Union minister Nirmala Sitharaman has said that the exemptions given to taxpayers now will eventually be removed. Speaking of the option given to tax payers in this union budget -- to remove exemptions and pay lower taxes -- Ms Sitharaman said while the intention this time was to "reduce rates and simplify structure", the government "will be able to gradually remove all exemptions".
For now, "Those who want to avail the benefits can follow the old method," the minister said at a press conference this afternoon, hours after she presented the union budget.
The new tax slabs announced today are:
- 5% tax for income between Rs 2.5-5 lakh
- 10% tax for income between Rs 5-7.5 lakh as against 20%
- 15% tax for income between Rs 7.5-10 lakh as against 20%
- 20% tax for income between Rs 10-12.5 lakh as against 30%
- 25% tax for income between Rs 12.5-15 lakh as against 30%
- 30% tax for income above Rs 15 lakh
But those who opt for it, will have to forego the exemptions granted under various heads, the minister said in her budget speech.
The exemptions that woould have to go under new rules would include the most commonly claimed ones under Section 80C for provident fund contributions, life insurance premium, school tuition fee for children and various specified investments such as ELSS, NPS, PPF etc.
It would also include the tax benefits on housing loan and house rent, mediclaim, leave travel allowance, family pension, interest on education loans, disability and donations to charitable institutions.
The minister, however assured that foregoing the exemptions would leave the salaried class richer under the new tax slabs. "You'll definitely benefit in terms of money that will remain in your hand under the new regime," she said.
Putting extra cash in people's hand is one of the ways which, the government hopes, will boost the sagging economy.
Over the last five quarters, the GDP growth has been on a downward spiral. It slowed to 4.5 per cent in the July-September quarter - the weakest pace since 2013. This is the biggest slowdown since the 2008-09 global financial crisis.