Budget 2020: All Income Tax Exemptions Will Be Removed Gradually, Says Nirmala Sitharaman After Announcing Major Rate Cuts

New Delhi, February 1: Union Finance Minister Nirmala Sitharaman, after presenting Union Budget 2020 in Parliament, said that the government plans to abolish all income tax exemptions in the long run. This came after Nirmala Sitharaman announced major income tax cuts for those who forgo exemptions. "The intention is to reduce the rate as much as to simplify the structure," she told during the post-Budget press conference. New Income Tax Rates And Slabs For FY 2020-21.

While explaining the new income tax rates announced with the Budget, Sitharaman said that giving up benefits of exemptions is optional. "Those who still want to have benefits of those exemptions which they have been using for some years can remain in the old system," she said. "We provided both with an intention that in the long run, we will be gradually able to remove all exemptions and in India, personal income tax will become simple with very low rates," she added. Nirmala Sitharaman Cuts Short Her Budget 2020 Speech After Beginning to Feel Unwell in Parliament.

Sitharaman said that several exemptions are hurdles in simplifying the taxation system in the country. "Too many exemptions are very difficult of the administrators to administer as much as too many exemptions you need an expert to keep advising you how you plan your taxation. So we wanted to achieve two goals," she said. We want to make out intentions clear, we want to simplify the income tax process. We want to reduce tax rates. To achieve both, we have come up with a new scheme with very limited exemptions to it," she added. Budget 2020: Full Text of Nirmala Sitharaman's Speech in Hindi And English.

"Ideally, a new scheme without any exemption would have been the best. But because there are some exemptions which are absolutely indispensable. Therefore, we have brought it only those exemptions and kept it as a minimum," the Finance Minister opined. According to the government, there are more than 100 exemptions under which an individual saves tax. If a taxpayer opts for the new income tax regime, he/she will have to forgo around 70 exemptions.

"Remaining exemptions and deductions to be reviewed and rationalised in coming years," the government said. Sitharaman proposed a 10 percent tax on income between Rs 5 lakh and Rs 7.5 lakh from the current 20 percent. Income between Rs 7.5 lakh to Rs 10 lakh will also attract a lower tax of 15 percent. For annual income between Rs 10 lakh and Rs 12.5 lakh, the income tax rate has been reduced to 20 percent from 30 percent

Those earning Rs 12.5 lakhs to Rs 15 lakhs will pay 25 percent tax. "A person earning Rs 15 lakh per annum and not availing any deductions will now pay Rs 1.95 lakh tax in place of Rs 2.73 lakh," Sitharaman said. At present, those earning upto Rs 2.5 lakh a year are exempted from income tax. The current income tax rate for those earning from Rs 2.5 lakh to Rs 5 lakh is 5 per cent but availing the deductions and exemptions, they can bring down their tax liability to nil.

(The above story first appeared on LatestLY on Feb 01, 2020 04:41 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).