Economy

Government has foregone more revenue benefiting Individuals/HUFs than corporates, says FM Sitharaman

Countering Opposition barbs about being a ‘suit-boot ki sarkar’, the government on Monday informed the Lok Sabha that the total revenue impact of major tax sops for Individual/HUF (Hindu Undivided Family) is almost double that of incentives given to corporate taxpayers.

In a written reply, Finance Minister Nirmala Sitharaman said that the total revenue impact of major tax incentives for Individual/HUF taxpayers for the last five years is over ₹8.69 lakh crore. In comparison, the total revenue impact of major tax incentives for corporate taxpayers for last five years is over ₹4.53 lakh crore. “It can be seen that the government has foregone huge revenue benefiting Individuals/HUFs taxpayers,” she said.

New tax regime

Talking about specific policies to ensure that the middle-class is benefited more from tax exemptions, she listed the new tax regime among others. Introduced in the Budget 2020-21, the new tax regime aims to simplify, reduce and make it easy for complying with income tax provisions and also to provide significant relief to the middle-class taxpayers. Almost 3/4th of the individual taxpayers have moved to the new regime.

“….(Under the new tax regime) the threshold total income limit exempt from income-tax i.e. ‘Nil’ income tax slab was upto ₹2.5 lakh, which was increased to ₹3 lakh in Budget 2023-24, and also now proposed to be increased to ₹4 lakh in Budget 2025-26,” she said. Further, with the help of rebate, an individual having annual income of ₹12 lakh (₹12.75 lakh for salaried person) will not have to pay income tax.

Also, taxpayers opting for new tax regime can avail benefit of certain exemptions which inter-alia include leave encashment upto ₹25 lakh, increased deduction of employers contribution under NPS, some allowances received by salaried persons like daily allowance, conveyance allowance etc, and gratuity amount, she said.

Sitharaman also highlighted that the tax rates under the new tax regime are comparatively lower than the tax rates in old regime for the respective income slabs. The new structure proposed in the current Budget will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment. As a result of proposals introduced in the Budget 2025-26, revenue of about ₹1 lakh crore in direct taxes will be forgone.

The Minister said that the tax benefits, which were earlier granted through the exemptions and deductions in the old regime, are now in-built into the slab and rate structure as well as some exemptions and deductions such as employers’ contribution under NPS, rebate etc, available under the new tax regime. Therefore, “tax benefits by way of slabs and rates under the new tax regime are more than what is available through exemptions and deductions in the old regime,” she said.

Corporate tax collection

In response to another question, in a written reply, Sitharaman said that there has been an overall increase in direct tax collections after reduction of the corporate tax rates with effect from AY 2020-21. It rose to over ₹16.14 lakh crore in first 9 months of current fiscal (FY25) from ₹10.51 lakh crore in full fiscal year of FY20. Also, “the net foreign investment Inflows have increased from $44,417 (in million) in FY 2019-20 to $53,105 (in million) in FY 2023-24,” she said.



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