above Rs 10 lakh -- 30%

[The Business Standard]