Budget Announcement Boosts Tax Regime Adoption

Significant Tax Cuts for Individual Taxpayers

The recent Budget announcement that exempts individuals earning up to Rs 12 lakh per annum from paying taxes, along with a restructuring of tax slabs, is expected to encourage more than 90% of individual taxpayers to adopt the new tax regime (NTR), according to CBDT Chairman Ravi Agrawal. Current data shows that approximately 75% of taxpayers have opted for this regime.

Government’s Philosophy: A Non-Intrusive Tax Administration

In an exclusive post-Budget interview with PTI, Agrawal emphasized the government’s commitment to a “non-intrusive” tax administration. This approach will leverage artificial intelligence (AI) and human intelligence to streamline processes for taxpayers.

Simplified Tax Reporting Processes

Agrawal pointed out that current tax reporting processes for ordinary taxpayers are not overly complex. Tools such as the simplified ITR-1 form, pre-filled Income Tax Returns, and automatic computation of Tax Deducted at Source (TDS) have been introduced to simplify the filing experience.

The Benefits of the New Tax Regime

The new tax regime eliminates deductions and exemptions, resulting in simpler calculations that make it easier for taxpayers to file their returns without professional assistance.

Impact of the Budget on Middle-Class Taxpayers

Finance Minister Nirmala Sitharaman’s announcement of significant income tax reductions is aimed at the middle class, raising the tax exemption threshold from Rs 7 lakh to Rs 12 lakh. An additional standard deduction of Rs 75,000 is also available for salaried individuals.

Encouraging Compliance Through Reduced Tax Burden

Agrawal expressed optimism that the new budget provisions will not only benefit those earning Rs 12 lakh annually but will also positively impact taxpayers across different income levels, boosting economic sentiment and growth.

Strategies for Widening and Deepening the Tax Base

Addressing how the CBDT plans to widen and deepen the tax base, Agrawal stated the department is heavily utilizing technology, including AI, to gather data and improve taxpayer compliance.

Enhancing Taxpayer Awareness

According to Agrawal, as taxpayers become more aware of their transactions, they are more likely to comply during return filing, thus contributing to a broader tax base.

Data Analytics for Tax Compliance

To deepen the tax base, the I-T department employs data analytics, encouraging taxpayers to review and comply with the information provided to them.

Recent Results of Compliance Efforts

Agrawal noted that about 90,000 taxpayers who claimed “wrong or bogus” deductions have since filed revised returns and paid approximately Rs 1,000 crore in taxes in the past year.

Taxpayer Engagement Through Updated Returns

Additionally, about 90 lakh individuals submitted updated ITRs, contributing Rs 8,500 crore in taxes to the government. This uptick in compliance is largely due to enhanced data availability.

A New Approach to Tax Compliance

Agrawal highlighted that the current philosophy of the tax department is to prompt taxpayers to voluntarily correct any discrepancies in their filings, fostering a culture of compliance.

Addressing Bogus Deductions

In response to issues with bogus deductions, the CBDT is collaborating with agencies in the public and private sectors to guide taxpayers in correcting filing errors through updated return facilities.

Proactive Measures Against Tax Evasion

Agrawal indicated that the department is actively investigating cases of tax evasion, implementing searches and surveys against those who promote claiming false deductions or exemptions.

The Future of Tax Compliance

Moving forward, Agrawal expects that the advancements in reporting processes and the push for compliance will significantly reduce the complexities faced by taxpayers.

Optimistic Outlook for Taxpayer Participation

While Agrawal acknowledges that a 100% participation rate may not be realistic, he believes that moving forward, participation in the NTR should reach the 90% mark next year.

Conclusion

With the recent changes in the tax structure and the innovative use of technology, the CBDT aims to create an efficient and encouraging environment for taxpayers, resulting in comprehensive compliance and a broader tax base.