New optional tax slabs more equitable: Ajay Bhushan

New optional tax slabs more equitable: Ajay Bhushan Pandey

Revenue Secretary Ajay Bhushan Pandey. (PTI Photo)

The new optional income tax slabs announced in the Union Budget 2020 are more equitable, said Revenue Secretary Ajay Bhushan Pandey.

Pandey told The Economic Times in an interview, that the plan was devised after a careful study of the rate structure in several countries. He further said the study showed that fewer income tax slabs can lead to inequity and hit low-income taxpayers more. 

"People say there should be one or two slabs but that would be highly inequitable... Rates would have to be steep if we have one or two slabs. The income tax structure has to be progressive," Pandey said.

If we take into account the new tax slabs, the number of slabs increases to seven from four earlier. 

Finance Minister Nirmala Sitharaman in Budget 2020-21 provided option to personal income taxpayers to remain in existing tax scheme with exemptions and deductions or opt for a new simplified tax regime with lower tax rates but without exemptions and deductions. She added that exemptions will eventually be scrapped and all taxpayers moved to the simpler regime.

Experts suggest that those with an annual income of up to Rs 15 lakh could make a tax saving of as much as Rs 78,000 under the new tax regime. 

Pandey added that IT-enabled tools such as pre-filled return forms would make it easy for taxpayers to file returns. "System itself would show in the form their tax liability in the pre-filled forms," he said.